This piece was originally published in August 2014, but has been updated as of June 2017
Unclaimed property voluntary disclosure programs, or voluntary compliance programs, provide excellent opportunities for businesses and entities, often referred to as “holders”, to come into compliance with the states’ unclaimed property laws.
Nearly every state offers some type of voluntary compliance initiative (often referred to as “VDA Programs”) as an incentive for holders to come into compliance by voluntarily reporting past due property. In exchange for the holder’s voluntary compliance, states will often waive or reduce penalties and interest on past due items.
Terms and requirements for the VDA programs differ from state to state. Some states offer formal programs, involving written disclosure agreements and specific procedures, while other states offer more informal programs whereby a the state will waive penalties and interest in recognition of a holder coming forward voluntarily to report past due property.
To be eligible for a voluntary disclosure program, states generally require that the holder not be under state audit or have been notified that an audit has been authorized. While some state VDA Programs are only open to first time reporters, some states will accept previous reporters into the VDA program if the past due property is a property type that was not previously reported or if the past due property was the result of a merger or acquisition.
Following are examples of formal VDA programs currently available to eligible holders. Complete information can be found on the state’s website. While the information provided is current as of this writing, it is important to check with each state for the most up to date information. Please reference the links provided below for complete information regarding holder eligibility and program requirements.
Arkansas offers three voluntary compliance initiatives to eligible holders.
- The Voluntary Compliance Program requires the holder to perform a self-review and file a report within six months, after which the holder must continue to file reports and deliver unclaimed property on a prospective basis.
- The Voluntary Disclosure Program requires the holder to voluntarily submit to an audit by the state, or a third party auditor acting on behalf of the state, and to file a report including all past due property, subject to a limited 10 year lookback. Interest and penalties are waived in both programs.
- The Voluntary Review Program is available to a limited number of holders per calendar year and there is no formal agreement.
Delaware’s Voluntary Disclosure Agreement Program is administered by the Secretary of State’s office and allows entities to enroll in its program so long as an audit notice has not been received. Delaware is unique in that legislation enacted in February, 2017, allows holders placed under audit prior to July 22, 2015 to convert an existing audit to a VDA or enter into a two-year expedited audit.
Elections to transfer to the Delaware VDA program or expedited audit program must be made within 60 days of the adoption of the audit and VDA regulations, which are expected to be promulgated by the Department of Finance by December 1, 2017.
The VDA program requires a self-review of the holder’s books and records and the presentation of conclusions consistent with the Department guidelines for approval. The look-back period is 10 report years plus the dormancy period for each property type (or 15 transaction years) from the date the holder received the original notice of Examination. Penalties and interest will be waived for holders who complete the VDA in good faith. Additionally, Delaware waives its right to audit the holder so long as it fulfills its future annual reporting requirements and completes the VDA in good faith.
Note: if your company has received a request or invitation to join the VDA program, you have 60 days following that notice to submit the “VDA-1” form. If you do not formally enroll in the program, your company will be referred to the State Escheator as “audit eligible”.
The Illinois Voluntary Disclosure Program allows eligible holders to come forward voluntarily to report property due in previous years without being assessed penalties and interest. The VDA has a ten year lookback and requires the holder to conduct a self-audit, and remit the findings within six months of executing the VDA.
There are two ways in which eligible holders can enter into the New York Voluntary Compliance Program. Eligible holders are holders who have not received notice of an audit from the state and must be first-time reporters (though in some cases, holders who have filed in the past but failed to report a certain property type may be able to voluntarily report such error).
Holders may either email the Voluntary Compliance Unit, review their company records and complete the online self-audit checklist or submit a Voluntary Compliance Agreement. The holder has six months from the time they register with the state to complete the review and file the report. Interest and penalties will then be waived.
Texas offers a voluntary disclosure agreement for holders seeking to report past due property. Interest and penalties can be waived if the holder has made a good faith effort to comply with Texas law. New holders may also be considered if they have not filed unclaimed property in the past and have not been audited by the comptroller.
The VDA requires a ten-year lookback period and the report must be filed within six months. Holders may request admittance into the VDA Program by contacting the Texas Comptroller.
Although it is not a formal VDA program, Washington provides an opportunity for holders to obtain a waiver of penalties and interest on any past-due property that was not reported. Holders must complete a waiver application, file a report, and pay or deliver all outstanding unclaimed property to qualify for the penalty and interest waiver. This waiver does not apply to amounts paid, delivered or reported to the state prior to July 1, 2015.
Depending on your organization’s unclaimed property liability and reporting obligations, a voluntary disclosure program is a great opportunity to achieve compliance without the fear of fines, penalties, or an unclaimed property audit. For additional information on state VDA programs, please contact a Keane representative.