TITLE 30

State Taxes

Income, Inheritance and Estate Taxes

CHAPTER 11. PERSONAL INCOME TAX

Subchapter III. Nonresident Individuals


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, reduced by the credit allowed under § 1110(b) of this title, and the difference, 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.

30 Del. C. 1953, § 1121; 57 Del. Laws, c. 737, § 1; 68 Del. Laws, c. 82, § 2; 70 Del. Laws, c. 297, § 1.;

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.

30 Del. C. 1953, § 1122; 57 Del. Laws, c. 737, § 1; 68 Del. Laws, c. 82, § 3.;

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.

30 Del. C. 1953, § 1123; 57 Del. Laws, c. 737, § 1; 66 Del. Laws, c. 86, § 5; 66 Del. Laws, c. 93, § 2; 68 Del. Laws, c. 82, § 4.;

(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 the federal adjusted gross income which is derived from sources in this State, including:

a. The individual's distributive share of partnership income and deductions determined under § 1623 of this title,

b. The individual's share of estate or trust income and deductions determined under § 1640 of this title, and

c. The individual's distributive share of the income and deductions of an S corporation; and

(2) The portion of the modifications described in § 1106(a)-(c) of this title which relate to income derived from sources in this State, including any modifications attributable to the individual as a partner or as a shareholder of an S corporation.

(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:

a. Rendered in this State, or

b. 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 (including that percentage of ordinary and capital gain dividends received from a real estate investment trust, as defined in § 856 of the Internal Revenue Code (26 U.S.C § 856), that is attributable to rents from real property located in Delaware or gain from the disposition of real property located in Delaware);

(3) A business, trade, commerce, profession or vocation carried on in this State; or

(4) Winnings from pari-mutuel wagering derived from the conduct of pari-mutuel 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.

For purposes of this subsection, intangible assets of the taxpayer which are treated as held for investment for federal income tax purposes (or would be so treated if such assets were held by an individual) shall not be considered as property employed by the taxpayer in a business, trade, commerce, profession or vocation carried on in this State. Notwithstanding the foregoing and for purposes of this subsection, assets whose acquisition, management and disposition constitute integral parts of the taxpayer's regular trade or business operations (other than the operations of a taxpayer whose trade or business is that of investing) shall not be considered held for investment.

(d) 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.

(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 [repealed] 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.

(f) 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.

(g) 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.

30 Del. C. 1953, § 1124; 57 Del. Laws, c. 737, § 1; 59 Del. Laws, c. 19, § 2; 65 Del. Laws, c. 461, § 2; 68 Del. Laws, c. 82, § 5; 68 Del. Laws, c. 423, §§ 2-4; 69 Del. Laws, c. 188, §§ 5, 8; 70 Del. Laws, c. 142, § 1; 70 Del. Laws, c. 186, § 1; 72 Del. Laws, c. 467, § 3.;

An individual who is a resident of this State for only part of a taxable year shall have the election to either:

(1) Report and compute the tax as payable by such individual under this chapter as if the individual were a resident for the entire taxable year and be allowed the applicable credit as provided in § 1111 of this title; or

(2) Report and compute the tax as if the individual 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.

68 Del. Laws, c. 82, § 6; 70 Del. Laws, c. 186, § 1.;

(a) Definitions.

(1) "Director" means the Director of the Division of Revenue or the Secretary of Finance of the State.

(2) "Nonresident individual" means, for purposes of this Section, an individual who is not a resident individual of this State for the individual's entire tax year.

(3) "Recorder" means the official with the duty to record deeds and similar instruments.

(4) "Transfer under a deed in lieu of foreclosure" includes all of the following:

a. A transfer by the owner of the property to the following:

1. With respect to a deed in lieu of foreclosure of a mortgage, the mortgagee, the assignee of the mortgage, or any designee or nominee of the mortgagee or assignee of the mortgage.

