TITLE 30

State Taxes

Income, Inheritance and Estate Taxes

CHAPTER 20. BUSINESS TAX CREDITS AND DEDUCTIONS

Subchapter VIII. Credit for Research and Development Expenses


(a) Credit calculation.

(1) General rule. — A taxpayer may elect a Delaware research and development tax credit for the taxable year equal to: (1) 10% of the excess of the taxpayer's total Delaware qualified research and development expenses for the taxable year over the taxpayer's Delaware base amount, or (2) 50% of Delaware's apportioned share of taxpayer's federal research and development tax credit calculated using the alternative simplified credit method under § 41(c) (5) of the Internal Revenue Code of 1986 (26 U.S.C. § 41(c) (5)), using federal definitions and methodology. Delaware's apportioned share of the federal credit shall be the amount of the alternative simplified credit the taxpayer can claim under § 41(c) (5) (26 U.S.C. § 41(c) (5)), multiplied by a percentage equal to the ratio of the taxpayer's Delaware qualified research and development expenses for the taxable year to the taxpayer's total qualified research and development expenses for the taxable year. A taxpayer's Delaware research and development tax credit determination election shall be an annual election, and shall be independent of taxpayer's federal research and development tax credit determination.

(2) Alternative calculation for small businesses. — In the case of a small business, paragraph (a) (1) of this section shall be applied by substituting "20%" for "10%" and by substituting "100%" for "50%." For the purposes of this subsection, "small business" means any taxpayer with average annual gross receipts, as determined by § 41(c)(1)(B) of the Internal Revenue Code of 1986 (26 U.S.C. § 41(c)(1)(B)), not in excess of the applicable threshold of $20,000,000. Taxpayers making use of the alternative calculation provided in this paragraph must conform to the definition of "small business" set forth herein without regard to the method by which the taxpayer calculates its federal research and development tax credit. The level of the applicable threshold in this subsection is subject to annual adjustment as more fully set forth in § 515 of this title.

(b) A research and development tax credit shall be applied against the taxpayer's qualified tax liability for the taxable year in which the qualified research and development expenses were taken into account for purposes of Delaware income taxation. In the case of partnerships, the credit shall be allocated among partners as provided in § 41(f)(2)(B) of the Internal Revenue Code of 1986 (26 U.S.C. § 41(f)(2)(B)).

(c) If the taxpayer cannot use the entire amount of the approved research and development tax credit, such unused credit shall be paid to it in the nature of a tax refund.

72 Del. Laws, c. 23, § 4; 77 Del. Laws, c. 329, § 64(c); 79 Del. Laws, c. 298, § 1; 80 Del. Laws, c. 207, § 2.;

Any term used in this subchapter shall have the same meaning as when used in a comparable context in the Internal Revenue laws of the United States, unless a different meaning is clearly required or unless any provision of this subchapter ascribes a different meaning to such term. References to the Internal Revenue Code shall mean the sections of the Internal Revenue Code as existing on any date on which any expenses subject to credit under this subchapter are taken into account for purposes of Delaware income taxation. However, if those sections of the Internal Revenue Code referenced in this chapter are repealed or terminated, references to the Internal Revenue Code shall mean those sections last having full force and effect. If, after repeal or termination, the Internal Revenue Code sections are revised or reenacted, references herein to Internal Revenue Code sections shall mean those revised or reenacted sections.

72 Del. Laws, c. 23, § 4.;

In prescribing standards for determining which qualified research and development expenses are considered Delaware qualified research and development expenses for purposes of computing the credit provided by this chapter, the Director may consider the location where the services are performed and other factors that the Director within the Director's sound discretion reasonably determines are relevant for the determination.

72 Del. Laws, c. 23, § 4; 70 Del. Laws, c. 186, § 1.;

A taxpayer who is eligible for the Research and Development Tax Credit under this chapter for the taxable year in which the Delaware qualified research and development expenses are taken into account for purposes of Delaware income taxation shall continue to be eligible for the credit permitted under this chapter, even if the federal research and development tax credit provided by § 41 of the Internal Revenue Code [26 U.S.C. § 41] has been terminated or revoked.

72 Del. Laws, c. 23, § 4; 75 Del. Laws, c. 140, § 2; 77 Del. Laws, c. 329, § 64(d); 78 Del. Laws, c. 76, § 66; 78 Del. Laws, c. 292, § 55; 79 Del. Laws, c. 81, § 1; 80 Del. Laws, c. 207, § 2.;

72 Del. Laws, c. 23, § 4; repealed by 80 Del. Laws, c. 207, § 2, eff. Jan. 1, 2017.;

72 Del. Laws, c. 23, § 4; repealed by 80 Del. Laws, c. 207, § 2, eff. Jan. 1, 2017.;