New Tax Laws Create Changes to the Delaware Franchise Tax

On July 2, 2017, the Delaware Governor signed House Bill 175, generating increases to the franchise tax. Key changes in H.B. 175 include:

• The maximum corporation franchise tax computed using either the authorized shares method or the assumed par value capital method increased to $200,000 (previously $180,000).
• The penalty for filing an annual franchise tax report after March 1 increased to $200 (previously $125).
• Under the authorized shares method, the franchise tax rate for corporations with greater than 10,000 authorized shares increased to $85 (previously $75) for each additional 10,000 shares (or fraction thereof) in excess of 10,000.
• Under the assumed par value capital method, the franchise tax rate for corporations with more than $1 million in assumed capital value increased to $85 (previously $75) for each additional $1 million (or fraction thereof) of assumed capital value.
• The assumed par value multiplier increased to $400 (previously $350).
• Corporations using the assumed par value capital method are subject to a minimum franchise tax of $400 (previously $350). The minimum franchise tax for corporations using the authorized shares method did not change and remains $175.
• Certain large, publicly traded corporations, identified by the Secretary of State, are subject to a new maximum franchise tax of $250,000.

Most changes to the fees and taxes assessed will take effect on August 1, 2017; however increases to the maximum franchise tax and the late penalty for the filing of an annual franchise tax report shall take effect for the tax year beginning January 1, 2017, and the increase of the assumed par value multiplier for calculation of the corporate franchise tax and the authorized shares multiplier for corporations with greater than 10,000 authorized shares for calculation of the corporate franchise tax shall take effect for the tax year beginning on January 1, 2018.

For questions about these law changes or other state and local tax matters, please contact us.