Key Points from Delaware’s February 2020 VDA Invitation –

• Delaware’s Secretary Of State Voluntary Disclosure Agreement (“VDA”) invitations mailed out in February 2020 have been granted a response extention.
• Responses are now required by July 18, 2020.
• These extension only apply to companies that received the VDA invitation in February 2020.
• Recipients of this letter may include the CFO, General Counsel, Accounting Manager or others.
• It is important to inform all persons and departments of what action they should take if they have received this February 2020 DE VDE invitation letter.
• If recipients do not respond to the invitation by the July 18, 2020 due date, they may/will be referred for an unclaimed property audit.
If you firm is contemplating participating in the Delaware VDA invitation, please feel free to contact us at 410.303.5510 for a free discussion as to whether or not it may be right for you.

California Decides Against Amnesty

The California State Controller’s Office (“SCO”) has been researching options for increasing Holder compliance to their unclaimed property reporting requirements for about a year. One of the options was to offer Holders an Amnesty Period that would waive any interest or penalties on any property reported past due. Numerous years ago the State offered the same type of Amnesty Period and it produced a major windfall of property revenue for the State.

However, upon completion of their research, and for some strange reason, the State decided NOT to offer an Amnesty Period because it was deemed “an ineffective solution to address noncompliance”. Additionally, the SCO also decided that implementing an Amnesty Program would “perpetuate inconsistent compliance” by the Holders which would lead to additional costs for the State due the number of unclaimed property reports that would potentially be received and processed.

The SCO’s reporting laws and guidelines do allow for Holders to report property late and, for any penalties and/or interest assessed, the Holders can request these penalties be abated if they can prove “reasonable cause”. This process essentially acts as a one-time amnesty program for the Holder.

Keep in mind the “reasonable cause” claimed by the Holder must be accepted by the State in order for any penalties to be waived. This acceptance process may take up to 9 months for the State to decide.

This SCO’s decision not to offer a Amnesty Period is a definite set back for the Holder Community. For further information on this recent decision and the best way to report unclaimed property to California or any other State(s), please feel free to contact PEACC to discuss all the options.



California Amnesty Update II – stayed tuned…..

California’s Governor recently signed the Budget Act of 2019 (SB 109). Within the Act, there is a provision which requires the Controller to provide the Joint Legislative Budget Committee and the chairpersons of the fiscal committees in each house of the legislature with a report on plans to provide for a one-time unclaimed property amnesty, or other options to increase compliance with the unclaimed property law in lieu of an amnesty program. The Controller must also provide options for increasing the return of unclaimed property to rightful owners. The due date for report is March 1, 2020. The State did offer an Amnesty Program about 20 years ago, for a year. Many Holders took advantage of it It was so successful and brought in so much unclaimed property penalty and interest free, the State extended the Program for a year.

What Constitutes Intangible Unclaimed Property Reportable Under the Law?

Generally intangible personal property for which there has been no owner generated activity for a specified period of time called “dormancy period” or “holding period”, is considered dormant or unclaimed.

Examples of intangible unclaimed property include:
-Uncashed payroll or commission checks
-Uncashed accounts payable/vendor checks
-Accounts receivable credit balances
-Gift certificates/gift cards
-Customer merchandise credits, layaways, deposits, refunds or rebates
-Overpayments/unidentified remittances
-Suspense accounts -Unused/outstanding benefits (non-ERISA)
-Goods received but not invoiced
-Miscellaneous income/bad debt expense accounts

Unclaimed Property Fines & Penalties for Non-Compliance

A Holder (Company) can be assessed Fines and/or Interest Penalties for Not Complying with State Unclaimed Property Laws.

1) Failure to Report and Remit Unclaimed Property.
2) Failure to Comply with the Entire State Unclaimed Property Statute.

– Interest penalty generally assessed at 10%–25% of property value
– Civil/Criminal penalties for failure to report/remit/deliver
OR filing a fraudulent report may include:
^ $100 – $200 per day ($10,000 maximum)
^ Varies from $1000 – $25,000 fine plus some States access an additional 25% of the value of the property
^ Some State laws include non-compliance as a Class B misdemeanor and/or jail term

Where Do I Report My Unclaimed Property?

