Delaware Research and Development Tax Credit

Program overview

Delaware modernised its research credit by removing the annual program cap and making credits fully refundable, which was a significant change for early-stage companies. Taxpayers compute the credit as a percentage of the federal credit attributable to Delaware research, with a more generous rate for small businesses. Applications are filed with the Delaware Division of Revenue after the federal return is completed, so the state claim follows the federal claim each year.

Eligibility

Taxpayers claiming a federal research credit for qualified research conducted in Delaware. Small businesses with gross receipts under $20 million receive the enhanced rate.

Benefits

Fully refundable credit paid in cash when it exceeds Delaware income tax liability.

Delaware IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

1. S1Confirm the research was physically performed within Delaware.
2. S2Provide the Delaware qualified research expense calculation and base amount.
3. S3Reconcile Delaware expenses to the federal Form 6765.
4. S4Show how wages and supplies were apportioned between Delaware and other locations.
5. S5Provide the Delaware return and credit schedule for each year claimed.
6. S6Show the carryforward schedule for unused Delaware credits.
7. S7Confirm the entity claiming the credit is the entity subject to Delaware tax.
8. DE-1Provide the pre-approval, certification or application filed for the Delaware credit, with its filing date.
9. DE-2Show the Delaware refund eligibility tests (such as small business status) were met in each year refunded.

Draft questions for illustration, reviewed by a specialist before any engagement.