Delaware General Assembly

CHAPTER 7

STATE REVENUE FRANCHISE TAX

AN ACT to amend Article 8 of Chapter 6 of the Revised Code of the State of Delaware as heretofore amended 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 103, Sec. 611. Code of 1915, of the State of Delaware, be and the same is hereby amended by striking out all of 103, Section 66, of the Revised Code of 1915, of the State of Delaware, as heretofore amended, 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 on Secretary of State ; Effect of; Process Book, how kept by Secretary of State : Annually on or be- Annual fore the first Tuesday in January, it shall be the duty of every corporation now existing or hereafter incorporated under the provisions of the General Corporation Law of Delaware, by its President, Secretary, Treasurer or other proper officer thereof, or by any two of its directors, or by Incorporators any two incorporators thereof in the event the board of directors thereof shall not have been elected, 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 maybe 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 of officers 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 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 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, report 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 wilfully 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 of State all corporations now existing or hereafter to be in 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 report 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 omitted (*) 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.

*so enrolled

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 Secretary of State 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 Notice by within two days after such service upon the Secretary of Secretary of State as aforesaid, it shall be the duty of said Secretary of State to notify such corporation 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 ; Plaintiff to and it shall be the duty of the plaintiff in any action in which pay fee 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 Process Book 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 2. That Article 8 of Chapter 6 of the Revised Code of 1915, of the State of Delaware, be and the same is hereby amended by striking out all of 104, Section 68, of the Revised Code of 1915, of the State of Delaware, as heretofore amended, and by inserting in lieu thereof the following:

104. Section 67. Rates of Franchise Taxes; All corporations, accepting the provisions of the Constitution of T" Rat" 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 Tax Department as follows:

Where the authorized capital stock does not exceed two 250 shares 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 1,000 shares 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 thou- sand shares but is not more than ten thousand shares, fifty 10,000 shares dollars ; and the further sum of twenty-five dollars on each $25.00 ten thousand shares or part thereof, provided, however, that in no case shall the tax payable at the foregoing rates for a full taxable year be less than five dollars nor more than Minimum and twenty-five thousand dollars. For the purpose of computing maximum the tax on par value stock each one hundred dollar unit of authorized capital stock shall be counted as one taxable computing share. In case the corporation has not been in existence during the whole year, the amount of tax due, at the foregoing going rates and as above provided, shall be prorated for the portion of the year during which the corporation was in existence. In case a corporation shall have changed during Change in capital the taxable year the amount of its authorized capital stock, stock the total annual franchise tax payable at the foregoing rates determined 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 was in effect. 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 when only at the rate of one-half of the amount of taxes scheduled above for such portion of the year as it shall not have been so engaged and at the full rate for the remainder of the year. Any such affidavit shall state fully the pertinent facts upon which the claim for one-half rate is based.

For the purpose of computing the taxes imposed by this section, the authorized capital stock of a corporation shall Stock basis of tax 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 3. That Article 8 of Chapter 6 of the Revised Code of 1915, of the State of Delaware, be and the same is hereby amended by striking out all of 109, Section 72, of the Revised Code of 1915, of the State of Delaware,. as heretofore amended, and by inserting in lieu thereof the following:

109. Section 72. Review of Assessment ; Proceedings for; Refunds ; Statistics ; Limitations of:

(A) The State Tax Board as provided for in Chapter 8, Volume 36, Laws of Delaware, shall for the purposes of this Act be vested with all the powers and duties now vested in that Board under Chapter 8, Volume 36, Laws of Delaware, and is especially authorized (a) to decide all questions of policy sub- mitted by the Secretary of State pertaining to the assessment of franchise taxes ; (b) to hear all complaints and appeals and all petitions for review of the assessments of franchise taxes and/or of penalties provided for by this Article, with power to affirm, modify or reverse, in whole or in part, any assessments of franchise taxes and/or of penalties made or imposed by the Secretary of State.

(B) The State Tax Department may examine or cause to be examined annual reports of all corporations assessed at rates less than the full rate of franchise tax provided in Section 67, and annual reports of all corporations petitioning for a reduction of franchise taxes from the full rate at the 1 direction of the State Tax Board.

(C) Any corporation may within the period of six Corporation months after the assessment apply to the State Tax Board for a refund or reduction of taxes by this Act claimed to be erroneously or illegally assessed and thereafter collected, 1 or of interest or penalties claimed to have been assessed and thereafter collected without authority, or of any payment claimed to have been excessive. If the Tax Board shall determine that the tax, interest and/or penalties assessed are Tax Board excessive or incorrect, in whole or in part, it shall resettle to adjust the same and adjust the assessment of tax, interest or claims penalties accordingly, and shall notify the corporation and the Secretary of State of such determination and direct the Tax Department 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 Tax Board shall be Tax Board further empowered to revise the penalty provided in Section may revise penalty 103, Section 66 of the Revised Code of the State of Delaware as amended. An Appeal may be taken to the Superior Court emit to of the State of Delaware from any decision, determination or final action of the State Tax Board under this Section by the State of Delaware or by any corporation affected thereby within sixty days after notification thereof and such Court may by its judgment affirm, modify or reverse the same in whole or in part.

(D) Repayment Fund: The Tax Department shall retain in its hands out of the revenue collected from the taxes imposed by this Act, or by Chapter 6, Article 8 of the Revised Code of 1915, as heretofore amended, a sum sufficient to provide at all times a fund of twenty thousand dollars, out of which it shall pay any refunds to which corporations shall become entitled under the provisions of this Act. Said Fund shall be deposited in the financial institution which is the legal depository of State moneys to the credit of the State Tax Department and shall be disbursable on order of State Tax Commissioner the State Tax Commissioner.

(E) The State Tax Department shall prepare and publish an annual report containing such statistics as may be Department to publish available with respect to the operation of this Act, including annual report the amounts collected and amounts unpaid for each year for which the tax is assessed, and such other facts as are deemed pertinent and desirable.

Section 4. That no franchise tax assessed or assessable during the calendar year 1930, or any prior year, under the provisions of 103, Section 66, 104, Section 67, and 109, Section 72, as heretofore existing, and no assessment, suit, proceeding, or matter of any kind with respect thereto, shall be in any wise affected by this Act, and the provisions of Law Involved said 103, Section 66, 104, Section 67, and 109, Section 72 as heretofore existing, shall be continued in full force and effect as to all such taxes, assessments, suits, proceedings and matters.

Section 5: If any word, clause, sentence, paragraph or part of this Act shall, for any reason, be adjudged by any Court of competent jurisdiction to be unconstitutional or part of this Act shall, for any reason, be adjudged by any invalidate the remainder of this Act, but shall be confined in its operation to the word, clause, sentence, paragraph or part thereof directly involved in the controversy in which such judgment shall have been rendered.

Section 6. That all Acts or parts of Acts inconsistent Acts Inconsistent with this Act be and they are hereby repealed to the extent of such inconsistencies only.

Approved April 22, 1931.