CHAPTER 6
STATE REVENUE - FRANCHISE TAX
AN ACT to amend Article 8 of Chapter 6 of the Revised Code of the State of Delaware relative to the State Revenue from Domestic Corporations.
Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:
Section 1. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 65, being Section 102 of the Revised Code of 1915, and by inserting in lieu thereof the following:
102. Section 65. Franchise Taxes ; Payable Annually; What Corporations Subject to Tax; What Corporations Exempted from 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 the State of Delaware, shall pay an annual tax, for the use of the State, by way of license for the corporate franchise as hereinafter mentioned; provided, however, 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.
Section 2. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 66, being Section 103 of the Revised Code of 1915, and by inserting in lieu thereof the following:
103. Section 66. Annual Reports to Secretary of State; Form and Purpose of; Penalties for not Filing; How Director May Free Himself from Disability Incurred ; In default of Report or Without Resident Agent, Service of Process may be made an Secretary of State; Effect of; Process Book, how kept by Secretary of State: Annually, on or before the first Tuesday in January, it shall be the duty of the President, Secretary, Treasurer or other proper officer, or any two directors, of any corporation now existing or hereafter to be incorporated under the provisions of the General Corporation Law of the State of Delaware, to make an annual report to the Secretary of State, stating specifically with the degree of particularity required by Paragraph 2, Section 5 of Chapter 15, being Section 1919 of the Revised Code of the State of Delaware, the location of its principal office in this State; the name of the agent upon whom service of process against said 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 said 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 stock holders for the election of directors; the number of shares of each class of the capital stock which is to be issued, if any, and the amount of the par value stock, and the number of shares actually issued of each class of the capital stock which is to be issued, if any, and the amount of the par value actually issued ; the amount of capital invested in real estate and manufacturing in the State of Delaware, and the taxes paid thereon; and, if exempt from taxation for any cause, the specific facts entitling such corporation to exemption from such taxation.
If such annual report is not so made and so filed by the corporation through its proper officers, or if any corporation shall neglect or refuse to make such 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 such basis of taxation under the provisions of this Article. In the event of neglect, refusal or failure on the part of any corporation to make such annual report to the Secretary of State within three months after the first Tuesday in January, as heretofore provided, the corporation shall pay the sum of Twenty-five Dollars to be recovered through an addition of this amount to the franchise tax as above determined and fixed, and such additional sum shall become a part of the franchise tax as so determined and fixed, and be collected in the same manner and subject to the same penalties. If such report shall not be so made and filed, all the directors of any such corporation, who shall willfully refuse to comply with the provisions herein set forth and who shall be in office during the default, shall at the time appointed for the next election, and for a period of one year thereafter, be thereby rendered ineligible for election or appointment to any office in the corporation as director or otherwise; no director shall be thus disqualified for the failure to make and file such report, if he shall file with the Secretary of State, before the time appointed for holding the next election of directors after such default, a certificate stating that he has endeavored to have such report made and filed, but that the officers have neglected to make and file the same, and shall report the items required to be stated in such annual report so far as they are within his knowledge, or are obtainable from sources of such information open to him, verified by him to be true to the best of his knowledge, information and belief. If any officer or director of a corporation required to make an annual report to the Secretary of State shall, in such return, make any false statement, he shall be deemed guilty of perjury.
All corporations, accepting the provisions of the Constitution of the State of Delaware, and coming under the provisions of the General Corporation Law of this State, and all corporations now existing or hereafter to be incorporated under the provisions of said law, shall make and file an annual report with the Secretary of State as hereinbefore provided in this Section; upon failure, neglect, or refusal to file such annual report the Secretary of State shall investigate the reasons therefor with the view of having the charter of such corporation forfeited in accordance with the provisions of Section 67 of Chapter 65 of the Revised Code of 1915; provided, however, that in the discretion of the Secretary of State the filing fee may be remitted in the case of a charitable or beneficial organization, carried on without profit, or a corporation that is required to file a report with the Insurance Commissioner or the State Bank Commissioner for which a fee is collected.
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.
