What You’ll Learn
If you’re a nonprofit in Delaware, or you’re a nonprofit considering fundraising or other activities in Delaware, you must understand the requirements that Delaware has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Delaware.
Getting to Know the State Nonprofit Corporation Law
*Important primarily for nonprofits incorporated in Delaware
One morning, when Gregor Samsa woke from troubled dreams, he found himself transformed in his bed into a horrible vermin. He lay on his armour-like back, and if he lifted his head a little he could see his brown belly, slightly domed and divided by arches into stiff sections. The bedding was hardly able to cover it and seemed ready to slide off any moment. His many legs, pitifully thin compared with the size of the rest of him, waved about helplessly as he looked.
- The Metamorphosis, Franz Kafka
When reading a novel, we get to know a fictional character by the author’s description of him or her. The author tells us what the character will look like, what his or her purpose will be, how he or she will act, and how he or she will make decisions.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law governing the nonprofit entity, along with its governing documents (which in Delaware are called the bylaws and certificate of incorporation). Delaware does not have a separate nonprofit statute, and therefore a nonprofit corporation that is incorporated in Delaware will be governed by the Delaware General Corporation Law, codified at 8 Del. C. §§ 101, et seq. The law and the organization’s own rules tell us what the organization will be called, what its purpose will be, how the nonprofit will act, and how it will make decisions.
To get to know your own nonprofit, you must be familiar with the sections below.
State Nonprofit Corporation Law
Delaware does not have a separate nonprofit statute, and therefore a nonprofit corporation that is incorporated in Delaware will be governed by the Delaware General Corporation Law, codified at 8 Del. C. §§ 101, et seq.
For Religious Nonprofits
Nonprofit Religious Corporation Act: Delaware’s corporation law lacks: (a) specific provisions permitting the formation of nonprofit religious corporations; (b) specific protections for religious exercise at faith-based organizations, and (c) any express acknowledgement of an option for nonprofits to incorporate for religious purposes. Del. Code Tit. 27 § 101, et. seq.; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Delaware law permits a director, in the fulfillment of the director’s fiduciary duties, to rely on the opinion of individuals who can reasonably be assumed to have expertise on a certain matter, but does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition. See 8 Del. Code Tit. 8, Ch. 1 § 101(a)
Understanding Religious Liberty in this State
*Important for all nonprofits doing business in Delaware, whether incorporated in Delaware or elsewhere
[Catholic Social Services] seeks only an accommodation that will allow it to continue serving the children of Philadelphia in a manner consistent with its religious beliefs; it does not seek to impose those beliefs on anyone else. The refusal of
Philadelphia to contract with CSS for the provision of foster care services unless it agrees to certify same-sex couples as foster parents cannot survive strict scrutiny, and violates the First Amendment.
- Fulton v. City of Philadelphia, 593 U.S. ___ (2021)
Sometimes, the state or local government (like the city or county) make laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of them impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Delaware has not enacted a RFRA and has enacted nondiscrimination laws that conflict with the beliefs of many religious organizations, but see Religious Freedom for All Act. Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
Constitutional Protections for Free Exercise: The Delaware Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. Del. State. Const. Art. I, § 1
State Blaine Amendment: The Delaware Constitution contains a Blaine Amendment that could prevent the participation of faith-based schools in generally available public benefit programs on the same terms as similarly situated secular schools. This is not as broad as a general Blaine Amendment, which prohibits all aid to faith-based institutions, but is still detrimental to the work of faith-based institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. Del. State. Const. Art. X, § 3; Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Religious Freedom and Public Accommodation Laws: Delaware’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities and provide no meaningful religious accommodations or exemptions. 6 Del. Code § 4500, et seq. Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Protections for Religious Exercise in State of Emergency: Delaware law has no explicit constitutional or statutory protections for religious exercise during a time of emergency.
Key Employment Laws and Regulations
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Delaware but incorporated elsewhere
If you are fundraising or conducting activities in this state, you must consider whether you need to register as a foreign nonprofit corporation. The state law requires entities that are “conducting a…not-for-profit activity” to register. An attorney can help you decide whether you need to register based on the type and volume of activities you have in this state.
Business Registration Statute
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Delaware and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
Delaware does not require charitable solicitation registration for nonprofit entities.
This does not mean you don’t need to pay attention to any Delaware requirements, however! Be sure to review other state registration, annual report and tax requirements, and stay apprised of updates by visiting the applicable state agency's website.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
The Unified Registration Statement (“URS”) is a standardized charitable registration accepted in many states. Since Delaware does not require any charitable fundraising registration, the URS is not needed to comply with Delaware law. However, if your organization is soliciting in other states, you should consider the URS.
Evaluate Whether You'll Need a Registered Agent
Foreign (in other words, non-Delaware) organizations doing business in Delaware must generally appoint a person in the state who can receive important mail and communications (such as notice of a lawsuit) on behalf of your organization. In legal language, this person is called a “registered agent.”
Follow the Rules About Communicating with the Public
This state requires organizations to include specific statements whenever an organization is requesting donations (also called “charitable solicitation”). In particular, the solicitor must identify himself or herself by name and the organization for which the funds are being solicited. Additionally, donors are entitled to question how the funds will be allocated between administrative costs and actual charitable use. Religious organizations generally are not required to include this statement, but posting or including the language in a solicitation is often a best practice to build trust with donors and state regulators. Below is sample language to use with charitable solicitations in this state:
This solicitation is made by &NAME& on behalf of &ORG&.
Charitable Registration Statute
Charitable Registration Exemption Statute
Annual Report Requirement
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Delaware, whether incorporated in Delaware or elsewhere
In this state, organizations which have received recognition of federal income tax exemption under IRC Sec. 501(c)(3) are automatically exempt from state income tax. Some organizations may choose to send a copy of their IRS determination letter to the state department of revenue to indicate the organization's position that it qualifies for the exemption. Note that Delaware does not impose a tax on unrelated business taxable income (UBTI).
It is also important to consider whether applying for gross receipts tax, franchise tax, and property tax exemption would be appropriate for your organization. Exemptions from taxation and assessment for public purposes on a Delaware county level for religious and charitable organizations is governed by Del. Code Tit. 9, Ch. § 8105. Information regarding property tax exemption is available from your local county. For an example, please see this guidance from New Castle County. More information about the Delaware gross receipts tax is available on the Delaware Department of Revenue website and in 30 Del. C. § 2101. Under 8 Del. C. § 501(b)(1), organizations that are exempt from federal income tax under IRC 501(c)(3) are also exempt from Delaware’s corporation franchise tax. An accountant or attorney can provide answers to specific questions about your organization’s eligibility.
Corporate Income Tax Statute
Delaware imposes a corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Del. Code Tit. 30, Ch. 19 § 1902
Corporate Franchise Tax Statute
State-Specific Special Requirements
Delaware Income Tax Statute for Pass-Through Entities, Estates and Trusts: Del. Code Tit. 30, Ch. 16 § 1601, et seq.
Delaware LLC Tax Statute: Del. Code Tit. 6, Ch. 18 § 18-1107
Delaware LP Tax Statute: Del. Code Tit. 6, Ch. 17 § 17-1109
Delaware Partnership Tax Statute: Del. Code Tit. 6, Ch. 15 § 15-1208
Delaware Statutory Trust Tax Classification Statute: Del. Code Tit. 12, Ch. 38 § 3809
A Volunteer Attorney in Delaware
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington