CHAPTER 155
FORMERLY
HOUSE BILL NO. 402
AS AMENDED BY HOUSE AMENDMENT NO. 1
AN ACT TO AMEND CHAPTER 20, TITLE 30, DELAWARE CODE TO PROVIDE TAX CREDITS AGAINST CORPORATION INCOME TAXES AND A REDUCTION IN MANUFACTURERS AND WHOLESALERS GROSS RECEIPTS TAXES TO PERSONS DEVELOPING NEW BUSINESS FACILITIES AND CREATING ADDITIONAL JOBS WITHIN DELAWARE.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Chapter 20, Part II, Title 30, of the Delaware Code by striking the title to said Chapter and substituting in lieu thereof the following:
"CHAPTER 20. BUSINESS TAX CREDITS AND DEDUCTIONS".
Section 2. Amend Chapter 20, Part II, Title 30, Delaware Code redesignating all of present Chapter 20 as new Subchapter Ito be entitled as follows:
"Subchapter I. Neighborhood Assistance Tax Deduction".
Section 3. Amend Chapter 20, Part II, Title 30, Delaware Code by adding thereto a new subchapter, designated as Subchapter II, to read as follows:
"Subchapter II. Tax Credit and Tax Reduction for New Employees and
Investment in New Business Facilities
§2010. Tax Credit and Reduction in License Fees
(a) Any taxpayer who shall establish a new business facility in this State, as defined in S2011(b), the utilization of which results in the employment of twenty-five (25) or more new business facility employees engaged or maintained in employment at the new business facility for the taxable year, or with respect to which new business facility investment, as defined in S2011(f), equals or exceeds One Million Dollars (31,000,000), shall be allowed a credit, in the amount determined under subsection (b), against the tax imposed on the new business facility income under Chapter 19 of this Title (relating to corporation income tax), and a reduction in the license fee, as determined under subsection (c), imposed on gross receipts under Chapter 27 or Chapter 29 of this Title (relating to the manufacturers and wholesalers license tax), for the taxable year or license year during which commencement of commercial operations, as defined in S2011(g), occurs at such new business facility, and for each of the nine (9) succeeding taxable years or license years.
(b) Subject to the limitations specified in subsection (d), the credit allowed by subsection (a) shall be a portion of the tax otherwise imposed on the taxpayer's new business facility income under Chapter 19 of this Title, which portion shall be an amount equal to the sum of the following:
(1) Seventy-five Dollars (375.00) for each new business facility employee, as determined under S2011(e), plus:
(2) One Hundred Eighty-five Dollars 0185.00) for each One Hundred Thousand Dollars (3100,000.00), or major fraction thereof, in new business facility investment, as defined in S2011(f).
(c) Subject to the limitations specified in subsection (d), the reduction in the license fee allowed by subsection (a) shall be a percentage of the license fee otherwise imposed on the taxpayer's new business facility gross receipts under S2702(b) or S2902(c) of this Title determined as follows:
(d)(I) The credit allowed under this Section shall not exceed fifty percent (50%) of the tax otherwise imposed under Chapter 19 of this Title which is directly attributable to the new business facility income.
(2) No credit or reduction in license fees shall be allowed under this Section for the establishment or expansion of a public utility as defined in Chapter I, Title 26, Delaware Code.
§2011. Definitions
(a) The term 'facility' shall mean any factory, mill, plant, refinery, warehouse, building, or complex of buildings located within this State, including the land on which located and all machinery, equipment and other real and tangible personal property located at or within such facility used in connection with the operation of such facility. If a facility, which does not constitute a new business facility, is expanded by the taxpayer, the expansion shall be considered a separate facility eligible for the credit allowed by 52010 if (1) the taxpayer's investment in the expansion as determined in accordance with subsection (f) of this Section exceeds One Million Dollars ($1,000,000), and (2) the expansion otherwise constitutes a new business facility as defined in subsection (b).
(b) The term 'new business facility' shall mean a facility which meets the requirements of paragraphs (I), (2), (3) and (4) of this subsection.
(I) Such facility is acquired by, or leased to, the taxpayer after June 30, 1979, and prior to July I, 1984. A facility shall be deemed to have been acquired by, or leased to, the taxpayer if the transfer of title to the taxpayer, or the commencement of the term of the lease to the taxpayer, occurs after June 30, 1979, and prior to July I, 1984, or if the faculty N constructed, erected or installed by or on behalf of the taxpayer, such construction, erection or installation is completed after June 30, 1979, and prior to July 1, 1984.
(3) Such facility was not employed, immediately prior to the transfer of title to such facility to the taxpayer, or the commencement of the term of the lease of such facility to the taxpayer, by any person or persons in the operation of a revenue producing enterprise and the taxpayer continues the operation of the same or substantially the same enterprise.
(4) Such facility is not a replacement business facility, as defined in subsection (d).
(c) The term revenue producing enterprise shall mean:
(1) The assembly, fabrication, manufacture or processing of any agricultural, mineral or manufactured product;
(2) The storage, warehousing, distribution or sale for purposes of resale of any products of agriculture, mining or manufacturing;
(3) The operation of laboratories or other facilities for scientific, agricultural or industrial research, development or testing;
(4) The administrative management of any of the foregoing activities; or
(5) Any combination of the foregoing activities.
