Del. Code tit. 8 § 503

Current through 2024 Legislative Session Act Chapter 531

Section 503 - [See Note] Rates and computation of franchise tax

(a) All corporations accepting the provisions of the Constitution of this State and coming under Chapter 1 of this title, and all corporations which have heretofore filed or may hereafter file a certificate of incorporation under said chapter, shall pay to the Secretary of State as an annual franchise tax whichever of the applicable amounts prescribed by paragraphs (a)(1) and (a)(2) of this section is the lesser:

(1) Where a corporation that is not authorized to issue capital stock is not an exempt corporation under § 501(b) of this title, $175; where the authorized capital stock does not exceed 5,000 shares, $175; where the authorized capital stock exceeds 5,000 shares, but is not more than 10,000 shares, $250; and the further sum of $85 on each 10,000 shares or part thereof.

(2) One hundred and seventy-five dollars where the assumed no-par capital of the corporation, found in the manner provided in this paragraph, does not exceed $500,000; $250 where the assumed no-par capital exceeds $500,000 but is not more than $1,000,000; and the further sum of $85 for each $1,000,000 or part thereof of such additional assumed no-par capital.

For the purpose of computing the tax in accordance with paragraph (a)(2) of this section, the corporation's assumed no-par capital, whenever the phrase "assumed no-par capital" is used in paragraph (a)(2) of this section, shall be found by multiplying the number of authorized shares of capital stock without par value by $100.

To the amount of tax attributable to the corporation's assumed no-par capital, computed as above prescribed, add $400 for each $1,000,000 or fraction thereof in excess of $1,000,000 of an assumed par value capital, found by multiplying the number of authorized shares of capital stock having par value by the quotient resulting from dividing the amount of the total assets of the corporation, as shown in the manner hereinafter provided, by the total number of issued shares of all denominations and classes. If the quotient shall be less than the par value of any denomination or class of authorized shares having par value, the number of the shares of each class shall be multiplied by their par value for the purpose of ascertaining the assumed par value capital in respect of the shares and the number of authorized shares having a par value to be multiplied by the quotient, as aforesaid, shall be reduced by the number of the shares whose par value exceeds the quotient; and where, to determine the assumed par value capital, it is necessary to multiply a class or classes of shares by the quotient and also to multiply a class or classes of shares by the par value of the shares, the assumed par value capital of the corporation shall be the sum of the products of the multiplications. Whenever the amount of the assumed par value capital, computed as above prescribed, is less than $1,000,000, the amount of the tax attributable thereto shall be the amount that bears the same relation to $400 that the amount of the assumed par value capital bears to $1,000,000.

(b) Unless a corporation shall submit to the Secretary of State, at the time of filing its annual franchise tax report, a statement setting forth the number of shares of each class of stock actually issued, if any, and the amount of the total gross assets of the corporation, as of the nearest date on which the amount is obtainable, including in the statement its goodwill valued at the same amount at which it is valued in the books of account of the corporation, it shall pay a franchise tax for such year computed in the manner prescribed by paragraph (a)(1) of this section.

(c) Except as provided in this subsection, in no case shall the tax on any corporation for a full taxable year, computed by paragraph (a)(1) of this section be more than $200,000 nor less than $175; or computed by paragraph (a)(2) of this section be more than $200,000 nor less than $400. As of December 1 of each calendar year, the Secretary of State shall compile a list of each corporation that , as of such date, met the criteria of a large corporate filer as follows :

(1) Had a class or series of stock listed on a national securities exchange; and

(2) Reported in its financial statements prepared in accordance with United States generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) and included in its most recent annual report filed with the United States Securities and Exchange Commission or any similar agency outside the United States with responsibility for enforcing securities laws or serving as a public repository for the corporation's financial disclosures, both of the following:

a. Consolidated annual gross revenues equal to or greater than $750,000,000 or consolidated assets equal to or greater than $750,000,000; and

b. Consolidated annual gross revenues not less than $250,000,000 and consolidated assets not less than $250,000,000;

provided that if the corporation's financial statements are reported in a currency other than United States dollars, then, for purposes of measuring the amount of revenues and assets set forth therein, such amounts shall be converted into United States dollars using the applicable spot exchange rate for value established by Bloomberg as of the last day of the corporation's most recently completed fiscal year.

