Compliance Digest

The next ninety days, prioritized

Delaware Franchise Tax

Every Delaware entity, regardless of where it actually does business, owes franchise tax to Delaware. For most small operating entities this is a $300 line item on a calendar. For corporations, the bill can vary by orders of magnitude depending on which calculation method is used. The practical takeaway: if your client's corporation is paying more than a few hundred dollars in DE franchise tax, verify the method.

What's owed, by entity type

The Annual Franchise Tax Report

Separate from the tax payment, every Delaware corporation must file an Annual Franchise Tax Report listing current officers, directors, and principal office. LLCs and LPs do not file a report. Late filing incurs a $200 penalty plus 1.5% monthly interest on unpaid tax.

Late-payment consequences

• $200 penalty plus 1.5%-per-month interest on unpaid tax.
• After two years of non-payment the entity loses good standing. That blocks amendments, certificates of good standing (needed for financing or M&A diligence), and legal capacity to maintain suit in Delaware courts.
• Restoration requires back taxes, penalties, interest, a $200 annual-report fee for each missed year, plus reinstatement fees. If the client is considering winding the entity down anyway, the cost analysis sometimes favors dissolution over reinstatement — a conversation worth having before July if the entity is already delinquent for 2025.

Action checklist for every DE-entity client

1. Confirm every DE entity on your roster is queued for the June 1 payment.
2. For corporations, verify which method was filed last year. If Authorized Shares and the corp has more than 5,000 authorized, run the Assumed Par Value numbers and consider the switch.
3. Refresh the officer / director list on the annual report. The Secretary of State will not catch a stale list; a future acquirer or lender will.
4. Communicate the payment amount to the client by May 15 at latest. Most clients need roughly two weeks to release funds, and June 1 is a Monday this year.
5. For any delinquent entity, raise the balance on this month's client call. The sooner, the cheaper.

Florida Annual Report — and the income tax filing that isn't it

If you have a Florida corporation, LLC, or limited partnership on your roster, the Annual Report is due today. This is a light filing compared to Delaware, but the late penalty is disproportionate.

• Fee: $138.75 (corporations and LLCs); $500 (LPs / LLLPs).
• Late fee: $400 if filed after May 1 — nearly triple the base fee for LLCs and corporations.
• Filed at: sunbiz.org.
• Required: principal office address, mailing address, registered agent, officers / directors or managing members, FEIN.
• Save the confirmation to the client file — counterparties request the current-year report in due-diligence packages.

The Annual Report is not the income tax filing

A persistent confusion: the Sunbiz Annual Report covers corporate identity (officers, directors, registered agent, principal office). It does not satisfy Florida's corporate income tax obligation. Florida assesses a 5.5% corporate income tax on Florida-apportioned income — it was not eliminated, and it applies to C-corps and to S-corps that elected federal C status. For calendar-year FL corporations, Form F-1120 is also due May 1, the same day as the Annual Report. The two filings are independent and route to different agencies (Sunbiz handles identity, the Florida Department of Revenue handles the tax).

• Form F-7004 grants an automatic six-month extension to November 1, but does not extend payment. Underpayment interest accrues from May 1.
• Form F-1120ES quarterly estimates are required if expected liability exceeds $2,500. Q2 estimate is due June 30, 2026 (last day of the 6th month of the fiscal year — note this is 15 days after the federal Q2 deadline).
• LLCs taxed as partnerships or disregarded entities do not file F-1120; the income flows through to owners. LLCs that elected C-corp federal treatment do.

Form 990 / 990-PF / 990-T

Every calendar-year tax-exempt entity has a federal information return due on the 15th of the 5th month after year-end — May 15 for 2025 returns. The form is determined by the entity's classification and gross receipts. A practice with charitable foundations on the roster has at least one of these to file in two weeks.

Which form, and who files it

Form 990-PF — the deadline that gets forgotten

Private foundations are the most common miss because the practitioner often thinks of them as "the family's foundation" and budgets the year around the family's planning calendar rather than the foundation's tax calendar. Three things to surface to every foundation client by May 1:

1. The §4940 excise tax on net investment income. Private foundations owe 1.39% on net investment income (interest, dividends, royalties, net capital gain). Quarterly estimated payments are required if liability exceeds $500. The check that funds this is part of the May 15 filing for foundations that did not pay quarterly. Common error: treating realized capital gains as not subject to §4940 because they are inside the foundation. They are.
2. The 5% qualifying distribution requirement (§4942). Foundations must distribute roughly 5% of average net investment assets each year, calculated on the prior year's asset base. Failure triggers a 30% excise tax on the undistributed portion. Common error: failing to include the prior year's carryover when computing the current-year distribution requirement, leading to either over- or under-distribution.
3. Self-dealing flags (§4941). Form 990-PF Part VII-B asks whether the foundation engaged in any of seven categories of self-dealing transactions with disqualified persons. Common error: "no" answers when the founder's spouse used a foundation-owned vacation property, or when the foundation paid the founder's law firm for unrelated work. Both are self-dealing. Penalty starts at 10% of the amount involved and escalates to 200% if uncorrected.

