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Author: Don Warrant, CPA, Director
Many companies or “holders” own personal or business properties that become abandoned or unclaimed once there has been an inactive dormancy period. Dormancy periods can vary, but most are five years.
Companies that have unclaimed property exposure in Delaware (DE) generally must forward such property to the state of incorporation, which often is Delaware (due to Delaware's well established corporate laws, and appealing tax rates). Since businesses have potential exposure to report all abandoned property dating back to 1981, the new Delaware voluntary disclosure agreement (VDA) program may offer companies an opportunity to decrease their unclaimed property exposure by limiting their look-back of liability (to 1996, or 1993). There are also no contingency fees, and no exposure to audit by the State Escheator until after July 1st, 2015.
Business that are in or incorporated in Delaware, may want to act quickly. Contacting a CPA may be a good step to evaluate whether any of your businesses might benefit from applying to this VDA. This is especially true for those companies in New York State that may be unaware of abandoned property in Delaware. Businesses with possible unclaimed property due to Delaware should carefully evaluate their compliance with the Delaware unclaimed property laws and assess their exposure against the potential benefits of the VDA program for their various types of reportable property. Property holders should exercise caution and perform their own due diligence in participating in the program. Applications for the full benefits of the VDA program are due by the June 30, 2013, so you must act quickly.
Unclaimed Property Self Audit
Businesses considering approaching states (such as Delaware) to enter unclaimed property VDAs should consider proactively conducting a self-audit, with the help of a CPA advisor, prior to approaching the state. The company should:
- Assess areas of exposure
- Review available records (e.g., payroll, accounts receivable, accounts payable, general ledgers, bank statements and reconciliations, equity and transfer agent reports)
- Evaluate unclaimed property reporting to other states, and
- Mitigate exposure by identifying applicable exemptions and possibly returning abandoned property to known owners prior to instituting the VDA process.