TAX INFORMATION
Corporate Income Tax Rate
Gross Receipts Tax Rates
Property Taxes
Tax Incentives
Corporate
Gross Receipt
Public
Utilities
Targeted
Area
Green
Industries
Brownfield
Facility Credit
How to
Apply for Tax Incentives
Neighborhood Assistance Act
Corporate Income Tax Rate
The tax rate is 8.7% on net income. Taxes are not paid on interest from United States or State of Delaware obligations or subdivisions of either, nor on gains from the sale of United States or Delaware securities. Taxes are not paid on dividends of foreign corporations that qualify for, and claim, foreign tax credit on federal returns. Investment and holding companies maintaining and managing intangible investments, and collecting and distributing income from such investments or from tangible property outside Delaware, are exempt from State corporate income tax.
Income from interest, rents and royalties, patent and copyright royalties, and gains and losses from the disposition of real property is allocated directly to the states where the property is physically located or where the transaction took place, reduced by applicable expenses.
For those businesses which operate interstate, unallocated corporate income is apportioned on an equally weighted three-factor formula that averages the ratios of: (1) Delaware property to total property, (2) Delaware wages to total wages, and (3) Delaware gross receipts to total gross receipts. The apportionment formula is applied to a company's entire taxable income, excluding allocated and exempt income.
Partnerships, sole proprietorships and shareholders of S Corporations are not subject to State corporate income taxes. Individuals carrying on business as partners, sole proprietors or who are shareholders of S Corporations are liable for personal income taxes imposed by the State only on their proportionate share of partnership, proprietorship or S Corporate income. The business may be subject to occupational and/or business license fees, as well as a gross receipt tax on sales/services within Delaware.
Corporate Income Tax Credits
Targeted Industry Tax Incentives
Corporate income tax credits and gross receipts tax reductions are available to:(a) manufacturers; (b) wholesalers; (c) laboratories or similar facilities used for scientific, agricultural or industrial research, development or testing; (d) computer processing services; (e) engineering services; (f) consumer credit reporting services; (g) aviation services; (h) wholesaler of computer software, (i) telecommunication services, (j) any combination of these activities and (k) the administration, management or support operations including marketing required for any of these activities.
Tax Credit Application
Expansions With Employment
The program requires that a taxpayer in a "targeted industry" invest a minimum of $200,000 in a new or expanded facility and hire a minimum of five new employees. Beginning January 1, 1997, the program provides credits of $400 for each new qualified employee and $400 for each $100,000 investment. During the ten-year life of credits, credits may not exceed 50 percent of the company's pre-credit tax liability in any one year. Unused credits may be carried forward for ten years.
Expansions Without Employment
Effective January 1, 1992, any taxpayer engaging in the activities of manufacturing or wholesaling, whose investment in the new or expanded facility equals or exceeds the greater of: (a) $1 million or (b) 15% of the unadjusted basis of the facility, is eligible for corporate income tax credits. The amount of the credit is equal to 75% of the credit described above, subject to the carry-over provisions, and further limited to a maximum lifetime credit of $500,000. In order to qualify for this credit, the employer must maintain employment at the expanded facility equal to 85% of the wages paid during the previous year.
Replacement Facilities
Effective for facilities placed in service after July 1, 1992, investment in replacement facilities are considered qualified investment for the corporate credits and license gross receipt reductions to the extent that the investment in the replacement facility exceeds the greater of: (1) 150% of the unadjusted cost basis of the facility which is being replaced or (2) 100% of the market value of the facility being replaced.
Green Industries
Effective for tax years beginning after December 31, 1991 and before January 1, 2007, any manufacturer may be entitled to claim credits against the Delaware corporate income tax in the amount of $250 ($400 effective 1/1/97. In order to qualify, the manufacturer must reduce the amount of waste released from their manufacturing process by 10% or use at least 25% of recycled materials in their manufacturing process. Any corporation may be entitled to claim credits against the Delaware corporate income tax if the corporation is engaged in the business of the processing and resale of materials removed from the Delaware solid waste stream or engaged in the business of the collection of materials for recycling and the distribution of recycled materials.
Brownfield Facility Credit
Any taxpayer that meets the qualification for a facility placed in service after June 30, 1995 and locates the facility on a "brownfield" site may be eligible for a credit against the Delaware corporate income tax. The facility must be placed in service after June 30, 1995 and before January 1, 2007.
