Review Panel Continues to Look into Delaware Tax Structure - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

Review Panel Continues to Look into Delaware Tax Structure

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NEW CASTLE, Del. (AP) - Delaware can't continue to rely on abandoned property collections as a key source of state revenue to the extent it has in the past, according to members of a panel exploring how to make the state's revenue portfolio less unpredictable and more reflective of economic conditions.

Members of the Structural Revenue Review Committee took an in-depth look at the abandoned property, or escheat, system on Friday as they face an April deadline for submitting a report.

Over the past 20 years, thanks in part to stepped-up enforcement, abandoned property collections have grown from about $20 million annually to more than $500 million a year.

But the volatility and uncertainty surrounding abandoned property collections, as well as pushback and lawsuits from the business community, make it an unstable and unreliable source of funds to help balance the state budget, officials said.

"I don't think the state can rely on that revenue source even to retain its current level," Secretary of State Jeffrey Bullock said after Friday's meeting.

David Gregor, deputy secretary of finance, noted that abandoned property collections have grown at an annual rate of more than 11 percent over the past 24 years.

"That's extraordinary when you think about it," he said, noting that the growth rate is 2.5 times more than that for the next closest revenue source.

As the legal or corporate home for hundreds of thousands of businesses, Delaware is allowed to take intangible assets such as dormant checking and savings accounts, uncashed checks and unclaimed dividends and stocks after a certain number of years if the owners can't be found.

"We are just in this very unique position because we're the preferred state for incorporations," Gregor said. ".... We don't apologize for that ... We're happy to have it obviously."

But corporations that are required to turn over their unclaimed property have challenged Delaware's enforcement methods, including estimating the amounts due when no actual records can be found. Meanwhile, only a fraction of companies subject to the escheat laws are complying with the reporting requirements.

Bullock noted that while increased compliance might bring in more abandoned property revenue, technology has made it easier for companies to track ownership of the assets, meaning there likely will be less for the state to claim in the future.

Meanwhile, the state also faces challenges when it comes to gambling revenue, as newer and bigger casinos in neighboring states continue to draw gamblers who used to come to Delaware's three casinos, panel members were told.

Lottery and gambling revenues contributed about $215 million to the general fund in fiscal 2014 but have declined steadily in recent years, with even more competition from other states on the horizon.

Panel members will meet again next week to begin discussing recommendations for stabilizing the state's revenue portfolio, but there's been no talk so far of instituting a sales tax.

"I think it's too far from what were accustomed to in Delaware, and I just don't think it's realistic," Bullock said.
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