Organizations wishing to apply for or retain an exemption from the District of Columbia on income and franchise tax, sales and use tax, or personal property tax are subject to some new filing requirements. Organizations now must re-certify their qualification for exemption every five years from the issuance date of the exemption certificate, and this includes obtaining an IRS Affirmation Letter of exempt status.
In the District of Columbia, obtaining exemption from the income and franchise tax, sales and use tax, or personal property tax are filed on Exemption to File (FR-164). The following documentation is now required to be submitted with the FR-164:
For All Filings
1. IRS Determination Letter. A copy of the IRS Determination Letter approving the organization's exemption from federal income tax.
2. IRS Affirmation Letter. If the IRS Determination Letter date is older than four years from the date of filing, the organization must also attach an IRS Affirmation Letter dated within the past year. (The organization must submit both the IRS Determination Letter and an IRS Affirmation Letter dated within 365 days prior to filing).
3. Certificate: A copy of one of the following certificates issued by the DC Department of Consumer Regulatory Affairs (DCRA).
- If incorporated in the District of Columbia:
- Certificate of Incorporation or
- Certificate of Authority
- If not incorporated in the District of Columbia:
- Certificate of Registration in the District of Columbia
For Sales and Use Tax Only
In addition to the documents required for all filings, a signed copy of a lease, District of Columbia Certificate of Occupancy permit issued to the organization, or other documentation to show proof of a physical location in D.C. must be submitted with the FR-164.
Personal Property Tax Only
In addition to the documents required for all filings, documentation to show proof of a physical location in D.C. must be submitted with the FR-164.
The D.C. Office of Tax Revenue says that entities will be reclassified as taxable if they fail to renew their exempt status or will be denied exemption if the appropriate paperwork is not submitted with an application.
According to the IRS, in order to obtain an IRS Affirmation Letter, an organization may generally contact IRS Customer Account Services to make a request by phone, letter, or fax. A request must include the organization's:
- full legal name;
- Employer Identification Number; and
- authorized signature (an officer or trustee) and title/capacity of the signer (i.e., president, treasurer, etc.)
While an organization may report a name or address change at the same time that it requests an affirmation letter, there are additional forms and requirements required for reporting name and address changes that are not the subject of this alert.
Organizations should begin preparing for the renewal of—or application for—the District of Columbia exemption with sufficient lead time to allow the IRS to process the thousands of requests for Affirmation Letters it will likely receive. The D.C. Office of Tax Revenue reports that it has sent notice to more than 14,000 entities to renew their exemptions, so there will no doubt be many requests to the IRS for Affirmation Letters.
Attorneys in Ballard Spahr's Exempt Organizations Group provide counsel on the full range of legal services for nonprofit and tax-exempt organizations and provide seasoned advice to address these organizations’ complex operational needs.
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