United States: Delaware (Re)Proposes Unclaimed Property Reporting And Examination Manual Regulation

On August 1, the Delaware Department of Finance (DOF) published a revised version of its proposed reporting and examination manual regulation addressing audit procedures and method of estimation. See 21 DE Reg 123 (Aug. 1, 2017). The revised proposed regulation is substantially similar to the first draft proposed earlier this year, but contains a dozen or so notable differences (described in more detail below). Because the former draft of the regulation was never finalized, the 60-day time period for eligible holders to convert to the Voluntary Disclosure Agreement (VDA) Program (administered by the Secretary of State) or an expedited audit has not started to run, and will not commence until the final DOF regulation is published in the monthly Register of Regulations. Based on the fact that the DOF is accepted comments through August 31, 2017 (and likely needs at least a month to take them into consideration), the final regulation is not expected to be published before October 1, 2017, giving eligible holders at least three more months before the looming conversion deadline.

Our summary of the initial regulations proposed by the DOF and Secretary of State (SOS) on April 1, 2017 is available here. The final SOS VDA estimation regulation was published on July 1, 2017, without substantive amendments. See 21 DE Reg 50 (July 1, 2017). Below is a brief summary of the key differences between the old and new proposed DOF reporting and examination manual that holder's should be aware of.

12 Key Differences

  1. Language was added to clarify that other reasonable alternative calculations of "gift card maximum cost" may be proposed by a holder and will be considered by the DOF on a case-by-case basis.
  2. Indication of owner interest in property provisions expanded to provide that "[p]roof to the satisfaction of the State Escheator that an Owner has had contact with a designated representative of the Holder in the period of dormancy may be considered an indication of owner interest in the property." This acknowledges that the contact need only be with the holder, not necessarily in reference to a specific piece of property.
  3. A list of records to be retained by holders showing "the date, place, and nature of the circumstances that gave rise of the property right" was added. See Sec. 2.10. While the list of records is helpful, it is still incomplete and should be expanded to include documentation of resolution of property issues such as voiding a check because services not performed. The proposed regulation also clarifies that holder's unclaimed property filing history is only required for all states if the holder is incorporated/formed in Delaware.
  4. Language was added to the Confidentiality & Nondisclosure Agreement (NDA) provisions, clarifying that a NDA is contingent upon the parties agreeing on the terms "within sixty (60) days of the date of the Notice of Examination letter." This means that the parties do not have to abide by the pre-approved State form, but must act quickly if they are going to deviate from it. The terms of the pre-approved sample NDA were also expanded to prevent the auditor from disclosing that Delaware has authorized an exam to solicit other states to join. This is an important provision that should be included in any NDA, and the DOF should be applauded for including it in their pre-approved sample.
  5. A new provision was added stating that "[u]pon request by the Holder, the State shall provide to the Holder all records of prior unclaimed property reports filed previously in the State." This is something that we have asked states to do for years, which is often met with significant resistance. It makes the most sense for states to automatically do this, and avoid the unnecessary nuisance that digging up this information puts on holders. More states should follow Delaware in explicitly acknowledging that they will provide holder reporting history upon request.
  6. Consistent with the new statutory requirement that abatement of penalties and interest must be for "good cause shown" the regulation specifies several factors that the State Escheator may consider (if applicable and without limitation) in making this determination, including: (1) whether the Holder has a significant history of filing unclaimed property reports; (2) the responsiveness of a Holder during the exam; and (3) whether the Holder used ordinary business care in its compliance efforts.
  7. In the estimation provisions, the exclusion of funds returned in the normal course of business from the population of potential unclaimed items is no longer contingent upon the funds being returned prior to the issuance of the exam notice. However, funds returned outside the normal course of business remain included in the population.
  8. The following language was stricken from the projection provisions:
    "The sole purpose of determining an estimated liability in a time period where records exist is for calculating an unclaimed property liability in years where records do not exist. The use of statistical sampling for estimation shall be used, therefore, where (a) prior approval is received by the State; and (b) records are not available and the names and address of rightful owners cannot be identified."
  9. A sample "due diligence" letter was added to the regulation to supplement the sample "remediation" letter (for sampling/estimation purposes) that was formerly included.
  10. A new provision was added that requires Delaware to "conduct periodic review of the Auditors' conduct, processes, and procedures to ensure that the Auditors are complying with security protocols, record retention and destruction requirements, and all applicable statutes and regulations."
  11. A new provision was added to provide that "[a]t the Holder's request, the State may provide a release and indemnification agreement for any categories of property where the examination is deemed to be complete." Across the country, many of the more aggressive and unreasonable states take the position that they are unable to release specific categories of property audited pursuant to a release. The DOF should be applauded for expressly acknowledging this release authority, which is necessary to prevent duplicate audits of the same property type and period. Other states are encouraged to take note and follow the DOF's lead here.
  12. A new provision on expedited examinations was added, but it lacks any meaningful guidance and appears to simply be a placeholder. Specifically, the provision states that "certain Holders may have the option of expediting the completion of a pending examination. The State shall publish a form 'Intent to Expedite Completion of Examination' which shall outline the expectations of the Holder in that circumstance." As such, the details of expedited examination process continue to remain a mystery until the form is published.

Practice Note

Any written submission in response to the revised reporting and examination manual must be received by the DOF no later than 4:00 pm EST, Thursday, August 31, 2017. Unsurprisingly, the revised DOF proposed regulation does not change basic estimation and extrapolation technique that a federal district court recently determined results in "significantly misleading results" before concluding that the method and audit techniques collectively "shock the conscience." This remains the elephant in the room. A number of other troubling provisions were retained in the most recent proposed DOF regulation, such as the express inclusion of non-domicile affiliates with no Delaware addressed property within the scope of an examination and requirement that they provide any and all records, an issue that is currently being litigated in the Marathon Petroleum case.

Given the fact that the conversion deadline is likely to be later this year, holders currently under audit are encouraged to reach out to the unclaimed property advisors now to discuss whether they are eligible and what their options are in light of the statutory and (proposed) administrative changes to the Delaware unclaimed property law.

Delaware (Re)Proposes Unclaimed Property Reporting and Examination Manual Regulation

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions