With all the voluntary disclosure letters and audit notices coming out of the state of Delaware, we’re pleased to present a timely contribution (“Delaware’s New Voluntary Disclosure Program Aims at Improving its Image with Holders”) by French Slaughter, Partner at McGuireWoods LLP based in Washington, DC.

In its effort to stem the backlash from Fortune 500 companies that have long been the targets of Delaware’s aggressive unclaimed property audits of businesses incorporated in Delaware, this past July the state enacted a sweeping new Voluntary Disclosure program. The terms of the new program - at least at face value - are substantially more generous to Holders than the terms Delaware demands in its contract audits of noncompliant Holders. For Holders that meet the new VDA requirements, Delaware will reduce the Holder’s liability look-back period by 15 years, from 1981 to 1996, and waive 100% of interest and penalties. This could reduce a typical noncompliant Holder’s liability dramatically.

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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.

Yours Truly,
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,
UP Adviser

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?

Signed,
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,
Compliance Advisor

Are you ready for the Spring Unclaimed Property Filing Deadlines?

On February 28, Moyer & Osibodu had the pleasure of co-presenting a webinar sponsored by the Mid-Atlantic Association of Insurance Compliance Professionals (AICP). With state filing deadlines for the insurance industry quickly approaching, the topic was certainly timely and well received.

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Update on State Unclaimed Property Audits

It is no longer a big secret that the states have stepped-up the enforcement of their unclaimed property laws. Within the last month or so, some companies have received audit notices from the state of Delaware. This audit campaign is expected to go on for the foreseeable future, partly due to the fact that a lot of Delaware incorporated entities have not availed themselves of the state’s voluntary disclosure program launched in July 1, 2012. This program is administered by the Delaware Secretary of State and will sunset in June 30, 2015. There are various incentives for companies to participate in the voluntary disclosure program, one of which is to significantly minimize the possibility of an unclaimed property audit.

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FREE Webinar –Preparing for an Unclaimed Property Audit

On Wednesday, March 20, at 1:30 PM EDT, strategic unclaimed property solution providers Chesapeake System Solutions, Inc. and Moyer & Osibodu will present a FREE webinar – “Preparing for an Unclaimed Property Audit.” During this informational session, Kathy Moyer and Josiah Osibodu will share their more than 50 years of audit preparation experience.

Don’t let your organization be caught unprepared for an unclaimed property audit! Are you prepared for an unclaimed audit? Most companies are not. What triggers an unclaimed property audit? Who will conduct the audit? What should I do if selected for an audit? What happens if I do not have records for the audit years? These are all topics that will be discussed in this free webinar.

To sign up for this FREE webinar, visit Chessys.com and register for the “Preparing for an Unclaimed Property Audit” session. Space is limited, so be sure to sign up today!

For more information about Chesapeake’s unclaimed property compliance software, visit www.bit.ly/unclprop.

For more information about Moyer & Osibodu Unclaimed Property Consulting, visit www.moyerosibodu.com