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By Scott Regan, Unclaimed Property | August 24, 2020

The clock has started on the 60 day enrollment period

The Altus Group unclaimed property team has learned that the office of the Delaware Secretary of State (DE SOS) mailed 200 “invitations” to the state’s Voluntary Disclosure Agreement (VDA) Program on August 21, 2020. By statute, all companies that receive an invitation must enroll in the VDA program within sixty days or they will be mailed an audit notice by the Delaware Department of Finance, Office of Unclaimed Property (DE DOF).

The VDA invitations are mailed to the office of the CEO and to a company’s Delaware Registered Agent.  It is vitally important to put those teams, as well as the mail room, on notice.

In February the DE SOS began its 2020 enforcement program with approximately 100 invitations were sent to Delaware incorporated companies on February 20th, 2020. The deadline for enrollment would thus have been early April. However the DE SOS offered two extensions first till May 22nd, 2020 and again to July 18th, 2020 due to the COVID-19 crisis.

The rules of unclaimed property compliance favor states of incorporation. That leaves nearly ever company as a target regardless of their compliance history as most US corporations are domiciled in Delaware.

Delaware’s audit program applies expansive extrapolation techniques that create material and unreserved unclaimed property liabilities in instances where 15 years of researchable records cannot be produced. Delaware’s estimation includes unclaimed property due to other states. These audits are driven by third party contingently paid audit firms that shop their Delaware assignments to the rest of their state clients. Thus, a Delaware unclaimed property audit quickly becomes a multi-state nightmare.

Why accept the VDA invitation?

While rigorous and challenging Delaware’s unclaimed property VDA program is much more favorable to US corporations than an audit. Here are the top 5 reasons to enroll. In fact, accepting the invitation to the DE SOS VDA program is one of the smartest decisions a company can make. At least five major US corporations have sued Delaware in Federal Court over the audit program.

While there has always been a percentage of companies who do not respond these invitations, that number appears to be rising. Due to the strains of the COVID-19 crisis, companies have been less likely to reply within the required sixty days.

Across the country state budgets are under duress due to lower tax revenue and the increased expense of massive numbers of unemployment claims and additional public safety expenditures.  We have seen increased unclaimed property enforcement and collections. Industries, such as commercial real estate, that historically have not been the focus of unclaimed property audits, are receiving scrutiny in 2020.  In 2019 Delaware mailed approximately 600 invitations and there are indications that it could exceed that number in 2020.

By any objective measurement, companies achieve much more favorable outcomes in the VDA program.  An experienced unclaimed property advocate provides the best opportunity for success.

Altus Group’s unclaimed property team will provide any company that receives a VDA invitation from the DE SOS or an audit letter from the DE DOF a complementary consultation. Best practices suggest that Delaware incorporated companies take proactive measures to quantify and minimize exposure, even if a letter has not yet been received.

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