The bank franchise tax is imposed on banking organizations, trust companies and out of state federal savings banks with branches in Delaware. Chapter 1, § 101(4) of Title 5 of the Delaware Code defines “banking organization” as:
“a. A bank or bank and trust company organized and existing under the laws of this State; b. A national bank, including federal savings bank, with its principal office in this State; c. An Edge Act corporation organized pursuant to § 25(a) of the Federal Reserve Act, 12 U.S.C. § 611 et seq., or a state chartered corporation exercising the powers granted thereunder pursuant to an agreement with the Board of Governors of the Federal Reserve System, and maintaining an office in this State; d. A federal branch or agency licensed pursuant to § 4 and § 5 of the International Banking Act of 1978, 12 U.S.C. § 3101 et seq., to maintain an office in this State; e. A foreign bank branch, foreign bank limited purpose branch or foreign bank agency organized pursuant to Chapter 14 of this title, or a resulting branch in this State of a foreign bank authorized pursuant to Chapter 14 of this title; or f. A resulting branch in this State of an out of state bank(as defined in § 795 of this title, and also including branch offices in this State of an out of state bank, as defined in § 795 of this title).”
A banking organization or trust company is subject to the bank franchise tax once a certificate of authority to transact business has been issued. An out of state federal savings bank is subject to the bank franchise tax when it opens a branch in Delaware.
Estimated Franchise Tax Returns are due March 1 of the current tax year and are required from banking organizations or trust companies, as well as out of state federal savings banks with branches in Delaware, with an annual bank franchise tax liability estimated to exceed $10,000.00.
The bank franchise tax forms are located on this web site under Tax Forms in the bank franchise tax section.
No, our office does not send out payment booklets.
The estimated bank franchise tax payments are due on or before June 1, September 1 and December 1.
The Estimated Franchise Tax Return is due on or before March 1 of the current tax year. The Final Franchise Tax Return is due on or before January 30 of the following tax year. Any final tax payment calculated on the Final Franchise Tax Return is due on or before March 1. No invoices are sent.
No extension is available for filing the Final Franchise Tax Return. A late filing penalty shall be assessed against the taxpayer in the amount of $25.00 for each day after the due date that the taxpayer fails to file the Final Franchise Tax Return, unless the State Bank Commissioner is satisfied that such failure was not willful.
The bank franchise tax calculation begins with net operating income before taxes as reported on the December 31 call report.
Yes, the bank franchise tax does include apportionment as provided in Chapter 11, § 1101A of Title 5 of the Delaware Code. In general the bank franchise tax on most banking organizations and trust companies is assessed on only 56% of net operating income before taxes, less applicable deductions. Several deductions are available for income attributable to subsidiaries or out of state or foreign branches that are otherwise subject to tax in Delaware or another state. Other deductions are available for foreign source income. Special provisions apply to out of state banks with branches in Delaware.
Yes, the bank franchise tax is calculated on a consolidated basis. The bank franchise tax calculation begins with net operating income before taxes as reported on the December 31 call report. Call reports are prepared on a consolidated basis in conformance with generally accepted accounting principles.
Examination fees paid to the Office of the State Bank Commissioner pursuant to Chapter 1, § 127(a) of Title 5 of the Delaware Code are deducted from net operating income before taxes. Supervisory assessments paid in accordance with Chapter 1, § 127(b) of Title 5 of the Delaware Code are not deductible.
Yes. Certain tax credits are provided in Chapter 11 of Title 5 of the Delaware Code. Certain tax credits are also available to bank franchise tax filers as provided in Title 30 of the Delaware Code.
The term “safe harbor rate” relates to the ability to make estimated bank franchise tax payments based on the prior year´s actual tax liability. For example, a bank’s June 1, 2014 estimated payment can be paid at 40% of the actual 2013 tax liability. A taxpayer making timely estimated tax payments at the safe harbor rate will not be subject to additional tax due to the underpayment of estimated tax.
As provided in Chapter 11, § 1104(c) of Title 5 of the Delaware Code additional tax due to the underpayment of estimated tax is owed when estimated tax payments are based on estimated tax that is less than 80% of the actual tax due for the taxable year, unless the estimated tax payments are made at the safe harbor rate (the previous years tax liability). Additional tax is determined at the rate of 0.05 percent per day upon the amount of the underpayment for the period of the underpayment.
In general, the bank franchise tax does not provide for carry-backs or carry-forwards between tax years. However, certain tax credits may be carried forward to future years.
The late payment penalty rate is 0.05% per day. The number of days late is determined by using the date we receive the payment in our office. The penalty is calculated by multiplying (1) the amount of the payment, (2) the rate of 0.05%, and (3) the number of days late. Our office calculates the late payment penalty on all late payments and sends an invoice for the amount due.
Yes. Amended returns with a balance due are subject to late payment penalties and additional tax due to the underpayment of estimated tax.
Yes. The Office of the State Bank Commissioner and the Office of the State Treasurer have established a program enabling bank franchise taxpayers to remit bank franchise tax payments electronically. Our electronic funds transfer program provides two options, Automated Clearing House (ACH) Debit and Automated Clearing House (ACH) Credit.
In general, there is no requirement for an amended estimated bank franchise tax return. However, if your bank’s taxable income exceeds your estimate, you may need to increase your estimated tax payments to avoid or limit additional tax due to the underpayment of estimated tax. Estimated bank franchise tax payments are reviewed and analyzed. When your actual estimated bank franchise tax payment is different from the estimate shown on your Estimated Franchise Tax Return, it signals to our office a change in your estimate. We welcome any information regarding changes in your estimate at any time during the tax year.
When a bank franchise taxpayer ceases operations in Delaware, a final call report or financial statement and a final franchise tax return are due within 30 days. A change in a bank’s charter or parent company may also require a final statement.