EXEMPT ORGANIZATIONS IN THE DISTRICT OF COLUMBIA

THURSDAY, SEPTEMBER 16, 2015

BY MR. DAVID WILSON, SUPERVISOR TAX AUDITOR

EXEMPT ORGANIZATIONS IN THE DISTRICT OF COLUMBIA

The Office of Tax and Revenue (OTR), which is part of the Office of the Chief Financial Officer, administers District of Columbia taxes. To assist non-profit organizations better understand their responsibilities as an entity conducting business in the District, OTR has prepared the following information:

QUALIFYING FOR TAX-EXEMPT STATUS

Most non-profit organizations which are recognized by the Internal Revenue Service as tax exempt under the Internal Revenue Code will qualify for exemption under the District of Columbia Income and Franchise Tax Act. The responsibility for establishing tax-exempt status rests with the non-profit organization. In order to establish tax-exemption status, an organization is required to file a Form FR 164 (Application for Exemption) with the Office of Tax and Revenue, Exempt Organizations, P.O. Box 556, Washington, D.C. 20044. For additional information on the District of Columbia’s tax-exemption policy for non-profit organizations, you may contact Mbanefo Vincent at (202) 442-6583, or via email at vincent.Mbanfo@dc.gov or Genevieve Menan at (202) 442-6442 or via e-mail at genevieve.menan@dc.gov or via fax at (202) 442-6883,

FRANCHISE TAXES

Corporations Organized Under Act of Congress. Title Holding Corporation for Exempt Organization. Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster

National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations.

Civic Leagues, Social Welfare Organizations, and Local Associations of Employees. Labor, Agricultural, and Horticulture Organizations. Business Leagues, Chambers of Commerce, Real Estate Boards, Etc. Reserved. Fraternal Beneficiary Societies and Associations. Voluntary Employees’ Beneficiary Associations. Domestic Fraternal Societies and Associations. 13. Cemetery Companies. 14. State Chartered Credit Union, Mutual Reserve Funds. 19. Post or Organizations of Past or Present Members of the Armed Forces. 25. Title Holding Corporations or Trusts with Multiple Parents. 26. Insurance companies, companies which guarantee the fidelity of any individual or

individuals, such as bonding companies which furnish abstracts of title or which insures titles to real estate, all of which pay taxes on their gross earnings, premiums, or gross receipts under existing laws of the District. 

Tax exempt organizations that have unrelated business income under the Internal Revenue Code are subject to the District’s franchise tax on such income. Generally, unrelated business income and expenses are apportioned under the three-factor formula, simple average rules.

PERSONAL PROPERTY

The District personal property tax provisions refer to organizations exempt from personal property taxes as "semipublic institutions." Semipublic institutions are corporations, community chests, funds or foundations organized and operated exclusively for religious, scientific, charitable, or educational purposes, i.e., 501(c)(3) type organizations, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

  Non-profit organizations other than “semipublic

institutions’ are subject to the District’s Personal Property tax on property located in the District. Semipublic institutions that have unrelated business income are subject to personal property tax to the extent that such property is used to produce the unrelated business income.

SALES TAXES

The District sales tax provisions refer to organizations exempt from sales taxes as "semipublic institutions." Semipublic institutions are corporations, community chests, funds or foundations organized and operated exclusively for religious, scientific, charitable, or educational purposes, i.e., 501(c)(3) type organizations, no part of the net earnings of which inures to the benefit of any private shareholder or individual. The semipublic institution must have an office in the District of Columbia.

SALES MADE TO SEMIPUBLIC INSTITUTIONS

Purchases made by semipublic institutions are exempt from District sales taxes if:

  The institution has first obtained an exemption

certificate and presents it at the time of sale;  The vendor keeps a record of the sale including date,

name of purchaser and certificate number;  The institution is located within the District and;  The items purchased are used in furtherance of the

institution's purposes, i.e. not for personal use or later resale.

SALES MADE BY EXEMPT ORGANIZATIONS

Sales within the District by exempt organizations which have an office or sales activities in the District of Columbia are subject to District sales taxes.

REAL PROPERTY TAXES

Real property tax exemption does not follow the same rules as exemption from franchise, personal property and sales taxes. Generally, property owned by some non-profit, educational, charitable, and religious organizations may be exempt from real property.

The following real property is exempt from the District's real property taxes:  Property belonging to the U.S. Property belonging to the District. Property belonging to foreign governments that is used for diplomatic purposes. Property belonging to the Commonwealth of the Philippines that is used for

government purposes. Property specifically exempted from taxation by any special act of Congress in

force December 24, 1942, as long as it is used for the purposes for which is was exempted.

Art gallery buildings owned and operated by nonprofit organizations open to the public generally, and admission to which is charged no more than twice a week.

Library buildings owned and operated by nonprofit organizations and open to the public generally.

Buildings owned and operated by nonprofit institutions for purposes of public charity principally in the District.

REAL PROPERTY TAXES (CONTINUED)

Hospital buildings and structures owned and operated by nonprofit organizations. Buildings owned and operated by nonprofit schools, colleges and universities that embrace the

generally recognized relationship of teacher and student. Buildings owned and operated by organizations exempted by a special act of Congress. Nonprofit cemeteries and associated structures used solely for burial purposes. Church buildings and associated structures. Buildings belonging to religious organizations primarily and regularly used for religious worship,

study, training, and missionary activities. Residences of clergy owned by the church or congregation in which the member of the clergy

officiates (only one such residence per church or congregation). Episcopal residences owned by a church used exclusively as a residence of a bishop of such

church. Headquarters buildings of organizations exempt from real property tax. Grounds owned and used for carrying on the purposes of organizations exempt from real

property tax. Additional contiguous grounds owned by organizations exempt from real property tax as of July

1, 1942, and not held for profit or sale (rather for enlargement or expansion). Buildings owned, occupied and operated by nonprofit theater, music or dance organizations. Certain qualifying multifamily and single family rental and cooperative housing for low and

moderate income persons. Certain property transferred to a qualifying lower income homeownership household. Certain property transferred to a qualifying nonprofit housing organization. Certain qualifying supermarket developments. Certain property transferred to a resident management corporation. The Correctional Treatment Facility, while used as such.

REAL PROPERTY TAXES (CONTINUED)

Additional code provisions grant real property tax exemption to specific organizations generally falling into one of categories described above. Organizations must file an application for real property tax exemption, except for real property described in items 1, 2, 3, 4, 5 and 11. An annual reporting is also required, except for real property described in items 1, 2 and 3.

  In order to establish tax exemption, an organization is

required to file a Form FP 300 (Application for Exemption from D.C. Real Property Tax) with the Office of Tax and Revenue, Director for Real Property Taxes, 1101 4TH Street SE, 5th Floor, Washington, D.C. 20044. For additional information you may contact Lisa Newman at (202) 442-7024 or Fax (202) 442-6796.

UNEMPLOYMENT INSURANCE

For any information, please call (202) 698-3569

WORKERS’ COMPENSATION

For any information, please call (202) 698-3569

EMPLOYER WITHHOLDING TAXES

DC Income Tax withholding is required on all employees who are District residents.

BALL PARK FEE

Tax exempt organizations that have unrelated business income under the Internal Revenue Code are subject to the District’s ball park fee if those organizations meet the ball park fee threshold.

QUESTIONS???