In case any such corporation shall fail to file such report within the time required by this Section, and in case the agent in charge of the principal office of any such corporation, upon whom process against such corporation may be served, shall die, or shall resign, or shall refuse to act as such, or shall remove from the State of Delaware, or such agent cannot with due diligence be found, it shall be lawful while such default continues, to serve process against such corporation upon the Secretary of State, and such service shall be as effective to all intents and purposes as if made upon the President or head officers of such corporation, and within two days after such service upon the Secretary of State as aforesaid, it shall be the duty of said Secretary of State to notify such corporations thereof by letter directed to such corporation at its registered office, in which letter shall be enclosed a copy of the process or other paper served; and it shall be the duty of the plaintiff in any action in which said process shall be issued to pay to the Secretary of State, for the use of the State, the sum of Three Dollars, which said sum shall be taxed as a part of the costs in said suit, if the plaintiff shall prevail therein; the Secretary of State shall keep a book to be called the "process book," in which shall be entered alphabetically, by the name of the plaintiff and defendant therein, the title of all causes in which processes have been served upon him, the text of the process so served, the return day thereof, and the day and hour when the service was made.
Section 3. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 67, being Section 104 of the Revised Code of 1915, and inserting in lieu thereof the following:
104. Section 67. Rates of Franchise Taxes: All corporations, accepting the provisions of the Constitution of the State of Delaware and coming under the provisions of the General Corporation Law of this State, and all corporations, which have heretofore filed or may hereafter file a certificate of incorporation under the provisions of said corporation law, shall pay an annual franchise tax to the State School Tax Department as follows:
Where the authorized capital stock does not exceed two hundred and fifty shares, Five Dollars; where the authorized capital stock exceeds two hundred and fifty shares but is not more than one thousand shares, Ten Dollars; where the authorized capital stock exceeds one thousand shares but is not more than three thousand shares, Twenty Dollars; where the authorized capital stock exceeds three thousand shares but is not more than five thousand shares, Twenty-five Dollars; where the authorized capital stock exceeds five thousand shares, but is not more than ten thousand shares, Fifty Dollars; and the further sum of Twenty-five Dollars per year on each ten thousand shares or part thereof; provided, however, that any such corporation shall be required to pay only one-half of the amount of taxes scheduled above, if the corporation shall show to the satisfaction of the Secretary of State that it has not been engaged in any of the business activities for which it was granted a certificate of incorporation. For the purpose of computing the tax on par value stock each One Hundred Dollar unit of authorized capital stock shall be counted as one taxable share. In no case shall the annual tax be less than Five Dollars nor more than Twenty-five Thousand Dollars.
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.
Section 4. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 68 and Section 68 A, being Sections 105 and 105 A, respectively, of the Revised Code of 1915, and by inserting in lieu thereof the following:
105. Section 68. Franchise Tax Accounts; Certified by Secretary of State to State Tax Department; Notice to Taxable; To Bear Interest When; Secretary of State may Investigate Reports Filed:The Secretary of State shall certify to and file with the State Tax Department, on or before the first day of April in each year, a statement of the basis of the franchise tax as determined from the annual report filed by each corporation as hereinbefore required, and the amount of tax due thereon respectively at the rate fixed by Section 67, Article 8, Chapter 6, Revised Code of Delaware; such tax shall thereafter become due and payable, and it shall be the duty of the State Tax Department to immediately notify all of said corporations of the amount of such franchise tax due and payable by them to the said State Tax Department, and it shall be the further duty of the said State Tax Department to receive such franchise tax and pay over all such taxes collected to the State Treasurer to be used by the State Board of Education for the support and maintenance of the free public schools of this State as provided by Section 58, Article XIII, Chapter 160, Volume 32, Laws of Delaware. If the tax of any corporation remains unpaid on the first day of July after the same becomes due, the tax shall bear interest at the rate of one per centum for each month until paid. The Secretary of State shall have power to inquire into the truth or falsity of every report required to be filed to carry out the provisions of this Article; and may require the production of the books of any corporation herein referred to and may swear or affirm and examine witnesses in relation thereto.
Section 5. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 69, being Section 106 of the Revised Code of 1915, and by inserting in lieu thereof the following:
106. Section 69. Tax as a Debt: The franchise tax, as assessed and levied in accordance with the provisions of this Article, shall be a debt due from any corporation, so assessed and such tax determined for, 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, and such tax shall also be a preferred debt in case of insolvency.
