United States

Delaware grants more time for unclaimed property estimation rules

Legislation also provides technical clarifications and corrections

TAX ALERT  | 

On June 29, 2017, Delaware Gov. John Carney signed Senate Substitute 1 for Senate Bill 79 (SS1/SB79), providing for various changes to the major unclaimed property overhaul enacted in February through Senate Bill 13. A summary of the changes are as follows:

  • The deadline for the Secretary of Finance to adopt regulations pursuant to the creation of estimation techniques is extended from July 1, 2017, to Dec. 1, 2017.
  • In order to provide additional time for unclaimed property holders to comply with the provisions Senate Bill 13, SS1/SB79 provides that the effective date of the provision requiring holders to send the owners of the property notice is July 1, 2017. Holders of property presumed abandoned are required to send to the owner notice in a format acceptable to the State Escheator, by first-class United States mail, not more than 120 days nor less than 60 days before filing the report. The previous effective date of the provision was the date Senate Bill 13 was signed, or Feb. 2, 2017.
  • SS1/SB79 clarifies the definition of ‘state’ for purposes of section 1153, Effect of payment or delivery of property to State Escheator. Delaware will defend and indemnify holders that escheated property to Delaware in good faith against claims arising from other states claiming the property under that state’s unclaimed property law. Eligible states now expressly include any foreign jurisdiction, the District of Columbia, the Commonwealth of Puerto Rico, and the United States Virgin Islands or similar territory under the jurisdiction of the United States.
  • Provides expanded authority in section 1185, Waiver of interest and penalty, for the State Escheator to waive interest for good cause in certain circumstances.
  • Other technical clarifications:

    o   An internal reference in section 1155, State Escheator’s options as to custody, is amended to correctly reflect paragraph (b)(4) instead of (b)(3).

    o   The July 1, 2017, notification date is removed from section 1172, Rules and procedures for conducting an examination, to correct an inconsistency.

    o   A technical date correction is made in section 1183, Interest and penalties, to correspond with the extended time for the Secretary of Finance to adopt regulations. Accordingly, interest is waived for any holder who has filed the holder's intent to enter into an expedited examination process within 60 days of the adoption of those regulations, rather than on or before July 1, 2017.

Takeaways

Notwithstanding the technical corrections and clarifications, SS1/SB79 provides the Secretary of Finance additional time to promulgate estimation regulations. Recall that Senate Bill 13 required the regulations to address permissible base periods, items to be excluded from the estimation calculation, aging criteria for outstanding and voided checks and the definition of what constitutes complete and researchable records. The holder community has been anticipating the regulations since the Temple-Inland, Inc. v. Cook decision heavily criticized the state’s current estimation procedures. Holders with questions should speak to their unclaimed property advisors.

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