STATE PRIORITY RULES FOR REPORTING UNCLAIMED PROPERTY –

In 1965, The United States Supreme Court, in Texas v. New Jersey, established these unclaimed property State priority reporting rules:

1) Unclaimed intangible property is required to be reported to the State of the property Owner’s last known address as reflected on the Holder’s books and records;
2) Unclaimed intangible property is required to be reported to the Holder’s State of Incorporation if the Owner’s address is unknown, in a foreign Country, or in a State that exempts the property type.

Main Benefits of a Self Unclaimed Property Audit or a Voluntary Disclosure Agreement (“VDA”)

– Waiver of interest and penalties on property reported late or past due.
– Reduced look-back period. Normally 10 years plus the dormancy period.
– The company has more control of the audit/review process.
– The opportunity is there to correct any issues or discrepancies.
– If estimation is used, the company has more of a say in the process.
– The company’s specific facts and circumstances are applied throughout the self- audit/VDA process.

Unclaimed Property Audit Triggers –

With more and more States jumping on the audit bandwagon, below are issues that could trigger the dreaded unclaimed property audit:

1) Non-reporting – A company has not been reporting their unclaimed property and has never reported in the past.

2) Property owners contacting the state to claim their funds.

3) Submitting negative reports (a report saying this is no unclaimed property to report) or submitting negative reports in back to back years.

4) Not reporting all property types required. Submitting reports with only vendor checks and no accounts receivables, miscellaneous type property or payroll checks.

5) Not reporting the type of property or value of property comparable type companies are reporting.

6) Spikes and dips in reporting.  Is company reporting consistent?

7) Has company been in the news.  Has one company acquired another? Is a company making a big yearly profit?

8) Industry under audit.  Are state audits concentrating on the retail, hospitability, manufacturing, insurance, real estate industry, etc.

9) State unclaimed property employees talk amongst themselves informally at industry trade shows/seminars/conferences.

Delaware VDA Opportunity Notification Letters

Based on recent correspondence with the State of Delaware and the Holder community, it has come to PEACC’s attention that Delaware’s Secretary of State has recently mailed opportunity letters to participate in the State’s Voluntary Disclosure Agreement (“VDA”) program. These notices were mailed to hundreds of companies throughout the United States who are incorporated in Delaware. As stated in the State’s recently revised laws and regulations, companies receiving the VDA letter have 60 days to respond. Companies not responding to the letter will be referred to the Delaware Department of Finance for an unclaimed property audit. Historically, the State turns to aggressive third-party, contingency fee paid auditors to perform these audits.

With this new letter notification initiative in mind, it is a best practice for any companies incorporated in Delaware, not fully compliant with the State’s unclaimed property rules and regulations, to keep an eye out for these VDA notices so they do not miss this opportunity to participate in the State’s VDA program.  PEACC advises all companies incorporated in Delaware (not just the ones receiving the letter) ensure they are in full compliance with the unclaimed property State laws and requirements as they may again begin to aggressively enforce their reporting requirements through State and State sponsored audits.

PEACC is advising companies to let their mailrooms and other appropriate personnel know to keep an eye out for any correspondence letters from the State of Delaware so this opportunity to report through a VDA does not pass them by. Missing this opportunity will lead to an unclaimed property audit.

For further information about this Delaware VDA letter writing campaign or the State’s VDA program and its benefits, please contact PEACC at 410.303.5510 for a free confidential consultation.

California Anmesty Bill (A.B. 2773) Update

California VDA Program Update –
California A.B. 2773, a bill to establish an unclaimed property voluntary disclosure program in the state has recently been pulled. The California State Controller’s Office has expressed some concerns with the bill’s language. The bill’s author, Assemblyman Dante Acosta, has since decided to pull the bill from consideration.

However, there is hope that the the bill will be reintroduction during the next California legislative session.

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