Richards Layton & Finger
 

Delaware Softens Unclaimed Property Audit Posture

July 2015

In the two decades subsequent to the United States Supreme Court decision in Delaware v. New York, Delaware maintained what was generally recognized as the broadest and most aggressive abandoned and unclaimed property audit program in the country. In Delaware v. New York, the United States Supreme Court confirmed the state of incorporation as the second priority state as it relates to state’s claims to escheat dormant unclaimed property held by a corporate holder. Thus, in the case of dormant unclaimed property held by a Delaware incorporated holder for which such holder does not have a last known address for the rightful owner on its books and records, Delaware is the state with the highest claim to escheat and take possession of such property. As Delaware remains the preeminent state for incorporation, escheat has not surprisingly become a significant source of funds to Delaware.

According to the most recent projections by the Delaware Economic Financial Advisory Committee (DEFAC), in the fiscal year running from July 1, 2015, to June 30, 2016, Delaware is expected to collect approximately $475 million of unclaimed property. This represents the third-largest source of state revenues to Delaware, behind only corporate franchise tax and personal income tax. For the upcoming fiscal year, unclaimed property collections represent approximately 13 percent of all Delaware revenues collected. While Delaware remains legally obligated to return all dormant unclaimed property that it collects to the rightful owner, in actuality only a small percentage of collected property is returned to the rightful owner; thus, unclaimed property serves as a source of revenue to the Delaware general fund.

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