Public charities — what triggers an audit

Form 990 (the long version) is functionally a public document. Three Schedule attachments draw the most enforcement attention in 2026:

• Schedule J (Compensation). Reasonable compensation for officers and key employees, with all forms of compensation reported. Common error: omitting deferred compensation, supplemental retirement benefits, or housing allowances.
• Schedule L (Transactions with Interested Persons). Loans to, from, or for the benefit of disqualified persons; grants benefiting interested parties. Required disclosure even where the transaction was at arm's length.
• Schedule R (Related Organizations). Identifies the family of related entities. The IRS uses this to map foundation-supporting-organization-affiliated-LLC structures and to identify §4943 excess business holdings exposure.

Extension & late-filing penalties

Form 8868 grants an automatic 6-month extension to November 15, 2026. No reason required, no signature required, no balance-due payment required (though excise tax for foundations is still due May 15). Filing a 990-PF on extension is the standard professional practice.

• 990 / 990-PF / 990-T. $20 per day, up to the lesser of $12,000 or 5% of gross receipts. For larger orgs (gross receipts > $1.2M), $120 per day, up to $60,000.
• Three consecutive years missed. Automatic loss of tax-exempt status, restored only by re-application on Form 1023 or 1024. The Marks Foundation problem from this month's Chancery Pulse is mild compared to a foundation that has lost exempt status entirely.
• Failure to file 8868 or to pay §4940 by May 15. Penalties begin to accrue immediately. The extension does not extend the time to pay.

Action checklist

1. Identify every exempt org on your roster — public charities, private foundations, supporting organizations, and any inactive entities still in existence.
2. For each, confirm the responsible party (often the foundation administrator or the family's CPA, not the T&E attorney).
3. By May 1, confirm in writing that either (a) the return will be filed on time or (b) Form 8868 will be filed by May 15.
4. For private foundations, confirm Q4 §4940 estimated tax was paid in January and that the §4942 distribution math has been run for 2025 against the prior year asset base.
5. Schedule the November 15 extended deadline now if 8868 will be filed.

Q2 Federal Estimates

Federal quarterly estimated tax is due June 15 on Form 1040-ES (individuals), 1120-W (C-corporations), or 1041-ES (non-grantor trusts). For pass-through owners whose K-1 income is not withheld, this is the second of four quarterly payments for TY 2026.

Safe harbor. Avoid an underpayment penalty by paying, in withholding plus estimates, either (i) 100% of prior-year total tax (110% if prior-year AGI exceeded $150,000), or (ii) 90% of current-year actual liability.

Trustee callout. Irrevocable non-grantor trusts are separate taxpayers and owe their own estimates on 1041-ES. Grantor trusts flow through. If you are serving as trustee for a non-grantor trust with taxable income, put June 15 on the trust's compliance calendar.

Form 706 & 8971

The federal estate tax return (Form 706) is due nine months after the date of death, with an automatic six-month extension available on Form 4768. If you have any client who died in the look-back window below, the 706 deadline is in this Digest's coverage window — and so is the §6324 lien on every estate asset until the tax is paid or extended.

Date-of-death windows triggering 706 / 4768 deadlines this issue

For each decedent in these windows, confirm:

1. Is a 706 actually required? A 706 is required if the gross estate exceeds the basic exclusion amount ($13,990,000 for 2025 deaths, $15,000,000 for 2026 deaths) — or the surviving spouse intends to elect portability of the deceased spouse's unused exclusion (DSUE), in which case the 706 must be filed even for a sub-threshold estate.
2. Has Form 4768 been filed if more time is needed? The six-month extension is automatic but it is not silent — the form must actually be filed by the original due date. Late-filed extensions are denied and the late-filing penalty (5% per month, capped at 25%) starts accruing from the original date.
3. Has the §6324 lien been mapped? The federal estate tax lien attaches to every estate asset on the date of death and continues until the tax is paid. Title companies will require either a 706 closing letter or a discharge of the lien before insuring transfers. Plan disposition timing accordingly.

