Lawmakers discussed a corporate tax measure on Thursday during a session of the General Assembly, positioning Delaware to shield state revenues from a projected multiyear decline linked to recent federal tax changes. The vote came as officials reviewed estimates showing a substantial drop in available resources over the next three fiscal years due to expanded federal deductions.
The legislation, House Bill 255, restructures how corporations and pass-through entities may claim several major business deductions. Delaware generally aligns with federal tax rules, but the measure would separate the state from new federal provisions that allow immediate, retroactive deductions for research and experimental spending and full expensing of many types of equipment and property. Under the bill, corporations and many pass-through businesses would continue to claim these deductions, but they would be spread across multiple years, restoring the timing rules used before the recent federal tax overhaul.
Supporters of the measure say these adjustments are needed to keep the state budget stable and prevent abrupt, midyear reductions to core programs. Estimates presented to lawmakers indicated that without HB 255, Delaware would face major revenue losses beginning in fiscal year 2026 and continuing through 2028.
Opponents argue that the new structure alters long-standing tax policy and increases tax burdens at the very moment businesses are investing in expansion, modernization, and innovation. They warn that shifting the timing of deductions raises the up-front cost of capital investment in Delaware compared with states that fully conform to federal rules. Concerns have also been raised about the bill’s retroactive reach to 2022, which could affect companies that made financial decisions based on prior expectations.
Business leaders have cautioned that decoupling the state from federal incentives may create uncertainty and elevate compliance costs for both large corporations and smaller firms. Corporate practitioners note that companies would need to maintain separate federal and state calculations for depreciation and research deductions, adding complexity for partnerships, manufacturers, and family-owned operations. While the bill maintains immediate expensing for many small-business equipment purchases, critics remain concerned about the broader impact on competitiveness.
The debate comes after several major corporations recently announced plans to leave Delaware and incorporate in other states, citing instability in Delaware’s business environment. These moves drew renewed attention to the state’s long-standing reliance on corporate revenue and prompted broader questions about how tax policy changes may influence future incorporation decisions.
Lawmakers divided sharply along party lines in the House voted to send the bill to the Senate.
