It’s Here! DC Exemptions Will Begin Expiring in 2019

by Eric Owens, Tax Senior

One year ago, we reported on an upcoming change to the DC tax exemptions rules, in which nonprofits exempt from DC franchise, sales/use, and property taxes would need to reapply for exemption every 5 years. Well, the change has finally arrived! During the 2019 calendar year, the DC Office of Tax and Revenue (OTR) will begin to expire tax exemptions granted under DC law and will require all exempt entities to renew their exemptions or be reclassified as fully taxable.

OTR is currently sending out informational letters to DC exempt organizations. These notices list each tax exemption held by an organization – income/franchise, sales/use, and personal property. OTR states that each organization must log onto their MyTax.DC.gov account and complete the new online-only FR-164 tax exemption application for all existing exempt accounts. Upon successful renewal, a new exemption certificate (with a five-year expiration date, of course) will be available on your MyTax.DC.gov account. It is not clear yet if a fee will be charged for this renewal. It also is not clear, from the notice DC is currently sending out, whether organizations may simply go ahead and renew now if they wish.

Should an organization fail to renew its exemption in a timely manner, the organization will be placed in fully taxable status, effective the date of expiration. OTR will send out courtesy reminders at least 30 days prior to the expiration of each exemption. Organizations will receive a “Notice of Exemption Expiration,” should their exemption expire, and will have to reapply for exemption.

Step-by-step instructions for completing the online FR-164 exemption application:

  1. Go to MyTax.DC.gov homepage and login using your username and password.
    1. If you don’t have a MyTax.DC.gov login, click here to access instructions to set one up.
  2. Once on your profile, click the More tab on the upper righthand corner.
  3. Scroll down and click Request for Exemption to File (FR-164).
  4. This leads to the Instructions page. Read the instructions carefully, make sure you have the required information and documents, and then click next.
  5. Click Select Exemption for the account type you want.
  6. Complete the Organization Summary.
  7. For personal property tax exemptions, provide the Physical Location of Tangible Personal Property in DC.
  8. Complete the Exemption Questionnaire and provide any required Attachments.
  9. Click OK on the Confirmation page.

These step-by-step instructions are also available in a tutorial on the DC OTR website: click here to access.

Required information for filing a DC tax exemption application include (note that all of these may not be required for renewal):

  1. Taxpayer ID Number;
  2. Name;
  3. Address;
  4. Sales Tax Account Number;
  5. NAICS Code;
  6. Federal Exemption Status;
  7. Proof of IRS exemption (e.g., IRS Determination Letter, Affirmation Letter, or Application for Recognition of Exemption);*
  8. Organizational details; and
  9. Articles of Incorporation.

*IMPORTANT: if your Federal determination letter is more than four years old, DC will require you to request an Affirmation Letter from IRS before you can renew your exemption. Accordingly, it would be a good idea for your organization to apply NOW for an affirmation letter, as it likely will take the letter some time to arrive. Remember that DC is only issuing 30-day notices of expiration, which may not leave enough time to obtain the requested letter. Click here to access IRS instructions on obtaining an affirmation letter.

UPDATE:  In May 2019, the DC Office of Tax and Revenue announced that it would no longer require submission of the IRS affirmation letters with exemption applications. Please read this announcement for further details.

Please Contact us if you are in need of assistance or have any questions regarding this matter.

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