Fill Your Delaware 1902 B Template

Delaware 1902 B: Usage Instruction

Filling out the Delaware 1902 B form is a necessary step for holding and investment companies aiming to claim exemption from Delaware corporate income tax. This form helps detail the company's activities within the state and assesses eligibility for tax exemption based on those activities. Careful and accurate completion of this form is essential for compliance with Delaware tax law. Below are step-by-step instructions on how to accurately complete the form.

1. Review the period covered by the return and ensure that the fiscal or calendar year matches your company's tax year.
2. Name of Corporation: Enter the full legal name of your corporation as registered.
3. Rev Code 042 20, Delaware Address, and Zip Code: Provide your corporation's Delaware office address and corresponding zip code.
4. Mailing Address (if different from above) and Zip Code: If applicable, provide a separate mailing address.
5. Date and State of Incorporation: Enter the date your company was incorporated and the state of incorporation.
6. Employer Identification Number: Provide the federal Employer Identification Number (EIN) assigned to your corporation.
7. PART I - GENERAL INFORMATION:
• For Line 1, list the names and social security numbers of compensated employees working in Delaware, excluding Directors. Indicate full or part time status.
• On Line 2, enter the name and FEIN/SSN of owners holding more than 10% of the stock, whose Delaware tax liability exceeded $100,000 in the past three years.
8. PART II - QUESTIONS RELATING TO NON-EXEMPT ACTIVITIES: Answer each question. If any answer is "YES," provide a brief description of the corresponding activity in Delaware.
9. PART III - QUESTIONS RELATING TO EXEMPT ACTIVITIES: Similarly, check the appropriate box for each source of income and describe any activity with income over $1 million.
10. PART IV - ADDITIONAL INFORMATION: Describe any sources of income not covered in Parts II and III and the related Delaware activities.
11. SIGNATURE: The form must be signed and dated by an authorized officer or designee of the corporation. Include the title of the person signing the return.
12. Finally, detach and mail the completed Form 1902(b) to the Division of Revenue at the specified address: 820 N. French Street, P.O. Box 2044, Wilmington, Delaware 19899-2044.

It's crucial to check every section for accuracy to ensure compliance with Delaware's tax laws. Additionally, attaching any required schedules or descriptions for clarity can help avoid processing delays or inquiries from the Division of Revenue.

1. What is the Delaware 1902 B form?

   The Delaware 1902 B form is an information return required from holding and investment companies claiming exemption from Delaware corporate income tax under certain conditions. It's designed to detail the activities and financial information of corporations to ensure compliance with Delaware tax laws.

2. Who needs to file the Delaware 1902 B form?

   Corporations that claim exemption from Delaware corporate income tax under Section 1902(b)(8) of Title 30 of the Delaware Code must file the form. This exemption applies to corporations whose activities within Delaware are confined to the management and collection of income from intangible investments or from tangible property located outside the state.

3. When is the Delaware 1902 B form due?

   This form must be filed by the first day of the fourth month following the end of the taxable year. If a corporation has an automatic extension of six months for filing its federal return, this extension also applies to the Delaware return. Otherwise, a separate request for extension must be submitted before the due date.

4. How can I request an extension for filing the Form 1902 B?

   An extension can be automatically granted if the corporation has already obtained a federal extension (Federal Form 7004). If not, the corporation must send a letter requesting an extension to the Delaware Division of Revenue by the original due date. Any extensions granted must be attached to the return when filed.

5. What information is required on the Form 1902 B?

   The form requires detailed information on compensated employees working in Delaware, owners holding more than 10% of the company’s stock with a Delaware tax liability exceeding $100,000, sources of income, and activities that may indicate the corporation is not exempt from Delaware corporate income tax. It also inquires about exemption-qualifying activities and other relevant financial details.

6. What happens if I don’t file the Form 1902 B?

   Failure to file the Form 1902 B can result in penalties and the loss of exemption from Delaware corporate income tax. This could lead to the corporation being assessed for taxes, penalties, and interest on income that might have otherwise been exempt.

7. Can I file this form electronically?

   As of the latest information available, the Delaware Division of Revenue requires the Form 1902 B to be mailed to their office. Electronic filing options, if available, would be detailed on the Division of Revenue's official website or by directly contacting them.

8. Where should I mail the completed Form 1902 B?

   The completed form, along with any attachments, should be mailed to the Division of Revenue, P.O. Box 2044, Wilmington, Delaware 19899-2044. Ensure that all required information is complete and that the form is signed by an authorized individual before mailing.

