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Many companies are incorporated in the state of Delaware benefiting from the absence of corporate income tax. However, the state of Delaware is very active in launching third-party unclaimed property audits.  Prior to sending an audit notice to a company, Delaware must submit an invitation to the Secretary of State’s Voluntary Disclosure Agreement (“VDA”) Program, to which the receiving company has 60 days to respond with their enrollment request.

You may have received a letter such as this from the State of Delaware inviting you into the Voluntary Disclosure Agreement Program.

The Risk Profile of Company’s Receiving Letters

  • Delaware incorporated companies
  • Companies with a significant presence in Delaware
  • Companies with unclaimed property liability due to Delaware

The Benefits of Participating

  • Full abatement of penalty and interest
  • Protection from the risk of audit
  • Beneficial review requirements (i.e. voided checks over 90 days as opposed to voided checks over 30 days when under audit)

The Challenge

Companies choosing to participate in Delaware’s VDA program are expected to perform a thorough review of the company’s book and records. While Delaware’s VDA website provides guidelines for conducting a self-review, most companies are unprepared for the complexity and extensive examination required.

The Solution

The scoping exercise, which allows a company to identify the entities in scope, the property types that require review, and classify the years where records are complete and researchable is the cornerstone for any VDA. Many companies choose to engage an accounting and legal advocate to manage and oversee both the scoping exercise and the entire VDA review process.

Altus Group’s Unclaimed Property practice includes professionals who specialize in the Delaware VDA program, and we have helped multiple companies complete an efficient Delaware VDA review. Using accepted practices, Altus Group has helped lower our clients’ liability on average by 25%.

VDA Best Practices

Over the years, the following points have proven to be best practices for companies going through the Delaware VDA process:

  • Holders or their advocates should keep in regular communication with Delaware’s vendors (Drinker Biddle & Reath LLP or TL2Q LLC) who review VDA submissions by participating companies.
  • Ensure that the methodology report aligns with the assessment workpapers and resulting liability.
  • Verify that the summary liability agrees to the line item detail reflected in the workpapers.
  • Upon finalizing the VDA, make sure that the deliverables are submitted in the required format.
  • Upon completion of the VDA, companies are expected to report unclaimed property reports to the state of Delaware for at least three (3) consecutive years.

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Julia ColbusColbusbu-state-local-tax unclaimed-propertyhunt-valley

Senior Director, State & Local Tax

Last updated on September 4th, 2019 at 05:04 pm

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