Delaware Practice and Procedure
Delaware matters to companies that have never set foot in it, because unclaimed property follows the state of incorporation whenever the owner's address is unknown, and Delaware is the state of incorporation for much of American business. Its enforcement runs through an unusual architecture: a Secretary of State letter offering voluntary disclosure, a 90 day clock, and a referral to examination for anyone who lets the clock run. This hub collects the questions that recur when that letter arrives.
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What does Delaware's 90-day unclaimed property letter mean?Twice a year, Delaware's Secretary of State mails a wave of letters inviting companies to enter the state's unclaimed property voluntary disclosure program. The letter reads like an invitation and operates like an ultimatum, because the statute behind it leaves no third path: a holder that does not deliver its notice of intent to enter the program within 90 days of the request being delivered shall be referred to the State Escheator for examination. The word is shall. The choice the letter actually presents is between a self-directed review with interest and penalty relief at the end, and a multi-year examination conducted by the state's outside audit firms with other states joined and no waiver waiting. Companies discard these letters with some regularity, usually on the theory that they have no unclaimed property, and the referral that follows is automatic. What the 90 days is for is not deciding whether to respond; it is for the preliminary scoping that lets the company enter the program with its eyes open.
What happens in a Delaware unclaimed property audit?A Delaware unclaimed property examination is unlike any tax audit a company has been through. It is typically conducted by an outside audit firm retained by the state, other states commonly join the same engagement, it routinely runs three to seven years, and it reaches back a decade. The lever that makes it expensive is estimation: where the holder cannot produce records for the lookback years, the State Escheator is authorized to determine the liability by reasonable estimation, and estimated property, carrying no owner address by definition, defaults to the state of incorporation under the second priority rule. For the large population of companies incorporated in Delaware, that combination converts missing records into Delaware liability. The current statute is the product of a constitutional collision: a federal court found the state's prior practices shocked the conscience, and the legislature responded in 2017 with a ten-year lookback, a record retention rule, and mandated estimation regulations. The examination that arrives today operates inside those limits, and a holder that knows where the limits sit defends from much better ground.