CHAPTER 423

FORMERLY

HOUSE BILL NO. 573

AS AMENDED BY HOUSE AMENDMENT NO. 1

AN ACT TO AMEND CHAPTERS 11 AND 19 OF TITLE 30 OF THE DELAWARE CODE RELATING TO THE CORPORATE AND PERSONAL INCOME TAX.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (three
fifths of all members elected to each house thereof concurring therein):

Section 1. Amend Paragraph (9) of Section 1902(b) of Title 30 of the Delaware Code to read as follows:

"(9) A corporation that is an S corporation for federal income tax purposes for any taxable year beginning on or after January 1, 1961.".

Section 2. Amend Section 1124(a)(1) of Title 30 of the Delaware Code by striking the word "and" as it appears between the symbol "," and the numeral "(ii)" and by adding the following phrase to be inserted between the word "title" (the second time such word appears) and the symbol ",": ", and (iii) his distributive share of the income and deductions of an S corporation".

Section 3. Amend Section 1124(a)(2) of Title 30 of the Delaware Code by adding thereto immediately before the symbol "." the phrase "or as a shareholder of an S corporation".

Section 4. Amend Section 1124(e) of Title 30 of the Delaware Code to read as follows:

"(e) Nonresident shareholders of S corporation. For purposes of

subsection (a) of this section, in the case of a nonresident individual who is a shareholder of an S corporation, the rules provided in subsections (a) and (c) of §1145 of this title shall apply in the same manner as if such S corporation were a partnership and such nonresident individual were a nonresident partner."

Section 5. Add a new Section 1158 to Title 30 of the Delaware Code to read as follows:

"§1158 Payment of tax on behalf of nonresident shareholders by S corporation.

(1) Every corporation that is an S corporation for federal income tax purposes for any taxable year beginning on or after January 1, 1992, in which it has any shareholder who is a nonresident individual, shall pay, at the times and in the percentages set forth in §1905 of this title, on behalf of each such nonresident, tax in an amount equal to the highest rate of tax set forth in §1102(a) of this title multiplied by such nonresident's distributive share of the income of such corporation determined in accordance with §1124 of this title.

(1) Any payment of tax under subsection (a) of this section by a corporation shall be considered to have been distributed or advanced by such corporation to the nonresident individual on whose behalf such tax was paid on the date such payment was made by such corporation. Such nonresident shall be credited for purposes of §1169 and §1170 of this title with having made a declaration and payment of estimated tax on the date such payment under subsection (a) of this section was made by such corporation, but such deemed payment of estimated tax shall be taken into account for the taxable year of such nonresident in which such nonresident is required to include in taxable income the distributive share of the income of such corporation for which such payment under said subsection (a) was made.

(1) If an S corporation fails to pay any tax required to be paid by such corporation under subsection (a) of this section, such corporation shall be liable for any penalties, interest and additions to tax applicable to such failure in the same manner as if such tax

were required to be paid by the corporation on its own behalf. Notwithstanding any other provision of this title, a nonresident individual who is a shareholder of an S corporation shall not be liable for any penalties, interest or additions to tax as a result of such nonresident's failure to make any payment of estimated tax otherwise required by §1170 of this title with respect to such nonresident's distributive share of such corporation's income.

(d) Any payment of tax made by a corporation under §1905 of this title with respect to any taxable year of such corporation ending on or before March 31, 1993, for which any payment is required to be made by such corporation under subsection (a) of this section shall be treated as a payment that was made under said subsection (a) for all purposes of this section, and no refund of any part of such payment shall be allowable solely on the basis that such payment was not required by §1905 of this title."

Section 6. Amend Section 1145(a) of Title 30 of the Delaware Code by striking the phrase "§1122 of this title" as it appears therein and substituting therefor the phrase 11124 of this title".

Section 7. (a) Except as provided in subsection (b) of this

section, if any provision of this Act or the application thereof to any person or circumstance is held invalid, this Act shall be considered invalid and void in its entirety from the date of its enactment, and the law shall be as if this Act had never been enacted.

(b) Notwithstanding subsection (a) of this section, if any

provision of this Act or the application thereof to any person or circumstance is held invalid with respect only to a certain time or period of time, this Act shall be considered invalid and void in its entirety under subsection (a) of this section only with respect to such time or period of time, but such invalidity shall not affect its validity with respect to other times or periods of time.

Section 8. Amend §1115, Title 30 of the Delaware Code by striking the word "resident" both times said word appears therein and by striking the word "resident's" as it appears therein and substitute in lieu of the word "resident's" the word "shareholder's" and in lieu of the word "resident" (only the second time said word appears in said section) the word "shareholder".

Section 9. This Act shall be effective for taxable years of S

corporations beginning on or after January 1, 1992.

Approved July 21, 1992.