Delaware’s Secretary of State (SOS) recently advised that they plan to send invitations to companies to participate in the Delaware Voluntary Disclosure Agreement (VDA) program on February 23, 2024, and July 26, 2024.
In the event that a company receives an invitation to participate in the VDA program and is interested in taking advantage of this opportunity, it must complete the VDA-1 application and email it to the DE SOS within 90 days of the invitation date. If a company does not notify the state of its intention to complete the VDA, it will be considered audit eligible and will be assigned to one of the DE third-party audit firms. Further, with the introduction of SB 104, DE has begun to assess 20% interest plus penalties on all property identified as being due to the state through the audit. Successful completion of the DE VDA will relieve interest and penalties, limit the review to Delaware property and provide audit protection for the years, entities and property types included within the scope of the review.
Organizations should encourage their unclaimed property contacts, Chief Financial Officer, C-suite executives and DE-registered agents to be on the lookout for this letter. Many times, letters are delivered to individuals or departments that are unaware of the implications associated with DE VDA program causing the company to miss their opportunity to participate in the VDA.
If you receive one of these invitations, Sovos’ unclaimed property consulting team has extensive experience assisting organizations as a Holder Advocate, ensuring that all requirements of the Delaware VDA program are completed in an efficient, effective, and compliant manner, while also working to prevent company assets from being considered wrongfully due to the state.
If you did not receive a DE VDA invitation but discover that you may have significant past due exposure due to Delaware, your company may want to consider participating in the VDA.
Top reasons to enroll in the DE Unclaimed Property VDA Program
- Eliminate penalties and interest: Delaware’s penalties and interest are among the highest in the nation. Effective August 2021, SB 104 introduced a 20% interest assessment plus penalties on all property identified as being due to the state through audit.
- Prevent an audit: Upon successful completion of the VDA, the state agrees not to audit the Holder, with the exception being evidence of fraud, for the entities, property types and years included in the scope of the VDA.
- Receive a broad release: After completing the VDA program, Delaware will issue a full and comprehensive release of liability to include the delivery of all past-due properties up and through the date of the final deliverable.
- Decrease time investment: With the VDA you can also reduce the amount of time needed to complete the review process — within two years, as opposed to an audit, which can take three to seven years. Participation in the VDA can reduce your company’s investment of time and talent.
- Receive favorable review criteria: Per the DE VDA Program Regulations, disbursements that remain outstanding or voided greater than 90-days from date of issue must be included in the population of potentially escheat-able property. DE audit requirements expand the criteria for voids to include transactions voided greater than 30 days from date of issue. This change can significantly increase the number of transactions considered as potential unclaimed property exposure due to the state.
- Control the process: The VDA can be customized to focus on entities with potential exposure due to Delaware. You may also have the option of selecting the property types to be included in the scope of the VDA, which gives you greater control of the process and the work impact to your team.
- Identify gaps and inconsistencies: Sovos unclaimed property professionals will provide independent support to review and test current procedures to help you identify strengths and/or weaknesses in your compliance process. The work efforts and information gained from the DE VDA process will help you test processes, identify gaps and inconsistencies and serve as a foundation to achieve improved compliance in other states where you may have potential exposures.
Post-Delaware VDA Responsibilities
Once the ink is dry on the VDA-2 agreement and the agreed-upon amounts due to Delaware have been filed, it is important to remember that your reporting obligation is not over. Per the terms of all Delaware VDA-2 agreements signed with the Secretary of State, Holders must continue to file reports to Delaware for a minimum of three years to maintain the protections that were afforded through the VDA program – even if you determine that you have no reportable property due to Delaware (this is called a negative report or zero-dollar report). Failure to do so could result in the appearance of non-compliance, potential loss of audit protection and could open the door to the Delaware Verified Report or Compliance Review. The State will issue a warning letter to the individual listed in VDA-2 form, notifying the Company of its failure to comply with the Agreement, no earlier than 30 days after the deadline to submit the annual report.
It is imperative that you continue filing to Delaware after completing the VDA process to ensure the time and effort exerted in completing the Delaware VDA is not wasted. While negative reports are not required in Delaware, it is best practice to submit a negative report if no unclaimed property is due to Delaware, even after the three year required period ends. This is considered a best practice as it confirms to the state that your company has completed your annual compliance check.
Sovos is a leading holder advocate for companies that require assistance, guidance, and support completing the Delaware Unclaimed Property VDA Program.
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