CHAPTER 90
AN ACT TO AMEND CHAPTER 5, TITLE 8, DELAWARE CODE, RELATING TO THE CORPORATION FRANCHISE TAX.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Chapter 5, Title 8, of the Delaware Code, is repealed and a new Chapter 5, Title 8, is enacted in lieu thereof to read as follows:
CHAPTER 5. CORPORATION FRANCHISE TAX
§ 501. Corporations subject to and exempt from franchise tax
Every telegraph, telephone or cable company, every electric company organized for the production and/or distribution of light, heat or power, every company organized for the purpose of producing and/or distributing steam, heat or power, every company organized for the purpose of the production and/or distribution and/or sale of gas, every parlor, palace or sleeping car company, every express company not owned by a railroad company, every pipe line company, every life insurance company, every other insurance company of whatever kind, and every corporation now existing or hereafter to be incorporated under the provisions of the laws of this State, shall pay an annual tax, for the use of the State, by way of license for the corporate franchise as prescribed in this chapter. No such tax shall be paid by any railroad, railway or canal corporation or any express company owned by a railroad company, or any banking corporation, savings bank or building and loan association, or any corporation for drainage and reclamation of low lands, or religious corporation, or purely charitable or educational association, or any company, association or society, which, by its certificate of incorporation, shall have for its object the assistance of sick, needy or disabled members, or the defraying of funeral expenses of deceased members, or to provide for the wants of the widows and families after death of its members.
§ 502. Annual report; contents; failure to file; duties of Secretary of State
(a) Annually on or before the second day in January 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 report to the Secretary of State. The report shall be signed by the corporation's president, secretary, treasurer or other proper officer duly authorized so to act, or by any two of its directors, or by any two incorporators in the event its board of directors shall not have been elected. The fact that an individual's name is signed on a certificate attached to a corporate 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 principal 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 or locations (city or cities, town or towns, street or streets and number of same, if number there be) of the place or places 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 report to the Secretary of State shall make any false statement in the return he shall be guilty of perjury.
(c) If the annual report is not made and filed by the corporation as required by Subsection (a) of this Section, or if any corporation shall neglect or refuse to make the report, 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 make the annual report to the Secretary of State on or before the first day of 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 report within the time required by this section, and in case the agent in charge of the principal 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 report, the Secretary of State shall 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 reports in proper form, and shall safely keep all reports returned in such manner as they may be open to the inspection of all persons at proper hours.
§ 503. Rates and computation of franchise tax
(a)
All corporations accepting the provisions of the Constitution of this State and coming under the provisions of Chapter 1
of this title, and all corporations which have heretofore filed or may hereafter file a certificate of incorporation un-
der the provisions of said Chapter, shall pay to the Secretary of State as an annual franchise tax whichever of the applicable amounts prescribed by paragraphs (1) or (2) of this Subsection is the lesser—
(1) Where the authorized capital stock does not exceed 1,000 shares, $10; where the authorized capital stock exceeds 1,000 shares but is not more than 3,000 shares, $22; where the authorized capital stock exceeds 3,000 shares but is not more than 5,000 shares, $27.50; where the authorized capital stock exceeds 5,000 shares but is not more than 10,000 shares, $55, and the further sum of $27.50 on each 10,000 shares or part thereof.
(2) Ten Dollars, where the assumed no-par capital of the corporation, found in the manner hereinafter in this paragraph provided, does not exceed $100,000; $22, where such assumed no-par capital exceeds $100,000 but is not more than $300,000; $27.50, where such assumed no-par capital exceeds $300,000 but is not more than $500,000; $55, where such assumed no-par capital exceeds $500,000 but is not more than $1,000,000, and the further sum of $27.50 for each $1,000,000 or part thereof of such additional assumed no-par capital.
