CHAPTER 450
FORMERLY HOUSE BILL
NO. 722 AS
AMENDED BY HOUSE
AMENDMENTS NO. 2
AND 3
AN ACT TO AMEND SECTIONS 313, 391, 502, 503, 504, 505, 507, 510, AND 511, TITLE 8, DELAWARE CODE, RELATING TO THE CORPORATION FRANCHISE TAX.
WHEREAS, the Governor's Corporation Franchise Tax Study Committee has recommended procedural changes in the method of assessing and collecting the corporation franchise tax; and
WHEREAS, among these changes are a revision of reporting
procedures, the method of assessment, and the tax due date; and
WHEREAS, it is estimated that these changes will save the State $10,000 annually in printing costs, mailing costs, secretarial time, and computer cost time.
Be it enacted by the General Assembly of the State of Delaware ( two-thirds of all members elected to each branch thereof concurring therein):
Section 1. Section 502 of Title 8, Delaware Code, is amended by striking said section, except as provided in Section 12 of this act, as it appears and inserting in lieu thereof a new § 502 to read as follows:
§ 502. Annual franchise tax report; contents; failure to file; duties of Secretary of State
(a) Annually on or before the first day in March, every corporation now existing or hereafter incorporated under Chapter 1 of this title or which has accepted the provisions of the Constitution of this State, shall make an annual franchise tax report to the Secretary of State. The report shall be made on a form designated by the Secretary of State and shall be signed by
the corporation's president, secretary, treasurer or other proper officer duly authorized so to act, or by any of its directors, or by any incorporator in the event its board of directors shall not have been elected. The fact that an individual's name is signed on the report shall be prima facie evidence that such individual is authorized to certify the report on behalf of the corporation; however, the official title or position of the individual signing the corporate report shall be designated. The report shall contain the following information: the location of its registered office in this State, stated with the degree of particularity required by subsection (a) (2) of Section 102 of this title; the name of the agent upon whom service of process against the corporation may be served; the location (city, town, street and number of same, if number there be) of the principal place of business of the corporation without this State, the names and addresses of all the directors and officers of the corporation and when the terms of each expire; the date appointed for the next annual meeting of the stockholders for the election of directors; the number of shares and the par value per share of each class of capital stock having a par value and the number of shares of each class of stock without par value which the corporation is authorized to issue and the number of shares of each class of stock actually issued, if any; and, if exempt from taxation for any cause, the specific facts entitling the corporation to exemption from taxation.
(b) If any officer or director of a corporation required to make an annual franchise tax report to the Secretary of State shall knowingly make any false statement in the report, he shall be guilty of perjury.
(c) If the annual franchise tax report and the franchise tax due are not filed or paid by the corporation as required by this chapter, the Secretary of State shall ascertain and fix the amount of the annual franchise tax as determined upon a basis by him deemed to be most practicable and the amount so fixed by him shall stand as the basis of taxation under the provisions of this chapter. In the event of neglect, refusal or failure on the part of any corporation to file the annual franchise tax report with the Secretary of State on or before the first day in March, the corporation shall pay the sum of $25 to be recovered by adding that amount to the franchise tax as herein determined and fixed, and such additional sum shall become a part of the franchise tax as so determined and fixed, and shall be collected in the same manner and subject to the same penalties.
(d) In case any corporation shall fail to file its annual franchise tax report, together with the franchise tax due, within the time required by this chapter and in case the agent in charge of the registered office of any corporation upon whom process against the corporation may be served, shall die, resign, refuse to act as such, remove from this State or cannot with due diligence be found, it shall be lawful while default continues, to serve process against the corporation upon the Secretary of State. Such service upon the Secretary of State shall be made in the manner and shall have the effect stated in subsection (b) of Section 321 of this title and shall be governed in all respects by the provisions of said subsection.
(e) Upon the failure, neglect or refusal of a corporation to file the annual franchise tax report, together with the franchise tax due, the Secretary of State may, in his discretion, investigate the reasons therefor and, if he believes such action is warranted, refer the matter to the Attorney General for proceedings under Section 283 of this title.
(f) The Secretary of State shall, upon application, forward blank annual franchise tax reports in proper form, and shall safely keep all reports returned in such manner as they may by open to the inspection of all persons at proper hours.