(3) As used in this subsection:

a. "Predecessor" means, with respect to any corporation, any other corporation or other entity whose consolidated assets and liabilities, immediately prior to a succession, are substantially the same as the consolidated assets and liabilities of such corporation immediately following such succession; and

b. "Succession" means the direct acquisition of assets and liabilities comprising a going business from a predecessor, whether by merger, consolidation, purchase or other direct transfer.

(4) Notwithstanding subsection (a) of this section and the first sentence of this subsection, for each corporation satisfying the requirements of paragraphs (c)(1) and (c)(2) of this section for a fiscal year for which its annual franchise tax would otherwise be $200,000 as computed under paragraph (a)(1) or (2) of this section (each, a "large corporate filer"), the Secretary of State shall fix the annual franchise tax for such taxable year at $250,000. If a corporation would otherwise qualify as a large corporate filer but has no filed annual report with the United States Securities and Exchange Commission (or any similar foreign agency), and became listed on a national securities exchange in connection with a succession within the taxable year, then reference must be made to the most recent annual report of the predecessor of such corporation for purposes of determining whether such corporation has satisfied the requirements of paragraphs (c)(2)a. and (c)(2)b. of this section.

Once a corporation is designated by the Secretary of State as a large corporate filer, it will be considered a large corporate filer until it submits evidence to the Secretary of State for any year in which the corporation does not meet the criteria in this subsection. Any such re-designation shall be effective as of the date the evidence of re-designation is received by the Secretary of State and will not retroactively modify the large corporate filer status of any corporation. Except as otherwise authorized by law, no large corporate filer shall be granted a refund of taxes paid due to its failure to comply with the requirements of this section.

(d) In case the corporation has not been in existence during the whole year, the amount of tax due, at the foregoing rates and as above provided, shall be prorated for the portion of the year during which the corporation was in existence.

(e) In case a corporation shall have changed during the taxable year the amount of its authorized capital stock, the total annual franchise tax payable at the foregoing rates shall be arrived at by adding together the franchise taxes calculated as above set forth as prorated for the several periods of the year during which each distinct authorized amount of capital stock was in effect. The filing of a certificate of validation pursuant to § 204 of this title shall not reduce the annual franchise tax due for any period prior to the filing of such certificate of validation and any calculation of additional annual franchise tax due for any period prior to the filing of such certificate of validation shall be calculated at the current rates in effect pursuant to this section.

(f) Every corporation which shall show on its annual franchise tax report that it has not been engaged in any of the business activities for which it was granted a certificate of incorporation, shall pay only at the rate of one half of the amount of taxes scheduled above for the portion of the year as it shall not have been so engaged and at the full rate for the remainder of the year. The Secretary of State may require the filling of a supplemental affidavit stating fully the pertinent facts upon which the claim for one-half rate is based.

(g) For the purpose of computing the taxes imposed by this section, the authorized capital stock of a corporation shall be considered to be the total number of shares which the corporation is authorized to issue, whether or not the number of shares that may be outstanding at any one time be limited to a less number.

