Onerous unclaimed property audits and vexing compliance issues will continue to challenge companies in a wide range of industries in 2018. Even with the robust economy, new federal tax provisions will push states to view escheat as an important source of revenue and contingent fee auditors will do their part to broaden the scope of escheat laws. Legislation enacted in 2017 has rewritten some states’ rules in this already uncertain area, and 2018 promises to be another year of rapidly evolving standards and ongoing disputes. Companies under audit confront difficult choices while those companies not (yet) under audit face an uncertain risk and compliance landscape.
Here are five key developments to watch in 2018.
1. Rapidly Evolving State Unclaimed Property Laws. State legislatures were extremely active on unclaimed property issues in 2017 and more legislative changes are expected in 2018. Following the promulgation of a new uniform act for unclaimed property in 2016, four states (Delaware, Illinois, Tennessee, and Utah) enacted wholesale replacements to their statutes in 2017 based in part on the new model. Already for 2018, Nebraska, Washington, Minnesota, and the District of Columbia are considering enacting the new uniform act, and proposed unclaimed property legislation is under discussion in Maine and Maryland. Other states are considering proposed legislation and/or regulations focused on particular issues, including Ohio (proposed legislation on stored value cards), New Jersey (proposed regulations on stored value cards), Wisconsin (proposed legislation on contingency fee auditors and life insurance), and Indiana (proposed legislation on time deposits).
Holders should be prepared for continued uncertainty and rapid changes in the laws in this area.
2. Delaware Again on the Move. After a period of relative calm for Delaware audits in 2017—during which Delaware overhauled its unclaimed property statute and adopted new audit regulations—Delaware is again pushing ahead with active unclaimed property enforcement. In late 2017, the Delaware Secretary of State began sending several rounds of notices to non-compliant holders threatening them with an audit if they do not enroll in the state’s voluntary disclosure agreement (VDA) program. Because Delaware law no longer permits the state to initiate audits without first giving a company the opportunity to enter into the VDA program,1 the notices from the Secretary of State are the first step for Delaware to start new rounds of audits. The short deadline to respond to the VDA notice (60 days from mailing) gives companies limited time to consider their options upon receipt of a notice. (In contrast, other states that send similar VDA notices typically give companies more time to elect to enter into a VDA.) Companies that receive a VDA notice but do not enroll in the Delaware VDA program should expect an...
