Delaware — No Pass-Through Entity Tax (PTET) — Delaware has not adopted an elective pass-through entity tax; partnership and S-corporation income is taxed to the owners

# Summary

Delaware does not impose an elective pass-through entity tax (PTET) for tax year 2025. There is no entity-level income tax a partnership, S corporation, or LLC may elect to pay in place of its owners' Delaware personal income tax, and therefore no PTET rate, no election, and no election deadline exist. Delaware taxes pass-through income only at the owner level: resident owners report their share on Form PIT-RES and nonresident owners on Form PIT-NON, or a qualifying nonresident owner may be included on the entity's composite return, Form CMP-TAX. Delaware has no elective PTET provision anywhere in Title 30, Chapter 16, which is the chapter governing pass-through entities in full (§§ 1601-1606, 1621-1625 and 1631-1640). This determination addresses only the elective entity-level income tax. Delaware does impose other obligations that fall on the entity itself, described below; those are not a PTET and should not be confused with one.

# What the statute says

30 Del. C. § 1621(a) states: "A pass-through entity as such shall not be subject to the income tax imposed by Chapter 11 or Chapter 19 of this title. Members of a pass-through entity shall be liable for the tax imposed by Chapter 11 or Chapter 19 of this title only in their separate or individual capacities." Chapter 11 is Delaware's personal income tax and Chapter 19 its corporate income tax, so the exclusion covers both. 30 Del. C. § 1623(a) then confirms the owner-level mechanism: a nonresident member's distributive share of the entity's income, gain, loss and deduction derived from Delaware sources is included in that member's own modified Delaware source income, determined "in the same manner as if such items had been realized directly by such member." No provision of Chapter 16 permits the entity to elect to pay that tax itself, and no provision sets an entity-level rate on distributive income. The Delaware Division of Revenue states the same conclusion in the Partnership Return instructions: "A partnership, as such, is not subject to tax. Instead, the partnership's partners are liable for Delaware personal income tax on their respective shares of partnership income."

# The composite return (Form CMP-TAX) is not a pass-through entity tax

Delaware's composite return, Form CMP-TAX, is a filing convenience for qualifying nonresident owners, not an entity-level tax, and it should not be read as a PTET election. The election belongs to the owner, not the entity: the CMP-TAX instructions state that "qualifying non-resident individual partners may elect to file the Delaware Form CMP-TAX," and that any individual who chooses not to be included "must file a Delaware Non-Resident Personal Income Tax Return, Form PIT-NON." The participating owners remain the taxpayers and are taxed at personal income tax rates; the entity files and remits on their behalf. Participation is restricted — an included individual must be a nonresident for the full taxable year, must have no Delaware-source income other than the distributive share, and must share the same tax year as the other participants; no net operating losses are allowed, and any refund is remitted to the entity for distribution to the members. The composite return is due on the 30th day of the fourth month following the close of the participants' taxable year, with extension on Form CMP-EXT and partnership estimated payments on Form CMP-EST. Because the owners remain the taxpayers, a composite filing does not produce the entity-level state tax deduction that a true PTET is designed to deliver.

# What does apply at the entity level (and is not a PTET)

Although no income tax reaches the entity, three obligations do fall on it, and none of them is a pass-through entity tax. First, business license and gross receipts taxes: 30 Del. C. § 1621(b) provides that the incidence of the taxes imposed by Parts III through VI of Title 30 "shall fall upon the pass-through entity and not its members." A partnership doing business in Delaware therefore owes an annual license fee in its own name — a general service license fee of $75 under 30 Del. C. § 2301(b), plus $25 for each additional branch or business location — together with the gross receipts fee of 0.3983% of aggregate gross receipts under § 2301(d)(1), payable monthly by the twentieth of each month. Occupation-specific rates apply under § 2301(a), and contractors pay $75 plus 0.6472% of gross receipts under § 2502. Second, real estate withholding: under 30 Del. C. § 1606, a nonresident pass-through entity that sells or exchanges Delaware real estate must file for each nonresident member and remit estimated tax to the Recorder with the deed before it is recorded, withheld from the net proceeds of the sale. This is the one circumstance in which a pass-through entity itself remits Delaware income tax, and it is transaction-specific rather than an entity-level tax on operating income. Third, an S-corporation-only payment obligation: the Division of Revenue's S Corporation Return instructions require an S corporation to pay, on behalf of each nonresident shareholder, an amount equal to the highest personal income tax rate set in 30 Del. C. § 1102(a) applied to that shareholder's share of distributive income apportioned to Delaware. That is a collection mechanism against the shareholder's own liability, not an elective entity-level tax, and it does not extend to partnerships.