Keanotes

All Eyes on Delaware: DE SB 13 Update

Heather Gabell, J.D., Director, Unclaimed Property Compliance

March 15, 2017

Oct 2017 – Breaking News Regarding Delaware Unclaimed Property Audits – Read More >>

Introduced on January 12, 2017 and signed into law on February 2, 2017, DE Senate Bill 13 substantially revises and restructures Delaware’s unclaimed property law.  Below are particular areas of interest for holders. The items below are listed in the order in which they appear in the statute.

Owner Interest:

  • No provision for automatic deposit/withdrawal
  • No catchall provision for owner interest
  • Specifically excludes application of an automatic premium loan provision or other nonforfeiture provision contained in an insurance policy
  • An unreturned 1099 or an executed W-8 BEN (for foreign address accounts) dated within 3 years of the end of any calendar year on file are provided as examples of indication of interest
  • If an owner has more than one account, an indication of owner interest with respect to one account with that holder is an indication of owner interest in all accounts

Knowledge of Death        

  • Knowledge of death may be identified through any source, including declaration of death, death certificate, DMF searches, or other equivalent sources

Retirement Accounts

  • A retirement account is presumed abandoned upon the earlier of:
    • 3 years after the owner’s last indication of interest in the account following the date specified in the federal income tax laws by which distribution of the property must begin in order to avoid a tax penalty, or
    • 3 years after the knowledge of death of the account owner that has been confirmed by the holder in its ordinary course of business, unless a beneficiary has indicated an interest in the account within 3 years after the date of death

Last Known Address

  • Any description, code or other indication of location of owner on the holder’s books and records, which identifies the state of the last known address of owner.
  • No zip code provision

Holder Reports

  • Beginning on 3/1/18, all reports must be in a web-based record
  • If a holder contracts with a third party to make the report, the holder is responsible for complete, accurate and timely reporting and payment or delivery of the property.
  • Holder must identify a designated individual to serve as the contact for all correspondence with the State related to the reporting and remittance of unclaimed property
  • No reporting is required solely by virtue of holding property constituting consideration paid for unredeemed gift cards, which, in the aggregate, for the reporting period having a face value of less than $5,000 or for gift cards having a face value of $5.00 or under issued by a holder whose business is described in Sec. 2906 of Title 30, whether or not it conducts business in this state.

When to File Reports       

  • Holders and business associations (other than banking organizations and insurance companies): on or before 3/1
  • Banking Organizations: on or before 11/10
  • Insurance Companies: on or before 12/20

Due Diligence

  • First class mail must be sent by holders not more than 120 days nor less than 60 days before filing. Threshold amount is $50.00, but holders must mail on securities regardless of value.

Notice by the Administrator to Owner

  • The State Escheator will send written notice prior to liquidation for securities or other property that is not money to the last known address in the records of the holder unless it determines that notice would not be receive or if the State Escheator determines that the total value of the security or other property that is not money does not exceed $50.
  • The State Escheator and the State of Delaware shall not be liable to an owner based upon the liquidation of a security or other property that is not money if the State Escheator did not act unreasonably in determining that mailed notice would not be received or for an amount that exceeds that which was actually received upon liquidation.

Record Retention

  • Holders shall retain records for 10 years after the report was filed

Statute of Limitations

  • 10 years, which is tolled by the State Escheator’s delivery of a notice of examination to a holder, or if the State Escheator reasonably concludes that the holder has filed a report containing a fraudulent or willful misrepresentation

Look Back Period

  • 10 years (plus the 5 year dormancy period)

Compliance Review

  • If a holder does not file a report as required or if the State Escheator believes a holder may have filed an inaccurate, incomplete or false report, the State Escheator may authorize a compliance review of the report and notification requirements do not apply. The review is limited to the contents of the report filed.
  • If a deficiency is found due and payable to the State, the holder shall be notified in writing within 1 year of the authorization of the compliance review. If the holder fails to pay the amount of the deficiency within 90 days, the State Escheator may seek to enforce the assessment or may refer the holder to the Department of State to request that the holder enter into a VDA.

Conversion to VDA

  • Holders currently under audit authorized by the State Escheator on or before 7/22/15 may notify the State Escheator and Secretary of State of their intent to convert the audit to a VDA. Such notification must occur within 60 days of the Secretary of Finance’s adoption of the new estimation regulations.
  • If Delaware joins a multi-state audit already initiated by another state, Delaware is no longer required to provide notice to holders that they may elect to enter into a VDA prior to an audit.

Expedited Audit

  • Holders currently under audit may notify the State Escheator of its intent to expedite the completion of the pending examination by providing written notification within 60 days of the Secretary of Finance’s adoption of the estimation regulations. The State Escheator has 2 years from the date of receipt of written notice to complete the exam and shall waive interest and penalties.

Estimation

  • The Secretary of Finance shall, within 60 days, promulgate regulations regarding the method of estimation that shall apply to both audits and VDAs.

Judicial Review

  • The Court of Chancery shall review errors of law de novo.

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