Delaware Yacht Registration
What you should know about registering a yacht in Delaware.
The State of Delaware was once a haven for both domestic and
foreign yacht owners looking to avoid taxes and assessments. Simplified
registrations while combined with easily formed corporations that offered a
degree of anonymity made it a popular alternative. However, in January of 2020 the Department
of Natural Resources came out with a restrictive ruling that changed
everything. This article explains why Delaware yacht registration is no
longer a viable solution for transient and offshore yachts.
Registration Methods
In order to understand the true meaning of a Delaware yacht registration,
you should know the differences between state level registration, titling
and federal Coast Guard vessel documentation. This is especially important
for foreign owners looking to establish an offshore yacht registry here in
the United States. A great deal of misunderstanding exists about
Delaware registrations when it comes to a yacht's nationality and the
avoidance of taxes.
State Registration: State registration in the usual sense is
a process by which various jurisdictions grant operational privileges for
all types of watercraft. These are evidenced by a certificate of
registration which must be present on the boat when underway. Although
generally viewed as evidence of ownership, state registrations are not bona
fide titles. While the states must conform to certain federal numbering
standards, there is otherwise no connection between state registration and
federal documentation.
State Titling:
Most states are now issuing separate title certificates in conjunction with
registrations similar to what you would find with vehicles. This is not
always the case, however, as some states such as Delaware are still known as registration
only jurisdictions. In these cases a registration certificate must serve as
evidence of ownership unless the boat is USCG documented.
USCG Documentation:
Coast Guard documentation is the process by which a vessel becomes
nationalized or more commonly known as flagged. Some states may require the
registration of documented vessels, but they may not be otherwise titled in
a state or foreign jurisdiction. Citizenship is also an issue when applying
for USCG documentation
Operational Requirements
Boats are not allowed to operate in any state unless duly registered or
specifically exempted according to size, propulsion and the type of usage.
There are also temporary visitation exceptions for those registered in
another state, USCG documented or foreign registered.
Place of Usage:
The place for registering a boat is determined by
the location in which it will be principally operated.
Boats are allowed visitation privileges for a certain
period of time if duly registered in another state, USCG documented or
foreign registered. Beyond that, an owner must obtain a special permit or
perhaps re-register the boat in that particular jurisdiction.
Citizenship
Requirements: The citizenship standing of a boat owner is not of concern
for state level registration and titling purposes. However, USCG
documentation is only available to boats that are wholly owned by U.S.
citizens.
Taxes and Fees
Most states will utilize the boat registration process to collect a substantial amount of fees and taxes. Delaware on the other hand, does not impose boat taxes and this is what makes it so popular for domestic or foreign owners looking to avoid such assessments. This is unrealistic, however, unless the boat remains in Delaware. If used beyond the visitation period in another state, it will fall subject to their taxes and permit requirements.
Delaware Registration
Delaware is a registration only state, does not issue boat titles and will
not have the authority to flag or nationalize yachts. Registrations are
evidenced by a small plastic card that must be renewed on a periodic basis.
Foreign and domestic owners were historically allowed to register boats in
Delaware by simply declaring that location as a place of intended
operation. There was no follow up by state officials to confirm this
even though it was obvious that many domestic and foreign yachts would never
see the waters of Delaware.
Residency Rules: In January of
2020, the Department of Natural Resources initiated a new ruling that was
designed to stem the tide of unsanctioned registrations. The ruling
specifically requires that a yacht must have operated in Delaware more than
any other state during a calendar year in order to apply for a registration
certificate. It also sets forth a unique ruling which promulgates that
a boat must have been physically located within Delaware for at least
60 days in order to qualify for registration. This is meant to discourage
both domestic and foreign operators from circumventing the residency rules.
Rules Enforcement: Although the DNR may investigate or require
evidence of residency under certain circumstances, it must basically rely on
an applicant's unwillingness to commit perjury by making false declarations.
Even though subject to severe penalties and perhaps even impoundments, this
still leaves the door open to unsanctioned registrations unless ultimately
detected.
Marine Industry
Over the years, an entire segment of the marine industry was built around a number of private enterprises that offer Delaware yacht registration and incorporation services. At a substantial cost, they will handle everything from start to finish with respect to both corporate and boat registrations. Some will even generate an official looking yacht registry certificate which affords an impression that the vessel is U.S. flagged. There are signs, however, that such companies are on the decline given the new DNR rules and a growing awareness about the true meaning of Delaware yacht registrations.
Conclusion
Interstate boat registration violations can result in severe penalties,
fines and the payment of back taxes. When it comes to offshore operations
under a false flag, however, this could result in seizure and forfeiture of
the subject yacht. It may also lead to the incarceration of the operators
and owners themselves. You may accordingly wish to consult with a maritime
attorney with any such concerns before making such choices.
References and Referrals
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