Commissioner Stewart Offers Tax Solution for Captive Insurers

DOVER, DE — Delaware Insurance Commissioner Karen Weldin Stewart has issued a bulletin which provides guidance to make it easier for captive insurers to comply with the new requirements within the federal Protecting Americans from Tax Hikes (PATH) Act.  Captive Insurance Bulletin No. 6 establishes procedures so that owners of captive insurance companies may satisfy the PATH Act’s new mandates for owning captives.

For tax years after December 31, 2016, the PATH Act will increase the annual premium to $2.2 million that an insurer making the Internal Revenue Code section 831(b) election may receive.  The PATH Act also creates two new provisions affecting these insurers.  The first is how much premium an insurer may derive from a single person and the second is new ownership requirements for these insurers.  Bulletin No. 6 establishes two cost efficient procedures that captive insurance company owners may follow that either change the ownership of an existing captive, or allow for the creation of a new captive.

“I am very proud that my captive insurance staff has established guidance that responds to a change in federal tax laws,” said Stewart. “Delaware’s captive insurance program is known throughout the world as an advocate for the captive insurance industry.  Bulletin No. 6 once again affirms Delaware’s position by offering a timely and efficient regulatory option for captive insurance companies.”

The full text of Captive Insurance Bulletin No. 6 can be found at http://www.delawareinsurance.gov/departments/documents/bulletins/CaptiveInsuranceBulletinNo6.pdf.

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Revenue Publishes List of Top Delinquent Taxpayers

Today, Division of Revenue Director Patrick Carter has announced the next posting of Delaware’s top 100 delinquent individual and business taxpayers on the state’s Delinquent Taxpayers website. The website posts the names of people and businesses who owe unpaid taxes to the state for public view.

“Posting these lists puts pressure on those in violation,” said Carter, “Anyone with access to the Internet can view the name, address, and amount of tax owed by some of our most chronic delinquent taxpayers, helping Delaware recoup outstanding balances with minimal expense.” Larger balances are targeted first for publication, and each quarter the next 100 consecutive business tax and 100 consecutive personal unresolved tax balances over $1,000 are posted to the site. Delinquent taxpayers can avoid appearing on the list by paying their balance in full or making payment arrangements.

In order to meet the criteria for having your name posted to the Delaware Delinquent Taxpayers site, individuals and businesses must have already received a judgment for unpaid taxes. They are then notified by mail that their names may be posted online, and given 60 days to respond. Delaware is one of over 20 states and the District of Columbia to publish delinquent taxpayers’ names online.

The names of those who enter into a payment agreement with the Division of Revenue or pay their balance in full are either not published or will be removed from the Delinquent Taxpayers list, depending on when the agreement takes place. Taxpayers who have filed for bankruptcy protection or who have incurred a liability that is being appealed are excluded from the published list until their case has been resolved.

Since its inception in February 2007, the Delinquent Taxpayers webpage has collected in excess of $12.5 million in back taxes from those whose names were published, or who were advised that they qualified to have their names published online.

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Leslie A. Poland
Public Information Officer
Delaware Department of Finance
(302) 577-8522
leslie.poland@delaware.gov


Delaware Competes Act Filed

Legislation would reform the Delaware Corporate Income tax to remove barriers to job creation and simplify compliance for small businesses.

Dover, DE – HB 235, known as the Delaware Competes Act and sponsored by leadership of both the Democratic and Republican parties of the House and Senate, was introduced today in advance of next week’s commencement of the 2016 General Assembly.

The bill would reform the way that the state apportions income tax for corporations to remove elements of the code that are disincentives for new investment and job creation. Under current law, companies that create jobs or invest in property in the state must pay more corporate income tax. While the Delaware Competes Act does not change the tax rate, it changes the apportionment formula to remove those disincentives, and calculates taxable income using the revenue generated by a business’ activities in the state.

The Delaware Competes Act also makes several changes to the code to simplify the filing process for small businesses, and gives them added protection from being penalized for filing errors.

“This bill will ensure that Delaware will continue to be an attractive place for businesses to relocate or expand,” said Governor Jack Markell. “I am grateful to the leaders of both parties for supporting these common sense reforms that will benefit all Delawareans. Employers should not have to pay more in taxes just because they decide to create more jobs in the state.”

