On April 15, 2014, Delaware Governor Jack Markell signed House Bill No. 265, as amended by House Amendment Numbers 1 and 3, into law.
The bill will be effective July 1, 2014 (although originally announced to be retroactively effective January 1, 2014) and will result in an increase to both the corporate franchise tax as well as the entity tax imposed on partnerships and limited liability companies (LLCs) organized in Delaware.
Franchise Tax for Corporations:
For filings based on the Authorized Shares Method, the franchise tax will increase as follows:
- If capital stock is 5,000 shares or less (minimum tax), increase from $75 to $175;
- If capital stock is 5,001 – 10,000 shares, increase from $150 to $250;
- The tax for each additional 10,000 shares or each additional $1 million of assumed no-par capital will remain at $75, with the maximum tax remaining at $180,000.
- If assumed no-par value is $500,000 or less, increase from $75 to $175; and
- If assumed no-par value is more than $500,000 but no more than $1 million, increase from $150 to $250.
For filings based on the Assumed Par Value Capital Method, the franchise tax is unchanged at $350 (minimum) and $180,000 (maximum).
Entity Tax for Partnerships and LLCs:
Annual taxes assessed on partnerships that have filed a statement of partnership existence, domestic and foreign limited partnerships and domestic and foreign LLCs on file with the State of Delaware will increase from $250 to $300.
For most filers, the increase will have no effect until it pays its 2014 taxes in the year 2015. However, if an entity is dissolving, converting or merging out of existence in 2014, it must pay their taxes up to the date of filing.