Filling out the Delaware 1902 B form can seem straightforward at first glance. However, a few common mistakes can create hurdles, potentially leading to incorrect filings. Let's delve into four pitfalls to avoid ensuring the process is smooth and accurate.

1. Not Updating Contact Information: It sounds simple, but ensuring accurate and current contact information, including the Delaware and mailing addresses, is crucial. Outdated or incorrect information can delay notifications and important correspondence from the Division of Revenue, potentially leading to overlooked deadlines or compliance issues.

2. Overlooking Part-Time Employees: When listing compensated employees working in Delaware, there's often a mistake in excluding part-time workers. All individuals employed within the state, except directors, must be listed regardless of their full-time or part-time status. This oversight can lead to incomplete disclosures, raising red flags with tax authorities.

3. Incorrectly Identifying Non-Exempt Activities: The section on non-exempt activities is a common stumbling block. Specifically, answering questions about income sources or services provided in Delaware without a thorough understanding of what is considered exempt can erroneously categorize a corporation as non-exempt from Delaware corporate tax under Section 1902(b)(8). When in doubt, providing a brief description for each "YES" answer helps clarify the nature of the activities, aiding accurate tax status determination.

4. Forgetting to Attach Required Schedules and Extensions: If additional space is needed or if an extension has been granted (either by the IRS or the Delaware Division of Revenue), forgetting to attach these documents is a typical oversight. This includes schedules for listing employees or stockholders with significant ownership shares, as well as any extension approval letters or forms. Such omissions can lead to processing delays or questions about the return's completeness.

Avoiding these mistakes requires a diligent review and a thorough understanding of the form's requirements. When in doubt, consulting with a tax professional familiar with Delaware's specific regulations can provide clarity and assurance that your filing will meet all necessary standards.

When preparing or filing the Delaware Form 1902(b), an Information Return for Holding Company/Investment Company, it's critical to understand this form's role within a broader context of corporate documentation. Form 1902(b) is just one component in a suite of documents that corporations might need to ensure compliance with Delaware's tax codes and corporate laws. Below is a list of other documents often used in conjunction with Form 1902(b), providing a glimpse into the complexity and scope of corporate governance and tax compliance.

• Certificate of Incorporation: This foundational document officially registers the company with the Delaware Secretary of State, outlining the fundamental aspects of the corporation, such as its name, purpose, stock details, and registered agent.
• Corporate Bylaws: Bylaws govern the internal operations of the corporation. They detail the rules for meetings, elections of officers and directors, and other corporate formalities.
• Annual Franchise Tax Report: Delaware corporations are required to file an annual report and pay a franchise tax, which varies based on the corporation type and other factors. This report ensures compliance with Delaware's annual requirements.
• Federal Form 1120: The U.S. Corporation Income Tax Return, Form 1120, is filed with the IRS. Although federal, it is crucial for Delaware corporations to comply with federal tax obligations.
• Operating Agreement (for LLCs): While specifically for LLCs, which may also engage in activities similar to holding companies, this document outlines the company's financial and functional decisions.
• Stock Ledger: A critical document for both internal tracking and compliance purposes, the stock ledger documents the issuance, transfer, and ownership of a company's stock.
• Employer Identification Number (EIN) Assignment Letter: This IRS-issued document confirms the company's EIN, a necessary identifier for tax purposes.
• Section 83(b) Election Form: For employees receiving stock options, making an 83(b) election allows them to pay taxes on the total fair market value at the time of granting rather than vesting, potentially reducing tax liability.

Navigating these documents, along with the Delaware Form 1902(b), underpins the legal and financial infrastructure of a corporation. Responsible management and compliance with Delaware laws and federal regulations require a comprehensive approach to documentation. Ensuring that all required forms, reports, and internal documents are accurately prepared and timely filed is essential for the smooth operation and long-term success of any corporation in Delaware.

The Delaware 1902 B form is comparably aligned with the U.S. Internal Revenue Service (IRS) Form 1120, U.S. Corporation Income Tax Return. Both documents require detailed financial and operational data from corporations, aiming to assess tax liabilities accurately. They focus on income sources, deductions, and the tax implications of the corporation's activities within their respective jurisdictions. Despite their focused geographic scope — one for Delaware and the other for federal purposes — they share a commonality in serving as a basis for calculating taxes owed by corporations.

