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Recent Developments Impacting the Delaware Unclaimed Property VDA

Ann Fulmer
July 9, 2021

60-Day Response Period Extended for February VDA Recipients

The deadline to respond to Delaware unclaimed property VDA invitations mailed in February 2021 was extended to July 31, 2021.

Per an announcement posted to the DE Secretary of State’s website, reminder letters were sent the week of June 14, 2021 to holders that received, but have not responded to, the February 2021 invitation. Holders who received a February 2021 DE VDA invitation from the Delaware Secretary of State have until July 31, 2021 to join. If a holder was invited to the DE VDA in February 2021 but has not enrolled by July 31, 2021, the Office of Unclaimed Property will send a Notice of Examination.

New Wave of Delaware VDA Invitation Letters Sent on June 11, 2021

The Delaware Secretary of State mailed the next wave of VDA invitations to holders believed to be noncompliant with Delaware unclaimed property reporting laws on June 11, 2021. Per the details of the notification letter, the 60-day response window remains in effect. As such, companies have until August 10, 2021, to file the VDA-1 application with the DE SOS to prevent being considered audit eligible. Organizations should encourage their 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.

New 20% Interest Considerations Introduced by SB 104

Effective August 1, 2021, to encourage voluntary annual compliance and participation in the Secretary of State’s VDA program, per SB 104, interest and penalties may be waived by the State Escheator, or Secretary of State for VDAs, in all circumstances, except the following:

  1. Past-due property determined in an expedited examination as established by the Act will be subject to a nominal, non-waivable 1% per incident interest assessment; and
  2. Past-due property determined in a conventional, non-expedited examination initiated after August 1, 2021, will be subject to a minimum, non-waivable 20% per incident interest assessment.

If you received an invitation to participate in February or June, and do not accept the invitation before the July 31st or August 10th deadlines, your company will be considered audit eligible and subject to the 20% interest assessment.  

Next Steps

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.

Top Reasons to Enroll in the Delaware Unclaimed Property VDA Program

  1. 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.
  2. 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.
  3. Reduce Penalties and Interest — Per SB 104 – Effective August 1, 2021, past-due property determined in a conventional, non-expedited examination initiated after August 1, 2021, will be subject to a minimum, non-waivable 20% per incident interest assessment. If you elect to participate in the VDA program, interest can be waived 100% by the Secretary of State.
  4. 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.
  5. Control the Process – By being proactive you can 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 included within the scope of the VDA which gives you greater control of the process and the work impact to your team.
  6. 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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Author

Ann Fulmer

As National Director of Consulting Services, Ann leads the Sovos Consulting and Advisory Services team that provides clients with a comprehensive approach to achieving and maintaining compliance with state unclaimed property rules and regulations. Ann’s experience as an unclaimed property audit manager for the Commonwealth of Pennsylvania affords her the opportunity to provide the unique insight and knowledge required to represent clients seeking to achieve voluntary compliance, as well as defend those that are facing an unclaimed property audit.
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