Letter to the UP Adviser
In this month’s newsletter, we have 2 letters to share with our readers that we hope you find beneficial:
Dear UP Adviser,
Our tax director was summoned into our CEO’s office recently to explain the letter received from the Delaware Secretary of State regarding the New Delaware Unclaimed Property Voluntary Disclosure Program. Our organization is located on the West Coast and we don’t believe we have any unclaimed property to report to Delaware. In addition, our tax department is short on staff and we’ve not filed or reported unclaimed property to any state. Our CEO wants some immediate answers from our tax director and our tax department is reaching out to various sources in order to formulate our answers. Your insight is greatly appreciated.
Clueless VDA Candidate
Dear Clueless VDA Candidate,
Thank you for reaching out to us. Your company received the Delaware letter and VDA-1, similar to other companies incorporated in Delaware that have not complied with the provisions of their unclaimed property laws. Even though your company is located on the West Coast and does not appear to have any physical connection with Delaware, there is a high likelihood that your company may have unclaimed property to report to Delaware, as your state of incorporation. Based on the priority rules set by the United States Supreme Court in 1965, your state of incorporation has the right to claim those unclaimed property with a last known address in their state or in a foreign country, in addition to any estimated amounts representing prior periods with no historical records. By the time you review your records for outstanding transactions to your customers, vendors, employees and shareholders (if your company is publicly traded), it is not impossible to have amounts that are past due for reporting to Delaware.
Delaware is currently providing an incentive for companies to get into compliance with their unclaimed property laws by participating in the new voluntary disclosure program administered by their secretary of state. Unlike their audits that go back to 1981, the program offers a reduced reach-back period to 1996 (or 1993), depending on when a company signs up for the program. There is also a waiver of interest and penalty as additional incentive, provided a company complies with the requirements of the program, which sunsets on June 30, 2015.
Please note that this program is a “fast track” process to get a company into compliance with Delaware’s unclaimed property laws. Our recommendation is for your company to sign up for the program as soon as possible and begin the review process to satisfy the voluntary disclosure requirements. Depending on the size of your company, you’re going to need all the time and resources (including external resources) in order to complete the voluntary disclosure review within the stated deadline.
Best of Luck,
Dear Compliance Advisor:
I have a question about the California two part reporting process. Since filing the preliminary report to California last Fall, we have discovered some additional unclaimed transactions with California addresses. Can we include these on the final remittance report due in June?
Questioning in California
Dear Questioning in California:
Good question. As you know, California is one of the few states with a two-report process. The “Holder Notice Report” is due before November 1 (before May 1 for life insurance companies) but the funds are not due until the “Holder Remit Report” is filed between June 1 and June 15 (or December 1 and December 15 for life insurance companies) of the following year. California sends out notices to owners of the unclaimed property reported on the “Holder Notice Report” and refers owners/claimants to the Holder for payment. The “Holder Remit Report” should only include property that was reported on the “Holder Notice Report.” It should not include additional unclaimed transactions not previously reflected on the notice report.
If additional unclaimed transactions are discovered after the preliminary filing, they must be reported on a separate “Supplemental Holder Notice Report.” No funds should be remitted with the supplemental report. California must first send out notices to the owners before the funds are remitted for these additional unclaimed transactions.
I hope this helps,