Businesses subject to the Hazardous Substance Cleanup Act (HSCA) should be aware that a new tax rate of 1.0429% will be going into effect on January 1, 2020. This will apply to the taxable gross receipts from the sale of petroleum or petroleum products. The Division of Revenue will be updating the rate in their online system before the effective date of January 1, 2020. The tax rate is currently 1.5244%, through December 31, 2019.

Legislation was passed in 2018 calling for future rate increases to be based on a lookback period. These adjustable rates cannot be lower than 0.675% or greater than 1.675%, and are calculated by multiplying 0.9% (the original rate) by a fraction – the numerator of which is $15,000,000 and the denominator of which is the total collections in the fund during the lookback period (July 1 to June 30 of the prior year). The HSCA was passed by the Delaware General Assembly in July of 1990 to ensure funding for the cleanup of facilities with a release or imminent threat of release of hazardous substances. The Department of Natural Resources and Environmental Control has identified over 700 sites in Delaware as potential hazardous substance release sites.

If you have questions about the new adjustable tax rate, please contact the Delaware Division of Revenue at (302) 577-8205.

The implementation of last year’s Tax Cuts and Jobs Act (TCJA) continues to affect many corporate taxpayers, particularly those that have filed extensions for the 2018 tax year. In Delaware, corporate income tax returns that are under extension are due on the same date as extended federal corporate income tax returns. Many taxpayer-related organizations have requested that Delaware offer relief from late-filing penalties for those corporate taxpayers who file their 2018 Delaware income tax return after the deadline, but on or before November 15. Because the Division of Revenue recognizes that some taxpayers may have trouble meeting Delaware’s extended filing deadline because the return due date coincides with the extended due date for federal returns, Delaware will be implementing a grace period for corporate taxpayers who file on or before November 15.

While the grace period should automatically eliminate the late-filing penalty for any Forms 1100 and 1100-S that are submitted on or before November 15, 2019, taxpayers should be aware that if they do receive a notice of assessment, a protest may be filed with the Tax Conferee. This should be sent via email to taxconferee@delaware.gov, or by mail, in writing, to:

Campbell Hay, Esquire
Tax Conferee
Delaware Division of Revenue
P. O. Box 8714
Wilmington, DE 19801

If you have any questions, please contact the Delaware Division of Revenue at (302) 577-8205.

Example Scam Letter April 2019

The Delaware Division of Revenue wants to alert citizens to a new taxpayer scam that is happening in Delaware. Victims may receive a letter from “The Bureau of Tax Enforcement” that threatens property seizure and wage garnishment unless they call a toll-free number to “avoid enforcement.”

“These scam mailings are designed to trick taxpayers into thinking they have received an official communication from the Division of Revenue,” warns Director Jennifer R. Hudson. The notices threaten the seizure of the taxpayer’s property if the recipient fails to make immediate payment. The scammers are accessing public records in order to include taxpayer-specific information on the notices to make them appear legitimate, and then using pressure tactics and fear to motivate the recipient into taking immediate action.

Taxpayers who think they may have received such a letter should contact the Division of Revenue at (302) 577-8200, option 3, with any questions. Taxpayers should also file a Consumer Complaint with the Delaware Department of Justice’s Consumer Protection Unit. Information about the complaint process is available at https://attorneygeneral.delaware.gov/fraud/cpu/ and the complaint form is available online – Consumer Complaint Form.

Prior to the Tax Cuts and Jobs Act (TCJA), individuals were permitted to claim an unlimited amount of state and local real property and income taxes paid as itemized deductions. Starting with tax years 2018, those deductions will be limited.

Delaware follows federal law regarding itemized deductions, and taxpayers will be entitled to an itemized deduction for state and local taxes equal to the total real property taxes and local income taxes paid – up to the maximum $10,000 (or $5,000 for married individuals filing a separate or combined separate return).

Taxpayers will continue to be allowed to claim itemized deductions on a Delaware return, even if the taxpayer has claimed the standard deduction on a federal return.

For more information, and detailed examples, the Delaware Division of Revenue has published a Technical Information Memorandum, available here: https://de.gov/tim201901.

With tax season well underway, Division of Revenue officials are noting an uptick in Delaware returns reporting overstated Delaware income tax withholding. The appropriate amount to report is limited to the total in Box 17 of the W-2 form provided by your employer (or the sum of those amounts if you have multiple employers), plus any state income tax withholding reported on a Form 1099-R.

Division of Revenue Director, Jennifer R. Hudson, Esq. noted “We are reviewing all returns that have overstated withholding, and they may be treated as fraudulent returns.”

Overstated withholding can be a sign of fraud, and returns with higher amounts than usual are being treated as suspicious. That means these returns will be pulled for review, extending the length of time required to process your return – and potentially delaying your refund.

If you have questions about the appropriate amounts to report, please contact the Division of Revenue Public Service area at 302-577-8200, or 1-800-292-7826.