Exactly two weeks after introduction, Delaware’s major unclaimed property overhaul bill – SB 13 – passed both the Senate and the House of Delaware’s General Assembly on January 26.  The bill is now on the desk of newly inaugurated Governor Carney and is awaiting signature.  We have previously addressed some of the significant features of SB 13 here.  To summarize, SB 13 represents a complete rewrite of the Delaware Escheats Law in reaction to the Temple-Inland decision and other recent unclaimed property developments.  Although SB 13 is inspired by and based in part on the new 2016 Uniform Unclaimed Property Act, there are many significant departures from that act.  SB 13 also preserves a number of existing features in the Escheats Law and thus is not a total departure.

The enacted version of SB 13 included a handful of changes made via a Senate amendment.  Most notably, as compared with the introduced version, the timing is changed for a holder under audit to opt into the expedited review process.  Instead of July 1, 2017, the deadline is now within 60 days of the Department of Finance’s adoption of estimation regulations.  It appears that the Senate intended to apply this same timing for opting into the Secretary of State’s VDA program; however, the bill includes reference to both July 1, 2017 and within 60 days of adoption of estimation regulations, so it is not clear which applies.  Presumably this was an error in drafting and the intent is that the same timing applies to opting into both the expedited review and the VDA program.

Some of the additional changes made by the amendment are as follows:

• “Virtual currency” is removed from the list of escheatable property.
• The escheatable amount of a stored-value card or gift card is now simply the “amount representing the maximum cost to the issuer of the merchandise, goods, or services represented by the card.” This now closely tracks the language related to the escheatable portion of unused gift certificate balances under the existing Escheats Law provision.
• A retirement account is now presumed abandoned upon the earlier of (a) 3 years after the owner’s last indication of interest in the account following the date specified in federal income tax laws by which distribution of the property must begin in order to avoid a tax penalty, or (b) 3 years after knowledge of the death of the account owner that has been confirmed by the holder in its ordinary course of business, unless a beneficiary has indicated an interest in the account within 3 years after the date of death. (New language underlined.)

Assuming SB 13 is signed into law by the governor (which is the expectation), the next step for the state would appear to be promulgating the required estimation regulations, as provided by new section 1176(b).  That section requires the Secretary of Finance, in consultation with the Secretary of State, on or before July 1, 2017, to “promulgate regulations regarding the method of estimation to create consistency in any examination or voluntary disclosure.  These regulations must include permissible base periods, items to be excluded from the estimation calculation, aging criteria for outstanding and voided checks, and the definition of what constitutes complete and researchable records.”  The substance of these regulations will be crucial in informing holders that are under audit regarding their next course of action, and we will be monitoring this process closely.

Given that the bill is now final and awaiting signature, holders under audit should begin planning their next course of action and considering all available options as they await the promulgation of the estimation regulations.  All holders, regardless of whether they are under audit, should also review the new provisions and determine the extent to which their internal unclaimed property compliance function needs to be brought up to date.

Stay tuned for A&B’s comprehensive analysis of SB 13.

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