2022 Legislative Session Summary
Delaware’s 151st General Assembly finished its second session in the very early hours of July 1 with members of DAR Leadership, DAR Public Policy Committee members, and DelPAC Trustees present in Legislative Hall making sure property rights were protected until the very last gavel.
Those bills introduced during the 151st General Assembly but which did not make their way through the legislative pipeline are essentially dead. However, similar bills could be introduced by the 152nd General Assembly next year.
Such was the case of HB 358, calling for a 1% reduction in the state’s portion of the Realty Transfer Tax. The bill was passed out of the House Administrative Committee but, unfortunately, stopped there. Any bills declared “dead” for this session can be introduced with revisions and similar language next session to try again.
Senate Substitute 1 for Senate Bill 101 (SS1 for SB 101), the Tenants Right to Counsel legislation, stalled in the House Appropriations Committee. However, certain members of the General Assembly halted all progress on the night of June 30, calling for a vote on the bill. It was finally defeated by the House of Representatives with 16 yes votes, 23 no votes, and two legislators abstaining due to conflicts of interest.
A bill that would potentially tax short-term rentals the same as hotels was never introduced due to DAR’s quick advocacy work. Numerous other issues of interest, including an electric vehicle construction mandate, arose during the session but did not move forward.
The General Assembly is on recess until January 2023. The upcoming election on November 8 could bring a substantial number of new legislators to both the House and Senate. The recent redrawing of district lines and a couple of retirements could bring some big changes next year.
Bills Passed and Awaiting the Governor’s Signature
As a result of HB 235 of 2019, as amended and championed by the Delaware Association of REALTORS®, you are no longer required to obtain business licenses for municipalities that charge a business license fee outside of your brokerage’s physical location.
Please be sure to read this entire document because there are exceptions allowing taxes to be charged.
Per the legislation, as of July 1, 2020, any county, municipality, or other political subdivision of the state is prohibited from imposing local business licensing requirements, fees, or taxes on real estate brokers, associate brokers, brokerage organizations, or real estate salespersons for any of the following activities in that jurisdiction:
- Listing real estate for sale
- Representing buyers in the purchase of real estate
- Rental of real estate for property owners or tenants unless the property is in a city with a population over 50,000 (as of today, the City of Wilmington is the only city that qualifies)
However, if a real estate broker, associate broker, brokerage organization, or real estate salesperson has a physical office in a jurisdiction that charges for business licenses, taxes, or fees, they MAY still be required to pay those fees and taxes on the same basis as other businesses with physical offices in that jurisdiction. Please check with the municipality in which your brokerage’s physical office is located to see if you must pay for a business license.
- Example 1: If you operate a brokerage organization in the Town of Bethany Beach, the Town of Bethany Beach requires a business license at the cost of $250.00. You are required to pay this business license fee as your physical office is located within the Town of Bethany Beach. As a result of the legislation, if your company conducts business in a surrounding municipality, you no longer need to obtain separate licenses for every municipality. You only need a license where your physical office is located.
- Example 2: If you are a real estate broker, associate broker, or real estate salesperson, you MAY still be required to obtain a business license and pay local fees or taxes if your physical brokerage (your real estate license will state your brokerage’s physical address) is within a municipality’s jurisdiction that requires business licenses or charges local fees or taxes. As a result of the legislation, you no longer need to obtain separate licenses in every municipality in which you practice—only within the jurisdiction where your physical brokerage is located IF they require you to have a business license. In addition, a municipality may have ordinances that permit them to charge a wage tax calculated on the same basis as other wages earned in that jurisdiction.
- Example 3: Your office is not in the City of Wilmington, but you handle rentals in the City of Wilmington. You are still required to obtain a City of Wilmington business license and pay the City wage tax (earned income tax) on that part of your commissions or other income attributable to time spent or services rendered in the City.
- Example 4. You handle sales in the City of Wilmington. You are still required to pay the City wage tax (earned income tax) on that part of your commissions or other income attributable to time spent or services rendered in the City. This applies whether or not you have a physical office in the City of Wilmington.
Note: The information above is specifically in regard to municipal business licenses, taxes, and fees. The State of Delaware still requires a state business license to operate by “any person or entity conducting a trade or business.” It is very important to note that real estate salespersons are EXEMPT from the state business license requirement at per a 1991 memo from the Division of Revenue. Therefore, the Brokerage organization is still required to obtain a State of Delaware business license. Individual salespeople and associate brokers do not need a State of Delaware business license.
Please understand that many of our local municipalities are aware of this legislation but do not have the capability to automatically take you out of their database. If you paid local business license fees to a municipality in the past, where your physical office is not located today, contact them directly to be removed.
We hope these clarifications make this very clear. Please do not hesitate to contact us directly if you have additional questions or concerns.
The Delaware Realty Transfer Tax is the highest in the nation. We need your help to roll it back!
