Delaware Bill Has Unclaimed Property Practices in Cross-Hairs

Just over a week ago, we discussed Delaware Senate Bill 215 that would prohibit contingent fees for unclaimed property third-party audit firms representing the state. This week comes news of a second bill that should be of interest to unclaimed property holders: Senate Bill 228.

As written, SB 228 would make it a misdemeanor for any state official to release information about holders concerning compliance history, voluntary disclosure agreements ("VDA"), or audit settlement agreements, past or present. The bill would also limit fees for non-compliance, to a maximum of $5,000. Finally, it would extend the Secretary of State VDA program by one year. So far, only 20 Secretary of State VDAs have been completed for approximately $50 million.

The holder confidentiality provisions are important to holders as this would limit outside auditors ability to comb through state records to identify companies with potentially large unclaimed property liabilities. This would put more of the burden on state officials instead of outsourcing the audit selection process.

Like SB 215, SB 228 has been assigned to the Senate Banking Committee.

Meanwhile, over the weekend, Delaware received scathing critiques of its unclaimed property practices by Delaware Online reporter Jonathan Starkey. In Abandoned property: Millions for Markell-linked firms, Starkey raises concerns relating to Governor Markell's connections to firms receiving contracts relating to the Staples litigation, contingent fee audits and the Secretary of State VDA program.

Of particular insight into Delaware officials' thinking may be this quote from Finance Secretary Tom Cook, "This is one of those things that does keep Delaware taxpayers' rates low overall," noting that to replace abandoned property, "you'd have to triple the gross receipts tax" on Delaware businesses. In other words, Delaware relies on activities occurring outside the state to keep taxes low in the state.

In State clashes over money with businesses it courts Starkey discusses the threat unclaimed property poses to the state's incorporation business.

Barganier and Associates will continue to monitor both of these bills as they progress through the state legislature.

See Also:
Lost that Loving Feeling in Delaware
Delaware Relies Heavily on Unclaimed Property Budget Process
Udinski Joins Kelmar Associates