The Delaware Secretary of State recently finalized its estimation regulations without any substantive change to Delaware’s proposed estimation practices. The final version of these regulations, which became effective July 11, 2017, acknowledges that the state received numerous public comments criticizing the proposed regulations, including the state’s practice of extrapolating unclaimed property liability to Delaware based on all unclaimed property reported in the base period, including property that was escheatable to other states. However, as anticipated, the Secretary of State “decided to not make [any] suggested changes”. The Secretary of State’s finalized estimation regulations can be viewed here: Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program.
On June 29, 2017, the Delaware Governor signed a technical correction bill (“SB 79”) to the State’s unclaimed property overhaul legislation (“SB 13”), after SB 79 unanimously passed the Delaware House of Representatives and the Delaware Senate. To briefly recap, Delaware enacted SB 13 on February 2, 2017 in an effort to reform its widely-criticized unclaimed property laws. Some of the more beneficial changes in SB 13 included a reduced audit look-back period of 10 report years, and the ability for certain holders currently under audit to elect to convert the existing audit into a voluntary disclosure agreement or to elect an expedited audit option — both of which would result in the waiver of penalties and interest.
On June 12, 2017, Congressman Jim Sensenbrenner (R-WI) reintroduced into Congress H.R. 2887, also known as the “No Regulation Without Representation Act of 2017” (the “Legislation”), which codifies the physical presence nexus requirement established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992) (“Quill”). The Legislation is interesting for several reasons: (1) it proposes to employ a result that is the exact opposite of the recent trend to overturn Quill; (2) it defines “tax” broadly to include net income and business activity taxes; and (3) it expands the law to require a physical presence for states to regulate a person’s activity in interstate commerce outside of the tax context.
On April 1, 2017, Delaware issued proposed regulations to establish instructions and guidelines for the administration of the state’s newly enacted abandoned and unclaimed property statute, SB 13. The proposed regulations would repeal and replace the existing unclaimed property regulations in Delaware and would be the primary guidance for implementing SB 13. SB 13 was introduced in the Delaware General Assembly in early January and was, ultimately, signed into law on February 2, 2017. SB 13 was enacted, in part, to address concerns raised in recent litigations, especially those constitutional concerns raised by the federal court in Temple-Inland Inc. v. Cook, 1:14-cv-00654 (D. Del. June 28, 2016) (“Temple-Inland”). (See our prior coverage Delaware Proposes Unclaimed Property Legislation).