Similar to the Schedule K-1 (Form 1065), which reports the share of income, deductions, credits, etc., to the IRS for partners in a partnership, the Delaware 1902 B form also requires information about significant stockholders. Both forms are integral for ensuring these entities or individuals accurately report and pay taxes on income derived from their investments. While the Schedule K-1 pertains to partnerships and their partners, the Delaware form applies to corporations and their stockholders, illustrating a broader application of similar reporting principles across different entity types.

Similarly, the Delaware Annual Franchise Tax Report, required of all Delaware corporations, shares common ground with the 1902 B form in that both entail financial reporting by corporations to Delaware's Division of Corporations. While the Franchise Tax Report calculates a corporation's annual franchise tax based on the corporation's stock structure or assets, the 1902 B form focuses on the corporation’s eligibility for certain tax exemptions. Both forms are critical for compliance with Delaware's corporate regulatory and tax obligations.

The Foreign Bank and Financial Accounts Report (FBAR) parallels the Delaware 1902 B form concerning the disclosure of external financial assets to a regulatory body. Although the FBAR is a federal requirement disclosing foreign accounts to the Financial Crimes Enforcement Network (FinCEN) and focuses on individual or entity foreign bank accounts, both forms serve regulatory purposes intended to monitor and tax income sources accurately. This demonstrates the broader applicability of disclosure norms across different regulatory levels and jurisdictions.

Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, required by the IRS, shares similarities with Delaware's 1902 B form in its focus on cross-border financial activities and ownership interests. Both forms require detailed information about the operations and tax obligations arising from ownership or control over corporate entities. While Form 5471 addresses U.S. persons' involvement with foreign corporations, the 1902 B form concentrates on the activities of holding and investment companies operating within Delaware, showcasing the varied reporting requirements across domestic and international jurisdictions.

State-specific income tax returns, such as the California Form 540, similarly necessitate detailed financial reporting from individuals or entities tailored to a specific jurisdiction's tax laws, akin to the Delaware 1902 B form's requirements for corporations. Despite the different entity types they apply to and their varied state focuses, both forms are integral components of a larger framework ensuring tax compliance and financial transparency within the respective states.

The Form 990, Return of Organization Exempt From Income Tax, required by the IRS from nonprofit organizations, highlights the scope of financial activity reporting across different types of entities. Like the Delaware 1902 B form, Form 990 ensures that entities claiming certain tax exemptions meet specific regulatory and financial criteria. This parallel underscores the importance of transparency and accountability in the tax-exempt sector, aligning with the broader principles of tax compliance and financial reporting.

The U.S. Bureau of Economic Analysis (BEA) Form BE-13, Survey of New Foreign Direct Investment in the United States, serves a distinct yet analogous role to the Delaware 1902 B form by collecting data on foreign investments. Though the BE-13 form is more focused on economic analysis and the impact of foreign direct investments, both forms contribute to a comprehensive understanding of financial and corporate activities within their respective domains, highlighting the intricate connections between corporate operations and regulatory oversight.

Overall, the Delaware 1902 B form is part of a broader ecosystem of financial and operational reporting requirements that span local, state, federal, and international levels. While each form serves its specific regulatory or analytical purpose, together they ensure a level of oversight and transparency essential for tax compliance, economic analysis, and the maintenance of fair and orderly markets.

When filling out the Delaware 1902 B form, it's crucial to be thorough and precise in providing the required information. This guide lays out essential dos and don'ts to ensure the process is smooth and the form is completed correctly.

• Do ensure that you're filling out the form for the correct tax year. This is vital for maintaining the accuracy of your records and ensuring compliance with state regulations.
• Do read the instructions carefully before you start to fill out the form. Understanding each section's requirements can prevent mistakes and save time.
• Do provide clear and accurate information for each question, especially when detailing the corporation's sources of income and the nature of its business activities within and outside of Delaware.
• Do include the name and social security numbers of all compensated employees working in Delaware, excluding Directors, as specified in Part I.
• Do check the appropriate boxes in Parts II and III to indicate whether the corporation receives income from specified sources or engages in certain activities, providing brief descriptions when required.
• Do attach additional schedules if you need more space to provide required information. Ensure these schedules are clearly marked and referenced in the main form.
• Don't leave any required fields blank. If a question does not apply to your situation, mark it as "N/A" (not applicable) rather than leaving it empty to indicate it was not overlooked.
• Don't forget to sign and date the form. The signature attests to the veracity of the information provided and is necessary for the form to be processed.
• Don't disregard the filing deadline. Submitting the form on or before the first day of the fourth month following the end of the taxable year is crucial to avoid penalties.

