Category: amnesty

An Offer You Might Not Want to Refuse

Delaware Secretary of State Issues VDA “Invitation” Notices

The Delaware Secretary of State’s Office recently sent letters to over 100 companies identified as “likely” out of compliance with Delaware’s unclaimed property laws. The letters “invite” those companies to enroll in Delaware’s Voluntary Disclosure Agreement (VDA) program. Delaware’s VDA is program pursuant to which a company performs a thorough self-review of its unclaimed property reporting history and remits any overdue unclaimed property to the state. That self-review is, in turn, thoroughly reviewed by unclaimed property professionals on behalf of the Secretary of State’s office who may identify additional property, if any, to be reported and remitted. In exchange for performing this self-review, the VDA program provides companies with a waiver of all penalties and interest that the state might otherwise assess on late-reported unclaimed property. In addition, the company and the Secretary of State will generally agree in advance on a methodology for certain contested issues that come up during the review: How far back does the review go? What entities have to be reviewed? What is the process for dealing with periods for which the company does not have researchable records?

The waiver of penalties and interest is the VDA’s “carrot;” now for the “stick”: companies who do not accept the invitation to enroll in the VDA program may be selected for audit by the State. That audit is not a company-controlled, state-checked review, but is conducted by a private auditing firm retained by the state. Those audits tend to be much (much, much) lengthier than a VDA and carry the threat of interest and penalties. In addition, the auditors generally employ more aggressive and controversial audit methodologies, seeking to shift the burden upon the company to prove that items are not unclaimed property, rather than the auditors demonstrating that items are unclaimed property. Indeed, there have been several lawsuits filed in just the past few years challenging the practices used by Delaware’s selected auditing firms. See Univar v. Geisenberger, Case No. 18-cv-01909 (U.S. District Court, D. Del.); AT&T Capital Services v. Geisenberger, Case No. 19-cv-2238 (U.S. District Court, D. Del.); Eaton Corp. v. Geisenberger, Case No. 19-cv-2269 (U.S. District Court, D. Del).

Given the potential audit risk, companies that are incorporated in Delaware should be on the lookout for these notices.  Unfortunately, the letters often do not go to the individual responsible for reporting and remitting unclaimed property at the organization, but rather are generally addressed to a senior executive such as the Chief Financial Officer.  Time to accept the invitation is limited; companies receiving the notice have 60 days from the date the request was made to enroll in the VDA program.  After that, an audit notice may issue.

California Legislature Taps Brakes on Potential VDA Program

A few weeks ago, the unclaimed property industry was abuzz with the news of California legislation that would implement the Golden State’s first Voluntary Disclosure Agreement (VDA) program since 20o2.  VDA arrangements are amnesty programs pursuant to which holders of unclaimed property can self-report and remit overdue property to the state.  In most such programs, in exchange for coming forward with the overdue funds, the holder generally receives a waiver of the late-reporting penalties and/or interest that would otherwise be assessed under the act.  While VDA programs have long been in place in unclaimed property significant states like Delaware and New York, California has been an extreme outlier:  not only does the state have no amnesty program, but it is among the most aggressive in assessing interest on unclaimed property.  Little wonder then that news of a potential California VDA program was welcome news.

Alas, it appears that the program is not in the immediate offing.  According to an article in the Northern California Record, the sponsor of the legislation has pulled the bill, suggesting that it needs “more work.”  No word on what that work is, or when a revised bill might be offered.


Reminder: Deadline for Converting Delaware Audit to VDA Approaching

As we noted earlier, Delaware legislation passed October 1 (effective October 11) commenced a 60 day period during which some holders undergoing Delaware unclaimed property audits have the option of converting that audit to a Voluntary Disclosure Agreement.

Unlike a traditional unclaimed property audit, in the VDA program a holder completes a self-review of its records and reports those items believed to be in scope.  In return for this remittance, the Secretary of State agrees to waive the interest and penalties that could otherwise be assessed the holder for noncompliance.  Note that while the VDA program offers a holder more autonomy and control over the review process, the holder’s ultimate report, methodology and remittance are subject to approval by the Secretary of State’s office.

According to the Delaware Secretary of State’s website, any holder currently under audit that received a notice of examination from the State Escheator on or before July 22, 2015, except any securities examinations in which estimation is not required, is eligible to convert.  Conversion forms are available from the Secretary of State’s website.  According to the website, the deadline for conversion is December 11.

Upcoming UPPO Events: Holders’ Seminar and (Non-Delaware) VDA Seminar

The Unclaimed Property Professionals’ Organization, the premiere trade group for holders of unclaimed property is holding its next Holders’ Seminar on August 14-15 in Chicago, Illinois.  The Holders’ Seminar features a wealth of information on unclaimed property topics, and features both “beginner” and “intermediate” educational tracks.  More information can be found on the UPPO website, here.