(h) All corporations as defined in this section which are regulated investment companies as defined by § 851 of the federal Internal Revenue Code [ 26 U.S.C. § 851 ], shall pay to the Secretary of State as an annual franchise tax, a tax computed either under paragraph (a)(1) or (a)(2) of this section, or a tax at the rate of $ 400 per annum for each $1,000,000, or fraction thereof in excess of $1,000,000, of the average gross assets thereof during the taxable year, whichever be the least, provided that in no case shall the tax on any corporation for a full taxable year under this subsection be more than $ 100,000. The average assets for the purposes of this section shall be taken to be the mean of the gross assets on January 1 and December 31 of the taxable year. Any corporation electing to pay a tax under this subsection shall show on its annual franchise tax report that the corporation is a regulated investment company as above defined, and the amount of its assets on January 1 and December 31 of the taxable year, and the mean thereof. The Secretary of State may investigate the facts set forth in the report and if it should be found that the corporation so electing to pay under this subsection shall not be a regulated investment company, as above defined, shall assess upon the corporation a tax under paragraphs (a)(1) and (a)(2) of this section, whichever be the lesser.

(i) As used in subsections (a) and (b) of this section, the term "total assets" and the term "total gross assets" are identical terms and mean all assets of the corporation, net only of allowances for bad debts, accumulated depreciation, accumulated depletion, accumulated amortization of land and accumulated amortization of intangible assets.

Such total assets and total gross assets shall be those "total assets" reported to the United States on U.S. Form 1120 Schedule L, relative to the company's fiscal year ending in the calendar year prior to filing with the Secretary of State pursuant to this section. If such schedule is no longer in use, the Secretary of State shall designate a replacement. The Secretary of State may at any time require a true and correct copy of such schedule to be filed with the Secretary of State's office. If such schedule or its replacement reports on a consolidated basis, the reporting corporation shall submit to the Secretary of State the consolidating ending balance sheets which accompany such schedule as a reconciliation of its reported total assets or total gross assets to the consolidated total assets reported on the schedule.

Interests in entities which are consolidated with the reporting company shall be included within "total assets " and "total gross assets ".

8 Del. C. § 503

Amended by Laws 2021 , ch. 377, s 17, eff. 8/1/2022.

Amended by Laws 2019 , ch. 45, s 21, eff. 1/1/2019.

Amended by Laws 2017 , ch. 425, s 3, eff. 9/4/2018.

Amended by Laws 2017 , ch. 53, s 4, eff. for the tax year beginning on January 1, 2017 with the exception of the increase of $350 to $400 which shall be effective on January 1, 2018.

Amended by Laws 2017 , ch. 53, s 3, eff. 1/1/2018.

Amended by Laws 2013 , ch. 212, Secs.s 4, s 5, s 6eff. 1/1/2014.

Amended by Laws 2013 , ch. 72, s 20, eff. 4/1/2014.

21 Del. Laws, c. 166, § 4; 22 Del. Laws, c. 15, § 4; 22 Del. Laws, c. 16, § 2; 22 Del. Laws, c. 259, § 1; 24 Del. Laws, c. 47, § 1; 27 Del. Laws, c. 19, §§ 2, 3; 27 Del. Laws, c. 20, § 1; Code 1915, § 105; 35 Del. Laws, c. 5, § 4; 36 Del. Laws, c. 6, § 3; 37 Del. Laws, c. 7, § 2; Code 1935, § 98; 41 Del. Laws, c. 5, §1; 44 Del. Laws, c. 3, § 1; 48 Del. Laws, c. 355, § 1; 8 Del. C. 1953, § 503; 53 Del. Laws, c. 116; 53 Del. Laws, c. 144; 55 Del. Laws, c. 90, § 1; 57 Del. Laws, c. 150, §§ 10-12; 58 Del. Laws, c. 450, § 2; 59 Del. Laws, c. 450, § 1; 64 Del. Laws, c. 317, §2 (a)-(d); 67 Del. Laws, c. 190, §14; 68 Del. Laws, c. 81, §§1, 2; 71 Del. Laws, c. 339, § 98; 74 Del. Laws, c. 51, §11; 75 Del. Laws, c. 306, § 22; 76 Del. Laws, c. 286, §§ 2- 4; 77 Del. Laws, c. 78, §§ 57, 58; 77 Del. Laws, c. 216, § 1; 77 Del. Laws, c. 253, § 69.;