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The Final Countdown: Just under two weeks remain for holders to enter Delaware’s new VDA program and take advantage of 1996 look-back period

Posted By Guest Author - Brenda Mayrack, Mayrack Law, LLC, Monday, June 17, 2013
Updated: Monday, June 17, 2013

It’s June 18, and holders have just a little less than two weeks remaining to participate in Delaware’s new Voluntary Disclosure Agreement (VDA) program and take advantage of the most favorable terms for holders. To participate, holders must submit Form VDA-1, the "Disclosure and Notice of Intent to Voluntarily Comply with Abandoned Property Law Pursuant to 12 Del. C. § 1177,” by June 30, 2013.

Delaware established this new VDA program in July 2012, with the passage of Senate Bill 258. The new program offers qualified holders the opportunity to achieve current compliance with the advantage of shorter look-back periods, less liability, and less risk of audit in a program managed by the Delaware Secretary of State, instead of the Department of Finance, which oversees reporting, owner claims, examinations, and its own ongoing VDA program.

In January 2013, the Delaware General Assembly, with the enactment of House Bill 2, expanded the scope of eligibility for holders to participate and extended certain deadlines, making the new VDA program even more favorable for holders. For more information, refer to this prior UPPO Focus Blog Post.

As Delaware Secretary of State Jeffrey Bullock has repeatedly noted, including in this prior UPPO Focus Guest Blog Post, the new Delaware VDA program is intended "to build on Delaware’s business reputation and specifically the reputation of the Department of State in providing quality service to Delaware’s corporate clients by making abandoned and unclaimed property compliance for Delaware companies cheaper, faster and easier.” Holders electing to participate, according to Secretary Bullock, should find a process that is "reliable, efficient, cost-effective, and most importantly, fair.”

Holders who do join the new VDA program by the end of this month will be able to achieve current compliance for any past due unclaimed property liability and apply a shorter look-back period – to transaction year 1996 – in their submission. In an audit context, Delaware looks back to 1981 to determine liability, and in prior years when the VDA program was managed by the Department of Finance, Delaware has looked back to 1991. Thus, for most holders, the new VDA program will offer a significant opportunity to come into current compliance for a smaller settlement amount.

Holders entering the program by June 30, 2013 will have two full years, until June 30, 2015, to complete their submissions applying the 1996 look-back period.

Even if holders miss the deadline to enter the program by the end of this month, they can still enter the program but on slightly less favorable terms. Holders who enter the VDA program after June 30, 2013, but before June 30, 2014, will be able to apply a 1993 look-back-period if the submission is completed within one year, by June 30, 2015.

Unless they have already received a notice of examination, are currently participating in the Department of Finance VDA program, or have already completed a Department of Finance VDA prior to June 30, 2012, holders are generally eligible to enter the new VDA program.

In addition, in the new VDA program managed by the Secretary of State, holders may seek broad releases of liability across multiple legal entities, years, and property types, or they may tailor their submissions for specific legal entities, years, and property types. Thus, holders who may have already participated in a Delaware Department of Finance VDA may achieve compliance under the more favorable terms of the new program for recently acquired entities as well as entities, report years, or property types that may have been omitted from the prior VDA submission.

The Delaware Department of State has aggressively marketed the new VDA program to Delaware corporations. This has included multiple direct contacts to the largest Delaware corporations eligible to participate. If a holder has received one of these notices from the Delaware Secretary of State and declines to participate in the new VDA program, it is highly possible that the Department of Finance will target that holder for audit during the next few years.

As such, holders, if they have not done so already, should take steps, consulting with experienced unclaimed property advocates and legal counsel, during the next two weeks to determine their eligibility to participate in the new VDA program and potential cost savings in doing so. If the holder is eligible and has financial incentive to participate, the holder should file the Form VDA-1 to join the program by June 30, 2013 on the most favorable terms for holders.

2013 UPPO Holders Seminar - See the Agenda Delaware VDA session

The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Compliance  Due Diligence  education  UP Laws  VDA 

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