For those of you who can’t make the trip to Chicago, on July 25th, UPPO is hosting a webinar on “VDAs: Everything but Delaware.”  Although the “First-Staters” out there may be loathe to admit it, there are other states out there.  (Really, they have flags and state birds, and everything).  For those of you with questions about voluntary disclosure and amnesty arrangements in places other than Delaware, UPPO has you covered.  Registration information can be found here

Delaware Extends Temporary VDA Program

As we’ve mentioned a few times, Delaware has a temporary Voluntary Disclosure Program that is being run out of the Secretary of State’s office – complete with a detailed website.  The Secretary of State’s program operates separately from the VDA program run by the Division of Finance — the latter a program oft-criticized for being more stick than carrot. 

Early reviews of the Secretary of State program have been favorable (though it should be noted that such work is still in the very preliminary stages) and the program has just been extended by the Delaware legislature.  Pursuant to House Bill No. 2, holders can still obtain a VDA “look back” period starting in 1996 if the enter into the VDA program by 6/30/13 and make payment (or arrangements for payment) by 6/30/15.

Delaware Launches New Voluntary Disclosure Agreement Website

Earlier this summer, Delaware created a new voluntary disclosure agreement (“VDA”) process run by the Secretary of State’s office, separate from the sometimes criticized program run by the Department of Finance.  Under the Secretary of State program (which is temporary) holders who come forward by June 2013 (and pay outstanding amounts by June 2014) will only have to review records back to 1996.  Holders who come forward by June 2014 (and pay by June 2015) will only have to review records back to 1993.  The VDA program run by the Department of Finance generally runs back to 1991.

Recently, the Secretary of State’s office launched, which appears to be a one-stop resource for holders considering entering into the new amnesty program.  There is an impressive amount of information available on the site, from an extensive overview of the VDA process, links to the governing legislation, forms, FAQs, and a list of upcoming educational seminars. 

Putting extensive information concerning a state’s unclaimed property amnesty program in one place, in a simple easy to use format should not be a novel concept, but it is.  Kudos to Delaware for taking this step.

Breaking News: Delaware Secretary of State VDA Process Signed Into Law

Last week, we mentioned that Delaware was considering a second voluntary disclosure process, separate from the one run by the Department of Finance.  That legislation was approved, and was signed by the Governor yesterday.  A copy of the legislation can be found here, but the highlights are as follows:  holders who come forward by June 2013 (and pay outstanding amounts by June 2014) will only have to review records back to 1996.  Holders who come forward by June 2014 (and pay by June 2015) will only have to review records back to 1993. 

Breaking News: Michigan Offering Unclaimed Property Amnesty in For A Short Time

A few months ago, Michigan made sweeping amendments to its unclaimed property laws.  The new laws shortened the dormancy period for most property types from 5 years to 3 years.  In addition, Michigan moved from a fall reporting state to a  spring summer state.  This year’s report is due on or before July 1 of each year for the 12 month period ending on the immediately preceding March 31.

Now that they have your attention, Michigan is now offering a limited time voluntary disclosure program for holders who have never reported unclaimed property (or have underreported unclaimed property) to the state.  Pursuant to the program, interested holders must enroll by January 31, 2012, and will have until July 1 to file a report for the current report year and the four previous report years.  In return, the state will agree to waive the interest and penalties that may otherwise be assessed for the late reporting or remittance of property.

If you are a Michigan-incorporated entity, do a lot of business in Michigan, or simply want to turn over some undelivered property to the state, you may wish to consider the Michigan VDA.

Deadlines Looming for One-Time Amnesty Programs

Noncompliance with state unclaimed property laws exposes a company to several different types of risks:  financial risks of reclassifying assets or liabilities, legal risks for running afoul of state administrators, and reputational risks from clients and customers.  Notwithstanding those risks, many holders fail to remedy historical noncompliance because of the possibility of interest and penalties being assessed, and the substantial risk of an audit.  Instead, many holders simply hope that they will not get audited. 

In at least two states, there are current amnesty programs being offered to allow holders to remedy historical noncompliance without the threat of interest, penalties, or a disruptive audit.  Both programs, however, expire on October 31.


Indiana currently has an amnesty program in effect that allows holders to avoid interest and penalties by filing a catch-up report for property due to the state over the past ten (10) reporting years.  The details of the Indiana amnesty program can be found here.


Pennsylvania is offering an amnesty program until October 31 for companies that (a) missed the April 15th reporting deadline, (b) have never filed, or (c) have gaps in their reporting history.  Holders with significant unclaimed property owed to Pennsylvania can review the amnesty program information here.

Many other states have voluntary compliance arrangements (VCAs) or voluntary disclosure agreements (VDAs) which allow holders to come up to date with their reporting obligations without the threat of interest and penalties. These programs run the gamut from very informal processes with flexible reporting periods and timelines, to very regimented audit-like procedures.  In any event, holders with significant unclaimed property liabilities are well advised to look into amnesty programs.