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
Comments - Suggestions - Corrections