CHAPTER 129
FORMERLY
HOUSE BILL NO. 403
AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO INHERITANCE TAXES.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend § 1322, Title 30, Delaware Code, by striking said section in its entirety and substitute in lieu thereof a new § 1322 to read as follows:
"Section 1322. Tax imposed.
A tax computed at the following rates is hereby imposed on the transfer to each beneficiary of his net taxable share of the gross estate as determined in accordance with Section 1321 of this title:
(a) Class A. Where the property or any interest or estate therein passes to or for the use of the husband or wife of the decedent, the tax on such property, interest or estate shall be at the following rates:
(1) On that part of its value exceeding $140,000 and not exceeding $200,000, 3 percent;
(2) On that part of its value exceeding $200,000, 4 percent.
(b) Class B. Where the property or any interest or estate therein passes to or for the use of a parent, grandparent, child by birth, spouse or surviving spouse of a child by birth, a child by legal adoption, the lineal descendant of the decedent, a stepchild of the decedent or the lineal descendant of a stepchild of the decedent, the tax on such property, interest or estate shall be at the following rates:
(1) On that part of its value exceeding $100,000 and not exceeding $200,000, 5 percent;
(2) On that part of its value exceeding $200,000, 6 percent.
(c) Class C Where the property or any interest or estate therein passes to or for the use of any person not described in Class B whose relationship to the decedent is within 5 degrees of consanguinity, whether by the whole or half blood, and whether a blood relative of the decedent or a relative by virtue of legal adoption, the tax shall be at the following rates:
(1)•On that part of its value exceeding $10,000 and not exceeding $25,000, 5 percent;
(2) On that part of its value exceeding $25,000 and not exceeding $50,000, 6 percent;
(3) On that part of its value exceeding $50,000 and not exceeding $100,000, 7 percent;
(4) On that part of its value exceeding $100,000 and not exceeding $150,000, 8 percent;
(5) On that part of its value exceeding $150,000 and not exceeding $200,000, 9 percent.
(6) On that part of its value exceeding $200,000, 10 percent.
(d) Class D. Where the property or any interest or estate therein passes to or for the use of any person not described in Class A, Class B, or Class C of this section, the tax shall be at the following rates:
(1) On that part of its value exceeding $2,000 and not exceeding $25,000, 10 percent;
(2) On that part of its value exceeding $25,000 and not exceeding $50,000, 12 percent;
(3) On that part of its value exceeding $50,000 and not exceeding $100,000, 14 percent
(4) On that part of its value exceeding $100,000, 16 percent.
Section 5. Amend § 1341, Title 30, Delaware Code, by striking the symbols and figures "$25,000", "$5,000" and "$1,000" and substitute in lieu thereof, respectively, the following symbols and figures: "$100,000", "$10,000" and "$2,000".
Section 6. Amend Title 30, Delaware Code, by adding thereto a new § 1327 to read as follows:
"§ 1327. Special Deduction for Closely Held Business Property.
(a) For purposes of this section:
(1) 'Closely held business' means:
(i) a trade or business carried on as a sole proprietorship;
(ii) a partnership carrying on a trade or business if the partnership had 15 or fewer partners; or
(iii) a corporation carrying on a trade or business if the corporation had 15 or fewer shareholders.
(2) 'Interest in a closely held business' means:
(i) an interest as a sole proprietor in a trade or business carried on as a sole proprietorship;
(ii) an interest as a partner in a partnership carrying on a trade or business if the partnership had 15 or fewer partners and if 20% or more of the total capital interest in such partnership would be included in the gross estate under this chapter but for this section and § 1323(b) of this title;
(iii) stock in a corporation carrying on a trade or business, if the corporation has 15 or fewer shareholders, and if 20% or more in value of the stock of the corporation would be included in the gross estate under this chapter but for this section and § 1323(b) of this title.
(3) 'Corporation' or 'partnership' shall mean an entity classified for federal income tax purposes as a corporation or partnership, respectively, regardless of the form of organization of such entity under state or federal law (other than the Internal Revenue Code of 1986).
(4) 'Shareholder' or 'partner' shall mean a person owning an interest in the profits or capital of a corporation or partnership regardless of the term by which such person is known under state or federal law (other than the Internal Revenue Code of 1986).
(5) 'Sole proprietor' shall mean a person owning a trade or business in such person's individual name and a person owning 100% of an entity classified for federal income tax purposes as a sole proprietorship.
(b) Determination for qualification under paragraph (a)(2) shall be made as of the time immediately before the decedent's death.
(c) Stock or a partnership interest held by a husband and wife as joint tenants, tenants in common, or tenants by the entirety is treated as owned by one shareholder or one partner, as the case may be.
(d).Property owned directly or indirectly by or for a corporation, partnership or sole proprietorship is considered as being owned proportionately by nr for its shareholders, partners, or proprietor, respectively.
(e) An interest in a closely held business owned by a trustee which is included in the gross estate of a decedent is considered as being owned by the decedent.
(f) Notwithstanding § 1321 of this title, in determining the amount of each Class A or Class B beneficiary's net taxable share of the gross estate, there shall be allowed a deduction for the fair market value of any interest in a closely held business otherwise included in the beneficiary's net taxable share."
Section 7. This Act shall be effective in the case of decedents dying after December 31, 1997.
Approved July 1, 1997