CHAPTER 56
FORMERLY
HOUSE BILL NO. 334
AS AMENDED BY
HOUSE AMENDMENT NO. 1
AND HOUSE AMENDMENT NO. 1
TO HOUSE AMENDMENT NO.1
AN ACT TO AMEND CHAPTER 11, TITLE 30, DELAWARE CODE, RELATING TO THE REDUCTION OF EACH PERSONAL INCOME TAX RATE AND EMPLOYER'S RETURN AND PAYMENT OF TAX WITHHELD; TO AMEND CHAPTER 19, TITLE 30, DELAWARE CODE, RELATING TO THE DETERMINATION OF THE ENTIRE NET INCOME OF A CORPORATION AS IT RELATES TO THE COST OF MODIFICATION FOR HANDICAPPED PERSONS; AND TO AMEND CHAPTER 13, TITLE 30, DELAWARE CODE, PERTAINING TO THE VALUATION OF CERTAIN FARM AND SMALL BUSINESS REAL PROPERTY FOR INHERITANCE TAX.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section I. Amend subsection (a), Section 1102, Chapter 11, Title 30 of the Delaware Code by striking the subsection in its entirety and substituting in lieu thereof the following:
"(a) A tax is hereby imposed for each taxable year on the entire taxable income of every resident of this State and on the taxable income of every nonresident which Is derived from sources within this State.
(1) For taxable years beginning before January I, 1979, the amount- of tax shall be determined as follows:
1.6% of the amount of taxable income not in excess of $1,000; 2.2% of the amount of taxable income in excess of $1,000, but not in excess of $2,000; 3.3% of the amount of taxable Income in excess of $2,000, but not in excess of $3,000; 4.4% of the amount of taxable income in excess of $3,000, but not in excess of $4,000; 5.5% of the amount of taxable income in excess of $4,000, but not in excess of $5,000; 6.6% of the amount of taxable income in excess of $5,000, but not in excess of $6,000; 7.7% of the amount of taxable income in excess of $6,000, but not in excess of $8,000; 8.8% of the amount of taxable Income in excess of $8,000, but not in excess of $20,000; 9.3% of the amount of taxable Income in excess of $20,000, but not in excess of $25,000; 9.9% of the amount of taxable income in excess of $25,000, but not in excess of $30,000, 12.1% of the amount of taxable income in excess of $30,000, but not In excess of $40,000; 13.2% of the amount of taxable income In excess of $40,000, but not in excess of $50,000; 15.4% of the amount of taxable Income in excess of $50,000, but not in excess of $75,000; 16.5% of the amount of taxable income in excess of $75,000, but not In excess of $100,000; 19.8% of the amount of taxable income in excess of $100,000.
(1) For taxable years beginning in 1979, the amount of tax shall be determined as follows:
1.5% of the amount of taxable income not In excess of $1,000, 2.1% of the amount of taxable income in excess of $1,000, but not in excess of $2,000; 3.15% of the amount of taxable income in excess of $2,000, but not in excess of $3,000; 4.3% of the amount of taxable income in excess of $3,000, but not in excess of $4,000; 5.35% of the amount of taxable income in excess of $4,000, but not in excess of $5,000; 6.4% of the amount of taxable Income In excess of $5,000, but not in excess of $6,000, 7.45% of the amount of taxable income in excess of $6,000, but not in excess of $8,000; 8.4% of the amount of taxable income In excess of $8,000, but not in excess of $10,000; 8.5% of the amount of taxable income in excess of $10,000, but not in excess of $15,000; 8.6% of the amount of taxable income in excess of $15,000, but not In excess of $20,000; 9.05% of
the amount of taxable income in excess of $20,000, but not in excess of $25,000; 9.65% of the amount of taxable income in excess of $25,000, but not in excess of $30,000; 11.55% of the amount of taxable income in excess of 30,000, but not in excess of $40,000; 12.8% of the amount of taxable income in excess of $40,000, but not in excess of $50,000; 14.45% of the amount of taxable income in excess of $50,000, but not in excess of $75,000; 15% of the amount of taxable income in excess of $75,000, but not in excess of $100,000; 16.65% of the amount of taxable income in excess of $100,000.
