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 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).
On January 12, 2017, significant unclaimed property legislation, SB13, was introduced in the Delaware General Assembly. If enacted, which appears likely, SB13 would make numerous changes to the state’s much-maligned procedures for enforcing its abandoned and unclaimed property laws. Legislation has been widely expected in the wake of last summer’s summary judgment decision against Delaware in Temple-Inland Inc. v. Cook, 1:14-cv-00654 (D. Del. filed May 21, 2014). In Temple-Inland a federal district court invalidated many of the unclaimed property audit practices authorized by Delaware and implemented by the state’s contract auditors (See our prior coverage Federal District Court Holds Delaware’s Unclaimed Property Enforcement Practices “Shock the Conscience” and Delaware Unclaimed Property Litigation Update). The parties agreed to dismiss the Temple-Inland case before the court could consider remedies to the substantive due process violations it found, and thus, the state was left with the opportunity to pass legislation likely in an effort to preserve the stream of unclaimed property receipts that have become one of Delaware’s largest sources of revenue. Among other changes, the proposed legislation addresses some of the federal district court’s concerns, and provides a path to the state’s voluntary disclosure agreement (“VDA”) program for companies already under audit. Descriptions of some of the more significant provisions of SB13 follow. Unless otherwise specified, the provisions below would be effective upon enactment of the legislation.