CHAPTER 371

FORMERLY

SENATE SUBSTITUTE NO. 1

TO

SENATE BILL NO. 281

AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO WITHHOLDING TAXES

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend §1 I 54(d), Title 30, Delaware Code, by designating said subsection as subsection (h) of said section.

Section 2. Amend § 1154, Title 30, Delaware Code, by striking subsections (a) through (c) of said section and substituting in lieu thereof the following:

"(a) General - Every employer required to deduct and withhold tax under this chapter shall file a withholding return as prescribed by the Division of Revenue and pay over such tax to the Division of Revenue, or to a depository designated by the Division of Revenue, at a frequency to be determined as follows:

(1) An employer whose aggregate amount of taxes required by this subchapter to be deducted and withheld during the lookback period did not exceed $3600 shall be a quarterly filer;

(2) An employer whose aggregate amount of taxes required by this subchapter to be deducted and withheld during the lookback period exceeded $3600 but did not exceed $20,000 or which had no employees within Delaware during the lookback period shall be a monthly filer; and

(3) An employer whose aggregate amount of taxes required by this subchapter to be deducted and withheld during the lookback period exceeded $20,000 shall be an eighth-monthly filer;

(b) A quarterly filer shall file a return and pay over taxes required to be deducted and withheld under this chapter not later than the last day of the month following the close of each calendar quarter.

(c) A monthly filer shall, for each month, tilt a return and pay over taxes required to be deducted and withheld during such month on or before the 15th day of the month following the end of such month.

(d) An eighth-monthly filer shall file a return and pay over taxes required to be deducted and withheld under this chapter not later than three working days following the end of any deposit or return period during which an employer made any payment subject to a requirement to withhold tax under this chapter. For purposes of this subsection, each month shall be divided into eight deposit or return periods. These deposit or return periods end on the 3rd, 7th, 11th, 15th, 19th, 22nd, 25th and last day of every month.

(e) For purposes of this subchapter, the term 'lookback period' shall refer to the twelve month period between July I and June 30 immediately preceding the calendar year for which the filing frequency is determined by reference to the lookback period.

(1) Any employer required under the provisions of §6302 (or successor provision) of the Internal Revenue Code to deposit federal employment taxes by electronic funds transfer shall be required to deposit taxes withheld under this subchapter by electronic funds transfer, except that, for purposes of this subsection, one year shall be added to the 'applicable effective date' on which deposit by electronic funds transfer is required of a particular employer under regulations promulgated pursuant to the provisions of §6302 (or successor provision) of the Internal Revenue Code. The Director of Revenue shall prescribe such regulations as may be necessary for the development and implementation of an electronic funds transfer system which is required to be used for the collection of taxes withheld under this chapter. Such system shall be designed in such manner as may be necessary to ensure that such taxes will be credited to an account maintained by the State Treasurer on the date on which the return and taxes would otherwise have been required to be filed under this subchapter.

(g) Any employer that demonstrates it filed and paid over withholding taxes under this chapter on or before the date on which it was required to deposit federal employment taxes shall be deemed to have established reasonable cause for late filing and payment of withheld taxes for purposes of chapter 5 of this title."

Section 3. If any provision of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared severable.

Section 4. This Act shall be effective for tax periods beginning after December 31, 1996. The first mandatory electronic funds transfer under this Act shall be for amounts withheld after December 31, 1996, for all employers required to file and remit electronically federal employment taxes as of January 1, 1996.

Approved June 19, 1996