ESCHEAT MAKING HEADLINES AGAIN
by James DeChene
This week the News Journal ran a front page article highlighting a lawsuit brought by the state of Pennsylvania against the state of Delaware citing Delaware improperly collected unclaimed property (also known as escheat) due to be returned to Pennsylvania citizens. As its longstanding policy, Delaware claims it is entitled to collect unclaimed property because the company in question is incorporated in Delaware.
This marks the third in a line of lawsuits brought against Delaware in the last year regarding Delaware’s collection of unclaimed property—currently a $450 million plus revenue item for the state and representing almost 15% of the overall budget. Last year, with input from the State Chamber and its members, a taskforce co-chaired by Sen. Bryan Townsend and Rep. Bryon Short made recommendations to modify how the state handles escheat by clarifying the process and limiting the look-back period.
During the meetings of the DEFAC Taskforce on Revenues, the topic of escheat was highlighted as a volatile source of revenue, meaning not only is it not a reliable long-term source of income, but can suffer adverse effects (in this case due to pending lawsuits) in the near future as well. Currently there is no budget plan in place to account for what would happen should it be ruled the state of Delaware is no longer entitled to collect escheat as a revenue source.
In the FY16 budget debate there was much controversy and acrimony over revenue and spending that amounted for 1% of the budget, or about $40 million. The Delaware State Chamber of Commerce message on this issue is clear: the state should be prepared for a world in which close to 15% of its budget revenue is substantially lowered, or in the worst case, eliminated.
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