The case is: Temple-Inland, Inc. v. Cook, (D. Del. June 28, 2016)
The federal district court in Delaware concluded that actions by Delaware—while not singularly leading to the due process violation—in combination led to the violation. Specifically, the court found that Delaware waited 22 years to audit the holder; exploited loopholes in the statute of limitations; failed to notify holders of the need to maintain unclaimed property records; failed to articulate a purpose for the unclaimed property law other than raising revenue; employed a flawed estimation method that negatively affected the holder; and subjected the holder to multiple liability. In the court’s view, Delaware “…engaged in a game of ‘gotcha’ that shocks the conscience.”
The court’s decision did not include any remedy for the state’s violation that would have an immediate impact on Delaware’s estimation techniques. However, the case remains one to watch because the ultimate decision(s) made by the court and/or by Delaware may have a implications for the state’s reach in terms of audit assessments of other companies in the future.
Read a July 2016 report [PDF 140 KB] prepared by KPMG’s State and Local Tax practice: Combination of Several Aspects of Delaware’s Unclaimed Property Audit Process, Including the Estimation Methodology, Violates a Holder’s Substantive Due Process
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.