Delaware’s Secretary of State (SOS) recently advised that they plan to send invitations to participate in the Delaware VDA program around February 18, 2022 and May 20, 2022. If a company is interested in participating in the VDA, they must complete the VDA-1 application and email it to the DE SOS before the deadline. If a company elects to forgo their opportunity to participate in the VDA, they will be considered audit eligible and will be assigned out to one of DE third-party audit firms. With the introduction of SB 104, DE now has the ability to assess 20% interest on all property identified as being due to the state through the audit. By electing to participate in the VDA, interest and penalties will be waived, the review will be limited to one participating state, and audit protection will be extended for the years, entities, and property types included within the scope of the project.
Organizations should encourage their unclaimed property contacts, CFO’s, upper management, and DE registered agents to be on the lookout for this letter. Many times, when holders receive these letters they are not brought to the attention of the appropriate person or department causing the company to miss their VDA invitation window. Holders that do not respond to the VDA invitation letter within 90 days will be referred to the State Escheator for audit examination.
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 and compliant manner.
If you did not receive a DE VDA invitation but have an unclaimed property reporting obligation to Delaware; meaning your company is incorporated in Delaware, operates in Delaware, or has investors, customers, or shareholders in Delaware – then it is highly encouraged to enroll in this voluntary compliance initiative.
Delaware VDA History
Delaware Senate Bill 141, which was passed and became effective on July 22, 2015, indefinitely extended the Delaware Secretary of State Unclaimed Property VDA program that originally expired July 1, 2016. Also included within DE SB 141 was the provision that no holder would be eligible for an audit without first receiving a notice or invitation to enroll in the VDA program. Holders are strongly encouraged to enroll in the program to avoid a costly unclaimed property audit and receive a full and comprehensive release of any past-due liabilities.
Holders enrolled in the VDA program are not eligible for audit by the State Escheator. However, if a holder receives an audit notice, they are precluded from enrolling the SOS VDA Program and the Department of State is unable to accept their enrollment.
The Delaware VDA process is designed to allow companies to come into compliance faster, easier, and less expensive than an audit. To make this process as streamlined as possible, holders are encouraged to utilize the services of an experienced holder advocate who possesses a thorough understanding of what is required to successfully complete the program. Sovos is a leading holder advocate for companies who require assistance, guidance, and support in completing the Delaware Unclaimed Property VDA Program.
Top Reasons to Enroll in the DE VDA Program
- 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.
- Avoid an Audit — Once accepted into the Delaware VDA program, the state agrees not to audit the Holder, with the exception being evidence of fraud. Holders that have already received an audit notice are not eligible to enroll in the VDA program.
- Reduce Penalties and Interest — Delaware’s penalties and interest are among some of the highest in the nation, in some cases up to 50% of the liability — 75% in cases of filing a fraudulent report. With the VDA you can accelerate the review period — likely within 2 years, as opposed to an audit, which can take between 5 to 7 years. The VDA allows your organization to come into compliance faster, easier, and less expensively than a traditional unclaimed property audit.
- Control the Process – By being proactive you may customize the scope of your VDA – The VDA can be customized to your lines of business. You have the option of selecting the property types and/or legal entities within the scope of the VDA which gives you greater control of the process and the work impact to your team.
- Identify Gaps and Inconsistencies – The unclaimed property professionals at Sovos will provide independent support to help review and test current procedures to help you identify current strengths and/or weaknesses in your compliance process. The work efforts and information gained from the DE VDA process will help you test processes and identify gaps and inconsistencies and serve as a foundation to achieve improved compliance in other states where you may have gaps in reporting.
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 3 years in order 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 and potential loss of audit protection. 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 you’ve determined you have no unclaimed property due in Delaware even after the 3 year required period ends. This is considered a best practice as it confirms with the state that your company has completed your annual compliance check. As a recent development, communications are being sent from the Office of the Secretary of State inquiring about continued compliance and requesting Holders to “please file the reports or provide proof that the reports have already been filed.”
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