Section 6. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 70, being Section 107 of the Revised Code of 1915, and by inserting in lieu thereof the following:
107. Section 70. Collection of Tax; Remedy by Injunction; Effect of: It shall be lawful for the Attorney General, either of his own motion, or upon request of the State Tax Department, whenever any franchise tax due under the provisions of this Article from any corporation shall have remained in arrears for a period of three months after the said tax shall have become payable to apply to the Court of Chancery, by petition in the name of the State, on five days' notice to such corporation, which notice may be served in such manner as the Chancellor may direct, for an injunction to restrain such corporation from the exercise of any franchise, or the transaction of any business within this State, until the payment of such tax and interest due thereon and the cost of such application, which shall be fixed by the Chancellor ; the said Court is authorized to grant such injunction, if a proper case appears, and upon granting and service of such injunction, it shall not be lawful for any such corporation thereafter to exercise any franchise or transact any business within this State until such injunction shall be dissolved.
Section 7. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 71, being Section 108 of the Revised Code of 1915, and by inserting in lieu thereof the following:
108. Section 71. Collection of Tax ; Further Remedy in Court of Chancery; Receiver When Appointed; Property of Delinquent Corporation How Applied to Payment of Tax: After any corporation, now existing or hereafter incorporated under the provisions of the General Corporation Law of this State, has failed or neglected for the period of two consecutive years to pay the franchise taxes imposed by law, and the State Tax Department shall have reported such corporation to the Governor of this State, as provided in Chapter 75 of this Article, then it shall be lawful for the Attorney General of this State to proceed against said corporation in the Court of Chancery of this State for the appointment of a receiver, or otherwise, and the said court in such proceeding shall ascertain the amount of the taxes remaining due and unpaid by such corporation to the State of Delaware, and shall enter a final decree for the amount so ascertained, and thereupon a fieri facias or other process shall issue for the collection of the same as other debts are collected, and if no property which may be seized and sold on fieri facias shall be found within the said State of Delaware, sufficient to pay such decree, the said court shall further order and decree that the said corporation, within ten days from and after the service of notice of such decree upon any officer of said corporation upon whom service of process may be lawfully made, or such notice as the court shall direct, shall assign and transfer to the trustees 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 said corporation, to be sold by said receiver or trustee for the satisfaction of such decree, and no injunction theretofore issued nor any forfeiture of the charter of any such corporation shall be held to exempt such corporation from compliance with such order of the court; and if the said corporation shall neglect or refuse within ten days from and after the service of such notice of such decree to assign and transfer the same to such receiver or trustee for sale as aforesaid, it shall be the duty of said court to appoint a trustee to make the assignment of the same, in the name and on behalf of such corporation, to the receiver or trustee appointed to make such sale, and the said 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, and the said receiver or trustee, upon the payment of the purchase money, shall execute and deliver to such 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 the right, title and interest whatsoever of the said corporation therein, and the proceeds of such sale shall be applied to the payment of such unpaid taxes, together with the costs of said proceedings.
Section 8. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 72, being Section 109 of the Revised Code of 1915, and by inserting in lieu thereof the following:
109. Section 72. Review of Assessment; Proceedings for; Limitation of; The officers of any corporation who shall consider the assessment made or the tax levied under the provisions of this Article excessive or otherwise unjust, may make application to the State Tax Board for a review of the assessment and commutation of the tax; provided, there be filed with the said Tax Board, within three months from the date of the assessment, a petition of appeal, duly verified according to law, stating specifically the grounds upon which the appeal is taken and the reason why the assessment is considered excessive or the tax unjust; the State Tax Board shall thereupon proceed to investigate the contentions raised by the said petition of appeal, and for the purpose of such investigations, the officers of said corporation may be summoned to appear before the said Board, either in person or by attorney, and questioned as to the statements set forth in the said petition; if, in the opinion of the State Tax Board, it shall appear that the assessment made is excessive or the tax so levied is unjust, the said Board shall request the officers of the corporation to file with the Board a corrected return, and the assessment shall be adjusted upon said corrected return and the tax commuted as in the opinion of the said Board shall be deemed proper.
Section 9. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 73, being Section 110 of the Revised Code of 1915, and by inserting in lieu thereof the following:
110. Section 73. Retaliating Taxation and Regulation; When Imposed: 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 the provisions of this Article, doing business in such 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 such laws continue in force in such other State or Nation, the same taxes, fines, penalties, licenses, fees, obligations and requirements of whatever kind shall be imposed upon all corporations of such other State or Nation doing business within this State or upon their agents here; provided, nothing herein shall be held to repeal any duty, condition or requirement now imposed by law upon such corporations of other States or Nations transacting business in this State.
