Delaware collects more than $600 million a year in unclaimed property, and many companies are wholly unaware of their annual reporting obligations. However, those still facing Delaware unclaimed property exposure are in luck. The Delaware General Assembly passed Senate Bill 228 (“SB 228”) June 26, 2014, and the governor is expected to sign the bill Monday, June 30.
SB 228 will extend the period that companies may enter into the Secretary of State’s voluntary disclosure program from the current deadline of June 30, 2014, to September 30, 2014. For those already participating in the program, the bill provides an extra year to comply—from July 1, 2015 to July 1, 2016. So companies that have not yet tackled their Delaware unclaimed property exposure can consider jumping in. Those who do not, face the risk of multistate audits conducted by private audit firms that are paid a percentage of the amount they demand.
The popularity of the program means that the legislative changes not only benefit holders, but also provide the Delaware Secretary of State much-needed breathing room. Absent the extended compliance date in the bill, the Secretary of State would need to review and finalize the agreements for current participants at a rate of approximately one holder per day until the July 1, 2015 deadline in order to process all of the voluntary disclosure agreements that are in the queue.1
For full details on the benefits of the program, see our May 28, 2013 client alert. If you have questions concerning how the program works from start to finish, please contact one of the authors of this alert.
In addition to the changes to the voluntary disclosure program, SB 228 offers some other holder-friendly changes worth reporting. It revises the penalty for failing to file an unclaimed property report from 5 percent per month to the lesser of 5 percent per month or $100 per day. The maximum penalty of 50 percent of the amount required to be reported is now reduced to $5,000. The legislation also eliminates the assessment of interest on outstanding unpaid amounts. Additionally, SB 228 extends confidentiality to the amounts reported and received by the State Escheator and the Secretary of State, related to any annual filing, voluntary disclosure agreement, or settlement agreement, “including past agreements.” Unauthorized disclosure of such information is a misdemeanor punishable by a fine of up to $1,000 and imprisonment for up to six months.
About Reed Smith State Tax Reed Smith’s state and local tax practice is comprised of more than 30 lawyers across seven offices nationwide. The practice focuses on state and local audit defense and refund appeals (from the administrative level through the appellate courts), as well as planning and transactional matters involving income, franchise, unclaimed property, sales and use, and property tax issues. Click here to view our State Tax team.
- The number of current participants in the program is greater than the number of days remaining until the original deadline.