If you saw my last post about escheat laws, you understand the basic idea that California requires businesses to report unclaimed property in an effort to get it to its rightful owner. Another state with fairly aggressive escheat laws, Delaware, recently made some changes to the legislation that affect how the rules play out for businesses.
Changes to Escheat Laws in Delaware
In an effort to improve the state’s escheat laws, Delaware changed a few of the regulations behind the law:
1. The look-back period for unclaimed property audits was reduced. Those meeting certain requirements will be able to enter into a voluntary disclosure agreement (VDA) which provides a shorter look-back period, meaning that if the State Escheator audits an organization holding unclaimed property, the dates of records reviewed will be years shorter. The VDA program is designed to encourage holders to become compliant without worrying about an unclaimed property audit.
- Moving forward, “For any ongoing audits the lookback period is reduced to begin with calendar year 1986. For any audit initiated from the date of enactment through December 31, 2016, the audit look-back period is reduced to begin with calendar year 1991. For any audit initiated on or after January 1, 2017, the audit look-back period will be 22 years prior to the report year for which the State Escheator provides written notice of examination.”
2. Delaware will help remind holders to file an unclaimed property report. If they’ve filed a report in the last five years, they will automatically receive notice to file a report 120 days before its due date.
3. Any unclaimed property reports that aren’t filed on time will now be charged .5 percent interest per month, up to 25 percent total, in addition to state-imposed penalties.
4. Delaware’s new legislation made it clear that, when it comes to escheat laws, holders need to designate one employee to be the contact for all correspondence related to unclaimed property.
5. To provide more checks and balances, Delaware adopted four additional ways for auditors to receive oversight:
- Auditors are more limited in how many contracts they can be assigned.
- A cooling off period was instituted that dictates how soon employees of the Division of Revenue or Department of Finance can be hired.
- A more central third-party review appeals process was established.
- A detailed audit manual will be published by the Department of Finance.
Even with these changes, Delaware’s system for dealing with the escheat process is still fairly cumbersome and punitive. And like so many other things multi-state, the escheat rules vary from state to state and can become administrative headaches for companies to manage.
As you can tell, I’m not the biggest fan of escheat laws, although – like Delaware – there are steps California could take to improve them. If your business has any unclaimed property, make sure you take the necessary steps to protect the organization from substantial liability. Contact Miles Consulting for more details about escheat laws and to find out if your company needs to take steps to be in compliance.
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit. To learn more, contact us today at www.MilesConsultingGroup.com.