For the purpose of computing the tax in accordance with paragraph (2) of this Subsection, the corporation's assumed no-par capital, whenever the phrase "assumed no-par capital" is used in paragraph (2) of this Subsection, shall be found by multiplying the number of authorized shares of capital stock without par value by $100.
To the amount of tax attributable to the corporation's assumed no-par capital, computed as above prescribed, add $110 for each $1,000,000 or fraction thereof in excess of $1,000,000 of an assumed par-value capital, found by multiplying the number of authorized shares of capital stock having par value by the quotient resulting from dividing the amount of the total assets of the corporation, as shown in the manner hereinafter provided, by the total number of issued shares of all denominations and classes. If the quotient shall be less than the par value of any denomination or class of authorized shares having par value, the number of the shares of each class shall be multiplied by their par value for the purpose of ascertaining the assumed par-value capital in respect of the shares and the number of authorized shares having a par value to be multiplied by the quotient, as aforesaid, shall be reduced by the number of the shares whose par value exceeds the quotient; and where, to determine the assumed par-value capital, it is necessary to multiply a class or classes of shares by the quotient and also to multiply a class or classes of shares by the par value of the shares, the assumed par-value capital of the corporation shall be the sum of the products of the multiplications. Whenever the amount of the assumed par-value capital, computed as above prescribed, is less than $1,000,000, the amount of the tax attributable thereto shall be the amount that bears the same relation to $110 that the amount of the assumed par-value capital bears to $1,000,000.
(b) Unless a corporation shall submit to the Secretary of State, at the time of filing its annual report as required by Section 502 of this title, a statement under oath made by its president, a vice-president, its treasurer, or its secretary, 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.
(c) In no case shall the tax on any corporation for a full taxable year, by whichever of (1) or (2) of subsection (a) of this section the same is computed, be more than $100,000 nor less than $10.
(d) In case the corporation has not been in existence during the whole year, the amount of tax due, at the foregoing rates and as above provided, shall be prorated for the portion of the year during which the corporation was in existence.
(e) In case a corporation shall have changed during the taxable year the amount of its authorized capital stock, the total annual franchise tax payable at the foregoing rates shall be arrived at by adding together the franchise taxes calculated
as above set forth as prorated for the several periods of the year during which each distinct authorized amount of capital stock was in effect.
(f) Every corporation which shall show by a supplemental affidavit attached to its annual report, duly sworn to by its president and secretary or treasurer, or two of its directors, or any two of its incorporators if directors or officers have not been elected, 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. Any affidavit shall state fully the pertinent facts upon which the claim for one-half rate is based.
(g) For the purpose of computing the taxes imposed by this section, the authorized capital stock of a corporation shall be considered to be the total number of shares which the corporation is authorized to issue, whether or not the number of shares that may be outstanding at any one time be limited to a less number.
(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 under paragraphs (1) or (2) of subsection (a) of this section, or a tax at the rate of $165 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 be more than $50,000. 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 submit to the Secretary of State at the time of filing its annual report as required by Section 502 of this title, a statement under oath made by its president, a vice-president, its treasurer or secretary, certifying that the corporation is a regulated investment company as above defined, and stating 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 statement under oath 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.
§ 504. Assessment and notice of tax; collection and disposition; penalty interest; investigation of annual report
(a) The Secretary of State shall determine on or before the fifteenth day of April in each year, the amount of franchise tax due from each corporation at the rate fixed by Section 503 of this title. The tax shall become due and payable on the fifteenth day of April. The Secretary of State, on or before the fifteenth day of May in each year shall notify all corporations of the amount of franchise tax due and payable by them to the Secretary of State.
(b) The Secretary of State shall receive the franchise tax, penalties and interest and pay over all money collected to the State Treasurer, except as provided in Section 506 of this title.
(c) If the tax of any corporation remains unpaid on the first day of July after it becomes due, the tax shall bear interest at the rate of one per cent for each month until paid.
(d) The Secretary of State has power to inquire into the truth or falsity 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.
