(a)Definitions. —(1) “Director” means the Director of the Division of Revenue or the Secretary of Finance of the State.
(2) “Nonresident pass-through entity” means, for purposes of this section, a pass-through entity having 1 or more members who are nonresident individuals or nonresident corporations.
(3) “Recorder” means the official with duty to record deeds and similar instruments.
(4) “Transfer under a deed in lieu of foreclosure” includes all of the following:
a. A transfer by the owner of the property to the following:
1. With respect to a deed in lieu of foreclosure of a mortgage, the mortgagee, the assignee of the mortgage, or any designee or nominee of the mortgagee or assignee of the mortgage.
2. With respect to a deed in lieu of foreclosure of any other lien instrument, the holder of the debt or other obligation secured by the lien instrument or any designee, nominee, or assignee of the holder of the debt secured by the lien instrument.
b. A transfer by any of the persons described in paragraph (a)(4)a. of this section to a subsequent purchaser for value.
(5) “Transfer under a foreclosure of a mortgage or other lien instrument” includes the following:
a. With respect to the foreclosure of a mortgage, all of the following:
1. A transfer by the sheriff or other party authorized to conduct the foreclosure sale under the mortgage to 1 of the following:
A. The mortgagee or the assignee of the mortgage.
B. Any designee, nominee, or assignee of the mortgagee or assignee of the mortgage.
C. Any purchaser, substituted purchaser, or assignee of any purchaser or substituted purchaser of the foreclosed property.
2. A transfer by any of the persons described in paragraphs (a)(5)a.1.A. and (a)(5)a.1.B. of this section to a subsequent purchaser for value.
b. With respect to the foreclosure of any other lien instrument, all of the following:
1. A transfer by the party authorized to make the sale to 1 of the following:
A. The holder of the debt or other obligation secured by the lien instrument.
B. Any designee, nominee, or assignee of the holder of the debt secured by the lien instrument.
C. Any purchaser, substituted purchaser, or assignee of any purchaser or substituted purchaser of the foreclosed property.
2. A transfer by any of the persons described in paragraphs (a)(5)b.1.A. and (a)(5)b.1.B. of this section to a subsequent purchaser for value.
(b)Estimated tax return; alternative forms. —Every nonresident pass-through entity that sells or exchanges Delaware real estate shall file with the Recorder for and on behalf of each of its nonresident members 1 of the following:
(1) A “Declaration of Estimated Income Tax” or a “Delaware Corporate Tentative Tax Return” for the quarter in which the sale or exchange is settled, applying the highest marginal rate of each of its nonresident members under § 1102 or § 1902 of this title, as the case may be, to an estimate of the nonresident member’s distributive share of the gain recognized on the sale or exchange.
(2) An alternative form prepared by the Director to calculate income tax at the highest marginal rate under § 1102 or § 1902 of this title, applied to the nonresident member’s distributive share of the difference between the total amount realized by the transferor and the net balance due at the time of settlement of all recorded liens encumbering the real estate.
(3) An alternative form prepared by the Director to declare under penalties of perjury that the sale or exchange of real estate is exempt from recognition of capital gain with respect to the tax year of the sale or exchange, with a statement of the facts and a citation to the provision or provisions of the Internal Revenue Code (Title 26, U.S.C.) relied upon.
(4) An alternative form prepared by the Director to declare under penalties of perjury that the sale or exchange of real estate is 1 of the following:
a. A transfer under a foreclosure of a mortgage or other lien instrument.
b. A transfer under a deed in lieu of foreclosure.
(5) An alternative form prepared by the Director to declare under penalties of perjury that the nonresident pass-through entity that is selling or exchanging Delaware real estate is exempt from the requirements of subsection (d) of this section and is not required to remit any tax due with the deed to the Recorder before the deed shall be recorded.
(c)Exemption. —(1) The Director will create an application process through which a nonresident pass-through entity involved in the sale or exchange of an average of 5 or more residential homes or residential lots in Delaware per quarter can apply for an exemption from the requirements of subsection (d) of this section.
(2) Subject to paragraph (c)(3) of this section, if an exemption is granted in accordance with paragraph (c)(1) of this section, such nonresident pass-through entity will be exempt from the requirements of subsection (d) of this section and will not be required to remit any tax due with the deed to the Recorder before the deed shall be recorded.
(3) If an exemption is granted in accordance with paragraph (c)(1) of this section and the Director subsequently determines that such nonresident pass-through entity or any member of such nonresident pass-through entity has failed to comply with its tax filing and payment obligations, the Director may revoke the exemption granted to such nonresident pass-through entity in accordance with paragraph (c)(1) of this section by providing written notice of such revocation to such nonresident pass-through entity.
(4) Within 60 days after the date of the mailing of a notice of revocation under paragraph (c)(3) of this section, the nonresident pass-through entity may file with the Director a written protest challenging the proposed revocation, in which the nonresident pass-through entity shall set forth the grounds upon which the protest is based. If such protest is filed, the Director will reconsider the proposed revocation and, if requested, may grant the taxpayer or the taxpayer’s authorized representative an oral hearing.
(5) Except to the extent inconsistent with the specific provisions of this section, the provisions of Chapter 5 of this title shall govern the review and appeal of such proposed revocation.
(d)Due date of estimated tax return, payment. —The return or form provided for in subsection (b) of this section and, unless the taxpayer is exempt as provided in subsection (c) of this section, the estimated tax reported due on such return or form, shall be remitted with the deed to the Recorder before the deed shall be recorded. Such payment shall be withheld from the net proceeds of the sale. To the extent that the sale does not result in net proceeds being available for the payment of the estimated tax, the Recorder may accept the form without payment, upon receipt of confirmation from the closing attorney that no funds are available for payment of the tax and that no funds were distributed to the seller.
(e)Payment credited to transferor. —The estimated tax remitted under subsection (d) of this section shall be deemed to have been paid to the Director on behalf of the nonresident members of the pass-through entity and the nonresident members shall be credited for purposes of §§ 1169 and 1170 or § 1905 of this title as a payment made on the date remitted to the Recorder.
(f)Persons or entities not liable for payments. —Neither the transferee, title insurance producer, title insurer, settlement agent, closing attorney, lending institution, nor the real estate agent or broker in a transaction subject to this section shall be liable for any amounts required to be collected and paid over to the Recorder or Director under this section.
(g)Tax not imposed; lawful collection of taxes not prohibited. —This section does not:
(1) Impose any tax on a transferor or affect any liability of the transferor for any tax; or
(2) Prohibit the Director from collecting any taxes due from a transferor in any other manner authorized by law.