Although unclaimed property is not a tax under state statutes, the states treat the money collected much the same way as they do taxes. States will keep a small amount of money available to pay out any claims that individuals or companies make and transfer the rest of the collections to the general fund or a special fund. With income tax revenues down, the states are looking to other sources of cash flow, such as unclaimed property.
As a result, states have increased enforcement activities, including assessing penalties and interest on late reported property and initiating new audits. In December, Montana joined the ranks of California in issuing standard interest notices for late property. Meanwhile, Delaware deputy finance secretary David Gregor said, in an article in the News Journal that "the scope of our audits is increasing." Delaware analysts have already boosted projected collections by $50 million for 2012 and 2013.
Unclaimed Property professionals watch Delaware actions closely, as it is the state of incorporation for most of the Fortune 1000. Under U.S. Supreme Court precedent, the state of incorporation holds the second priority to claim unclaimed property when the owner's name or address is unknown. Delaware and other states have used this second priority right to extrapolate and estimate unclaimed property liability. Delaware reserves the right to audit as far back as 1981, with assessments running into the tens of millions of dollars. Ongoing awareness and corporate compliance is the best course to mitigate the risk associated with a Delaware audit.
Barganier and Associates, LLC provides full compliance and audit defense services to clients. If your company has been contacted about an unclaimed property audit, please contact us before proceeding. Our team of professionals may be able to assist you in managing the pending audit.