Delaware offers production tax credits for in-state work

The law allows an eligible company to claim a tax credit equal to 30% of qualifying costs. Eligible work includes commercial films, television, esports, and video games. Political ads, instructional videos, obscene content, athletic events other than esports, website development, and certain promotional products do not qualify. The company must be incorporated in Delaware or registered to do business there, and cannot be connected to a business or person in default on a state tax obligation or state loan. Qualifying activities must have more than $100,000 in eligible costs during any 12 consecutive months; costs from multiple projects may be combined. The Division of Small Business must approve the production, and the company must offer Delaware residents internship opportunities under agency rules. Awards are capped at $10 million per fiscal year. Unused credits cannot be refunded or carried back, but generally may be carried forward for up to five years. The law took effect July 1, 2026. Applications may be submitted through June 30, 2031; projects initially approved by then may receive final approval later.

A production company or its payroll service must withhold Delaware income tax from payments to loan-out companies for services performed in Delaware. A loan-out company supplies individual workers, such as actors or directors, to a production company. The rule covers those workers' services performed in Delaware. The withholding rate is 6.6%. The withheld tax is treated as withheld from the loan-out company's employees and allocated among them based on payments the company makes to them. The production company or payroll service must provide records requested by the Director of Revenue. Loan-out company employees who are nonresidents are taxable in Delaware for the year they perform services there. The withholding applies to payments for services performed in Delaware.

Applicants must submit a Delaware Impact Plan, and state officials must prioritize applicants based on expected benefit to Delaware. These rules apply to companies seeking the production tax credit and to people or businesses receiving a transferred credit. Priority goes to applicants expected to employ many Delaware residents, use Delaware vendors or facilities, return with more projects, or permanently expand in the state. Applicants and people or businesses accepting transferred credits agree to public disclosure of the amount awarded or transferred. No new applications may be submitted after June 30, 2031. Projects initially approved before then may receive final approval later.