DOVER – Lawmakers introduced new legislation Wednesday that would immediately address a projected $400 million budget shortfall caused by recent federal tax code changes under the “One Big Beautiful Bill Act” (OBBBA).
Sponsored by Rep. Kerri Evelyn Harris and Sen. Bryan Townsend, House Bill 255 would decouple Delaware’s tax code from certain provisions of the federal Internal Revenue Code (IRC) to reverse the automatic adoption of costly corporate giveaways that would drain hundreds of millions from the state’s budget over the next three years.
“Every day, Delawareans are struggling to pay for housing, fill their gas tanks, afford a doctor’s visit, or buy their prescriptions. Instead of working to address these problems, Washington Republicans passed a tax plan that gives even more to the wealthy and big corporations while working people are left footing the bill,” said Rep. Kerri Evelyn Harris
“Every Delaware tax dollar that goes to these corporate giveaways is a dollar that could have helped a child learn, kept a neighborhood safe, or supported a family in crisis. Decoupling is how we make sure Delawareans get their fair share. It is time, and it is the right thing to do, to lift our people and build an economy that works for everyone.”
Delaware is a rolling conformity state, meaning our tax code automatically incorporates most changes to federal tax law unless the state specifically “decouples” from them.
The OBBBA, passed by Congress in July, made significant changes to federal tax law. Specifically, the bill altered how businesses can deduct certain expenses, allowing companies to immediately write off the full cost of research, experimental activities, and certain property investments instead of spreading those deductions over several years and in some cases, decades.
Those new provisions, which are retroactive for businesses beginning in tax year 2022 and for all taxpayers in 2025, would result in a major loss of state revenue. Without legislative action, the state stands to lose $222.8 million in fiscal year 2026, $107.4 million in fiscal year 2027, and $79.9 million in fiscal year 2028.
However, by decoupling from some of these new provisions, HB 255 would preserve this funding and protect Delaware’s financial stability.
Importantly, HB 255 does not eliminate depreciation of property or expensing, but instead adjusts the timing of deductions impacted by the OBBBA, keeping the deductions spread out over multiple years rather than allowing corporations to claim a massive, immediate tax break.
“Delaware joins a number of states — blue and red states alike — whose lawmakers are now racing the clock to quickly amend their tax code and spare their state budgets from owing hundreds of millions in unforeseen retroactive corporate tax changes. We’re fortunate that here in Delaware, state leaders are able to move swiftly and cohesively,” said Sen. Bryan Townsend.
“By passing House Bill 255 before the end of the year, we are preserving the revenues we budgeted bi-partisanly in June and ensuring our ability to continue supporting Delaware’s working families at a time when the Trump Administration is casting a long shadow of economic uncertainty.”
While the General Assembly is only months away from formally convening for the 2026 Legislative Session in January, it was necessary to convene as soon as possible to prevent taxpayers from having to file amended returns and to avoid complications with tax planning, estimated payments, and compliance. Delaying action would also place a significant administrative burden on the Division of Revenue, requiring system reprogramming, additional audits, and increased taxpayer assistance.
“The federal government is trying to force Delawareans to pay for tax breaks for the largest corporations in the world — and state leaders won’t stand for it,” Governor Matt Meyer said.
“Thank you to Speaker Minor-Brown and House Majority Leader Harris for moving quickly to bring this bill before the House, and thank you to Senate Pro-Tempore Sokola and Senate Majority Leader Townsend for championing the bill in the Senate. By working together, we will address the $400 million deficit the federal government created, without cutting state services or raising taxes.”
HB 255 requires a three-fifths majority vote in both chambers. The bill will be heard by the House Administration Committee on Friday, November 7, at 11:30 a.m..
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