A "brownfield" is defined as a vacant or unoccupied site that has been environmentally contaminated by commercial or industrial activity as verified by the Department of Natural Resources and Environmental Control. A "qualified facility" is any business, trade, commerce, profession or vocation carried on or in connection with the "brownfield" site. The amount of the investment in this facility shall include all amounts expended by the taxpayer for environmental investigation and remediation of the "brownfield".
Any corporate taxpayer hiring new permanent and full time employees at a qualified "brownfield" site is allowed a credit equal to the sum of $650 times the number of qualified employees, plus $650 times each $100,000 (or major fraction thereof) of qualified facility investment.
If the "brownfield" site is located in a targeted area, the credits are increased to $900 times the number of qualified employees plus $900 times each $100,000 unit of investment.
Targeted Area Tax Credits
Corporate Income Tax Credits
Firms which qualify for targeted industry credits and locate in a targeted area qualify for corporate income tax credits of $650 for each new employee and $650 for each new $100,000 investment. Targeted areas are defined as: (a) real property that is owned by any level of government or any of their agencies; (b) real property owned by a non-profit organization which is organized and operated solely for the purpose of fostering economic development; (c) real property which has been approved as a Delaware Foreign Trade Zone and (d) 30 targeted Census tracts throughout the State. To veiw the Targeted Area Tax areas please click here(Contact the Division of Revenue to determine if your business is located in a targeted census tract.)
How to Apply for the Tax Incentives
Before any corporate income tax credits or license gross receipts reductions can be taken for the activities described above, the business must apply to the Division of Revenue by completing Form 402AP, Application for New Business Facility Tax Credits. The Division of Revenue will review the application and arrange for a site visit of the facility if necessary.
If the facility is approved, Form 1100CR, Worksheet for Credit for Approved New Business Facilities, will be used to take the corporate income tax credits and/or Form 402LTR, Computation Schedule for Claiming License Tax Reduction for Approved New Business Facility Gross Receipts, to take the reduction in license gross receipts taxes. All of the necessary forms are available at the Division of Revenue.
Neighborhood Assistance Act
The Neighborhood Assistance Act of 1999 encourages business firms paying Delaware corporate tax to invest in neighborhoods and communities considered impoverished under the Act by offering a tax credit to the corporation.
If a business firm invests in an impoverished community either directly by providing services or projects to low-income individuals in an impoverished area, or indirectly by contributing money or goods and services to a neighborhood organization that provides services in this community, then it may be eligible for a tax credit of up to 50% of the investment or donation up to a maximum of $100,000.
Total tax credits available for the State’s fiscal year are $500,000.
Tax credits are available through a Delaware Economic Development Office application and approval process
For more information please click here
Public Utility Tax Rebates
Firms meeting the criteria for targeted industry tax credits are eligible for a rebate of 50% of the public utilities tax imposed on new or increased consumption of gas and electricity for five years. The public utilities tax rate is 4.25%.
The utility tax on the consumption of electric by licensed manufacturers and food or agribusiness processors is reduced from 4.25% to 2%. Additionally, electric consumed in the manufacture of automobiles is exempt from the utility tax.
Gross Receipt Taxes and License Fees
Most occupations and businesses require the purchase of a license in order to operate legally in Delaware. Although license fees are minimal, several types of businesses, including those listed below, are required to pay a gross receipts tax in addition to the business license fees. Gross receipts tax information for types of businesses other than those listed may be obtained from the Delaware Economic Development Office.
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Manufacturers - $75 annual
fee for each place of business, plus a tax of 0.180%
(effective January 1, 2000) on the gross receipts
for all goods manufactured in Delaware, regardless
of the location of sale. In computing monthly gross
receipts, the first $1 million in receipts are not
subject to taxation.
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Wholesalers - $75 annual
fee for each place of business, plus a tax of 0.384%
on the gross receipts of all goods physically delivered
within Delaware to the purchaser. In computing monthly
gross receipts, the first $50,000, in receipts are
not taxable. Manufacturers that also wholesale their
products are subject to both the manufacturing and
wholesale tax on gross receipts.