House Majority Leader Valerie Longhurst, who is sponsoring the bill, noted that the measure will benefit many small businesses throughout the state by reducing and simplifying filings they must submit, protecting them from being penalized due to errors during filing.

“Most other states have abandoned this method of calculating corporate income tax, which leaves Delaware at a competitive disadvantage. By taking these steps, we are putting Delaware on a level playing field with our surrounding states,” said Rep. Longhurst, D-Bear. “I’m pleased that leaders on both sides of the aisle have quickly come together to make Delaware an even better place for businesses. I hope we can continue to work together on other efforts to address our fiscal situation.”

In recent years, more and more states have adopted this method of apportionment, with Pennsylvania, New Jersey, and New York among those who have made similar adjustments.

Senator Patricia Blevins, the lead Senate sponsor and President Pro Tempore of the Senate, hailed the bill as an example of what can be accomplished when the parties are willing to come together and put the interests of citizens before politics.

“Adjusting to our rapidly changing economy means both parties must quickly coalesce around some new ideas that put Delawareans first,” Blevins said. “I’m proud that more often than not, that’s the spirit that carries the day in Legislative Hall, and I’m hopeful that our cooperation on this issue will set the tone for this upcoming legislative session.”

“This bill will reform our corporate income tax calculation, remove a disincentive for job creation, and make us more competitive with other states. It is a positive, bipartisan step towards improving Delaware’s business climate,” said House Minority Leader Danny Short, a Prime sponsor of the bill.

Senate Minority Whip Greg Lavelle, another Prime Sponsor, said that the bill was a win for both our citizens and business community. “Being able to review and modify our corporate income tax structure is worthwhile and worth doing. It’s a big deal.”

Business community leaders also expressed their support for the Delaware Competes Act. “The Delaware State Chamber of Commerce is pleased that the Administration and General Assembly are taking this step to help make Delaware more competitive regionally and nationally,” said A. Richard Heffron, President of the Delaware State Chamber of Commerce.  “Policies like these are what we need to attract and retain companies in Delaware, which is vital to our long term economic growth.”

Modernizing Delaware’s business taxes, as proposed in the Delaware Competes Act, was identified by the Governor’s Revenue Review Task Force as one way to provide more predictability and stability for Delaware’s Corporate Income Tax. “I am happy to see that the General Assembly is taking steps to enact this change,” said Josh Martin, Chairman of the Task Force. “This recommendation had unanimous support from the group, and its adoption would have a positive impact on the state going forward.”

The Delaware Competes Act has been assigned to the House Revenue & Finance Committee.

HB 235 changes the method of calculating Corporate Income Tax apportionment. Currently, three factors are used to determine what portion of a company’s total income is attributed to Delaware for the purposes of assessment- their total payroll in Delaware relative to their payroll in the US, their total property holdings in Delaware relative to their property throughout the US, and their total sales in Delaware relative to their total sales throughout the country. The bill adjusts this calculation so that by 2020, attribution is determined 100% by using the ratio of sales in Delaware. It phases in this change over the next four years, weighting sales at a 50% rate in 2017, a 60% rate in 2018, and a 75% rate in 2019. Companies with headquarters in Delaware would see the shift to 100% take full effect in 2017.

The bill makes some other adjustments targeted to assist small businesses. Currently, businesses must make payments totaling 70% of their estimate total tax for the year by June 1st. This can be difficult for small businesses, because their revenue is frequently more volatile than larger corporations, and their cash flow is often more challenging to manage. The bill allows small companies to file 25% estimates each quarter, smoothing out the payments throughout the course of the year.

The legislation also adjusts the threshold for the safe harbor from penalties for incorrect estimates. The safe harbor provision for small businesses was enacted in 1984, but the qualification threshold has not been adjusted, so many small businesses no longer qualify. The bill adjusts the qualification threshold and indexes it against inflation, so small companies will remain eligible as originally intended. The threshold for qualification to report gross receipts data quarterly instead of monthly is also adjusted, meaning smaller businesses will not have to go through the reporting process as often as they currently do. Finally, the bill clarifies that, for the purposes of income attribution, only US based assets are part of the calculation. This has been done in practice since a court ruling mandated it several years ago, but was never codified.

Full text of the legislation can be found here.

