Senate Bill 141 (SB 141) was approved by Governor Jack Markell on July 22, 2015, with an immediate effective date. The bill provides significant changes to the Delaware Abandoned and Unclaimed Property (AUP) law, many of which are very beneficial to the holder community. Ryan’s recent AUP Alert provides a detailed analysis of the points in the bill and how they affect holders. See Abandoned and Unclaimed Property Alert: Significant Changes Proposed to Delaware Unclaimed Property Law. Holders should review the following new rules carefully, as they may directly affect strategic business decisions relative to Delaware’s unclaimed property compliance and enforcement.
- Limitations on State Escheator’s Ability to Select Companies for Audit - The bill, effective July 1, 2015, provides that the State Escheator shall not initiate any new examination or investigation of a business association or organization (i.e., a holder) unless the holder has first been notified in writing by the Delaware Secretary of State (SOS) that it may enter into a voluntary disclosure agreement (VDA) administered by the SOS, or unless a holder has failed to comply with a requirement of the VDA SOS program.
- Audit Look Back Periods Shortened - The bill provides new rules that shorten the audit look back period and are summarized in the Ryan June 22, 2015 Alert on the legislation. For audits commencing on or after January 1, 2017, the prior “1981 fixed date rule” is replaced by a “rolling 22-year look back” window.
- Secretary of State’s VDA Program Extended - The bill extends and makes permanent the VDA program administered by the SOS. However, if the SOS requests a holder to enter into a VDA, and the holder does not evidence its intent to enter into a VDA within 60 days, the bill directs the SOS to refer the holder to the State Escheator for examination.
- VDA Look Back Periods Modified - New rules are provided in this area. If a VDA is accepted by the SOS on or after January 1, 2017, the look back period is 19 years prior to the year in which the holder’s intent to enter into a VDA was accepted by the SOS. This period is three years shorter than the new 22-year look back period for audits.
- Reinstatement of Interest - The bill amends the penalty section of Delaware law to provide that Delaware may assess interest at a rate of 0.5% per month on “any late-filed unclaimed property that is reported and remitted on or after March 1, 2016.” However, the total interest that may be due is capped at 25% of the amount required to be paid, which is measurably less than the previous 50% interest cap that was repealed in 2014.
In summary, key provisions of the bill provide that there are significant advantages of entering into a Delaware SOS VDA, as opposed to undergoing a State Escheator audit, including: (i) shorter look back periods, (ii) an absence of penalties and interest, and (iii) for most holders, completion of the SOS VDA in a much shorter time period than would likely be the case in such an audit. Holders seeking additional clarification on either how these changes could impact their specific factual situation or whether they are eligible for participating in the SOS VDA program may contact one of the Ryan contacts below.