December 12, 2023

DC Updates Exemption Policy: Nonprofits Must Renew Tax-Exempt Status Every Five Years

By Sara Smith, Manager, Tax & Business Services

DC Updates Exemption Policy: Nonprofits Must Renew Tax-Exempt Status Every Five Years Nonprofit Tax Services

While many states grant automatic recognition of tax-exempt status to nonprofit organizations following recognition by the Internal Revenue Service, certain states and the District of Columbia mandate a separate application process. Organizations must complete and submit Form FR-164 to request DC’s recognition of their tax-exempt status. Traditionally, this was a one-time filing obligation that would remain effective indefinitely.

However, there has been a notable change to this process in recent years. For exemption certificates issued on or after June 1, 2018, the validity of exemptions granted by DC will now extend only for five years. At the end of this term, organizations are required to file a renewal application to maintain their tax-exempt status. Tax-exempt entities should anticipate receiving a notice 180 days before their exemption expires, followed by a second notice 30 days before the expiration date.

To maintain compliance, both initial applications and subsequent renewal submissions must be processed through the organization’s portal account. The online renewal procedure mirrors the initial exemption applications; however, the renewal process has been streamlined to no longer necessitate a copy of the IRS Determination or Affirmation letter.

Due to the updated process, it is imperative for nonprofit organizations to be vigilant for expiration notices from the District of Columbia, as many exemption certificates expire in the coming months. It is equally important to prepare and submit renewal requests promptly to avoid any lapse in tax-exempt status.