Delaware House Bill 255, signed into law in November 2025, brings important changes to how Delaware businesses will handle deductions for research spending and major equipment or property purchases in the coming years. The bill was created in direct response to the federal “One Big Beautiful Bill Act” (OBBBA), which significantly expanded immediate expensing for research and certain property.  Because Delaware is a “rolling conformity” state, federal tax changes flow directly into the state code unless the General Assembly chooses to “decouple.” With OBBBA offering far more generous and immediate deductions, this automatic conformity would have resulted in substantial and immediate revenue losses for Delaware, an estimated $222.8 million in fiscal year 2026 alone. HB 255 was enacted to prevent that instability and preserve the funding needed for essential public services. 

 

Under the new law, Delaware will not follow the federal rules that allow full, immediate expensing for certain research and capital investments. Instead, the state maintains a more gradual deduction structure. For C corporations, research and experimental expenditures made between 2022 and 2025 must continue to be amortized over five years, as they were before OBBBA. Delaware also decouples from federal provisions that would allow full expensing of certain business property placed in service after January 19, 2025, as well as from the special depreciation allowance for qualified production property. For individuals with business income, such as S corporation shareholders and partners, the state similarly rejects the federal changes for property placed in service after December 31, 2025. These shifts do not eliminate deductions; they simply delay them, spreading expenses over multiple years rather than allowing businesses to claim them all at once. 

 

While these changes introduce less favorable timing for large and mid-sized businesses with significant R&D or capital-intensive operations, Delaware preserved an important advantage for smaller companies. Businesses purchasing up to $2.5 million of qualifying equipment or property each year may still take an immediate deduction, helping reduce the impact on organizations with more modest investment needs. For others, the effect will likely show up as higher Delaware taxable income in the early years of a purchase or project, and additional complexity in tracking separate federal and state depreciation schedules. Businesses planning major investments or research activity should review their multi-year cost projections and work with advisors to ensure compliance and avoid surprises at tax time. 

 

Lawmakers included a provision requiring the Department of Finance to report back to the Delaware Economic and Financial Advisory Council in December 2027. That report will evaluate the bill’s revenue impact, summarize relevant federal updates, and recommend whether Delaware should adjust its tax policy moving forward. 

 

For now, Delaware business owners should be proactive. With amortization rules continuing for certain research expenditures and immediate expensing no longer available for many large property purchases, the timing of deductions matters more than ever. Reviewing upcoming projects, revisiting depreciation strategies, and anticipating differences between federal and Delaware tax filings will help businesses stay prepared as these changes take effect. As the state approaches its 2027 policy review, further adjustments remain possible, making it essential for businesses to stay informed and forward-focused.