(3) For taxable years beginning after 1979, the amount of the tax shall be determined as follows:
1.4% of the amount of taxable income not in excess of $1,000; 2.0% of the amount of taxable income in excess of $1,000, but not in excess of $2,000; 3.0% of the amount of taxable income in excess of $2,000, but not in excess of $3,000; 4.2% of the amount of taxable income in excess of $3,000, but not in excess of $4,000; 5.2% of the amount of taxable income in excess of $4,000, but not in excess of $5,000; 6.2% of the amount of taxable income in excess of $5,000, but not in excess of $6,000; 7.2% of the amount of taxable income in excess of $6,000, but not in excess of $8,000; 8.0% of the amount of taxable income in excess of $8,000, but not in excess of $10,000; 8.2% of the amount of taxable income in excess of $10,000, but not in excess of $15,000; 8.4% of the amount of taxable income in excess of $15,000, but not in excess of $20,000; 8.8% of the amount of taxable income in excess of $20,000, but not in excess of $25,000; 9.4% of the amount of taxable income in excess of $25,000, but not in excess of $30,000; 11.0% of the amount of taxable income in excess of $30,000, but not in excess of $40,000; 12.2% of the amount of taxable income in excess of $40,000, but not in excess of $50,000; 13.5% of the amount of taxable income in excess of $50,000."
Section 2. Amend Section 1154, Chapter ll, Title 30 of the Delaware Code by striking subsection (a) in its entirety and substituting in lieu thereof a new subsection (a) to read as follows:
"(a) Every employer required to deduct and withhold tax under this Chapter shall, for each calendar month, on or before the 15th day of the month following the end of such calendar month, file a withholding return as prescribed by the Division of Revenue and pay over to the Division of Revenue or to a depository designated by the Division of Revenue, the tax as so required to be deducted and withheld; provided, however, that where the aggregate amount of taxes required to be deducted and withheld during the first two months of any calendar quarter will not exceed $200, such employer may file and pay the tax for such quarter on or before the 15th day of the month following the close of such quarter. The Division of Revenue may, if it believes such action necessary for the protection of the revenue, require any employer to make such return and pay the tax deducted and withheld at any time, or from time to time. When the amount of wages paid by an employer is not sufficient under this Chapter to require the withholding of tax from the wages of any of his employees, the Division of Revenue may permit such employer to file an annual return on or before January 31 of the succeeding calendar year."
Section 3. Amend subsection (a) of Section 1903, Chapter 19, Title 30 of the Delaware Code to add subparagraph 7 to read as follows:
"7. The cost, not to exceed $5,000, of a renovation project to remove physical design features in a building, that restrict the full use of the building by physically handicapped persons. The modification shall be allowed for the taxable year in which the renovation project Is completed and is in addition to any depreciation or amortization of the cost of the renovation project. 'Building' means a building or structure or that part of a building or structure and its related sidewalks, curbing, driveways and entrances that are located in Delaware and open to the general public."
Section 4. Amend Chapter 13, Title 30 of the Delaware Code by adding a new Section numbered 1314 to read as follows:
"Section 1314. (a) If (1) the decedent was, at the time of his death, a resident of the State of Delaware and (2) the person filing the return of tax imposed by this Chapter elects the application of this Section, the value of qualified real property shall be its value for use under which it qualified, under subsection (b), as qualified real property. The aggregate decrease in the value of qualified real property which results from the application of this Section with respect to the gross estate of any decedent shall not exceed five hundred thousand dollars ($500,000).
(b) For purposes of this Section: (I) "Qualified real property" means real property located in the State which, on the date of the decedent's death, was being used for a qualified use, but only if:
(A) Fifty percent (50%) or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which:
(t) On the date of the decedent's death, was being used for a qualified use; and
(ii) was acquired from or passed from the decedent to a qualified heir of the decedent;
(B) Twenty-five percent (25%) or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subparagraphs (A) (ii) and (C) of the subsection (b).
(C) During the eight-year period ending on the date of the decedent's death there have been periods aggregating five (5) years or more, or during any period ending prior to the date of the decedent's death there have been periods aggregating ten (10) years or more, during which:
(i) Such real property was owned by the decedent or a member of the decedent's family and used for a qualified use; and
(ii) there was material participation by the decedent or a member of the decedent's family in the operation of the farm or other business.
(2) "Qualified use" means the devotion of the property to any of the following:
(A) Use as a farm for farming purposes; or
(3) use in a trade or business other than the trade or business of farming.
(3) "Adjusted value", for purposes of paragraph (1) of this subsection (b), means:
(A) In the case of the gross estate, the value of the gross estate, determined without regard to this Section, reduced by any amounts allowable as a deduction under paragraph (4) of Section t323 (a), or
(B) In the case of any real or personal property, the value of such property for purposes of this Act, determined without regard to this Section, reduced by any amounts allowable as a deduction in respect to such property under paragraph (4) of Section 1323 (a).
(C) Election. The election under this Section shall be made not later than the time prescribed by Sections 1342 and 1343 for filing the return of the tax
imposed by this Chapter and shall be made in such manner as the Secretary of Finance shall prescribe by rules and regulations.
(D) Definitions. For purposes of this Section:
(1) "Qualified heir" means, with respect to any property, a member of the decedent's family who acquired such property, or to whom such property passed, from the decedent. If a qualified heir disposes of any interest in qualified real property to any member of his or her family, such member shall thereafter be treated as the qualified heir with respect to such interest.
(2) "Member of the family" means, with respect to any individual, only such individual's ancestor or lineal descendant, a lineal descendant of a grandparent of such individual, the spouse of such individual, or the spouse of any such descendant. For purposes of the preceding sentence, a legally adopted child of an individual shall be treated as a child of such individual by blood.
(1) In the case of real property which meets the requirements of subparagraph (C) of subsection (b) (1), residential buildings and related improvements on such real property occupied on a regular basis by the owner or lessee of such real property or by persons employed by such owner or lessee for the purpose of operating or maintaining such real property, and roads, buildings, and other structures and improvements functionally related to the qualified use shall be treated as real property devoted to the qualified use.
(2) "Farm" includes stock, dairy, poultry, fruit, furbearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses, or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards and woodlands.
(1) "Farming purposes" means:
(A) Cultivating the soil or raising or harvesting any agricultural or horticultural commodity including the raising, shearing, feeding, caring for, training, and management of animals on a farm;
(B) handling, drying, packing, grading, or storing on a farm any agricultural or horticultural commodity in its unmanufactured state, but only if the owner, tenant, or operator of the farm regularly produces more than one-half (1/2) of the commodity so treated; and
(C) (I) the planting, cultivating, caring for, or cutting of trees, or (ii) the preparation, other than milling, of trees for market.
(8) Material participation shall be determined in a manner similar to the manner used for purposes of paragraph (1) of 26 U.S.C. 1402 (a) as such section existed on December 31,1970.
(7) (A) Except as provided in subparagraph (U), the value of a farm for farming purposes shall be determined by dividing (1) the excess for the average annual gross cash rental for comparable land used for farming purposes and located in the locality of such farm over the average annual state and local real estate taxes for such comparable land, by (H) the average annual effective interest rate for all now federal land bank loans. For purposes of the preceding sentence, each average annual computation shall be made on the basis of the five (5) most recent calendar years ending before the data of the decedent's death.
(B) The formula provided by subparagraph (7) (A) shall not be used (0 where it is established that there is no comparable land from which the average annual gross cash rental may be determined, or (H) where the
executor elects to have the value of the farm for farming purposes determined under paragraph (8).
(8) In any case to which paragraph (7) (A) does not apply, the following factors shall apply in determining the value of any qualified real property:
(A) The capitalization of income which the property can be expected to yield for farming or closely held business purposes over a reasonable period of time under prudent management using traditional cropping patterns for the area, taking into account soil capacity, terrain configuration, and similar factors;
(W The capitalization of the fair rental value of the land for farmland or closely held business purposes;
(C) Assessed land values in the State pursuant to use value appraisal for farmland or closely held business;
(D) Comparable sales of other farm or closely held business land in the same geographical area far enough removed from a metropolitan or
resort area so that nonagricultural use is not a significant factor In the sales price; and
(E) Any other factor which fairly values the farm or closely held business value of the property.