2. With respect to a deed in lieu of foreclosure of any other lien instrument, the holder of the debt or other obligation secured by the lien instrument or any designee, nominee, or assignee of the holder of the debt secured by the lien instrument.

b. A transfer by any of the persons described in paragraph (a)(4)a. of this section to a subsequent purchaser for value.

(5) "Transfer under a foreclosure of a mortgage or other lien instrument" includes the following:

a. With respect to the foreclosure of a mortgage, all of the following:

1. A transfer by the sheriff or other party authorized to conduct the foreclosure sale under the mortgage to 1 of the following:

A. The mortgagee or the assignee of the mortgage.

B. Any designee, nominee, or assignee of the mortgagee or assignee of the mortgage.

C. Any purchaser, substituted purchaser, or assignee of any purchaser or substituted purchaser of the foreclosed property.

2. A transfer by any of the persons described in paragraphs (a)(5)a.1.A. and (a)(5)a.1.B. of this section to a subsequent purchaser for value.

b. With respect to the foreclosure of any other lien instrument, all of the following:

1. A transfer by the party authorized to make the sale to 1 of the following:

A. The holder of the debt or other obligation secured by the lien instrument.

B. Any designee, nominee, or assignee of the holder of the debt secured by the lien instrument.

C. Any purchaser, substituted purchaser, or assignee of any purchaser or substituted purchaser of the foreclosed property.

2. A transfer by any of the persons described in paragraphs (a)(5)b.1.A. and (a)(5)b.1.B. of this section to a subsequent purchaser for value.

(b) Estimated tax return; alternative forms. — Every nonresident individual who sells or exchanges Delaware real estate shall file with the Recorder 1 of the following:

(1) A "Declaration of Estimated Income Tax" for the quarter in which the sale or exchange is settled, applying the highest marginal rate under § 1102 of this title to an estimate of the gain recognized on the sale or exchange.

(2) An alternative form prepared by the Director to calculate income tax at the highest marginal rate under § 1102 of this title, applied to the difference between the total amount realized by the transferor and the net balance due at the time of settlement of all recorded liens encumbering the real estate.

(3)a. An alternative form prepared by the Director to declare under penalties of perjury 1 of the following:

1. That the sale or exchange of real estate is exempt from recognition of capital gain with respect to the tax year of the sale or exchange.

2. That all or a part of the gain realized that may be excluded from income with respect to the tax year of the sale or exchange.

3. That the sale or exchange of real estate is 1 of the following:

A. A transfer under a foreclosure of a mortgage or other lien instrument.

B. A transfer under a deed in lieu of foreclosure.

b. With respect to a claim of exemption or exclusion under paragraph (b)(3)a.1. or (b)(3)a.2. of this section, a statement of the facts and a citation to the provision of the Internal Revenue Code (Title 26, U.S.C.) relied upon for such exemption or exclusion must also be included in the declaration.

(c) Due date of estimated tax return, payment. — The return or form provided for in subsection (b) of this section, and the estimated tax reported due, shall be remitted with the deed to the Recorder before the deed shall be recorded.

(d) Payment credited to transferor. — The estimated tax remitted under subsection (c) of this section shall be deemed to have been paid to the Director on behalf of the nonresident transferor and the nonresident transferor shall be credited for purposes of §§ 1169 and 1170 of this title as a payment made on the date remitted to the Recorder.

(e) Persons or entities not liable for payments. — Neither the transferee, title insurance producer, title insurer, settlement agent, closing attorney, lending institution, nor the real estate agent or broker in a transaction subject to this section shall be liable for any amounts required to be collected and paid over to the Recorder or Director under this section.

(f) Tax not imposed; lawful collection of taxes not prohibited. — This section does not:

(1) Impose any tax on a transferor or affect any liability of the transferor for any tax; or

(2) Prohibit the Director from collecting any taxes due from a transferor in any other manner authorized by law.

77 Del. Laws, c. 291, § 1; 81 Del. Laws, c. 363, § 1.;

Repealed by 66 Del. Laws, c. 86, § 7, effective Dec. 31, 1987.;