Section 2. Section 503 of Title 8, Delaware Code, is amended by striking therefrom subsections (b), (f) and (h), except as provided in Section 12 of this act, as they appear therein and inserting in lieu thereof new subsections (b), (f) and (h) to read as follows:
(b) Unless a corporation shall submit to the Secretary of State, at the time of filing its annual franchise tax report as required by Section 502 of this title, a statement setting forth the amount of the total gross assets of the corporation, as of the nearest date on which the amount is obtainable, including in the statement its good will valued at the same amount at which it is valued in the books of account of the corporation, it shall pay a franchise tax for the current year computed in the manner prescribed by paragraph (1) of subsection (a) of this section.
(f) Every corporation which shall show on its annual franchise tax report that it has not been engaged in any of the
business activities for which it was granted a certificate of incorporation, shall pay only at the rate of one-half of the amount of taxes scheduled above for the portion of the year as it shall not have been so engaged and, at the full rate for the remainder of the year. The Secretary of State may require the filing of a supplemental affidavit stating fully the pertinent facts upon which the claim for one-half rate is based.
(h) All corporations as defined in this section which are regulated investment companies as defined by Section 851 of the Federal Internal Revenue Code, shall pay to the Secretary of State as an annual franchise tax, a tax computed either unchr paragraph (1) or paragraph (2) of subsection (a) of this section, or a tax at the rate of $181.50 per annum for each $1,000,000, or fraction thereof in excess of $1,000,000, of the average gross assets thereof during the taxable year, whichever be the least, provided that in no case shall the tax on any corporation for a full taxable year under this subsection (h) be more than $55,000. The average assets for the purposes of this section shall be taken to be the mean of the gross assets on January 1 and December 31 of the taxable year. Any corporation electing to pay a tax under this subsection shall show on its annual franchise tax report that the corporation is a regulated investment company as above defined, and the amount of its assets on January 1 and December 31 of the taxable year, and the mean thereof. The Secretary of State may investigate the facts set forth in the report and if it should be found that the corporation so electing to pay under this subsection shall not be a regulated investment company, as above defined, shall assess upon the corporation a tax under paragraphs (1) or (2) of subsection (a) of this section, whichever be the lesser.
Section 3. Section 504 of Title 8, Delaware Code, is amended by striking said section, except as provided in Section 12 of this act, as it appears therein and inserting in lieu thereof a new § 504 to read as follows:
§ 504. Collection and disposition of tax; penalty interest; investigation of annual franchise tax report
(a) The franchise tax shall become due and payable on the first day of March.
(b) The Department of State shall receive the franchise tax
and pay over all taxes collected to the Department of Finance, except as provided in Section 506 of this title.
(c) If the tax of any corporation remains unpaid after the first day of March, the tax shall bear interest at the rate of one percent for each month or portion thereof until fully paid.
(d) The Secretary of State has power to inquire into the truth or falsity or accuracy of every report required to be filed to carry out the provisions of this chapter. He may require the production of the books of any corporation referred to in this chapter and may swear or affirm and examine witnesses in relation thereto. Where the Secretary of State shall determine the amount of franchise tax which has been paid is less than the franchise tax due, he shall notify the taxpayer of the additional tax and any interest thereon which is due. Such additional tax and interest thereon shall be paid, or a petition for review thereof shall be filed, within sixty days after the notification to the taxpayer.
Section 4. Section 505 of Title 8, Delaware Code, is amended by striking said section, except as provided in Section 12 of this act, as it appears and inserting in lieu thereof a new § 505 to read as follows:
§ 505. Review and refund; jurisdiction and power of the Secretary of State; appeal
(a) Any corporation may, within the period of sixty days after the Secretary of State has notified the taxpayer of the fixing or determination of the tax, pursuant to Sections 502 (c) and 504 (a) of this chapter, or after the payment of taxes imposed by this chapter, petition the Secretary of State for a reduction or refund of taxes, penalties, or interest claimed to have been erroneously or illegally fixed or paid. The petition shall set forth the facts upon which the petitioner relies.
(b) If the Secretary of State determines the tax, interest and/or penalties fixed by him or taxes paid are excessive or incorrect, in whole or in part, he shall resettle the same and adjust the assessment of tax, interest or penalties accordingly and shall refund to the corporation any amount paid in excess of the proper amount of tax, interest and/or penalties so determined to be due. In the case of any corporation which is not required to pay an
annual tax under Section 501 of this title, the Secretary of State may remit all or part of the penalties and interest provided in this chap ter.
