Delaware Finalizes Regulation Temporarily Shortening Unclaimed Property Audit Look-Back Period
November 13, 2012
On November 1, 2012, the Delaware Department of Finance promulgated a final regulation, effective December 1, 2012, that shortens the look-back period for currently ongoing Delaware unclaimed property audits. Prior to the promulgation of 16 DE Reg. 530, the Department of Finance has generally audited companies with respect to their compliance with Delaware unclaimed property laws back to the year 1981. In addition, the Department of Finance operated a voluntary disclosure program (“VDA”) pursuant to which a company could limit the period of review back to 1991.
On July 11, 2012, Governor Markell signed 78 Del. Laws, c. 367, which created a new voluntary disclosure program (“New VDA”) to be administered through the Delaware Secretary of State’s office, rather than the Department of Finance. Pursuant to that act, a company that indicates an intent to participate in the New VDA prior to June 30, 2013 and resolves its Delaware unclaimed property liability prior to June 30, 2014 will only be subject to potential liability back to 1996 (rather than 1991 under the current VDA). Alternatively, under the act, a company that indicates an intent to participate in the New VDA between July 1, 2013 and June 30, 2014 and resolves its Delaware unclaimed property liability by June 30, 2015 will be subject to potential liability back to 1993 (rather than 1991 under the current VDA).
Under the act, companies that are currently under audit by the Delaware Department of Finance with respect to unclaimed property are ineligible to participate in the New VDA. In order to ameliorate this inequity, the Department of Finance promulgated 16 DE Reg. 530. Pursuant to this new regulation, a company that is currently under audit by the Department of Finance or becomes subject to audit prior to the effective date of the regulation (December 1, 2012) will only be subject to liability back to 1986 (i.e., a five-year reduction in current Delaware audit practice). In order to be entitled to this reduced look-back period, the audit must be completed by June 30, 2015. The regulation clarifies that (i) an audit is deemed completed as of the date that the audit manager mails the statement of findings and request for payment; and (ii) an audit may be deemed completed on a property type by property type basis.