Form 8971 — basis reporting

Within 30 days after the 706 is filed, the executor must also file Form 8971 plus Schedule A for each beneficiary, reporting the date-of-death basis of each asset that beneficiary received. This is the rule that establishes the §1014(f) consistent-basis requirement: a beneficiary cannot later report a higher basis on sale than was reported on the 706.

For 706s filed in May 2026 → 8971 due in June. June 706s → July 8971. July 706s → August 8971. The 30-day clock is short and the penalty stack is meaningful: $310 per failure, capped at $3.78M for any one calendar year (intentional disregard removes the cap entirely).

Common error: filing the 706 with no contemporaneous 8971 calendar entry, then realizing 45 days later that the deadline passed. The 8971 is its own file-under-its-own-deadline obligation that the 706 software does not always surface.

Your calendar, not your client's

Delaware Bar — assessment & certification due July 1, 2026

Every member of the Delaware Bar in active status owes the annual assessment by July 1. The 2026 assessment is $305 for active members admitted more than five years and $225 for those admitted less than five years. The annual registration form filed alongside the assessment confirms current contact information, employer affiliation, IOLTA-eligible trust account institution(s), and pro bono hours reported under DLRPC 6.1.

• Late assessment. 25% late penalty plus suspension proceedings if not paid within 30 days. Reinstatement requires curing the assessment plus a separate reinstatement fee.
• CLE. 24 credits per two-year reporting period, including 4 in Enhanced Ethics and at least 6 in legal ethics or professionalism more broadly. The current reporting period for most active members ends June 30, 2026. Members short on credits should look at the DSBA's online catalog now.
• Pro bono reporting. DLRPC 6.1 requires reporting of pro bono hours on the annual registration. Aspirational target is 50 hours/year. Reporting is mandatory; the hours themselves are not.

Florida Bar — fees due August 15, 2026

The Florida Bar membership year runs July 1 – June 30, with annual member fees due August 15. For 2026–2027 the fee is $265 for members in good standing more than ten years, with reduced fees for newer admittees and inactive members. Late payment incurs a 10% penalty after September 30 and suspension after January 1. CLE is 33 hours per 3-year cycle, including 5 hours in approved ethics, professionalism, bias elimination, substance abuse, or mental illness awareness.

IOLTA & trust account certification

Both Delaware and Florida require attorneys with client funds to maintain IOLTA-eligible trust accounts at approved financial institutions and to certify compliance annually as part of bar registration:

• Delaware. Compliance certification is part of the July 1 annual registration. DLRPC 1.15 trust accounting rules apply to every active member who handles client funds; failure to certify, or maintaining a non-IOLTA trust account, is a separate disciplinary matter from late dues.
• Florida. Trust accounting compliance certification is part of the annual fee statement. Florida operates a more aggressive random-audit program than Delaware (TFB Rule 5-1.2(f)). The most common audit finding is failure to maintain monthly three-way reconciliations between bank statement, ledger, and individual client subaccounts.
• Common error in both jurisdictions. Treating the IOLTA certification as a one-time setup. The certification is annual. If the firm changed banks, opened a new trust account, or closed an old one, that change must be reported on the next certification — or the prior year's certification was technically false.

Multi-jurisdictional practitioners

If you are admitted in additional jurisdictions (NY, CA, PA are common AEGIS audience overlaps), each has its own dues + CLE + IOLTA cycle. The most common gap is the bar admission held "for old times' sake" in a state where the practitioner no longer practices but still pays inactive dues. Audit all bar admissions annually and decide affirmatively whether to maintain or resign each one. Inactive status is meaningfully cheaper than active in most jurisdictions.

What to do this week

1. Confirm the DE assessment is calendared for July 1. $305 active / $225 less-than-5-year. Auto-pay if available.
2. Pull your CLE transcript today. If your reporting period closes June 30, identify the gap and book courses before May 31. Earlier is cheaper.
3. Verify your IOLTA bank is still on the approved-institution list. Banks occasionally drop off following M&A activity, leaving practitioners unknowingly out of compliance.
4. For Florida-admitted: put the Aug 15 fee on the August calendar. Will be in next month's Digest.
5. For multi-jurisdictional: list every active bar admission and confirm dues-and-CLE status of each. An inactive PA admission is materially cheaper than active.

April developments

Every deadline in the window, in date order

Quietly catches multi-jurisdiction practices