Section 10. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 74, being Section 111 of the Revised Code of 1915, and by inserting in lieu thereof the following:
111. Section 74. Failure to Pay Franchise Tax for Two Years; Charter Void :If any corporation, accepting the provisions of the Constitution of the State of Delaware and coming under the provisions of the General Corporation Law of this State, or any corporation which has heretofore filed or may hereafter file a certificate of incorporation under the provisions of the said law, shall for two consecutive years neglect or refuse 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 Article, the charter of such corporation shall be void, and all powers conferred by law upon such corporation are declared inoperative, unless the State Tax Board shall for good cause shown to it, give further time for the payment of such tax or taxes, in which case a certificate thereof shall be filed by the said Board in the office of the State Tax Department stating the reason therefor.
Section 11. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 75, being Section 112 of the Revised Code of 1915, and by inserting in lieu thereof the following:
112. Section 75. Report of Delinquent Corporations by State Tax Department to Governor; Proclamation by Governor: On or before the first Tuesday of January in each year, the State Tax Department 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.
Section 12. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 76, being Section 113 of the Revised Code of 1915, and by inserting in lieu thereof the following:
113. Section 76. Proclamation Filed and Published; Note on Record of Certificate of Incorporation of Repeal of Charter:
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 such proclamation, the Secretary of State shall transmit forthwith to the Recorder of each County of this State a certified copy of said 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 named in said proclamation, which is of record in his office, the fact that the charter of said corporation is repealed, and the date of said repeal.
Section 13. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 77, being Section 114 of the Revised Code of 1915, and by inserting in lieu thereof the following:
114. Section 77. Acting under Proclaimed Charter a Misdemeanor; Penalty: Any corporation, firm, company, association, persons, or person, who shall exercise or attempt to exercise any powers under the Certificate of Incorporation of any corporation, which shall have been proclaimed by the Governor, after the issuance of such proclamation, shall be deemed guilty of a misdemeanor and shall be punished by a fine not exceeding One Thousand Dollars ($1,000.) or by imprisonment not exceeding one (1) year, or both, in the discretion of the Court.
Section 14. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 78, being Section 115 of the Revised Code of 1915, and by inserting in lieu thereof the following:
115. Section 78. Duties of Deputy Attorney General: The Deputy Attorney General, appointed in accordance with the provisions of Section 32, Chapter 9, Volume 32, Laws of Delaware, as amended, shall have all the powers and authorities in conjunction with the State Tax Department to collect all franchise taxes and penalties due from proclaimed corporations and corporations whose charter has become void by operation of law for non-payment of taxes thereunder.
Section 15. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by striking out Section 79, being Section 116 of the Revised Code of 1915, and by inserting in lieu thereof the following:
116. Section 79. Mistakes in Proclamation; How Corrected: Whenever it is established to the satisfaction of the Governor that any corporation named in said 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 State Tax Department as refusing or neglecting to pay such taxes as aforesaid, the Governor is authorized to correct such mistake and to make the same known by filing his proclamation to that effect in the office of the Secretary of State, who shall restore to said 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.
Section 16. That Article 8 of Chapter 6 of the Revised Code of the State of Delaware be and the same is hereby amended by repealing Section 80, Section 81, Section 82 and Section 83, being Sections 117, 118, 119 and 120, respectively, of the Revised Code of 1915.
Section 17. That no franchise tax assessed or assessable during the calendar year 1929, or any prior year, under the provisions of 102. Section 65, 103. Section 66, 104. Section 67, 105. Section 68 and 106. Section 69, as heretofore existing, and no assessment, suit, proceeding, or matter of any kind with respect thereto, shall be in anywise affected by this Act, and the provisions of said 102. Section 65, 103. Section 66, 104. Section 67, 105. Section 68 and 106. Section 69, as heretofore existing, shall be continued in full force and effect as to all such taxes, assessments, suits, proceedings and matters. All said franchise taxes so assessed or assessable during the calendar year 1929, or any prior year, shall be paid over to the State Treasurer by the State Tax Department to be used by the State Board of Education for the support and maintenance of the free public schools of this State.
Section 18. That all Acts or parts of Acts inconsistent with this Act be and they are hereby repealed to the extent of such inconsistencies only.
Approved April 1, 1929.