The Delaware Secretary of State’s (SOS) has recently posted a notice on its website stating that it began sending a new round of invitations for holders to participate in the Delaware SOS Voluntary Disclosure Agreement (VDA) Program on Nov. 15, 2024. In addition to inviting a company to participate in the SOS’ VDA Program, these outreach letters also put the company on notice that if it declines to participate, the Delaware Department of Finance will issue an audit notice 60 days after the date the letter was mailed to the company. Given the upcoming year end and short response time, it is critical that companies be on the lookout for any notices from the state.
Why the two-step process? Delaware law provides that the Department of Finance cannot initiate new unclaimed property audits unless the SOS first notifies a company in writing that it has the option to enter the SOS’ VDA Program. As a result, the notices are both invitations to the SOS VDA Program as well as the “first step” of the audit process.
Another step in ongoing initiatives
This current VDA outreach is the most recent of a series of such initiatives. On Feb. 23, 2024, the first round of 2024 VDA invitations were sent by the SOS, resulting in many companies either entering a VDA with the state or risk facing an unclaimed property audit.
Recently, in addition to the SOS’ VDA invitations, Delaware’s Department of Finance reached out to holders by sending notices requesting “verified reports” of unclaimed property, which focus on the single-year review of a company’s most recent annual filing. Even companies that did not file an unclaimed property report with Delaware may receive verified report notices, including holding companies and other companies without operational activity. Unfortunately, there are no specific criteria set forth in Delaware that would qualify a company for receiving a notice or not.
If your company receives an SOS VDA Program invitation
- Be on the lookout. Notify your team that invitations for the SOS VDA Program may be coming. If unanswered, the invitations to participate in the SOS VDA Program will likely lead to an audit notice. This step is especially important as the invitation may be easily overlooked as your team focuses on year-end activities, and more may be out of the office for the holiday season.
- Review your options. If you receive an invitation, assess your options carefully. Most companies will benefit by entering the SOS VDA Program, but each company’s facts and circumstances are unique. In most cases, a company will benefit from speaking to counsel or holder advocates familiar with unclaimed property who can discuss the benefits and burdens of each option.
- Respond promptly. If you have determined that the SOS VDA Program is right for your company, make sure to respond as soon as possible to ensure its right to participate. If your company does miss the deadline to respond to a notice, your company may still be able to enter the SOS VDA Program if an audit notice has not yet been issued.
To learn more about the Delaware VDA invitations, or for other unclaimed property questions, reach out to a Baker Tilly unclaimed property specialist for guidance and assistance.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