(c) Any corporation, within a period of sixty days after the determination by the Secretary of State on a petition filed pursuant to subsection (a) of this section, may petition the Court of Chancery, in and for the county where the registered office or place of business of the corporation is located, for a review de novo of the determination of the Secretary of State. The petition shall set forth the facts upon which the petitioner relies. The Secretary of State shall be named as respondent in any such petition and be served therewith in the same manner as if he were a defendant in a civil suit.
(d) If the Court of Chancery determines that the tax, interest and/or penalties determined by the Secretary of State pursuant to subsection (a) of this section are excessive or incorrect, in whole or in part, it shall resettle the same and adjust the assessment of tax, interest or penalties accordingly, and notify the corporation and the Secretary of State of its determination and direct the Secretary of State to refund to the corporation any amount paid in excess of the proper amount of tax, interest and/or penalties so determined to be due. The Court of Chancery may remit all or part of the penalties and interest provided in Section 502 of this title.
Section 5. Section 507 of Title 8, Delaware Code, is amended by striking said section, except as provided in Section 12 of this act, as it appears and inserting in lieu thereof a new § 507 to read as follows:
§ 507. Collection of tax; preferred debt
The franchise tax shall be a debt due from the corporation to the State, for which an action at law may be maintained after the same shall have been in arrears for a period of one month. The tax shall also be a preferred debt in case of insolvency.
Section 6. Section 510 of Title 8, Delaware Code, is amended by striking said section, except as provided in Section 12 of this act, as it appears and inserting in lieu thereof a new § 510 to read as follows:
§ 510. Failure to pay tax for one year; charter void; extension of time
If any corporation, accepting the provisions of the Constitution of this State and coming under the provisions of Chapter 1 of this title, or any corporation which has heretofore filed or may hereafter file a certificate of incorporation under the provisions of said chapter, neglects or refuses for one year to pay the State any franchise tax or taxes, which has or have been, or shall be assessed against it, or which it is required to pay under the provisions of this chapter, the charter of the corporation shall be void, and all powers conferred by law upon the corporation are declared inoperative, unless the Secretary of State, for good cause shown to him, shall have given further time for the payment of the tax or taxes, in which case a certificate thereof shall be filed in the office of the Secretary of State stating the reason therefor. On or before the last day of November in each year, the Secretary of State shall notify each corporation which has neglected or refused to pay the franchise tax or taxes assessed against it or becoming due during the year that the charter of the corporation shall become void unless such taxes are paid on or before the first day of March of the following year.
Section 7. Section 511 of Title 8, Delaware Code, is amended by striking said section as it appears and inserting in lieu thereof a new § 511 to read as follows:
§ 0. Repeal of charters of delinquent corporations; report to Governor and proclamation
On or before the thirtieth day of June in each year, the Secretary of State shall report to the Governor a list of all the corporations, which for one year next preceding such report, have failed, neglected or refused to pay the franchise taxes assessed against them or due by them, under the laws of this State, and the Governor shall forthwith issue his proclamation declaring that the charters of these corporations are repealed.
Section 8. Amend Section 313 of Title 8, Delaware Code, by striking the words "annual reports" from subsection (a) and inserting in lieu thereof the words, "annual franchise tax reports."
Section 9. Amend section 391 of Title 8, Delaware Code, by striking the words "annual report" from subsection (a) (17) and inserting in lieu thereof the words, "annual franchise tax report."
Section 10. All rights, privileges, and immunities vested or accrued by and under any laws enacted prior to the effective date of this Act, all suits pending, all rights of action conferred, and all duties, restrictions, liabilities and penalties imposed or required by and under laws enacted prior to the adoption of this Act, shall not be impaired, diminished or affected by this Act.
Section 11. If any provision of this Act or the application thereof is held invalid, such invalidity shall not affect any other provision or application of this Act which can be given effect without the invalid provision or application, and to that end, each provision of this Act is declared to be severable.
Section 12. This Act shall become effective on January 1, 1973, and shall apply to franchise taxes for 1972 and all years thereafter. The first annual franchise tax report required by this Act shall be for 1972 and shall be filed, together with the franchise tax due, on or before March 1, 1973. Sections 502, 503, 504, 505, 507, 510 and 511, as said sections exist immediately prior to the effective date of this Act, shall continue in effect after such date with respect to, but only with respect to, annual reports required to be filed on or before January 2, 1972, and franchise taxes due and payable on or before April 15, 1972.