§ 505. Review of assessment and refund; jurisdiction and power of the Secretary of State; appeal
(a) Any corporation may, within the period of sixty days after the assessment or 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 assessed 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 assessed 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. The Secretary of State may remit all or part of the penalties and interest provided in this chapter.
(c) Any corporation, within the 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 principal office of 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 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.
§ 506. Fund for payment of refunds
The Secretary of State shall retain in his hands out of the revenue collected from the taxes imposed by this chapter a sum sufficient to provide at all times a fund of $20,000, out of which he shall pay any refunds to which corporations shall
become entitled under the provisions of this chapter. The fund shall be deposited in the financial institution which is legal depository of State moneys to the credit of the Secretary of State and shall be disbursable on order of the Secretary of State.
§ 507. Collection of tax;
preferred debt
The franchise tax, as assessed and levied in accordance with the provisions of this chapter, 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.
§ 508. Injunction against exercise of franchise or transacting business
The Attorney General, either of his own motion or upon request of the Secretary of State, whenever any franchise tax due under the provisions of this chapter from any corporation shall have remained in arrears for a period of three months after the tax shall have become payable, may apply to the Court of Chancery, by petition in the name of the State, on five days' notice to the corporation, which notice may be served in such manner as the court may direct, for an injunction to restrain the corporation from the exercise of any franchise or the transaction of any business within the State, until the payment of the tax, interest due thereon and the cost of the application, which shall be fixed by the court. The Court of Chancery may grant the injunction, if a proper case appears, and upon granting and service of the injunction, the corporation thereafter shall not exercise any franchise or transact any business within this State until the injunction shall be dissolved.
§ 509. Further remedy in Court of Chancery; appointment of receiver or trustee; sale of property
(a) After any corporation, now existing or hereafter incorporated under the provisions of Chapter 1 of this title, has failed or neglected for the period of two consecutive years to pay the franchise taxes imposed by law, and the Secretary of State shall have reported such corporation to the Governor of this State, as provided in Section 511 of this title, then the Attorney General of this State may proceed against the corporation in the Court of Chancery of this State for the appointment of a receiver, or otherwise.
(b) The Court of Chancery in the proceeding shall as certain the amount of the taxes remaining due and unpaid by the corporation to this State, and shall enter a final decree for the amount so ascertained. Thereupon a fieri facias or other process shall issue for the collection of the same as other debts are collected. If no property which may be seized and sold on fieri facias shall be found within this State sufficient to pay the decree, the court shall further order and decree that the corporation, within ten days from and after the service of notice of the decree upon any officer of the corporation upon whom service of process may be lawfully made, or such notice as the court shall direct, shall assign and transfer to the trustee or receiver appointed by the court, any chose in action, or any patent or patents, or any assignments of or license under any patented invention or inventions owned by, leased or licensed to or controlled in whole or in part by the corporation, to be sold by the receiver or trustee for the satisfaction of the decree. No injunction theretofore issued nor any forfeiture of the charter of any corporation shall be held to exempt the corporation from compliance with the order of the court.
(c) If the corporation neglects or refuses within ten days from and after the service of the notice of the decree to assign and transfer the same to the receiver or trustee for sale as aforesaid, the court shall appoint a trustee to make the assignment of the same, in the name and on behalf of the corporation, to the receiver or trustee appointed to make the sale. The receiver or trustee shall thereupon, after such notice and in such manner as required for the sale under fieri facias of personal property, sell the same to the highest bidder. The receiver or trustee, upon the payment of the purchase money, shall execute and deliver to the purchaser an assignment and transfer of all the patents and interests of the corporation so sold, which assignment or transfer shall vest in the purchaser
a valid title to all right, title and interest whatsoever of the corporation therein, and the proceeds of the sale shall be applied to the payment of the unpaid taxes, together with the costs of the proceedings.
§ 510. Failure to pay tax for two years; 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 two consecutive years 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.
