Select Page

By Scott Regan, Business Development Manager | December 8, 2020

Nearly every company is a target of a Delaware audit

The Altus Group Unclaimed Property team has learned that recently the Delaware Department of Finance, Office of Unclaimed Property (DE DOF) has mailed a round of unclaimed property audit notices to US Corporations around the country that are incorporated in Delaware.

Delaware began its 2020 unclaimed property enforcement efforts in February when the Delaware Secretary of State (DE SOS) mailed 200 invitations to the state’s Voluntary Disclosure Agreement (VDA) Program. A second round of 200 invitations were mailed in August.

By statute, all companies that receive a DE SOS invitation must enroll in the VDA program within sixty days or they will be mailed an audit notice by the DE DOF. As expected, both the February and August invitations triggered audit notices for corporations that did not enroll.

 

Details on Delaware’s unclaimed property audits

The rules of unclaimed property compliance favor states of incorporation. That leaves nearly every 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 may 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 audit quickly becomes a multi-state audit.

 

Challenges of staying compliant with unclaimed property during a pandemic

While challenging in it’s own right, Delaware’s unclaimed property VDA program is more favorable to the audit program, and, if possible, corporations should respond to a DE SOS invitation without delay.

While there has always been a percentage of companies who do not respond to these invitations, that number appears to be rising. Due to the strains of the COVID-19 crisis, companies have been more likely to be unable to reply in time.

Across the country budgets are under duress due to lower tax revenue and the increased expense of massive numbers in unemployment claims and additional public safety expenditures. We have seen increased unclaimed property enforcement and collections. Industries that historically have not been the focus of unclaimed property audits, are receiving scrutiny in 2020.

In 2019 Delaware mailed approximately 600 invitations. As we noted above, DE SOS sent less invitations in 2020 than usual due to pandemic. Delaware has spent time to build-in accommodations for their staff and we’ve seen indications that Delaware will match or exceed their 2019 volumes in 2021. Like many other states, they may have no choice but to increase enforcement in the current economic climate.

Altus Group Unclaimed Property Team’s will provide any company that receives 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.

Delaware’s unclaimed property audit program can be contentious, and in fact at least five major US Corporations have sued Delaware in Federal Court over the program in the last year alone. It is critical to build an advocacy support team if an audit notice is received.

The Altus Group Unclaimed Property Team is highly competent and experienced and provides cost effective service. We are here to help.

 

close
close
forumContact us
close
close

Thank you for contacting us. we will get back to you shortly!

This site uses cookies to improve your user experience. By using our website, you are agreeing to our use of cookies.
Click here for more information.