Fill a Valid Delaware 1902 B Form

Detailed Guide for Filling Out Delaware 1902 B

Filling out the Delaware 1902 B form is a critical step for holding and investment companies operating within Delaware to maintain their tax exemption status under specific sections of the Delaware Code. This process involves detailing the company's earnings, activities, and ownership information, along with specifying whether income derived from sources or activities both inside and outside of Delaware falls within the exemption criteria. Submitting this form accurately and timely ensures compliance with Delaware's tax regulations, avoiding unnecessary complications or liabilities. Here are the steps needed to complete the form:

1. Identify the reporting period: Indicate whether the form is for the calendar year 2011 or, if different, specify the ending date of the fiscal year at the top of the form.
2. Provide company details: Enter the Name of Corporation, Delaware Address, Zip Code, Mailing Address (if different), Date and State of Incorporation, and Employer Identification Number as requested in the header section of the form.
3. Part I - General Information:
   1. For Line 1, list the names and social security numbers of all compensated employees (excluding Directors) working in Delaware, indicating whether they are employed on a full or part-time basis. Attach a separate schedule if more space is needed.
   2. On Line 2, enter the name and Federal Employer Identification Number or Social Security Number of any owner (individual, partnership, or corporation) holding more than 10% of the corporation's stock, whose Delaware tax liability exceeded $100,000 in any of the past three years. Use an additional sheet if necessary.
4. Part II - Questions Relating to Non-Exempt Activities: Check the appropriate boxes to indicate whether the corporation received any income from specified sources within Delaware or provided certain services. Provide descriptions as necessary for any "YES" answers.
5. Part III - Questions Relating to Exempt Activities: Check the appropriate boxes for each source of income, and for any "YES" answers where income exceeded $1 million, provide a detailed description of the activity in Delaware.
6. Part IV - Additional Information: If the corporation had any sources of income other than those described in Parts II and III, describe the source of income and related activities in Delaware.
7. Signature: The return must be signed and dated by an officer of the corporation or an authorized designee, indicating their title. Detach and mail the completed Form 1902(b) to the Division of Revenue, 820 N. French Street, P.O. Box 2044, Wilmington, Delaware 19899-2044.

By following these steps, holding and investment companies can accurately submit Form 1902(b), ensuring compliance with Delaware's tax exemption provisions and maintaining good standing within the state.

1. What is the Delaware 1902 B form and who needs to file it?

   The Delaware 1902 B form, officially known as the Information Return for Holding Company/Investment Company, is a document required by the state of Delaware. It must be filed annually by corporations that claim exemption from Delaware corporate income tax under Section 1902(b)(8) of Title 30 of the Delaware Code. Specifically, this exemption applies to corporations whose activities within the state of Delaware are limited to the maintenance and management of their intangible investments and the collection and distribution of the income from such investments, or from tangible property physically located outside Delaware. In essence, if a corporation’s presence in Delaware is solely for handling its intangible assets or managing income from outside the state, it needs to file this form to document its tax-exempt status.

2. When is the Delaware 1902 B form due?

   The form is due on or before the first day of the fourth month following the end of the corporation's taxable year. For companies operating on a calendar year basis, this means the due date is April 1st. It's important to note that if a corporation has an extension for filing its federal tax return, this will automatically extend the filing deadline for the Delaware 1902 B form by six months. If no federal extension was requested, corporations can still request an extension from Delaware by submitting a letter by the original due date. Any granted extensions should be attached to the form when it is filed.

3. What information is required on the Delaware 1902 B form?

   • General Information: Names and Social Security numbers of compensated employees working in Delaware (excluding directors), and names and identification numbers of owners holding more than 10% of the corporation's stock whose Delaware tax liability exceeded $100,000 in the past three years.
   • Non-Exempt Activities: Details on whether the corporation received income from certain Delaware-based sources or provided specific services in Delaware that might disqualify it from tax exemption.
   • Exempt Activities: Information on income derived from sources that might qualify the corporation for tax exemption, including specifics if the income from a single source exceeds $1 million.
   • Additional Information: Any other sources of income or relevant activities in Delaware not covered in previous sections.

4. What indicates that a corporation is NOT exempt from Delaware corporate income tax?

   There are specific indicators within the form that suggest a corporation might not qualify for tax exemption under Section 1902(b)(8). If a corporation receives income from rental properties or tangible personal property located within Delaware, or if it provides certain enumerated services to unaffiliated entities or affiliated entities beyond just managing its intangible assets, it might not be exempt. Essentially, active business operations or certain income sources within Delaware could disqualify a corporation from exemption.