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Retailers - $75 annual
fee, plus $25 for each separate branch or additional
business location. Each retailer pays an additional
tax of 0.720% on the aggregate receipts in excess
of $50,000 per month.
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Restaurants - $75 annual
fee, plus $25 for each separate branch or location,
plus an additional fee of 0.624% on aggregate receipts
in excess of $50,000 per month.
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Food Processors - $75
annual fee for each place of business, plus a tax
of 0.192% on gross receipts, in excess of $50,000
per month, from all goods sold within Delaware.
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Petroleum Products Wholesalers
- $75 annual fee for each place of business, plus
0.9% (Hazardous Substances Cleanup Tax) and 0.384%
on aggregate receipts in excess of $50,000 per month.
Wholesalers are also subject to a surtax of 0.24%
(.0024) on the sale of petroleum products.
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Petroleum Products Retailers
- $75 annual fee for each place of business, plus
additional fees of 0.9% (Hazardous Substances Cleanup
Tax) and 0.72% on aggregate receipts in excess of
$50,000 per month. (Retailers are exempt from 0.9%
and 0.72% tax if the Hazardous Substances Cleanup
Tax was paid to their supplier.)
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Occupational/Professional/General
Services - $75 annual fee for first location
and $25 for each additional location for most, plus
an additional fee of 0.384% on aggregate receipts
in excess of $50,000 per month.
Gross Receipts Tax Reductions
In addition to the corporate income tax credits, qualifying firms will not be subject to gross receipts taxes for the first five years and will then have these gross receipts taxes reduced on a declining scale for a period of ten years beginning with a 90% reduction on the sixth year and ending with a 5% reduction the fifteenth year.
Commercial, Retail Business Tax Incentives
Selected commercial and retail businesses which locate in one of the 30 targeted Census Tracts and meet the minimum investment and employment criteria qualify for corporate income tax credits of $400 for each new qualified employee and $400 for each $100,000 investment. These businesses also qualify for the ten-year reduction in gross receipts taxes.
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Years from start-up
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Reduction in gross receipts tax
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1
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90%
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2
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80%
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3
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70%
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4
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60%
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5
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50%
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6
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40%
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7
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30%
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8
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20%
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9
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10%
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10
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5%
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Over 10
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0%
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Real Property Taxes
County and municipal governments and school districts are financed in part through real property tax receipts. Real estate is subject to county property taxes, school district property taxes, vocational school district taxes, and if located within an incorporated area, municipal property taxes. There is no State-level tax on real or personal property. The total property tax burden depends on the tax rate, the property assessment, and the assessment ratio. To view detailed property tax information for Kent County, New Castle County and Sussex County please click on the county name. The Delaware Economic Development Office can provide property tax information for all geographic areas within the State.
Personal Income Taxes
State personal income taxes for residents are assessed on Delaware taxable income. Delaware taxable income equals Delaware adjusted gross income (AGI) minus standard or itemized deductions. The starting point in calculating Delaware adjusted gross income is federal AGI. To federal AGI, taxpayers must add back income derived from securities issued by states or political subdivisions other than Delaware or its subdivisions. Taxpayers age 60 and over are entitled to exclude from taxable income up to $12,500 of the aggregate amount received from the following sources: dividends, interest, rents, capital gains, employer-provided pensions, and qualified retirement plans (e.g., IRA's & 401(k) plants). Nonresidents are taxed on the portion of tax attributable to income derived from sources within Delaware. The current State tax rate schedule is graduated and includes seven rate brackets. Each taxpayer is allowed $110 in tax credits times the number of personal exemptions allowed for federal purposes plus those allowed to persons age 60 and over.
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Delaware Taxable Income
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2002 Tax Liability
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$ 0 - $ 2,000
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$ 0.00% of income
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2,000 - 5,000
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0.00 + 2.20% of income over $ 2,000
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5,000 - 10,000
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66.00 + 3.90% of income over $ 5,000
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10,000 - 20,000
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261.00 + 4.80% of income over $10,000
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20,000 - 25,000
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741.00 + 5.20% of income over $20,000
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25,000 - 60,000
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1,001.00 + 5.55% of income over $25,000
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$60,000 and over
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2,943.50 + 5.95% of income over $60,000
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Source: Delaware Division of Revenue, 2002.
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