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Is Your Organization Tax-Exempt in D.C.? Act Soon to Retain the Exemption!

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.

Copyright © by Ballard Spahr LLP

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Kendis Muscheid Tax Lawyer Ballard
Partner

Kendis Key Muscheid, one of the leading nonprofit tax attorneys in the Southwest, focuses her practice on the representation of nonprofit and tax-exempt organizations, charitable trusts, and donors making charitable gifts.

Her clients include a variety of 501(c)(3) and other tax-exempt organizations, such as private foundations, supporting organizations, universities, charter schools and research institutions, hospitals and their related foundations, religious entities, museums, social welfare organizations, trade associations, and groups...

602-798-5410
Ann Novachek Tax Attorney Ballard Spahr Minneapolis
Of Counsel

Ann Novacheck represents established and emerging nonprofit and tax-exempt organizations, providing practical legal counsel to private foundations, operating foundations, public charities, trade associations, and health care providers. Ann leverages her deep experience to understand not only how to solve a client's problem, but also how to align the solution with both organizational goals and larger industry trends. 

Ann has particular experience in matters involving questions of governance,federal and state compliance, public charity support calculations, private foundation tax issues, intermediate sanctions, joint ventures, conflicts of interest, unrelated business tax issues, property-tax exemption, and benefit corporations. She also provides tax-planning advice to individuals and businesses, and she defends taxpayers and tax-exempt organizations before federal and state taxing authorities, tax courts, and attorneys general.

Representative Matters

Nonprofit and Tax-Exempt Organizations

  • Counseled clients on compliance issues, including applying for and maintaining tax exempt status, filing applicable tax returns, and meeting state registration requirements
  • Prepared comprehensive plans for land use to qualify for a property tax exemption and prepared the related applications
  • Assisted clients with developing and amending articles of incorporation and bylaws, board and employee policies, investment policies, management compensation, grant-making procedures, contracts, and annual meeting minutes
  • Represented organizations responding to IRS and Attorney General inquiries, in federal and state audits, and administrative appeals
  • Developed and implemented reorganization structures to enhance program operating strategies and compliance with applicable federal and state laws
  • Counseled clients on sophisticated fund-raising programs, including naming-rights agreements, capital campaigns, and endowment-fund development
  • Trained Boards of Directors, officers, and staff on nonprofit and tax-exempt issues and strategies
  • Developed donor-advised and donor-directed fundraising programs
  • Provided grantee and program partner due diligence
  • Prepared legal opinion letters on a variety of legal issues in the nonprofit and tax-exempt areas
  • Advised on charitable gambling
  • Represented clients seeking private letter rulings

Tax Planning

  • Counseled clients on partnership and corporate (subchapters C and S) tax issues, including choice of entity
  • Structured taxable and tax-free acquisitions, mergers, divestitures, and spin-off transactions for public and private corporations
  • Prepared tax opinions for transactions
  • Advised owners of closely held businesses on matters related to operations and succession planning
  • Represented taxpayers responding to IRS and state agency inquires and federal and state audits and appeals
  • Advised clients with regard to state tax nexus and compliance
612.371.3917
Vicky Tsilas, Ballard Spahr Law Firm, Washington DC, Tax Law Attorney
Partner

Vicky Tsilas focuses on the tax aspects of tax-exempt and tax-credit bond transactions and issues related to tax exempt organizations. She represents nonprofit organizations as borrowers and state and local governments as bond counsel in tax-exempt bond financings. She also has extensive experience representing clients in IRS audits of tax-exempt bond financings involving hospital systems, universities, and solid-waste and sewage facilities.  In addition to her private practice experience, Vicky has served in the highest legal positions overseeing tax-exempt bonds at the...

202-661-7694
Thomas Havener, Ballard Spahr Law Firm, Washington DC, Finance and Tax Law Attorney
Attorney

Thomas G. Havener is a public finance tax attorney with 30 years of experience rendering legal opinions on the exemption of interest on governmental (and conduit) debt obligations from federal and state income tax. He has substantial experience in tax disputes, including large, complex matters involving IRS audits of billions of dollars of tax-exempt governmental general obligation bonds, qualified 501(c)(3) bonds issued for the benefit of large health care, educational, and other charitable and cultural institutions, as well as tax-exempt “exempt facility bonds” issued...

202-661-2274