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Breaking News: Unclaimed Property Legislation Passes Delaware General Assembly

On January 26, 2017, the Delaware House approved comprehensive unclaimed property rewrite legislation (SB 13) that was passed by the Senate (with committee amendments) last week.  Our summary of many of the key provisions of the bill (as introduced) is available here.  Because the amended version of SB 13 has now passed both chambers of the General Assembly, it will be sent to Governor John C. Carney Jr. for signature, and will become effective immediately upon his approval.  Rumors are circling that follow-up legislation is likely, and may be considered this session. Senate Amendment The Senate Amendment adopted by both chambers made relatively minor changes to the introduced legislation. First, it struck all references to and the definition of “net card value” that was used to determine the amount presumed abandoned in the stored-value and gift card context.  As passed today, “the amount unclaimed is amount representing the maximum cost to the issuer of the merchandise, goods, or services represented by the card.”  The 5 year dormancy period tied to “the later of the date of purchase, the addition of funds to the stored-value card or gift card, a verification of the balance by the owner, or the last indication of interest in the property” was not changed. Second, the amendment struck all references to and the definition of “virtual currency.”  This is significant because the introduced version of the legislation expressly included an expansive definition of virtual currency in the definition of “property” subject to escheat.  While the inclusion of virtual currency in the definition of “property” is consistent with the approach taken in the Revised Uniform Unclaimed Property Act (RUUPA) adopted by the Uniform Law Commission (ULC) last year, the introduced Delaware legislation definition of “virtual currency” omitted two exclusions (the software or protocols governing the transfer of the digital representation of value and game-related digital content) contained in the RUUPA definition that were included after careful consideration to limit the potentially vast scope.  By removing virtual currency entirely from the Delaware legislation, it will not be presumed to be property subject to escheat. Third, the Senate Amendment changes the timeframe that holders currently under audit have to submit a written application to participate in the Secretary of State VDA program or expedited audit process.  As introduced, the Delaware legislation would have required these decisions to be made by July 1, 2017.  As amended (and passed), this period would be extended to within 60 days from the date of the adoption of regulations pertaining to the methods of estimation used. Practice Note With the passage of this legislation, there is a lot for holders to consider.  In particular, holders with an on-going audit will need to make the decision whether to: (1) make an election to join the Secretary of State VDA program; (2) expedite the audit; or (3) continue as-is.  With new penalties and mandatory interest enacted as part of the legislation, securing waiver of penalties and interest should be a top [...]

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Breaking News: Delaware Unclaimed Property Legislation – Lipstick on a Pig?

The Delaware General Assembly has introduced legislation that would significantly rewrite the Delaware unclaimed property statute by repealing the three current subchapters and replacing them with a single unclaimed property subchapter. This article highlights key proposed changes in the bill.

Read the full article.




Delaware Senate Passes Unclaimed Property Reform Bill

On June 18, 2015, a bill (S.B. 141) was unanimously approved by the Delaware Senate that would place limits on the look-back period and permanently extend the Voluntary Disclosure Agreement (VDA) program. This represents the second bill this year that seeks to implement the recommended changes contained in the Unclaimed Property Task Force’s (Task Force) December 2014 final report (the first, S.B. 11, was signed by Governor Jack Markell on January 29, 2015). If passed by the House, the legislation would offer several additional protections to holders; however, it also contains a number of traps for the unwary that should not be overlooked.

Look-back Period Shortened

First, and most significantly, the bill would limit the examination look-back period in Delaware to 22 years, starting in 2017. For periods before 2017, the bill would limit the look-back period to 1986 (if currently under examination) or 1991 (for any examinations initiated after enactment).  While this proposed look-back period decrease would be a significant improvement from the status quo (which allows Delaware to look-back to any period after 1980), it would still represent one of the longer look-back periods in the country. Notably, the proposed 22-year look-back period would remain over twice as long as most state unclaimed property look-back periods (which are usually 10 years or less).

Permanent VDA Program

Second, the VDA program is amended to authorize the Secretary of State to request that any potential holder enter into an unclaimed property VDA. If the potential holder does not agree to the VDA within 60 days, they will be referred to the State Escheator for examination. The bill provides for a 19-year (reduced) look-back period for any holder than enters the VDA program on or after January 1, 2017, and allows two years to complete the VDA process. Additionally, S.B. 141 would strike the sunset provision for the VDA program, which is currently scheduled to expire July 1, 2016. Certain holders are not permitted to participate in the VDA program, including those that: (1) formally withdrew from the voluntary disclosure agreement program, or (2) were removed from the VDA program for failure to work in good faith to complete the VDA program as soon as practicable.

Interest

The bill would also amend the governing statute to allow interest of 0.5 percent per month (up to 25 percent of the amount due) to accrue from the due date for any late-filed unclaimed property reported and remitted on or after March 1, 2016. The current unclaimed property statute in Delaware does not have a provision permitting the accrual of interest (former interest provisions were repealed in June 2014 with the enactment of S.B. 228). Even before their repeal, the interest provisions were largely unenforced. Because the look-back period would remain over 20 years in Delaware, the added costs associated with the proposed interest increase (and actual enforcement) will likely be more than the amounts no longer owed due to the proposed look-back period reduction.

Mandatory Holder Contact

One procedural change [...]

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