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Who Must File The Delaware Annual Franchise Tax Report Due March 1?

All active non-exempt domestic corporations incorporated in Delaware are required to file an annual franchise tax report and pay franchise tax electronically with the Secretary of State on or before March 1st1. The franchise tax is separate from state income tax and is not tax imposed on a franchise; it is tax for the privilege of conducting business and incorporating in Delaware. Non-exempt domestic corporations are subject to franchise tax regardless of income earned whereas income tax is based on a corporation’s profit.

How Much Does Corporations Have to Pay?

Exempt domestic corporations must pay a filing fee of $25 but is not required to pay franchise tax. Non-exempt domestic corporations must pay a filing fee of $50 and calculate the franchise tax using either of the following methods.

  1. Authorized Shares Method2 – This method is used for shares without par value. The amount of tax due is based on the corporation’s number of authorized shares.
    • 1 – 5,000 shares $175 (minimum)
    • 5,001 – 10,000 shares $250
    • Each additional 10,000 shares or portion thereof add $85.
  1. Assumed Par Value Capital Method – The tax rate under this method is $400 per $1 million (or portion thereof) of assumed par value capital. The minimum tax is $400, and the following information is required to calculate the assumed par value capital.
    • Total number of authorized shares for each class of stock and their respective par value
    • Total number of issued shares
    • Total gross assets

Under both methods, the maximum tax is $200,000 unless the corporation is identified as a Large Corporate Filer (flat fee of $250,000).

How Does a Corporation Qualify as a Large Corporate Filer?

The corporation must meet all of the following criteria.

  1. Class or series of stock listed on the national securities exchange
  2. Consolidated annual gross revenues equal to or greater than $750,000,000 or consolidated assets equal to or greater than $750,000,000
  3. Consolidated annual gross revenues not less than $250,000,000 and consolidated assets not less than $250,000,000

Who Must Pay Estimated Payments?

Quarterly installments are required for taxpayers who owes $5,000 or more. Estimated payments are due on the 1st of June, September, December, and the remainder on March.

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1For foreign corporations, annual reports and $125 filing fee are due on or before June 1st. For domestic/foreign LLC, LP and GP who are formed or registered in Delaware are not required to file an annual report but must pay $300 for franchise tax on or before June 1st.

2The minimum franchise tax for domestic non-stock non-exempt corporations is $175.

Article by Zaid Butt, Director 

Zaid Butt
Author: Zaid Butt
Zaid is a certified public accountant with significant tax compliance and consulting experience in diverse industries, including private equity, software, construction, manufacturing, retail, and financial services.