DE tax return question - non resident

[bryce]

I have a client that lives in MD and has a S Corporation in MD.  In 2024, he started a new business in DE that is also an S Corporation.  I prepared both S Corporation returns. The DE S Corp has $150k of net income.  The MD S Corporation had $100k loss.  The net results in $50k taxable income on the federal return.

I'm preparing his Non Resident DE tax return now.  I'm filling out Form PIT-NON. In Section A, the Federal Column A shows shows the $50,000.  DE Source Income Column B shows $150k. 

I would have thought he would be paying tax on the full $150k. However, Line 30b "Delaware AGI" is using the $50k and the client seems to only be paying tax on that amount.  I called Proseries and that didn't get me anywhere. I called State of DE and talked to an auditor who basically said "that is how it's calculating, so go with it and we'll fix it on our end if its wrong"

Any idea if this is correct?

[dascpa]

First off DE has nonresident taxes due on the S corporation income.  This does not apply to 1065 income. On the SCT-RTN (formerly 1100S) form it should calculate.

Next, you have to enter manually the Column B, line 10 amount on the PIT-NON for rents, royalties, partnerships, S corps, etc. and report the actual DE source income (in your case the $150k).  Column A would show $50k since it's the Federal amount.

[bryce]

Yes, we paid the Non Resident tax at the S Corp level, which he is getting credit for on his DE Non resident personal return.

I did it exactly as you indicated. Here is the issue. His FED AGI only $75k, while his DE sourced income is $150k. So the DE tax is being calculated on $75k. This is the amount reported on line 30b. The calculation of the tax is based off this amount, which is $75k.  I would have thought it would be calculated based on $150k.

On line 42 of Form PIT-NON, the proration decimal is 1.0 (or 100%) since his DE income ($150k) is more than the taxable income ($75k). So he is paying 100% of the calculated tax. But again, the calculated tax is off $75k......when he actually made $150k in DE.