Gov. Jack Markell, D-Delaware, signed legislation Wednesday that aims to incentivize new investment and job creation in the state by changing tax laws.
“Other states made improvements that made the corporate income tax in Delaware not as favorable, and we had to change that and make it more favorable,” Markell said.
“I think when businesses make their decisions about where to locate they have lots of different things they factor….But taxes are certainly on that list, and what this does is remove the disadvantage they had before. “
The Delaware Competes Act modifies the way corporate income tax is calculated to ensure companies don’t pay more for decisions to hire and expand in the state, and to adjust filing requirements that could be a burden to small businesses.
Prior to the new law, payroll, property holdings and total sales were used to determine what portion of a company’s total income would be attributed to Delaware for tax purposes. Now only sales will be factored into the calculation, which means companies will not be penalized for adding payroll or property in the state.
The bill also intends to make the filing process for small businesses easier, and reduce the possibility of receiving penalties for tax filing errors.
Previously, businesses were required to make payments totaling 70 percent of their estimated total tax for the year by June 1st. The new law allows small companies to file 25 percent estimates each quarter, leveling out the payments throughout the course of the year.
The legislation also adjusts the threshold for the safe harbor from penalties for incorrect estimates. By raising the threshold for this safe harbor and indexing it to inflation, small companies will remain eligible for it.
The threshold for qualification to report gross receipts data quarterly instead of monthly has also been adjusted, so businesses won’t need to go through the reporting process as often as they currently do.