5. How does a corporation demonstrate exempt status on this form?

   Exemption status is primarily determined through the responses in Part III of the form, which focuses on exempt activities. Corporations demonstrate their eligibility for tax exemption by reporting income derived from intangible investments or assets outside Delaware. They must provide details on these income sources, especially for any single source generating income in excess of $1 million, along with descriptions of related activities performed within Delaware. Exempt status is closely tied to a corporation's passive income and investment management within the state.

6. Where should the Delaware 1902 B form be sent?

   After completion, the form should be detached and mailed to the Delaware Division of Revenue. The specific address for submission is Division of Revenue, 820 N. French Street, P.O. Box 2044, Wilmington, Delaware 19899-2044. It’s important for corporations to ensure that the form is filled out completely and accurately before sending it to this address to avoid any processing delays or issues with their exemption status.

Filling out the Delaware 1902 B form, a crucial document for holding and investment companies aiming to claim exemption from corporate tax in Delaware, requires meticulous attention to detail. Common mistakes can lead to errors that might complicate or delay the exemption process. Here's a look at ten common errors:

1. Not filling out the calendar or fiscal year correctly. This form is time-sensitive, and ensuring the correct period is covered is essential for its accurate processing.
2. Incorrectly listing the names and social security numbers of compensated employees working in Delaware. It's a frequent oversight to include directors, who should not be listed in this section.
3. Omitting names and identification numbers of owners owning more than 10% of the stock, especially when these parties had a Delaware income tax liability exceeding $100,000 in any of the past three years.
4. Failure to check off the correct boxes or provide details for non-exempt and exempt activities under Parts II and III. This mistake could incorrectly classify the corporation, affecting its tax liabilities.
5. Not providing adequate descriptions of income received from sources both within and outside of Delaware, especially where income exceeds $1 million. Detailed descriptions are crucial for substantiating exemption claims.
6. Overlooking the requirement to specify if the corporation is engaged in business activities outside of Delaware not described in Question 1 of Part III, leading to incomplete disclosure of the corporation's activities.
7. Misunderstanding the types of services provided within Delaware, as listed in Part II, can be problematic. If services are offered within the state outside of the management of intangible assets, those need precise articulation to ensure tax compliance.
8. Forgetting to declare additional sources of income not covered in the earlier sections under Part IV. Any income, including from sources not explicitly named in the form, must be disclosed.
9. Submitting the form without the proper signature, title, and date. This oversight can delay processing, as an unsigned form is not considered valid.
10. Not attaching the necessary schedules for additional information. Given the form's space limitations, attachment of separate schedules for comprehensive detailing of employees, owners, and activities is often needed but frequently forgotten.

To mitigate these mistakes, it is crucial to review each part of the form thoroughly before submission. Understanding the specific requirements—such as the precise listing of employees, clear articulation of corporate activities within and outside of Delaware, and the accurate declaration of all sources of income—is fundamental. Additionally, consulting with a professional experienced in Delaware's corporate tax exemptions can provide invaluable guidance. By avoiding these common errors, corporations can streamline their filing process, ensuring a smoother path to claiming their deserved tax exemptions.

Filing Form 1902(b) for holding and investment companies in Delaware involves providing comprehensive details about the company's income sources, activities, and ownership. Companies often need to submit additional documents alongside this form to comply fully with Delaware tax laws and regulations. Below is a list of forms and documents frequently used in conjunction this pivotal form.

• Form 7004: Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. This form is critical for businesses that need additional time to gather the required information to complete their filing accurately.
• Certificate of Incorporation: This document serves as proof of the company's legal existence and outlines its business purposes, share structure, and other fundamental information. It's often required to verify the company’s status and date of incorporation.
• Operating Agreement: Though primarily used by LLCs, an operating agreement may be relevant for holding or investment companies structured as LLCs. This document details the ownership and member duties, providing insight into the company's operation.
• Annual Report: Many companies are required to file an annual report with the state of Delaware. This document outlines the company’s activities throughout the year and confirms its ongoing compliance with state laws.
• Stock Ledger: A comprehensive record of the company's stock transactions, which is often necessary to establish ownership percentages and comply with the detailed reporting requirements of Form 1902(b).
• IRS Form W-9: Request for Taxpayer Identification Number and Certification. This form is often required for identifying the correct tax identification numbers of the parties involved, which must be reported on Form 1902(b).
• Schedule of Real and Tangible Property: A detailed list of the company’s property holdings, both within and outside Delaware, may be needed to address specific sections of Form 1902(b) related to sources of income and business activities.

