Bill seeks to revise Delaware tax code for corporations

Proposed legislation meant to change Delaware’s tax code for corporate expense write-offs is part of an effort by Democrats to address the state’s projected budget shortfall.

House Bill 255, sponsored by House Majority Leader Rep. Kerri Evelyn Harris, Senate Majority Leader Bryan Townsend and other Democrats, would change Delaware’s tax code on corporate deductions from the federal tax code that Delaware currently follows. Under the Trump administration's One Big Beautiful Bill, corporations are allowed to immediately deduct expenses from the 2022 tax year, allowing companies to immediately write off the full cost of research and development and other depreciation instead of spreading them across five or more years. Small company startups with little cash flow have used bonus depreciation to help make ends meet.

Delaware is a rolling conformity state, which means its tax code automatically incorporates most changes to federal tax law unless the state specifically decouples from them. 

Without legislative action, officials said, the state stands to lose $222.8 million in Fiscal Year 2026, $107.4 million in FY 2027, and $79.9 million in FY 2028. 

“Every Delaware tax dollar that goes to these corporate giveaways is a dollar that could have helped a child learn, kept a neighborhood safe or supported a family in crisis. Decoupling is how we make sure Delawareans get their fair share. It is time, and it is the right thing to do, to lift our people and build an economy that works for everyone,” Harris said in a statement.

The bill does not eliminate depreciation of property or expensing, but instead modifies the timing of deductions that were impacted by the One Big Beautiful Bill Act. For corporations taxed as separate entities, commonly called C corporations, this act continues expensing provisions for domestic research and experimental expenditures made after Dec. 31, 2021, but on or before Dec. 31, 2025, under the provisions in place before the OBBBA. 

The bill then decouples from the OBBBA provision for full expensing of certain business property acquired and placed in service after Jan. 19, 2025, and decouples from the special depreciation allowance for qualified production property.

For individuals with business income such as an S corporation or a partnership, changes would be made to Delaware’s personal income tax code, beginning Jan. 1, 2026, by decoupling from the OBBBA allowance for full expensing for certain business property acquired and placed in service after Dec. 31, 2025, and decoupling from the special depreciation allowance for qualified production property acquired and placed in service after Dec. 31, 2025.

HB 255 requires a three-fifths majority vote in both chambers, and will be heard by the House Administration Committee at 11:30 a.m., Friday, Nov. 7. A special session has been called Thursday, Nov. 13, for the General Assembly.