Delaware Research & Development Tax Credit Glossary
What are the Delaware R&D Tax Credit Glossary Terms?
Answer: The Delaware R&D Tax Credit Glossary provides specific definitions for legal statutes, calculating methods, eligible expenditures, and required state forms relevant to claiming business research and development tax incentives within the state of Delaware. Understanding these terms ensures strict compliance and maximizes potential corporate tax offsets.
Glossary of Terms and Definitions
| Glossary Term (Column A) | Definition (Column B) |
|---|---|
| Delaware Division of Revenue (DOR) | The official state agency responsible for administering tax laws and collecting revenue in Delaware. |
| Del. Code Ann. tit. 30, §§ 2070-2075 | Statutory provisions governing Delaware's specific corporate income tax credits for qualified research and development. |
| Credit for Research and Development Expenses | A valuable state tax incentive rewarding businesses for qualified research activities conducted within Delaware. |
| Taxpayer's Delaware Base Amount | A historical average of Delaware research expenses used to determine the incremental credit amount. |
| Total Delaware Qualified Research and Development Expenses | The complete sum of all eligible costs incurred for qualifying research activities within Delaware. |
| Excess Delaware Qualified Research Expenses | Eligible research costs that significantly exceed the established Delaware base amount for the current year. |
| 10% Credit Rate (General Rule) | The standard Delaware R&D tax credit rate applied to excess qualified research and development expenses. |
| 20% Credit Rate (Small Business Alternative) | An enhanced credit rate available to qualifying small businesses exceeding their established Delaware base amount. |
| Small Business Definition (≤ $20M Gross Receipts) | A commercial entity whose average annual gross receipts do not exceed twenty million US dollars. |
| Average Annual Gross Receipts (Delaware) | The mathematical average of the taxpayer's gross receipts spanning the preceding four taxable years. |
| Delaware Apportioned Share | The specific portion of federal research expenses or credits directly allocated to Delaware based activities. |
| Federal Research and Development Tax Credit | A prominent federal tax incentive under IRC Section 41 for increasing qualified business research activities. |
| Alternative Simplified Credit (ASC) Method | An alternative federal calculation method for the R&D credit based on recent years' qualified expenses. |
| Delaware's Apportioned Share of Federal ASC | The specific fraction of a taxpayer's federal alternative simplified credit allocated to Delaware research activities. |
| 50% Apportionment Rate (General Rule ASC) | The standard percentage used to calculate Delaware's share when utilizing the alternative simplified credit method. |
| 100% Apportionment Rate (Small Business ASC) | The fully apportioned state rate available to qualifying small businesses using the alternative simplified credit. |
| Annual Election (Delaware Credit Calculation) | The yearly choice taxpayers make regarding which specific method to use for calculating Delaware credits. |
| Independent Election (of Federal Method) | The statutory ability to choose a Delaware calculation method regardless of the federal method selected. |
| Fully Refundable Credit | A beneficial tax credit that can be formally paid out in cash if it exceeds liabilities. |
| Unused Credit Refund (Cash Payment) | The cash distribution provided to taxpayers when refundable state credits exceed their current tax obligations. |
| Qualified Tax Liability | The specific state tax obligation against which the Delaware research and development credit is applied. |
| Corporate Income Tax (Offset) | The primary Delaware state tax liability that can be legally reduced by applying the R&D credit. |
| Partnership Allocation (§ 41(f)(2)(B)) | Internal Revenue Code rules governing how research credits are distributed among partners based on economic interests. |
| S Corporation Pass-Through | The structural mechanism allowing S corporations to pass R&D credits directly to shareholders' personal tax returns. |
| LLC Tax Treatment (Pass-Through) | The established process where Limited Liability Companies flow R&D credits through to individual members' returns. |
| Form 2070AC (Application and Computation Schedule) | The official Delaware tax form strictly used to formally apply for and compute the R&D credit. |
| Filing Deadline (September 15th) | The strict annual due date for submitting the official Delaware Form 2070AC to claim R&D credits. |
| Federal Form 6765 (Required Attachment) | The standard federal tax form for R&D credits that must accompany the Delaware state credit application. |
| Form 700 (Delaware Income Tax Credit Schedule) | A required Delaware schedule utilized to accurately report various income tax credits, including R&D offsets. |
| Qualified Research Expenses (QREs) | Specific costs meeting rigid criteria under IRC Section 41, including employee wages, supplies, and contract research. |
| Research Conducted in Delaware | Eligible scientific research activities physically performed exclusively within the geographical boundaries of the state of Delaware. |
| Wages for Qualified Services (Delaware) | Taxable compensation paid to employees directly engaging in or supervising qualified research activities within Delaware. |
| Supplies Used in Qualified Research (Delaware) | Tangible physical property consumed directly during the active performance of qualified research activities located in Delaware. |
| Contract Research Expenses (Delaware) | Eligible financial costs appropriately paid to third parties for performing qualified research on the taxpayer's behalf. |
| IRC § 41 (Federal Definitions) | The fundamental federal Internal Revenue Code section providing the foundational definitions for all qualified research activities. |
| Technological in Nature (4-Part Test) | The statutory requirement that research heavily relies on proven principles of physical, biological, computer, or engineering sciences. |
| Elimination of Uncertainty (4-Part Test) | The specific requirement that research aims to definitively resolve technical unknowns regarding capability, method, or design. |
| Process of Experimentation (4-Part Test) | The fundamental requirement that research systematically evaluates technical alternatives through modeling, simulation, or trial and error. |
| Permitted Purpose (4-Part Test) | The key requirement that research broadly aims to fundamentally improve function, performance, reliability, or quality of products. |
| Prior Year's Expenditures (Base Amount Calculation) | Historical research costs strategically utilized to establish the baseline for measuring incremental research increases accurately over time. |
| Delaware Fixed-Base Percentage | A calculated historical ratio of research expenses to gross receipts used strictly in computing the base amount. |
| Gross Receipts for the 4 Preceding Years | The total collected revenue utilized to determine small business status and compute the historical research base amount. |
| Taxable Year | The official annual accounting period for which the taxpayer carefully calculates and formally claims the research credit. |
| Carryforward of Unused Credit | The beneficial ability to proactively apply excess, non-refundable tax credits to offset state tax liabilities in future years. |
| Carryforward Period (15 Years) | The strict statutory time limit explicitly allowing unused Delaware R&D credits to be utilized in future taxable periods. |
| Former Credit Cap ($5 Million Cap) | A historical statutory limitation on the absolute total aggregate amount of R&D credits Delaware could award annually. |
| Former Tax Liability Limit (50%) | A previous legislative restriction strictly limiting the R&D credit offset to exactly half of total state tax liability. |
| Statute Section 2073 (Time Limitations) | The specific legal provision clearly outlining the strict deadlines and temporal restrictions for successfully claiming the Delaware credit. |
| Apportionment Rules (Corporate) | Complex guidelines properly determining how multi-state corporations accurately allocate their income, expenses, and research credits directly to Delaware. |
