NOTE: The following is a reaction to today’s House passage of House Bill 255.
Needing a minimum of 25 votes to pass, the measure garnered 26 “yes” votes, all of which were from members of the House Democratic Caucus. The final tally was 26 “yes,” 13 “no,” and two absent.
The leadership of the Senate chose not to bring their members to Legislative Hall today, despite being called back into extraordinary session by the governor. Although unconfirmed, it is believed the upper chamber will convene next week to consider the bill.
Less than eight months ago, the Delaware General Assembly enacted legislation to reform Delaware corporate law and restore predictability to the adjudication of cases coming before the Chancery Court.
This was a reaction to companies, including SpaceX, Tripadvisor, Dropbox, Andreessen Horowitz, The Trade Desk, Neuralink, and many others, announcing plans to leave Delaware and incorporate elsewhere.
The First State’s long-standing status as a destination for incorporations has reaped enormous benefits. Corporate franchise taxes, business entity fees, corporate income tax, and escheat (abandoned) property provide more than a third of our revenues. Those figures are measured in the billions of dollars and are a fixture of our state’s financial foundation.
By contrast, House Bill 255 will make permanent changes to our state’s business tax code to deal with a fleeting situation and a comparatively modest amount of revenue. This legislation is not only a sharp break with historical precedent, but by decoupling our tax code from aspects of federal law, we are denying Delaware businesses incentives for facilitating research & development and the purchase of new equipment.
Enacting HB 255 will make our state less attractive for developing domestic enterprises and give corporate leaders who are uncertain about retaining their presence here another reason to relocate.
Just yesterday (11/12), Coinbase announced it was leaving Delaware to reincorporate in Texas. The company’s chief legal officer cited Delaware’s unpredictable business climate as the top reason for the company’s decision.
Meeting in an extraordinary session and changing our House Rules to allow remote voting solely to ensure the passage of House Bill 255 will do nothing but confirm that Delaware is now a volatile business venue. Enacting this measure is a fool’s bargain that trades short-term monetary gains for long-term financial stability and an uncertain future.
