By Peter G. Pupke, Esq., Checkpoint News
Delaware has enacted legislation that defines trust fund taxes, shortens protest timelines for trust find taxes, clarifies the trigger for the 6-year extended statute of limitations for substantial understatements, standardizes the filing deadline for all Delaware information returns (for example, Form 1099, W-2) to January 31 following the close of the tax year, conforming to the federal due date, expands public disclosure for information on expired business licenses, clarifies a definition for real property transfer tax purposes, and makes retroactive technical corrections to the trade name registration process. (L. 2026, H296 (c. 301), 06/02/2026 or as otherwise shown.)
Trust fund taxes
The bill creates a statutory definition for “trust fund tax.” These are taxes collected by a third-party for remittance to the state. Under the bill, trust fund taxes includes all of the following: 988 surcharge; E911 surcharge; Hazardous Substance Cleanup Act (HSCA) Tax; lessee tax lodging tax (public accommodation tax); marijuana tax; public utility tax; scrap tire fee; short-term rental lodging tax; and withholding tax.
Shortened protest timelines
For the newly defined trust fund taxes, the time for a taxpayer to protest a proposed assessment or a refund denial is shortened from 60 days to 30 days.
Statute of limitations for substantial understatement of tax
The trigger for the 6-year extended statute of limitations for substantial understatements is clarified. The extended period now applies if a misstatement on a return results in a tax liability that is understated by more than 25% of the tax shown on the return. The previous trigger was based on the amount of omitted income.
Information return due date
The filing deadline for all Delaware information returns (for example, Form 1099, W-2) is standardized to January 31 following the close of the tax year, conforming to the federal due date.
Other technical changes
The act also expands public disclosure for information on expired business licenses, clarifies a definition for real property transfer tax purposes, and, effective retroactively to February 3, 2026, makes technical corrections to the trade name registration process.
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