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Newest Online List Of Delinquent Delaware Taxpayers

Statewide – Delaware Division of Revenue Director Patrick Carter announced today the posting of another list of top 100 delinquent individual and business taxpayers at on the Delinquent Taxpayers website.

Since the Delaware Delinquent Taxpayers website went live in February 2007, the state has collected more than $8,600,000 in back taxes from taxpayers whose names were posted or were advised they qualified to have their name posted. With the posting of this round of Delaware’s delinquent taxpayers Carter says he expects Delaware to see even more money in the weeks to come.

The Delaware Delinquent Taxpayers website posts for public view the names of people and businesses who owe unpaid taxes to the state. By legislative order, larger balances were targeted first for publication. Each quarter the next 100 business taxpayers and 100 personal taxpayers who have balances over $1,000 are posted to the site.

“This site is extremely successful,” Carter says. “People don’t want their names posted online for not paying taxes. Delaware is collecting outstanding debt that might otherwise require the State to raise revenue.”

Rep. Deborah Hudson, who proposed the program and sponsored the legislation that established the posting requirements for Delaware’s delinquent taxpayers, agrees that the Delaware Delinquent Taxpayers site is a genuine success.

“When you consider the challenges facing the people of Delaware, I am proud to have successfully proposed and sponsored programs like this that, without raising taxes, collect amounts that are due to the State and help out in these trying fiscal times.”

Since its inception in February 2007, the Delinquent Taxpayers webpage has encouraged Delaware taxpayers to resolve their unpaid tax bills. The new lists will name individuals and businesses that, combined, owe over $3.6 million to the State.

To meet the criteria for posting to the Delaware Delinquent Taxpayers site, individuals and businesses must have already received a judgment for unpaid taxes. They are then notified by mail that their names may be posted online and given 60 days to respond. The names of those who enter into a payment agreement with the Division of Revenue or pay their balance in full are either not published or will be removed from the Delinquent Taxpayers list, depending on when the agreement takes place. Taxpayers who have filed for bankruptcy protection or have incurred a liability that is being appealed are excluded from the published list until their case has been resolved.

“A large percentage of outstanding taxpayers resolve their liabilities to avoid having their names posted online,” Carter says. “However, others wait until their names are actually posted and then resolve their accounts. Ultimately, this site provides the motivation some people need to finally pay their tax debt.”

Delaware is one of over 20 states and the District of Columbia to publish delinquent taxpayers’ names online.

Contact:
Valerie Watson
Delaware Department of Finance
Valerie.watson@delaware.gov


Delaware Personal Income Taxes due April 30th

Free online tax filing available through state website

Statewide, DE – Division of Revenue Director Patrick T. Carter reminds taxpayers today that State of Delaware Personal Income Tax is due April 30, 2014.  Citizens can file their Delaware Income Taxes online for free at www.delaware.gov.

On average, Delaware’s online filing system allows taxpayers requesting a refund to receive their refund two weeks earlier than those filing paper returns. Currently, the average time to issue a refund for online tax filing is under 9 days, compared to paper tax filing which is over 21 days.

Online filing also allows taxpayers to file their taxes electronically and then schedule any payment due closer to the April 30th deadline. Online filing is available 24/7. Taxpayers may pay their State of Delaware taxes using a credit card or by debiting their bank account.

Because Delaware does not maintain reciprocity agreements with other states, it is important for anyone who is not a Delaware resident – but worked in Delaware in 2013 – to understand that they must file a Delaware tax return. Likewise, Delaware Residents who work out-of-state are required to file returns with Delaware, in addition to the state where they worked.

If a taxpayer owes Delaware and doesn’t have the funds to make payment on April 30th, it is still important to file the return and make future payment arrangements because there is a 5% monthly penalty if the return is not filed on time. Likewise, if a taxpayer doesn’t have all of their return completed they can file an extension using the Delaware extension form, DE1027, which will give them until October 15, 2014 to file the original tax return without the 5% non-filing penalty.

By law, Delaware employees should have received their W-2 employment forms by January 31st for any job worked during the 2013 calendar year. Those who haven’t received a W-2 should contact their employer immediately.

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Contact:
Angela Moffett-Batty
Community Relations Coordinator
Delaware Division of Revenue
302-577-8522