(d) The term 'replacement business facility' shall mean a facility which replaces another facility located within the State which the taxpayer or a related taxpayer previously operated but discontinued operating and which:
(1) was operated by the taxpayer or a related taxpayer for more than two (2) taxable years out of the five (5) taxable years next preceding the taxable year in which commencement of commercial operations occurs at the new facility; and
(2) was employed by the taxpayer or related taxpayer in the operation of a revenue producing enterprise and the taxpayer continues the operation of the same or substantially the same enterprise.
(e) The term 'new business facility employee' shall mean a person employed by the taxpayer on a regular and full-time basis in the operation of a new business facility during the taxable year for which the credit allowed by this Section is claimed. The number of new business facility employees during any taxable year shall be determined by the dividing by twelve (12) the sum of the number of new business facility employees on the last business day of each month of such taxable year. If the facility is in operation for less than the entire taxable year, the number of new business facility employees shall be determined by dividing the sum of the number of such employees on the last business day of each full calendar month during which the new business facility was In operation by the number of full calendar months during such period.
(f) The term 'new business facility investment' shall mean the value of the real and tangible personal property, except inventory or property held for sale to customers in the ordinary course of the taxpayers business, which constitutes the new business facility, or which is teed by the taxpayer in the operation of the new business facility, during the taxable year for which the credit or reduction in license fee allowed by S2010 is claimed. The value of such property during such taxable year shall be:
(I) its original cost if owned by the taxpayer, or
(2) eight (8) times the net annual rental rate, if leased by the taxpayer. The net annual rental rate shall be the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. The new business facility investment shall be determined as of the last business day of the taxable year for which the credit or reduction in license fee allowed by S2010 is claimed.
(g) Commencement of commercial operations shall be deemed to occur during the first taxable year or license year for which the new business facility is first available and used by the taxpayer in the revenue producing enterprise the taxpayer intended for the new business facility.
(h) The term 'related taxpayer' shall mean:
(1) a corporation, partnership, trust or association controlled by the taxpayer;
(2) an individual, corporation, partnership, trust or association in control of the taxpayer; or
(3) a corporation, partnership, trust or association controlled by an individual, corporation, partnership, trust or association in control of the taxpayer. For the purposes of this Chapter, 'control of a corporation' shall mean ownership, directly or indirectly, of stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote and at least fifty percent (50%) of all other classes of stock of the corporation, 'control of a partnership or association' shall mean ownership of at least fifty percent (50%) of the capital or profits interest in such partnership or association; and 'control of a trust' shall mean ownership, directly or indirectly, of at least fifty percent (50%) of the beneficial interest in the principal or income of such trust.
(i) The term 'new business facility income' shall mean the Delaware taxable income, as defined and computed under S1903, Chapter 19, of this Title, and amendments thereto, which is attributable to and derived by the taxpayer from the operation of the new business facility. If a taxpayer has income derived from the operation of a new business facility as well as from other activities conducted within this State, the Delaware taxable income derived by the taxpayer from the operation of the new business facility shall be determined by multiplying the taxpayer's Delaware taxable income, computed in accordance with S1903, Chapter 19 of this Title, by a fraction the numerator of which is the property factor, as defined in paragraph (1), plus the payroll factor, as defined in paragraph (2), and the denominator of which is two (2).
(1) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in connection with the operation of the new business facility during the tax period, and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used in this State during the tax period.
(2) The payroll factor is a fraction, the numerator of which is the total amount paid during the tax period by the taxpayer for compensation to persons qualifying as a new business facility employees, as determined under subsection (e), at the new business facility, and the denominator of which is the total amount paid in this State during the tax period by the taxpayer for compensation. The formula set forth in this subsection (1) shall not be used for any purpose other than determining the new business facility income attributable to a new business facility.
(J) The term 'new business facility gross receipts' shall mean:
(1) If the taxpayer is subject to licensing as a manufacturer, the total Delaware gross receipts, as defined and computed under Chapter 27 of this Title attributable to and derived by the taxpayer from the operation of the new business facility.
(2) If the taxpayer is subject to licensing as a wholesaler, the total Delaware gross receipts, as defined and computed under Chapter 29 of this Title attributable to and derived by the taxpayer from the operation of the new business facility.
§2012. Termination of Operations
If a taxpayer has terminated the operation of a revenue producing enterprise at a new business facility prior to the expiration of the ten-year (10) period during which a credit is allowed under this 52010, and later resumes the operation of the same or a different revenue producing enterprise at such new business facility, the taxpayer may, with the consent of the Secretary of Finance, elect to claim a credit, upon resuming the operation of a revenue producing enterprise at such new business facility, computed in accordance with 52010, but for a number of years following resumption of such operations equal to ten (10) reduced by the number of years for which the credit was claimed prior to termination of operation of such revenue producing enterprise. The Secretary of Finance shall grant such consent if it is determined that the termination of operations was due to reasonable came and that the resumption of operations of a revenue producing enterprise at such new business facility will provide increased opportunities for employment and result in a substantial contribution to the economy of the State.
§2013. Rules and Regulations
The Secretary of Finance or his delegate shall prescribe such rules and regulations as may be deemed necessary to carry out the purposes of this subchapter."
Section 4. This Act shall take effect upon approval by the Governor.
Approved July 14, 1979.