Delaware, DuPont and Tax Deals for Big Economic Players

As recent Delaware legislation shows, states must create and maintain the right economic environment to assure employers of growth and convince them to remain in-state.

When DuPont and Dow announced their plans to merge and spin off into three new companies late last year, Delaware acted quickly to ensure that the resulting organizations would keep the state part of its future plans. Given the dire prospect of losing a substantial number of jobs from one of the state’s largest employers, Delaware committed to changing its state tax code and making certain capital investment funds available through its economic development organization. [1]

The tax changes were approved on March 17 with the governor’s signing of Senate Bill 200, the Commitment to Innovation Act. This legislation modifies the state’s Research and Development Tax Credit by removing the annual $5 million total credit cap and making the credit refundable. Further, it reintroduces the state’s New Economy Jobs Tax Credit, providing tax credits based on a percentage of the total payroll resulting from high-paying jobs for global headquarters based in the state.

These tax commitments are in addition to the signing this January of House Bill 235, the Delaware Competes Act, which removes measures of property and payroll from the state’s income tax apportionment factor. By basing state business income tax solely off the revenues earned in the state, businesses are not penalized with a higher state income tax bill after expanding physical operations within a state. Also known as a “single sales factor” rule, this pro-business tax trend has already been enacted in approximately 20 other states, and Delaware will phase it in over the next four years.

While retaining a division of the new DuPont/Dow organization is a victory for Delaware’s economy this year, it comes at the expense of an estimated $62.8 million in state tax changes and incentives over the next three years alone. [2] Further, New Castle County, DuPont’s current base in Delaware, has pledged up to $7.5 million in additional incentives specific to just DuPont over the next five years. However, states regularly lose major employers due to a combination of (i) changes to home state tax policies that the employer views unfavorably and/or (ii) other states offering sweeter deals. Ultimately, states are forced to weigh the prospect of losing established companies, jobs and/or residents against the costs of keeping them.

A recent example includes General Electric’s decision this January to move its longtime corporate headquarters from Connecticut to Boston, Massachusetts. [3] While GE received approximately $145 million in state and local tax incentives as part of the move, it only began searching for a new home after publicly announcing last June that it was unhappy with recent Connecticut tax reforms that included increased corporate taxes.

On one hand, states must find the right economic environment (both business and tax) to assure existing and prospective employers that sustained and profitable growth can be had in the state. Yet on the other hand, it’s crucial to develop a wide and diverse business and tax base so as not to be held hostage to another state’s bid to keep a major employer around. After all, what would Georgia have to do if Delta or Coca-Cola expressed serious interest in moving their corporate operations to a new state?

Aprio’s SALT team has experience assisting businesses that are looking to relocate with analyzing the impact of state tax systems, including state and local statutory tax credits and incentives as well as negotiating discretionary tax incentives. We continue to monitor these and other developments in state taxes, and we will include significant updates in future issues of the Aprio SALT Newsletter.

Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at for more information.

This article was featured in the March 2016 SALT Newsletter. To view the newsletter, click here.

[1] State of Delaware Press Release, 2/19/2016.

[2] Fiscal Notes to HB 235 estimate a decrease in tax revenue of $48.7 million through 2019 while Fiscal Notes to SB 200 estimate a decrease in tax revenue of $14.1 million through 2019.


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