In order to take advantage of the shortest look-back period of the Secretary of State's Voluntary Disclosure program, companies must indicate in writing to the Secretary of State that they intend to enter a Voluntary Disclosure Agreement by June 30, 2013. That deadline is quickly approaching for companies considering entering the program to seek a waiver of interest and penalties on late reportable unclaimed property, as well as to reduce the risk of a Delaware audit.
The Delaware Secretary of State began an alternative Voluntary Disclosure Program in 2012. The purpose of this program was to provide an alternative to the typical VDA program through the state's Unclaimed Property Division and the State Escheator. The Unclaimed Property Division's program has often been criticized by participants and advocates as the first step to a Delaware unclaimed property audit, which would lead to much larger liability assessments. In addition, the State Escheator maintained the right to assess penalties and interest up to 100% of the company's total liability.
The Secretary of State's VDA program has been promoted as a business friendly alternative to bringing companies into compliance and begin annual reporting. This VDA program limits the look-back period to 1996 or 1993, depending on when the company enters the VDA program. This is in comparison to the typical Delaware audit that looks back to transactions occurring in 1981, or 1986 for audits completed by June 30, 2015. Many companies have not maintained records back to the early 1990s, and most have not maintained records back to 1981. For Delaware incorporated entities, a lack of records would lead to extrapolations to estimate liability that companies would find egregious.
In order to enter the Voluntary Disclosure program, a company must not have been notified of an audit by the State Escheator or currently be under audit by Delaware. If a company has previously entered into a VDA with the state of Delaware, the new VDA is limited to property types, time periods, or subsidiaries that were not covered by the prior VDA. The VDA must be completed and payment submitted to the Secretary of State by June 30, 2015.
If your company is considering entering the VDA program, contact Barganier and Associates for guidance on completing the VDA process. Our team has helped many companies successfully complete the process in Delaware and elsewhere.