(9) The method elected for valuing any qualified real property under the provisions of this Section shall be the same method as that elected for valuing said property for federal estate tax purposes if an election is made to value such property under the provisions of 26 U.S.C. 2032 (a), as said Section existed on December 31,1977.
(e) Additional Tax in the Case of Dispositions and Failures to use for Qualified Use -
(1) If, within 15 years after the decedent's death before the death of the qualified heir -
(A) The qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his family), or
(B) The qualified heir ceased to use for the qualified use the qualified real property which was acquired (or passed) from the decedent, then there is hereby imposed an additional inheritance tax.
(2) Amount of additional Tax -
(A) The amount of the additional tax imposed by paragraph (1) with respect to any interest shall be the amount equal to the lesser of -
(i) the adjusted tax difference attributable to such interest, or
(ii) the excess of the amount realized with respect to the interest (or, in any case other than a sale or exchange at arm's length, the fair-market value of the interest) over the value of the interest determined under subsection (a) of this Section.
(B) For purposes of subparagraph (A), the adjusted tax difference attributable to an interest is the amount which bears the same ratio to the adjusted tax difference with respect to the estate (determined under subparagraph (C) as -
(i) the excess of the value of such interest for purposes of this Chapter (determined without regard to subsection (a) over the value of such interest determined under subsection (a), bear to
(ii) a similar excess determined for all qualified real property.
(C) For purposes of subparagraph (B), the term "adjusted tax difference with respect to the estate" means the excess of what would have been the inheritance tax liability but for subsection (a) over the inheritance tax liability imposed by Section 1322 reduced by the credits allowable against such tax.
(D) For purposes of this paragraph, where the qualified heir disposes of a portion of the interest acquired by (or passing to) such heir (or a predecessor qualified heir) or there is a cessation of use of such a portion -
(i) the value determined under subsection (a) taken into account under subparagraph (A) (ii) with respect to such portion shall be its pro rata share of such value of such interest; and
(ii) the adjusted tax difference attributable to the interest taken into account with respect to the transaction involving the second or any succeeding portion shall be reduced by the amount of the tax imposed by this subsection with respect to all prior transactions involving portions of such interest.
(3) Phaseout of Additional Tax Between 10th and 15th Years, -
if the date of the disposition or cessation referred to in paragraph (1) occurs more than 120 months and less than 180 months after the date of the death of the decedent, the amount of the tax imposed by this subsection shall be reduced (but not below zero) by an amount determined by multiplying the amount of such tax (determined without regard to this paragraph) by a frac tion
(A) the numerator of which is the number of full months after such death in excess of 120, and
(B) the denominator of which is 60.
(4) in the case of an interest acquired from (or passing from) any decedent. if subparagraphs (A) or (B) of paragraph (1) applies to any portion of an interest, subparagraph (B) or (M, as the case may be, of paragraph (1) shall not apply with respect to the same portion of such interest.
(5) Due Date. The additional tax imposed by this subsection shall become due and payable on the day which is 6 months after the date of the disposition or cessation referred to in paragraph (1).
(6) Liability for Tax. The qualified heir shall be personally liable for the additional tax imposed by this subsection with respect to his interest.
(7) Cessation of Qualified Use. For purposes of paragraph (1) (B), real property shall cease to be used for the qualified use if-
(A) such property cease to be used for the qualified use set forth in subparagraph (A) or (B) of subsection (b) (2) under which the property qualified under subsection (b), or
(B) during any period of 8 years ending after the date of the decedent's death and before the date of the death of the qualified heir, there had been periods aggregating 3 years or more during which -
(I) in the case of periods during which the property was held by the decedent, there was no material participation by the decedent or any member of his family in the operation of the farm or other business, and
(ii) in the case of periods during which the property was held by any qualified heir, there was no material participation by such qualified heir or any member of his family in the operation of the farm or other business."
Section 5. This Act shall become effective January 1, 1979. Approved June 6, 1979.