These documents support the detailed reporting required by Form 1902(b) and ensure that holding and investment companies comply with Delaware's taxation laws. They provide the necessary background information, verify the company’s tax status, and elucidate its financial and operational activities within and beyond Delaware. It is advisable for companies to prepare these documents in advance of their filing to facilitate a smooth and compliant process.

The Delaware 1902(a) Information Return for Residents is akin to the 1902(b) form but specifically tailored for resident entities. While the 1902(b) form is designed for holding and investment companies, the 1902(a) version caters to virtually all resident businesses, capturing details pertinent to Delaware's tax exemption criteria. Both forms serve as essential tools in delineating the tax-exempt status of businesses, emphasizing the income sources and operational activities within the state.

The IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, shares similarities with the Delaware 1902(b) form in its purpose of transparency and compliance. Though the 5472 form focuses on international relations and foreign corporations, both it and the Delaware variant require detailed reporting of income and shareholder information to prevent tax evasion and ensure proper taxation.

The IRS Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, parallels the Delaware 1902(b) in its cross-border reporting requirements. Where Form 926 deals with the transfer of property to foreign corporations, the Delaware form scrutinizes the sources of income from tangible and intangible investments. Each form exists to keep tabs on the movement of assets or incomes that may influence tax liabilities.

IRS Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, serves a purpose akin to the Delaware 1902(b) form but from the perspective of foreign entities operating within the U.S. Like the Delaware form, which delineates the taxable and non-taxable income of holding and investment companies, Form 1120-F details the income, deductions, and credits of foreign corporations, ensuring they meet their U.S. tax obligations based on their American operations.

The Delaware Annual Franchise Tax Report for domestic and foreign corporations functions similarly to the 1902(b) form but focuses more broadly on the rights and privileges afforded to companies by the state. While the 1902(b) form assesses exemption from corporate income tax, the Franchise Tax Report evaluates annual fees based on the corporation’s capital or issued stock, underlining the state’s method of taxing corporations for their existence within Delaware’s legal framework.

IRS Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is designed to track the financial transactions between U.S. companies and their foreign affiliates. This mirrors the intent behind Delaware’s 1902(b) form which aims to monitor income derived within the state by holding and investment companies, ensuring accurate tax reporting and compliance for both domestic and international dealings.

IRS Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, juxtaposes the Delaware 1900(b) with its international approach. Form 8865 gathers details on the foreign partnerships of U.S. persons, akin to how the 1902(b) collects information on the exempt and non-exempt activities of corporations in Delaware. Both serve to highlight the global and local activities of entities for tax scrutiny.

The Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, and the Delaware 1902(b) form share common ground in their treatment of rental income. While Form 8825 zeroes in on the rental property details for partnerships and S corporations, 1902(b) queries about rental income from both real and tangible personal property within Delaware, underlining the tax implications of such incomes.

New Jersey Corporation Business Tax Return (CBT-100) aligns with the Delaware 1902(b) form in serving a specific state’s corporate tax reporting requirements. Though each form caters to its respective state regulations, they collectively analyze corporate structures, income sources, and activities to decide taxation levels. Both forms function as integral components in the broader matrix of state-level corporate taxation in the United States.

IRS Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), while focused on international taxation under U.S. tax reform's anti-deferral provisions, parallels the Delaware 1902(b) form’s objective of dissecting income sources. The 1902(b) form's scrutiny over how a corporation generates income within Delaware mirrors the scrutiny IRS Form 8992 applies in determining a U.S. shareholder's income inclusion from low-taxed foreign corporations, highlighting the comprehensive approach both take towards income analysis for tax purposes.

Filling out the Delaware 1902 B form, an Information Return for Holding Company/Investment Company, requires attention to detail and an understanding of your corporation's financial and operational status. Below are key do's and don'ts that can guide you through the process efficiently and effectively.

