CHAPTER 82
FORMERLY
HOUSE BILL NO. 349
AN ACT TO AMEND CHAPTERS 11 AND 19 OF TITLE 30 OF THE DELAWARE CODE RELATING TO INCOME TAXES.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fifths of all the members of each House thereof concurring therein):
Section 1. Amend §1102, Title 30 of the Delaware Code by deleting from the first sentence of said section the following phrase: and on the taxable income of every nonresident which is derived from sources within this State".
Section 2. Amend §1121, Title 30 of the Delaware Code by deleting said section in its entirety and substituting in lieu thereof the following:
"§1121. Imposition of tax upon nonresidents.
A tax is hereby imposed for each taxable year on the taxable income of every nonresident individual of this State equal to the tax determined under §1102 of this title as if such individual were a resident, multiplied by a fraction, the numerator of which is such individual's modified Delaware source income and the denominator of which is such individual's Delaware adjusted gross income."
Section 3. Amend §1122, Title 30 of the Delaware Code by deleting said section in its entirety and substituting in lieu thereof the following:
"§1122. Modified Delaware source income.
The modified Delaware source income of a nonresident individual means that part of such individual's federal adjusted gross income and modifications provided for under §1106 of this title derived from sources within this State determined under §1124 of this title."
Section 4. Amend §1123, Title 30 of the Delaware Code by deleting said section in its entirety and substituting in lieu thereof the following:
"§1123. Delaware adjusted gross income.
The Delaware adjusted gross income of an individual means such individual's federal adjusted gross income with the modifications provided for under §1106 of this title."
Section 5. Amend §1124, Title 30 of the Delaware Code by deleting said section in its entirety and substituting in lieu thereof the following:
"§1124. Income derived from sources within this State.
(a) General. That part of a nonresident individual's federal adjusted
gross income derived from sources within this State shall be the sum of the following:
(1) The amount of items of income, gain, loss, and deduction entering into his federal adjusted gross income which is derived from sources in this State, including (i) his distributive share of partnership income and deductions determined under the provisions of section 1145 of this title, and (ii) his share of estate or trust income and deductions determined under the provisions of section 1142 of this title; and
(2) the portion of the modifications described in subsections (a), (b) and
(c) of section 1106 of this title which relate to income derived from sources in this State, including any modifications attributable to him as a partner.
(b) Income and deductions having source within this State Items of
income, gain, loss and deduction derived from, or connected with, sources within this State are those items attributable to:
(1) Compensation, other than pensions, as an employee in the conduct of the business of an employer, for personal services (i) rendered in this State, or (ii) attributable to employment in this State and not required to be performed elsewhere;
(2) The ownership or disposition of any interest in real or tangible personal property in this State;
(1) A business, trade, commerce, profession or vocation carried on in this State; or
(2) Winnings from parimutuel wagering derived from the conduct of parimutuel activities within this State;
(c) Intangibles. Income from intangible personal property, including
annuities, dividends, interest, and gains from the disposition of intangible personal property, shall constitute income derived from sources within this State only to the extent that such income is from property employed by the taxpayer in a business, trade, commerce, profession or vocation carried on in this State.
(a) Deduction for losses. Deductions for capital losses, net capital gains and net operating losses shall be based solely on income, gains, losses and deductions derived from, or connected with, sources in this State, but otherwise shall be determined in the same manner as the corresponding federal deductions.
(a) Small business corporation shareholder. For a nonresident individual
who is a shareholder of a corporation which is a Subchapter S corporation for federal income tax purposes, the undistributed taxable income of such corporation shall not constitute income derived from sources within this State and a net operating loss of such corporation shall not constitute a loss or deduction connected with sources in this State.
(a) Apportionment and allocation. If a business, trade, commerce,
profession or vocation is carried on partly within this State and partly without this State, the items of income and deduction derived from, or connected with, sources within this State shall be determined by apportionment and allocation under rules prescribed by the Director of the Division of Revenue.
(a) Service in armed forces. Compensation paid by the United States for service in the armed forces of the United States performed by a nonresident shall not constitute income derived from sources within this State."
Section 6. Amend §1125, Title 30 of the Delaware Code by striking said section in its entirety and substituting in lieu thereof a new Section 1125 to read as follows:
11125. Individual who is Delaware resident for part of year: computation of tax. An individual who is a resident of this State for only part of a taxable year shall have the election to either:
(a) Report and compute the tax as payable by such individual under this chapter as if he or she were a resident for the entire taxable year and be allowed the applicable credit as provided in §1111 of this Title; or
(b) Report and compute the tax as if he or she were a nonresident of this State for the entire year, except, however, that for purposes of such computation: (I) such individual's modified Delaware source income (as otherwise determined under §1122 of this title) for that period during which such individual was a resident of this State shall include all items of income, gain, loss and deduction whether or not derived from, or connected with, sources within this State; and (ii) the credit provided by §1111 of this title shall be allowed; provided that, however, for purposes of computing such credit, the amount of income taxes paid to another state shall be deemed to be limited by an amount which bears the same ratio to the total income taxes actually paid by such individual to such other state for such taxable year as the amount of Delaware adjusted gross income derived from sources within such other state (applying the rules of § 1124 of this title) while such individual was a resident of this State bears to the total Delaware adjusted gross income derived from sources within such other state (applying the rules of §1124 of this title) for such taxable year."
Section 7. Amend Chapter 11, Title 30 of the Delaware Code by striking §1126 of said chapter in its entirety.
Section 8. Amend §1166, Title 30 of the Delaware Code by striking said section in its entirety.
Section 9. Amend §1903(a), Title 30 of the Delaware Code by deleting all the words of said subsection between the designation "(a)" and the beginning of paragraph (1) of said subsection and substituting in lieu thereof the following:
"The 'entire net income' of a corporation for any income year means the amount of its federal taxable income for such year as computed for purposes of the federal income tax increased by (1) any interest income (including discount) on obligations issued bystates of the United States or political subdivisions thereof other than this State and its subdivisions, and (11) the amount of any deduction allowed for purposes of the federal income tax pursuant to §164 of the Internal Revenue Code (26 U.S.C. §164] for taxes paid on, or according to or measured by, in whole or in part, suchcorporation's net income or profits, to any state (including this State), territory, county, or political subdivision thereof, or any tax paid in lieu of such income tax, and its federal taxable incomeshall be further adjusted by eliminating:"
Section 10. Amend §1903(a), Title 30 of the Delaware Code by deleting paragraph (1) of said subsection in its entirety, and renumbering the remaining paragraphs accordingly.
Section 11. Sections 1 through 8 of this Act shall be effective for
taxable periods commencing on or after January 1, 1992. Sections 9 and 10 of this Act shall be effective for taxable periods ending after the date of this Act's enactment into law.
Section 12. If any provision of this Act or the application thereof to any person or circumstances is held invalid, the invalidity shall not affect other provisions or applications of this Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.