Analysis: Will the Supreme Court put the brakes on Delaware’s unclaimed property windfall?

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Based on coverage from Bloomberg Tax, (paywall), things aren’t going well for Delaware’s unclaimed property practices in arguments before the  U.S. Supreme Court. Coverage points to at least some of the justices not buying into the state’s arguments.

At stake, in a  case that has received little attention,  is some of the nearly half a billion dollars a year windfall the state receives from unclaimed property.

A majority of U.S.  states have filed a suit that has been moving through the courts over the issue of whether the First State can snap up unclaimed funds from MoneyGram rather than leave the process to the state where the transaction took place. 

States argue that Moneygram’s money order drafts, which you can get at grocery stores and other locations, amount to checks presumably not covered by a federal statute.

Delaware relies on federal legislation that was designed to ensure that larger states with more resources did not snap up the unclaimed funds, leaving smaller fry at a disadvantage.

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Delaware, skilled at getting money from outside its borders, has a well-oiled machine used in acquiring those funds since many of the nation’s largest companies are incorporated here. 

Companies have taken aim at Delaware’s practices, particularly its estimates of unclaimed funds.

This time around, the state may face an uphill battle, especially after a special master appointed by a Court of Appeals judge recommended that the MoneyGram funds be claimed by the state where the transaction originated.

In the past legislative session, the governor and the Democratic majority in both houses stopped short of following other states in cutting taxes.

While prospects of a future economic downturn were cited, looming in the background was the unclaimed funds issue.

In the meantime, Delaware is going the extra mile in getting unclaimed property payments to those where identities can be easily traced.

 It is now sending checks minus the level of paperwork formerly required.

Delaware could also take the added step in dealing with lazy companies that could easily issue small checks from overpayments but instead throw the money into the unclaimed pot. – Doug Rainey, chief content officer.

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