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State program

Delaware Research and Development Credit

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  • Refundable
  • Pre-approval required

Last reviewed November 2026

At a glance

  • Jurisdiction: Delaware (DE)
  • Credit name: Delaware Research and Development Tax Credit (30 Del. C. §§ 2070–2073).
  • Administering agency: Delaware Division of Revenue.
  • Rate(s) and base: Annual election. Method A: 10% of Delaware qualified research expenses (QREs) above the Delaware base amount. Method B: 50% of Delaware's apportioned share of the federal alternative simplified credit (ASC) (federal ASC × Delaware QREs ÷ total QREs). Small businesses: 20% (Method A) or 100% (Method B).
  • Refundable? Yes. For tax periods beginning after December 31, 2016, an approved credit that exceeds tax is paid to the taxpayer as a refund.
  • Transferable? No. Credits of S corporations and partnerships are allocated to owners.
  • Carryforward: Not needed for current credits because the excess is refunded. Pre-2017 credits carried forward up to 15 years.
  • Annual cap / proration: None. The former $5 million statewide cap and proration were repealed effective January 1, 2017.
  • Pre-approval / application and deadline: Required. Form BUS-RDC must be filed with the Division of Revenue on or before September 15 after the end of the taxable year in which the QREs were incurred. The Division must approve the credit before it is claimed.
  • Forms: BUS-RDC (Application and Computation Schedule, with a copy of federal Form 6765 attached; consolidated filers attach a pro forma 6765 for the applicant), then BUS-CRS (businesses) or PIT-CRS (individuals) attached to the return.
  • Sunset / recent changes: No sunset; the credit continues even if the federal § 41 credit ends. No 2025 or 2026 legislation affecting the credit was identified.

What it is

Delaware offers a refundable credit for research conducted in Delaware. Each year the taxpayer chooses, independently of its federal method, between a Delaware-only incremental calculation and a share of the federal ASC. Small businesses receive double rates. Because the credit has been refundable and uncapped since 2017, it delivers cash even to companies with no Delaware tax liability, as long as the September 15 application is timely.

Who can claim it

Corporations, S corporations, partnerships and individuals (including sole proprietors) with IRC § 41 qualified research expenses for research conducted in Delaware. A small business is a taxpayer whose average annual gross receipts (as defined in IRC § 41(c)(1)(B)) do not exceed $20 million, adjusted annually for inflation, regardless of how it computes its federal credit.

How it is calculated

  • Method A: 10% (20% for small businesses) of Delaware QREs above the Delaware base amount. The base equals the fixed-base percentage times average annual gross receipts for the four prior years, and the excess may not exceed 50% of current-year Delaware QREs.
  • Method B: 50% (100% for small businesses) of the federal ASC (IRC § 41(c)(4)) multiplied by the ratio of Delaware QREs to total QREs.
  • Only one method may be selected each year. The Director may set standards for determining Delaware QREs, including where services are performed.

How to claim it

  1. Complete Form BUS-RDC, choose Method A or B, and attach federal Form 6765 (or a pro forma 6765 if a consolidated return is filed).
  2. Mail BUS-RDC to the Delaware Division of Revenue, 820 North French St., P.O. Box 8763, Wilmington, DE 19899-8763, on or before September 15 after the tax year ends.
  3. After approval, report the approved amount on BUS-CRS, Line 10 (C corporations; S corporations and partnerships allocate by ownership percentage) or PIT-CRS, Line 10 (individuals), and attach BUS-CRS and BUS-RDC to the return.
  4. Federal Form 6765 note: Section G (business component detail) is optional for tax years beginning before 2026 and required for tax years beginning after December 31, 2025, except for qualified small businesses electing the payroll offset and filers with total QREs of $1.5 million or less and gross receipts of $50 million or less that report the credit on an original return (the small-filer exception does not apply to amended returns or refund claims).

Recent changes

  • No Delaware legislation in 2024–2026 changed the credit.
  • The current framework comes from 80 Del. Laws c. 207 (SB 200, the Delaware Commitment to Innovation Act of 2016), effective for tax periods after December 31, 2016: refundability, small business rates, the ASC-based Method B, and repeal of the $5 million statewide cap.
  • The 2025 BUS-RDC and its instructions (revised October 3, 2025) are the current versions.

Likely examiner questions

These questions illustrate what an examiner may ask about this credit. They are drafts for illustration and should be reviewed by a specialist before use. Most state claims also face standard questions: where the research was physically performed, how wages, supplies and contract research were apportioned between Delaware and other locations, how Delaware amounts reconcile to federal Form 6765, the Delaware credit and carryforward schedule for each year claimed, and whether the claiming entity is the one subject to Delaware tax.

  1. Provide proof that BUS-RDC was filed by September 15 after the tax year.
  2. Show that each research activity was performed in Delaware and how wages were assigned to Delaware.
  3. Provide the Method A base computation (fixed-base percentage and four prior years' gross receipts) or the federal ASC computation and Delaware ratio for Method B.
  4. For small business rates, provide average annual gross receipts under § 41(c)(1)(B) and the applicable inflation-adjusted threshold.
  5. Reconcile Delaware QREs to federal Form 6765.
  6. For pass-through entities, show the allocation to each owner.

Common weak spots

  • Missing the September 15 BUS-RDC deadline, which forfeits the year's credit.
  • Treating the credit as nonrefundable and leaving cash unclaimed.
  • Choosing a method without modelling both (Method A versus Method B), so the benefit is misstated.
  • Small business status assumed without computing average gross receipts.
  • Out-of-state QREs included in the Delaware numerator.

Next steps

Important

This page is general information, not tax advice. Rules change; confirm current requirements with the state revenue agency or a qualified tax professional. creditARMOR is a free service. Passing this mock audit does not guarantee that your claim will pass an IRS or state examination. If needed, Swanson Reed can assist you with representation before the IRS. creditARMOR and TaxTrex are products of Swanson Reed.

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