By adhering to these guidelines, you can ensure that your Delaware 1902 B form is correctly filled out and submitted, thereby fulfilling your reporting obligations accurately and efficiently.

Delving into the complexities of tax documentation, the Delaware Form 1902(b) often becomes a source of misunderstandings for many. Here, we aim to clarify some of the most common misconceptions surrounding this particular form and its use for businesses in Delaware.

• Misconception 1: Form 1902(b) applies to all Delaware corporations.

This is incorrect. Form 1902(b) is specifically designed for holding and investment companies claiming exemption from Delaware corporate income tax under Section 1902(b)(8), 30 DEL. C. This exemption pertains to corporations whose activities within Delaware are confined to the maintenance and management of their intangible investments and the collection and distribution of the income from these investments.

• Misconception 2: Only income earned within Delaware needs to be reported.

Not quite. While Form 1902(b) focuses on activities and income related to Delaware, it also inquires about income from sources located outside of Delaware. This includes income from intangible investments and tangible property physically located outside the state, which are relevant for determining the company's tax exemption status.

• Misconception 3: The form is the same as a tax return.

Form 1902(b) is not a tax return but an information return. It is used by holding and investment companies to claim exemption from Delaware corporate income tax. While it does entail reporting income and other financial information, it doesn’t calculate tax liability but instead helps ascertain eligibility for the said exemption.

• Misconception 4: All rental income is treated the same.

This statement doesn't hold true according to the form's instructions. There's a differentiation between rental income from real property and tangible personal property located within versus outside Delaware. This distinction matters when determining whether the income supports a corporation's tax exempt status under specific sections of Delaware Code.

• Misconception 5: Form 1902(b) is only filed with federal tax returns.

Actually, this form must be specifically filed with the Delaware Division of Revenue. While it aligns with the fiscal year used for federal income tax purposes and can be affected by extensions granted on the federal level, it remains a separate filing specific to Delaware's tax requirements.

• Misconception 6: Any corporation can automatically claim exemption.

Filing Form 1902(b) doesn't guarantee exemption from Delaware corporate income tax. The corporation must meet specific criteria related to its income generating activities within and outside Delaware. It’s the information provided in the form that helps the state determine the company's eligibility for exemption.

• Misconception 7: Compensation of directors needs to be reported.

Form 1902(b) explicitly excludes directors from the compensation reporting requirement in Part I. Only the compensation of employees working in Delaware, excluding directors, must be reported, underscoring the form's focus on operational rather than governance activities.

• Misconception 8: The form only requests current year data.

The form also requires information on owners holding more than 10% of the corporation’s stock who had a Delaware income tax liability exceeding $100,000 in any of the past three years. This historical perspective helps affirm the ongoing eligibility for income tax exemption.

• Misconception 9: Digital services are not relevant to the form’s reporting.

On the contrary, the form inquires about the provision of services within Delaware, including computer services, to unaffiliated or affiliated entities. This is crucial in determining whether a corporation's activities extend beyond the permitted scope of management and investment of intangible assets, thus affecting its tax exemption status.

Understanding these nuances helps corporations accurately complete their Delaware Form 1902(b) and effectively navigate the intricacies of state tax laws.

Filling out the Form 1902(b) for Delaware-based holding or investment companies is crucial for maintaining tax compliance and securing potential exemptions. Understanding the form's requirements can ensure accuracy in reporting and potentially avoid unnecessary tax burdens. Here are key takeaways to consider when completing this form:

• Entities must disclose the names and social security numbers of compensated employees working within Delaware, excluding directors, which is essential for verifying the company's operational scope and workforce in the state.
• Companies need to report owners holding more than 10% of the corporation's stock, whose tax liability in Delaware exceeded $100,000 in any of the past three years, highlighting the significance of tracking ownership and financial contributions.
• The form distinguishes between exempt activities, such as the management of intangible investments outside Delaware, and non-exempt activities, which include providing various services within the state. This distinction is pivotal in determining eligibility for corporate income tax exemption under Section 1902(b)(8) of Title 30 of the Delaware Code.
• A timely submission, following the fiscal year or by the first day of the fourth month following the year's end, is required. Extensions from the IRS automatically apply, emphasizing the importance of staying on top of filing deadlines to avoid penalties.

Understanding these key points can significantly streamline the filing process for companies and ensure compliance with Delaware's tax regulations. Accurate and thorough completion of the Form 1902(b) supports a transparent and efficient assessment of a company's tax obligations.