Two Plans Vie to Hike Delaware’s Franchise Tax

Bloomberg BNA | by Leslie A. Pappas

Statement by Rep. John Kowalko

My bill to raise the maximum corporate franchise tax, HB 102, would generate approximately $108 million or more. Basically multiplying the number of corporations that currently avail themselves of the cap times $60,000. The exact number of corporations that currently use the max cap can be attained from Delaware’s Department of State. I have already conceded that I would be willing to support the Administration’s legislation if it was filed, released from committee, and put on the floor for a vote now. I will not wait until the waning days of the session to try and guess what revenue we have secured as has historically been the case with past administrations. I will be moving forward with my legislation as soon as it gets in and out of committee hopefully shortly after the Easter break.

A group of seven Delaware lawmakers have proposed a $60,000 hike in the state’s maximum corporate franchise tax, offering an alternative plan to what Gov. John Carney (D) proposed in his fiscal year 2018 budget.

The vying proposals offer two ways for Delaware to raise revenue as the state grapples to fill an almost $400 million budget deficit.

H.B. 102, sponsored by Rep. John A. Kowalko (D), would increase the maximum annual corporation franchise tax to $240,000 from $180,000. It was introduced March 28 and assigned to the House’s revenue and finance committee.

The governor’s proposal would add a new tax tier to the system and increase the maximum tax for the first tier to $200,000 from $180,000.

The governor’s plan then creates a new second tier for public companies with greater than $750 million in revenue or assets and no less than $250 million in revenue or assets.

$116 Million in Revenue

Companies would need to meet thresholds in both categories to fall into the second tier, Doug Denison, director of community relations at the Delaware Department of State, told Bloomberg BNA in a March 31 email.

In other words, to become part of the second tier, a company with $750 million in assets also must have at least $250 million in revenue, while a company with $750 million in revenue also must have at least $250 million in assets.

Companies that fall into the second tier would pay a maximum tax of $250,000.

About 950 companies would fall into the new category, Denison said. Carney estimates his plan for the corporate franchise tax would raise an additional $116.1 million in revenue.

Kowalko’s bill, which isn’t part of the governor’s plan, didn’t offer an estimate on how much additional revenue it would raise. Kowalko didn’t immediately respond to requests for comment.

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