• Do ensure that you have gathered all relevant information about your company's income sources, both within and outside of Delaware, before starting the form. This preparation streamlines the process.
• Do double-check the names and social security numbers of compensated employees working in Delaware. Accuracy here is crucial as errors can lead to processing delays.
• Do clearly indicate whether income was received from listed sources within Delaware, especially rental income from real or tangible personal property, and services provided for unaffiliated or affiliated entities. Precise information helps in determining tax exemption eligibility.
• Do provide a detailed description for any "Yes" answers in the sections concerning sources of income and services provided. Detailed explanations support your exemption claims and ensure compliance with Delaware corporate tax laws.
• Do sign and date the return, confirming the truthfulness and accuracy of the provided information under penalty of perjury. This legal affirmation is a critical final step.
• Don't include Directors when listing compensated employees within Delaware. This specific exclusion is noted in the form instructions.
• Don't overlook the deadlines for filing the form. Submitting the form on or before the first day of the fourth month following the end of the taxable year is mandatory, with extensions requiring formal request procedures.
• Don't neglect to attach any necessary schedules or documentation, especially if more space is needed than what is provided on the form. Comprehensive documentation supports your submission.

By following these guidelines, you can navigate the complexities of the Delaware 1902 B form with confidence, ensuring compliance while maximizing your corporation's tax benefits.

Understanding the complexities of tax documents can be challenging, and the Delaware 1902 B form is no exception. This document, particularly relevant to holding and investment companies in Delaware, carries with it several misconceptions. Here are four common misunderstandings:

• Exclusively for Corporations with Physical Presence in Delaware: Many believe that the Delaware 1902 B form applies only to corporations physically located within the state. However, this form is also required for entities that, while possibly based outside Delaware, hold intangible investments or properties managed from the state, making their income subject to Delaware's jurisdiction.
• Limited to Annual Filing Only: There's a misconception that this form is strictly an annual filing requirement. While it's true the form is filed annually, corporations must also pay close attention to changes in their investment activities or ownership throughout the year. These changes may affect their tax obligations and exemptions under Delaware law.
• It's Only About Reporting Income: Another misunderstanding is that Form 1902(b) is solely for reporting the corporation's income. While income from intangible investments and the related activities is a significant part, the form also scrutinizes the nature of these incomes and services provided within Delaware, helping determine the corporation's tax exemption status.
• Applicable to All Delaware Corporations: Some might think that all Delaware corporations need to file Form 1902(b), but it specifically targets holding and investment companies. These entities are defined by their maintenance, management, and collection of income from their intangible investments, or from tangible property located outside of Delaware. Other corporate entities may be subject to different reporting requirements.

Addressing these misconceptions is crucial for holding and investment companies to ensure compliance with Delaware's tax laws. Understanding the purpose and requirements of the Delaware 1902 B form helps corporations accurately assess their tax obligations and benefits.

Understanding the Delaware Form 1902(b) is crucial for holding and investment companies aiming to comply with state tax requirements. Here are key takeaways to guide in accurately filling out and utilizing the form:

• The Delaware Form 1902(b) Information Return is specifically designed for holding and investment companies seeking exemption from Delaware corporate income tax under Section 1902(b)(8), Title 30 of the Delaware Code.
• Companies must file this form annually to report their qualifications for tax exemption, which is centered around their engagement with intangible investments and income from sources outside of Delaware.
• The form covers activities within a calendar year. If a company operates on a different fiscal year, the ending date of that fiscal year should be indicated.
• Part I of the form requires general information about the company, including compensated employees working in Delaware and owners holding more than 10% of the company’s stock if their Delaware income tax liability exceeded $100,000 in the past three years.
• Part II focuses on non-exempt activities and requires companies to disclose income from specific sources within Delaware, such as rental income from real or tangible personal property and any services provided within the state that do not relate to the management of intangible assets.
• Part III delves into exempt activities, asking for information on sources of income that could qualify the corporation for tax exemption. This includes various forms of interest, dividends, and gains on intangible investments, emphasizing the importance of activities conducted outside Delaware.
• Corporations must carefully review the criteria listed under both non-exempt and exempt activities to determine their tax obligations and possible exemptions accurately.
• The form mandates a thorough declaration of any income sources not covered in Parts II and III in Part IV, ensuring a comprehensive financial disclosure.
• Filing the Form 1902(b) must be done by the first day of the fourth month following the end of the taxable year. An automatic six-month extension is available for those who have already obtained a federal extension.
• The form requires a signature under penalties of perjury, attesting to the accuracy and completeness of the information provided.

The Delaware Form 1901(b) serves as a critical tool for holding and investment companies to navigate their tax obligations and exemptions. By carefully adhering to the requirements and meticulously providing all requested information, companies can ensure compliance with Delaware’s tax laws.