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DC Removes Affirmation Letter Requirement from Exemption Renewal Process

The District of Columbia Office of Tax and Revenue (OTR) has reversed a burdensome plan that would have required many nonprofits operating in D.C. to get an updated confirmation of their federal tax-exempt status from the IRS as a condition for DC tax-exemption.

Late last year, OTR announced that, beginning in 2019, DC tax-exempt status would expire after five years, and all tax-exempt entities operating in DC would have to reapply for their DC tax-exemption. Many organizations have already received the relevant “Notice of Upcoming Exemption Expiration” from OTR, which explains the new requirement and announces that entities will receive a thirty-day notice prior to the expiration of their exemption. As a prominent piece of this renewal process, OTR planned to require organizations whose IRS determination letter (the letter from the IRS recognizing the organization’s federal tax-exempt status) was more than four years old to obtain and submit a recent affirmation letter from the IRS.

This requirement would have been unnecessarily burdensome. The IRS does not conduct a new review of an organization’s purposes and activities prior to issuing an affirmation letter. The letter merely offers the same information about an organization’s current federal tax-exempt status that can be confirmed online by looking up the organization on the IRS Tax Exempt Organization Search website. Obtaining an affirmation letter from the IRS also often takes longer than thirty days, creating the risk that organizations receiving the exemption expiration notice from OTR might lose their DC tax-exempt status before receiving the affirmation letter that OTR planned to require.

Many raised concerns over this impractical requirement, and Harmon Curran got more than two dozen local lawyers representing DC tax-exempt organizations to join in a letter to OTR urging the agency to reconsider its affirmation letter mandate. In the wake of the protests, OTR recently informed Harmon Curran that the agency will no longer require submission of a recent affirmation letter as part of the exemption renewal process. Instead, OTR will confirm an organization’s federal tax-exempt status by searching the IRS exemption database online. The online DC exemption application will still include a way for organizations to submit an IRS affirmation letter, but applicants will not be required to do so.

OTR’s recent decision will undoubtedly streamline the renewal process for DC tax-exempt status. If you have questions about the filing itself, which must be completed online, please let us know.

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