Delaware officials present updated corporate franchise numbers for the first time in 2 years

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The Delaware Economic and Financial Advisory Council approved budget estimates Monday that give state lawmakers nearly $200 million more to spend in fiscal year 2027.

That amount is an upward revision from March’s meeting. State Sen. Trey Paradee, D-Dover and legislative head budget writer, started to immediately dampen expectations that the Joint Finance Committee would add a bunch of additional spending to the state’s budget.

“Obviously, we had a lot of additional revenue show up this year,” said Paradee, who also sits on DEFAC. “All that revenue is not necessarily sustainable, and we just have to be very careful not to build a lot of recurring expenditures into the budget. That being said, I think we have the opportunity to do some critical one-time investments.”

Senate Minority Leader Brian Pettyjohn, R-Georgetown, said he agreed with taking a measured approach to spending this year, despite the windfall.

“I don’t want us to start to grow the budget for when we do have that downturn and have some of those out years where revenues are going to be low,” he said. “It’s encouraging, but I don’t think we’re necessarily out of the woods.”

Meyer officials give first corporate franchise revenue update in 2 years

But the public reveal of updated corporate franchise numbers stole the show for the second meeting in a row. The Delaware Department of State had not supplied the public with new numbers since May 2024.

The lack of data on corporate franchise tax revenue at March’s DEFAC meeting alarmed some current and former members, including Mike Houghton, a former chairman. Days after WHYY News’ exclusive reporting on Houghton’s questions, Gov. Matt Meyer fired him from DEFAC. That led some lawmakers to express concern that asking tough questions of the Meyer administration could lead to political consequences.

The corporate franchise tax accounts for nearly a third of Delaware’s budget and is the state’s second-largest revenue source, after personal income tax. It’s an annual fee that businesses pay to incorporate in the state. Large corporations are where the state really makes its money.

The tax is calculated using either a shares or assets method, with a maximum of $200,000, unless the company is a large corporate filer, in which case the fee rises to $250,000 a year. The payments are due by March 1.

Limited liability corporations, general partnerships and limited partnerships pay a flat $300 fee by June 1.

Department of State boasts about boost in new, total business entities

Delaware Secretary of State Charuni Patibanda-Sanchez highlighted new business entities rising by about 15% and the total number of entities increasing by 6% in calendar year 2025, compared with the previous year.

The Meyer administration has touted the number of business entities formed in Delaware rising by 100,000 in 2025. According to data provided at Monday’s council meeting, the state has largely added new LLCs and limited partnerships over the past calendar year. LLCs and LPs increased by over 130,000, while an additional 24,000 corporations formed in Delaware.

According to the state department, corporate franchise revenue is $9 million higher than in March, and it rose 1% compared with fiscal 2025 actual collections. DEFAC is projecting a $24 million increase in revenue from limited liability companies since March, an increase of 10% over fiscal 2025.

Corporate franchise tax revenue for fiscal year 2026 is projected at $2.1 billion. Similar to March, officials gave no growth projection for fiscal years 2027 and 2028.

Debate continues over lack of March franchise data

During a presentation on the corporate franchise, Patibanda-Sanchez reiterated the administration’s position that the lack of revenue data provided in March was consistent with the past three years and chided those for sharing “conjecture, misinformation and exaggeration.”

“The impact those types of statements have can ripple far beyond this room, and at a time when, in reality, we have turned a corner and are proving to the world that Delaware is rowing in one direction,” she said. “It is critical that when we speak about the franchise, Delaware speaks in one informed voice.”

However, some long-time former members of DEFAC have called the dearth of information on corporate franchise tax revenue “unusual” and have pointed to 2022 as an example where some revenue data was presented at the March meeting.

Former Secretary of Finance Rick Geisenberger appeared to push back on Patibanda-Sanchez’s assertions. Although he said he was cutting his public comments short in light of corrections made to the state’s incorporation forecast.

“The need for these adjustments were apparent to many longtime DEFAC observers as early as December and certainly in March based upon publicly available data,” he said.

Geisenberger also voiced concerns over corporate franchise tax collections being a lagging indicator.

“It is totally unprecedented to have back-to-back essentially flat revenue growth when domestic equity markets are as strong as they’ve been the past two years,” he said. “I’m glad this body is asking probing and perhaps even uncomfortable questions and that the secretary is studying the drivers.”

Delaware lawmakers are currently pushing legislation to codify DEFAC into law. State Sen. Paradee said Giesenberger’s comments about the independence of DEFAC were “on point.”

“This is not supposed to be a rubber stamp for the Meyer administration or any other administration, and I think that anyone who is a member of this committee should be able to come here and be able to speak freely without fear that they’re going to be terminated the next day because they somehow offended the governor or the secretary of state,” he said.

The bipartisan legislation putting DEFAC into the state code passed both chambers and is headed to Meyer’s desk.