§ 511. Repeal of charters of delinquent corporations; report to Governor and proclamation
On or before the thirty-first day of January in each year, the Secretary of State shall report to the Governor a list of all the corporations, which for two years 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.
§ 512. Filing and publication of proclamation; noting repeal in recorder's office
The proclamation of the Governor shall be filed in the office of the Secretary of State and advertised in at least one, and not more than three, newspapers published within this
State. Upon the filing of the proclamation, the Secretary of State shall transmit forthwith to the recorder of each county of this State a certified copy of the proclamation, and each recorder shall, upon receipt of such certified copy, forthwith mark in brief upon the margin of the record of the certificate of incorporation of the corporation named in the proclamation, which is of record in his office, the fact that the charter of the corporation is repealed, and the date of the repeal.
§ 513. Acting under proclaimed charter; penalty
Whoever exercises or attempts to exercise any powers under the certificate of incorporation of any corporation which has been proclaimed by the Governor, after the issuance of the proclamation, shall be fined not more than $1,000 or imprisoned not more than one year, or both.
§ 0. Mistakes in proclamation; correction
Whenever it is established to the satisfaction of the Governor that any corporation named in the proclamation has not neglected or refused to pay the franchise tax within two consecutive years, or has been inadvertently reported to the Governor by the Secretary of State as refusing or neglecting to pay the taxes, the Governor may correct the mistake and may make the same known by filing his proclamation to that effect in the office of the Secretary of State, who shall restore to the corporation its charter, together with all the rights, privileges, and immunities and subject to all its duties, debts and liabilities which had been secured or imposed by its original charter and all amendments thereto.
§ 1. Annual report of Secretary of State
The Secretary of State shall prepare and publish an annual report containing such statistics as may be available with respect to the operation of this chapter, including the amounts collected and amount unpaid for each year for which the tax is assessed, and such other facts as are pertinent and desirable.
§ 2. Retaliatory taxation and regulation; imposition
When, by the laws of any other state or nation, any other or greater taxes, fines, penalties, licenses, fees, or other obligations or requirements are imposed upon corporations chartered under Chapter 1 of this title, doing business in the other state or nation, or upon their agents therein, than the law of this State imposes upon their corporations or agents doing business in this State, so long as the laws continue in force in the other state or nation, the same taxes, fines, penalties, licenses, fee, obligations and requirements of whatever kind shall be imposed upon all corporations of the other state or nation doing business within this State or upon their agents here. Nothing in this section shall be held to repeal any duty, condition or requirement now imposed by law upon the corporations of other states or nations transacting business in this State.
§ 517. Duties of Attorney General
The Attorney General shall have all the powers and authorities in conjunction with the Secretary of State to collect franchise taxes and penalties due from proclaimed corporations and corporations whose charters have become void by operation of law for non-payment of taxes.
§ 518. Relief for corporations with assets in certain unfriendly nations
All corporations incorporated and existing under the laws of the State of Delaware, all of whose assets are located in any country from which it is impossible to remove such assets or withdraw income, or whose assets are located at any place where it is made unlawful by any law of the United States of America now or hereafter enacted or by any rule, regulation or proclamation or executive order issued under any such law, to send any communications, may, in the discretion of the Secretary of State, be relieved and freed from any and all assessment of franchise taxes provided for by this chapter and such corporations may further be relieved by the Secretary of State of the necessity of filing any State reports due or required.
The Secretary of State shall administer the provisions of this section and may require such evidence, submitted by any officer or agent, as in his judgment may be necessary or desirable to determine whether or not a corporation deserves such relief from taxes and the filing of reports, and may make such regulations in relation thereto as he may deem. desirable or necessary.
Section 2. This Act shall take effect January 1, 1966; provided, however, that the functions of the State Tax Department under Chapter 5, Title 8, of the Delaware Code, shall be transferred to the office of the Secretary of State no later than September 15, 1965.
Approved May 27, 1965.