Corporate Close-Up: Delaware Continues Developing Unclaimed Property Rules


The field of unclaimed property has been subject to a wave of developments in the past year. The approval of the new version of the Revised Uniform Unclaimed Property Act (RUUPA) in November 2016 has set off continuous change among the states, especially in Delaware. Most recently, Delaware has updated its proposal for new regulations regarding its unclaimed property audit program.

Since the Uniform Law Commission, an organization which drafts and approves model legislation with the goal of uniformity among states, approved RUUPA, Delaware, Tennessee, Utah, and most recently, Illinois have passed new laws amending their unclaimed property rules. Delaware has been the most active; in April, it proposed new regulations for the estimation of unreported property for which there are no records originally. In July, Delaware adopted new regulations regarding the administration of the state’s unclaimed property voluntary disclosure program.

After some concerns were raised regarding the initial proposal for the regulations, on Aug. 1, Delaware released a new version of the proposed regulations, hoping to allay concerns of the holder community. The state must reconcile its estimation techniques with the ruling in the Temple-Inland case, which ruled that the estimation methods used during unclaimed property audits by the State Escheator were unconstitutional.

However, as reported by Leslie Pappas in Bloomberg BNA’s Daily Tax Report: State (subscription required), many of the same problems originally noted in the first proposed regulations remain in the second, specifically that the regulations fail to address the problems with estimation methods in audits that were struck down in Temple-Inland. Pappas writes, “The first draft of the regulations issued in April disappointed companies because it appeared to reiterate old practices without clarifying the new statute.”

It appears that the new proposed regulations suffer from many of the same problems. Pappas notes that Sara A. Lima, a partner in Reed Smith LLP, has raised concerns that the new regulations do not provide guidance for the new expedited audit process included in the overhauled regime, are too similar to the state’s voluntary disclosure examination rules adopted in July, and still do not address the concerns regarding the estimation methods for unclaimed property. If Delaware adopts these new regulations, more legal challenges to the audit process are likely to arise.

As more states continue to overhaul their unclaimed property laws based on RUUPA, Delaware continues to adopt a stance in its regulations that keeps it in the past. Whether the state will be able to maintain its course in its procedures without significant legal challenges remains to be seen.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will Delaware’s new unclaimed property rules survive legal challenge?

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