Delaware S‑Corporations: State & Federal Rules for Owners

Delaware recognizes the federal S corporation election and generally does not impose Delaware corporate income tax at the entity level on pass‑through income. Instead, an S corporation with Delaware‑source income files the state S‑Corporation Reconciliation and Shareholders Information Return (Form SCT‑RTN) and facilitates Delaware tax compliance for its shareholders, including special estimated payment obligations for nonresident owners. Separately, because an S corporation is a “corporation” under Delaware law, it is subject to Delaware’s corporate franchise tax administered by the Secretary of State, with specific computation methods and payment procedures. For official guidance, see Delaware’s Corporate Income Tax FAQs and filing overview, and the Division of Corporations’ franchise tax portal Corporate Income Tax FAQs and Filing Corporate Income Tax and Division of Corporations – Franchise Tax & Annual Reports.

Delaware Recognition of the Federal S Election and Shareholder‑Level Taxation

• Delaware explicitly recognizes the federal S election and does not impose Delaware corporate income tax on an S corporation’s pass‑through income. Every S corporation deriving income from sources within Delaware must file Form SCT‑RTN (S‑Corporation Reconciliation and Shareholders Information Return). Delaware also requires the S corporation to make estimated personal income tax payments on behalf of nonresident shareholders based on their pro rata share of distributive income; resident and nonresident shareholders then report their respective shares on their Delaware individual returns Corporate Income Tax FAQs.

• For federal status, the S election is made by filing IRS Form 2553 and continuing to meet the federal eligibility rules (domestic corporation; allowable shareholders; ≤ 100 shareholders; single class of stock; and not an ineligible corporation). Delaware relies on that federal election—no separate state S election is required. See IRS materials for S corporation eligibility and filing S Corporations (IRS) and Instructions for Form 2553.

Corporate Income Tax Filing Requirements in Delaware (Entity and Owners)

• Every domestic or foreign corporation doing business in Delaware must file a Delaware corporate income tax return; however, for S corporations, the filing obligation is Form SCT‑RTN rather than an entity‑level income tax return for pass‑through income. Delaware corporate income tax returns for corporations that are not S corporations are due April 15 for calendar‑year taxpayers; S corporations file the information return and facilitate owner compliance. Delaware follows the corporation’s federal taxable status (C or S) when determining state filing posture Corporate Income Tax FAQs.

• Apportionment (context): Effective January 1, 2020, Delaware transitioned to a single‑sales‑factor apportionment (sales or gross receipts factor), replacing the historic three‑factor method. While S corporations typically do not owe Delaware corporate income tax on pass‑through income, the single‑sales‑factor rule applies to C corporations and informs Delaware source rules more broadly Corporate Income Tax FAQs.

S‑Corp Obligations to Make Estimated Payments for Nonresident Shareholders

• Delaware requires S corporations with Delaware‑source income to make estimated personal income tax payments on behalf of nonresident shareholders based on each nonresident’s share of the S corporation’s distributive income. This ensures timely Delaware tax remittance; resident and nonresident shareholders then report their shares on their individual returns Corporate Income Tax FAQs.

Corporate Franchise Tax Applies to Delaware Corporations (Including S Corporations)

• Domestic corporations pay Delaware’s corporate franchise tax for the privilege of being incorporated in Delaware; franchise tax administration (calculation methods, filings, and payments) is handled by the Secretary of State. Foreign corporations doing business in Delaware must register and file an annual report and pay the applicable annual report fee. For payment and method details, use the Division of Corporations’ online portal Division of Corporations – Franchise Tax & Annual Reports.

• Franchise tax computation methods include the Authorized Shares method and the Assumed Par Value Capital method. Official guidance, due dates, and penalties are provided by the Secretary of State’s portal linked above Division of Corporations – Franchise Tax & Annual Reports.

Delaware “Doing Business” and Filing Context

• Delaware filing requirements depend on whether an entity conducts business in Delaware. Corporations not conducting business in Delaware are not required to file a Delaware corporate income tax return; those conducting business must file (C corporations on Form CIT‑TAX, S corporations on Form SCT‑RTN). Delaware provides separate pages and forms for these filings Filing Corporate Income Tax.

Payments and Electronic Funds Transfer (EFT) Options

• Delaware accepts electronic payments via ACH Debit or ACH Credit for Withholding, Corporate Tentative, and S Corporation Estimated Tax Payments. Instructions and enrollment details are provided by the Division of Revenue. Fedwire is permitted only as an emergency option with prior approval Business Electronic Funds Transfer.

Federal S‑Corp Background (Understanding Delaware’s Reliance on Federal Status)

• S corporations are pass‑through entities for federal tax purposes; shareholders report flow‑through items on their personal returns. At the entity level, S corporations file Form 1120‑S, and shareholders receive Schedule K‑1. See IRS overview for eligibility and filing S Corporations (IRS) and 2024 Instructions for Form 1120‑S.

• Making and maintaining the election: The S election (Form 2553) remains in effect until terminated by revocation or automatic termination (e.g., violation of eligibility rules). Delaware’s state treatment mirrors the corporation’s federal S status Instructions for Form 2553.

Practical Compliance Checklist for Delaware S‑Corp Owners

• Confirm the federal S election is in effect (Form 2553). Delaware recognizes the federal election and treats the entity accordingly S Corporations (IRS) and Instructions for Form 2553.

• If the S corporation has Delaware‑source income, file Form SCT‑RTN and make required estimated personal income tax payments on behalf of nonresident shareholders; shareholders then report their shares on their individual returns Corporate Income Tax FAQs.

• Pay Delaware corporate franchise tax and file the annual report with the Secretary of State by the prescribed deadlines, using the appropriate computation method (Authorized Shares or Assumed Par Value Capital). Use the Division of Corporations’ portal for method selection, calculations, due dates, and payments Division of Corporations – Franchise Tax & Annual Reports.

• Use Delaware’s EFT options (ACH Debit/Credit) to remit withholding, corporate tentative, and S corporation estimated taxes; enroll per Division of Revenue procedures Business Electronic Funds Transfer.

Key Delaware‑Specific Benefits and Requirements for S‑Corp Owners

• Benefit: Delaware recognizes federal S status and does not impose Delaware corporate income tax on an S corporation’s pass‑through income; owner taxation occurs at the individual level, facilitated by the S‑Corporation Reconciliation return and nonresident estimated payments Corporate Income Tax FAQs.

• Requirement: S corporations must file Delaware’s S‑Corporation Reconciliation return (SCT‑RTN) if they derive income from Delaware sources and must make estimated personal income tax payments for nonresident shareholders based on pro rata distributive income Corporate Income Tax FAQs.

• Requirement: As Delaware corporations, S corporations owe the Delaware corporate franchise tax and must file the annual report with the Secretary of State, using either the Authorized Shares or Assumed Par Value Capital method and following official due dates and payment procedures Division of Corporations – Franchise Tax & Annual Reports.

• Option/Procedure: Delaware supports electronic payments (ACH Debit/Credit) for S corporation estimated taxes and other business taxes through the Division of Revenue’s EFT program, with Fedwire available only by exception Business Electronic Funds Transfer.

This essay is not tax advice. Always consult a qualified tax professional for your specific situation.