Delaware State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Delaware.

March 10, 2023

U.S. Supreme Court Rules Delaware Cannot Escheat Unclaimed Money Orders

Authored by: Brandon Vance and George Gonzales, MST

The U.S. Supreme Court issued a unanimous decision Delaware v. Pennsylvania and Wisconsin, ruling that Moneygram financial instruments were money orders. The issue at hand was whether the uncashed Moneygram instruments were “checks” or “money orders. ”Uncashed checks are subject to escheatment in the state where the issuer is incorporated while uncashed money orders are escheated to the state where the money order was purchased. Delaware claimed the Moneygram instruments were uncashed checks, and thus should be escheated to Delaware. However, 30 other states argued that the unclaimed property belonged to them. As this was a dispute between states, the Supreme Court agreed to hear the case as a matter of original jurisdiction.

Ultimately, The Court determined Moneygram instruments at issue were “money orders.” As such, The Court ruled the “Disposition of Abandoned Money Orders and Traveler’s Checks Act of 1974,” sources unclaimed money orders to the state where it was purchased – not the state where the issuer is incorporated.As such, these instruments are to be escheated to the state where they were purchased, and Delaware can only claim uncashed Moneygrams to the extent they were purchased in the state.

Please note that the ruling in Delaware v. Pennsylvania and Wisconsin was the first opinion authored by Justice Jackson since she was confirmed to The Court.

If you have questions about whether your business needs to escheat unclaimed property, please reach out to a member of the Withum SALT Team.

October 14, 2022

U.S. Supreme Court Hears First Unclaimed Property Case in 30 Years

Authored by: Brandon Vance and Bonnie Susmano, JD, MBA

On October 3, 2022, the U.S. Supreme Court heard its first challenge to an unclaimed property law in 30 years, six years after agreeing to listen to the challenge in the Court’s original jurisdiction. MoneyGram is a money transfer services company incorporated in Delaware. The Company maintains large balances of the money order and official checks while it waits to distribute them to the owner of the money order or check. Some money orders and checks will not be claimed within a reasonable time frame and are thus deemed uncashed instruments that are escheatable to the respective state.

Generally, unclaimed property is escheated to the state of incorporation of the holder of the liability when the address is unknown. However, not all unclaimed property follows the same rules. Money Orders follow the Disposition Act, which makes money orders escheatable to the state in which the instrument was purchased. MoneyGram believed the Disposition Act covered money orders and escheated to Delaware, its State of Incorporation because MoneyGram did not collect the address from the institutions that sold them the instruments. At issue was whether MoneyGram’s official checks are treated as money orders covered under the Disposition Act or financial instruments covered under a set of priority rules. The Supreme Court will opine whether MoneyGram was correctly escheating their official checks to Delaware. A decision is expected by June 2023. However, there is no doubt that the Supreme Court’s decision will significantly impact the treatment of financial instruments for unclaimed property purposes.