DE HB489

Establishes an elective entity-level tax on pass-through entities (partnerships and S-corporations) allowing them to pay Delaware income tax at 8.7% on their income instead of individual members paying personal income tax.

Permits pass-through entity members to claim a subtraction from federal adjusted gross income for their share of electing pass-through entity income, enabling the entity-level tax to be deductible at the federal level and mitigating the $10,000 federal cap on state and local tax deductions.

Requires electing pass-through entities to file tentative returns with quarterly estimated tax payments (25% each on April 15, June 15, September 15, and December 15 for calendar year entities) and final returns by the federal return due date.

Limits eligibility to "qualified pass-through entities" that are 100% owned by individuals or certain trusts, cannot claim certain tax credits, and cannot deduct net operating losses.

Takes effect January 1 of the year following the Secretary of Finance's certification that the Department of Revenue has necessary systems in place, with a deadline of December 31, 2025 for the certification to occur or the Act becomes void.