LawFlash

DC Requires Nonprofits to Renew District Tax Exemptions

January 08, 2019

Beginning this year, the District of Columbia (DC) Office of Tax and Revenue (OTR) is requiring nonprofit organizations that claim DC tax-exempt status to reapply for tax exemption through an online renewal process. DC OTR has begun sending notices to many organizations informing them about the new requirement. Nonprofit organizations that received determination letters from the Internal Revenue Service (IRS) more than four years ago will need to request an affirmation letter from the IRS confirming their federal tax-exempt status in order to complete the renewal process.

Background

Most nonprofit organizations that are recognized as tax-exempt by the IRS will also qualify for tax-exempt status with DC OTR. To establish DC tax-exempt status, organizations are required to register for taxes with DC OTR and apply for tax-exempt status by filing a DC form FR-164. This has previously been a one-time requirement, and organizations that were recognized as tax-exempt by DC OTR were not required to periodically renew their tax-exempt status.

New Renewal Requirement

Starting January 1, 2019, DC OTR will begin to expire the current DC tax-exempt status of nonprofit organizations and require all organizations to renew their exemptions or be reclassified to a fully taxable status every five years. Many organizations have already received notices from DC OTR informing them of the upcoming requirement (“Notice of Upcoming Exemption Expiration”). Organizations will also receive a notice at least 30 days before the actual expiration date of their tax exemptions.

To complete the renewal process, organizations will need to log into their MyTax.DC.gov accounts and complete the online form FR-164 application for all of their current tax exemptions. DC will no longer accept paper applications for tax exemption. Organizations may need to provide the following documents if they are not already uploaded into MyTax.DC.gov:

  1. Certificate of incorporation (if incorporated in DC) or certificate of registration (if not incorporated in DC)
  2. IRS determination letter – If the determination letter is more than four years old, the organization will need to also include an affirmation letter from the IRS dated within the past year confirming its federal tax-exempt status
  3. Current certificate of occupancy and/or lease showing proof of physical location in DC if applying for sales and use/personal property tax exemption

Once the application is approved, DC OTR will provide a new exemption certificate that will include an expiration date. Organizations will need to recertify every five years from the issuance date on the exemption certificate by recompleting the form FR-164 online.

DC OTR has provided a User Guide to help organizations with completing the online exemption application.

To request an Affirmation Letter, organizations can contact the IRS Exempt Organization Customer Account Services by telephone, mail, or fax. A letter or fax requesting an affirmation letter must include the organization’s full name and employer identification number, and it must be signed by an authorized officer or trustee and indicate the capacity in which such person is signing (for example, “President” or “Trustee”).

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash please contact any of the following Morgan Lewis lawyers:

Washington, DC
Celia Roady
Caroline Waldner
Shira M. Helstrom