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Business Victorious in Unclaimed Gift Card False Claims Case

The Delaware Supreme Court gave Overstock.com a win in a False Claims Act (FCA) suit alleging the retailer failed to remit unclaimed gift card funds to the state. Overstock.com Inc. v. the State of Delaware and French, DE Sup. Ct., No. 327,2019 (June 25, 2020). A jury previously found Overstock liable for approximately $7.3 million. The Delaware Supreme Court, interpreting the FCA statute in effect for the years at issue, determined the trial court judge improperly instructed the jury that the knowing failure to file unclaimed property reports was the making of a false statement as required to succeed on an FCA claim. Contrary to the trial judge’s instructions, the Supreme Court determined that to meet the FCA standard in effect for the years at issue, some document incorporating the alleged false claim must have been provided to the government. Failure to file a report was by definition not a false record or statement because there was not record or...

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Delaware Starts Unclaimed Property “Compliance Reviews” (Different from Audits)

If the Delaware Office of Unclaimed Property believes that a person may have filed an “inaccurate, incomplete, or false report,” the State Escheator may authorize a “compliance review” under Del. Code Ann. tit. 12, § 1170(b). This is not a standard audit and as a result, the target is not entitled to the option of entering the state’s voluntary disclosure program rather than being subject to the audit. Nevertheless, the compliance review can result in a finding of liability. Correspondence between the Unclaimed Property Professionals Organization and the Delaware State Escheator’s Office acknowledges that several holders have been selected for this review. According to the Escheator’s Office, if a holder has no report or a negative report, the state will typically request a copy of the holder’s unclaimed property policies and procedures that would support the lack of property due to the state. By statute, the state may review the filed reports and “all...

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Finishing SALT: Inside SALT’s Monthly Recap

Wrapping Up October – and Looking Forward to November As we wrap up October, you can view all of the topics we discussed over the last month and take a look at the State and Local Tax events where our lawyers will be speaking in November. SALT Activities in November: November 1, 2017: Jane May presented “State Conformity with Federal Income Tax Laws — Especially in Light of Possible Sweeping Federal Income Tax Legislation?” at the 2017 Annual Meeting of the California Tax Bar and California Tax Policy Conference. November 2, 2017: Peter Faber presented an Update on SALT Developments at the Philadelphia Tax Conference. November 2, 2017: Arthur Rosen presented “Doing Business Beyond Michigan Borders” and “Recent and Impending Developments in State Taxation” at the Michigan Tax Conference in Livonia, Michigan. November 6, 2017: Peter Faber presented on sales tax on investment research and planning for defending a False Claims act at the Wall Street Tax...

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Get Ready for the Countdown: Final Delaware Unclaimed Property Regulations Published

On October 1, 2017, the Delaware Department of Finance published final regulations in the Register of Regulations repealing its former unclaimed property regulations and promulgating a new reporting and examination manual.  See 21 DE Reg 336 (Oct. 1, 2017).  The final reporting and examination regulation contains no substantive changes from the revised version that was re-proposed on August 1, 2017.  As published, the regulations are set to be adopted and take effect on October 11, 2017. This development is significant for holders that are currently under audit and considering enrolling in the Secretary of State’s Voluntary Disclosure Agreement Program (VDA Program) or converting the audit to an “expedited audit” because October 11 marks the start of the 60-day period allotted for holders to notify the Secretary of State and/or State Escheator of their intention.  See 12 Del. Code § 1172(b)-(c).  At the conclusion of this 60-day period, any holder that has...

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Wrapping Up August – and Looking Forward to September

Upcoming McDermott Will & Emery SALT Activities in September: September 14, 2017: Robin Greenhouse, Kristen Hazel, Sandra McGill and Alysse McLoughlin will be speaking at McDermott Will & Emery’s Tax in the City®: A Women’s Tax Roundtable meeting in New York City about local tax updates and ethics. September 15, 2017: Jane Wells May is speaking in Austin, TX at the ABA Tax Section Meeting about “False Claims Acts and State Taxes.” September 18, 2017: Mary Kay Martire is speaking in San Antonio, TX at the 2017 IPT Sales Tax Symposium about “Third Party Tax Enforcement Actions.” September 19, 2017: Arthur Rosen is speaking in San Antonio, TX at the 2017 IPT Sales Tax Symposium about sales tax nexus –“Son of Quill: The Sequel.” September 19, 2017: Stephen Kranz is speaking in San Antonio, TX at the 2017 IPT Sales Tax Symposium about uncollectible debts – “Breaking Bad from Bad Debt.” September 26, 2017: Cate Battin and Mary Kay Martire are presenting a...

