The Heat is On as Delaware Mails Next Round of VDA Invitations

Based on the information posted on the Delaware Secretary of State’s website, the next round of VDA invitations was scheduled to be mailed on or around Friday, July 14, 2023.  The first round was sent out on or around February 24, 2023.

Under the Delaware unclaimed property law, the state must first notify a holder in writing that it may enter into a voluntary disclosure agreement (VDA) with the state before it can initiate an unclaimed property examination, or audit.  The failure to respond to the invitation within the 90-day timeframe to enroll in the VDA program will result in an audit by the Department of Finance.

Holders should be aware of any type of mailing received from the state, as Delaware employs a variety of methods to ensure compliance with the unclaimed property law.  For example, holders may instead receive a request for a verified report or to undergo a compliance review.  The failure to respond to or comply with these requests can also lead to an audit, as such failure nullifies the holder’s ability to enter into the VDA program.

Mailings are often directed to the Chief Financial Officer or another C-suite individual’s office that may not be aware of their importance and time sensitivity.  We recommend that holders incorporated in Delaware or with substantial operations in the state communicate internally so that everyone is aware of what to do in the event such an invitation or mailing is received and who to reach out to for assistance when considering next steps.

There are many benefits to enrolling in the VDA program, including saving time and money. Audits may take 5 or more years and can drain company resources.  Holders are also in the driver’s seat, as opposed to the state, as they conduct their own self-review of entities and property types that will be in scope.  Upon completion, the holder will also receive a waiver of all penalties and interest and is discharged from any liability related to such property types.  The state also waives its right to audit the holder the entities, property types and years that were included in the VDA.

With that said, there are times when enrolling in the VDA program may not be the best option for the holder.  For example, a holder participating in the VDA program waives its right to legally challenge Delaware’s position, for example, on estimation.   Delaware’s record retention is 10 years, plus an additional 5 years when accounting for the dormancy period for many property types.  Delaware estimates liability for those periods where the holder does not have adequate books and records.

If you have received a VDA invitation, or any other type of mail from Delaware, or any other state, contact MarketSphere to receive expert advice and discuss strategy that is best for your organization.

*Content contained in this article is considered accurate as of the publish date.