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A recent changing of the guard and a proposed rule revamp in Delaware suggest unclaimed property may be getting a makeover in the First State this year.
State Escheator David Gregor became the state’s new director of revenue Jan. 9, and it remains unclear whether a new escheator will take his place. Meanwhile, the Delaware Senate is considering another round of changes to the state’s abandoned property laws.
The changes are the latest in Delaware involving unclaimed property as the state finds itself increasingly under fire for its practices. Unclaimed property is the state’s third-largest revenue source, and a spate of litigation has put Delaware on the defensive.
In a case soon to be heard by the U.S. Supreme Court, Delaware is fighting against 29 states over millions worth of unclaimed MoneyGram payments. In another case, two French scientists accuse Delaware of unlawfully seizing and selling $12 million worth of their stock. And in August, Delaware settled with Austin, Texas-based Temple-Inland Inc. after a judge found that Delaware’s estimation methods during audits “engaged in a game of ‘gotcha’ that shocks the conscience.”
Gregor, along with retiring Finance Secretary Tom Cook, is named as a defendant in many of Delaware’s unclaimed property disputes.
Gregor has been Delaware’s escheator since August 2013 while simultaneously serving as deputy secretary of finance, a position he has held since August 2010. Newly elected Gov. John Carney’s (D) nominee for finance secretary, Richard J. “Rick” Geisenberger, was formally sworn in Jan. 18.
“We will have to wait and see if Mr. Geisenberger chooses to appoint a Deputy Secretary, and if he wishes to name a new State Escheator,” Delaware Department of Finance spokeswoman Leslie A. Poland told Bloomberg BNA in an e-mail. “Until such time as that decision is made, Mr. Gregor will remain acting in those positions, as well as performing the duties of Director.”
The personnel changes came as the Senate Committee on Banking, Business & Insurance considered a proposed revamp of laws relating to abandoned or unclaimed property.
S.B. 13, sponsored by Sen. Bryan Townsend (D), seeks to make “significant changes to the State’s unclaimed property law to bring greater predictability, efficiency, and fairness,” according to the bill’s synopsis.
The bill includes a “host of significant changes” to Delaware’s unclaimed property regime, and is in part a response to the recent litigation, according to an alert by McDermott, Will & Emery. Possible changes include look-back periods, periods of record retention, estimation methods, and interest and penalties.
The proposed legislation “represents a step in the right direction for holders seeking more clarity and transparency,” Dallas, Texas-based tax consultancy Ryan LLC wrote in an alert Jan. 18.
The bill passed out of committee Jan. 18 by a 3-1 vote and passed the Senate Jan. 19-0 vote with one senator absent. The bill now goes to the House.
In a Jan. 17 letter, the Council on State Taxation urged the Delaware General Assembly to “seize this opportunity to bolster the State's reputation as America's corporate home” by better addressing the “fundamental unfairness occurring in Delaware unclaimed property audits.”
The Washington, D.C.-based trade group suggested a three-year statute of limitations on unclaimed property reporting and liabilities, the elimination of business-to-business transactions in the definition of unclaimed property, exemption of gift cards, and language to curtail abusive audit tactics such as "cherry picking" audit targets or using unfair estimation techniques that inflate amounts owed to Delaware.
To contact the reporter on this story: Leslie A. Pappas in Philadelphia at LPappas@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
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