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Delaware (Re)Proposes Unclaimed Property Reporting and Examination Manual Regulation

On August 1, the Delaware Department of Finance (DOF) published a revised version of its proposed reporting and examination manual regulation addressing audit procedures and method of estimation.  See 21 DE Reg 123 (Aug. 1, 2017). The revised proposed regulation is substantially similar to the first draft proposed earlier this year, but contains a dozen or so notable differences (described in more detail below). Because the former draft of the regulation was never finalized, the 60-day time period for eligible holders to convert to the Voluntary Disclosure Agreement (VDA) Program (administered by the Secretary of State) or an expedited audit has not started to run, and will not commence until the final DOF regulation is published in the monthly Register of Regulations. Based on the fact that the DOF is accepted comments through August 31, 2017 (and likely needs at least a month to take them into consideration), the final regulation is not expected to be...

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Resistance is not Always Futile: New Decision in Ongoing Delaware Unclaimed Property Audit Litigation

On August 9, 2017, the US Court of Appeals for the Third Circuit (Third Circuit), overruling the US District Court for the District of Delaware (District Court), allowed a claim by a holder seeking to prevent an unclaimed property audit by Delaware on due process grounds to proceed. See Plains All American Pipeline L.P. v. Cook et al., No. 16-3631 (3d Cir. Aug. 9, 2017).  The procedural due process claim challenges Delaware’s use of auditors that have a stake in the assessment. Consistent with the District Court decision, the Third Circuit held that challenges to Delaware’s estimation methodology were ruled not ripe. The case has been remanded to the District Court for further proceedings. Background The holder, Plains All American Pipeline L.P. (Plains) brought a lawsuit against Delaware officials including the Secretary of Finance, the State Escheator, the State unclaimed property Audit Manager and third party auditor, Kelmar Associates, LLC (Kelmar)....

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Finishing SALT: Inside SALT’s Monthly Recap

Wrapping up July—and Looking Forward to August SALT Activities for August: August 2, 2017: Diann Smith is moderating a panel at the 50th Multistate Tax Commission Annual Conference in Louisville, Kentucky about “The Significance of the MTC – Past, Present, and Future – from the Outside.” August 5, 2017: Stephen Kranz is presenting about Unclaimed Property at the National Conference of State Legislatures (NCSL) SALT Task Force Meeting in Boston, Massachusetts, and will cover the following topics: Lessons learned from the first legislative season in which the Revised Uniform Unclaimed Property Act was considered, and in some cases adopted in part. The MoneyGram case, currently before the United States Supreme Court under its original jurisdiction to handle cases brought by one state against another, which may rewrite the rules regarding which state has priority over custody of unclaimed funds. Wrapping up July: Our July 2017 blog posts are available on...

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Finishing SALT: Inside SALT’s Monthly Recap

Wrapping Up June Our June 2017 blog posts are available on insidesalt.com, or read each article by clicking on the titles below. To receive the latest on state and local tax news and commentary directly in your inbox as they are posted, click here to subscribe to our email list. June 5, 2017: Nexus is Crucial, Complex Connection for State Tax Professionals June 6, 2017: Substitute Alert – Delaware Technical Corrections Bill June 8, 2017: Inside SALT Event in McDermott Will & Emery’s New York Office New York, NY: The annual Inside SALT event took place on Thursday, June 8, 2017 in McDermott’s New York office. Tax lawyers Peter Faber, Todd Harrison, Stephen Kranz, Alysse McLoughlin, Art Rosen, Diann Smith and Mark Yopp presented a substantive half-day program highlighting many State and Local Tax updates, including recent changes specific to the New York area, Nexus developments in digital taxation, and news related to apportionment, transfer pricing and...

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Illinois Unclaimed Property Law Substantially Revised As Part of Revenue Package Supporting Illinois Budget

Yesterday the Illinois House of Representatives voted to override Governor Bruce Rauner’s veto of Senate Bill (SB) 9, the revenue bill supporting the State’s Fiscal Year (FY) 2017-2018 Budget. Just days before the vote, SB 9 was amended to include a revised version of the Illinois Unclaimed Property Bill (House Bill (HB) 2603) on which we’ve previously reported. The new law (part of Public Act 100-0022) is known as the Revised Uniform Unclaimed Property Act (RUUPA). The RUUPA becomes effective January 1, 2018. Below is a brief summary of a few of the highlights of which holders should be aware. Gift Cards, Loyalty Cards and Game-Related Digital Content Exempt Unlike HB 2603, the Illinois RUUPA expressly excludes “gift cards” from the definition of “property” subject to escheat. Pulling (in-part) from the Uniform Law Commission (ULC) definition, “gift card” is defined in the Illinois RUUPA as “a stored-value card: (i) issued on a prepaid basis in a specified...

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