Internal Revenue Service Issues Updated Group Exemption Procedures

The US Internal Revenue Service released Revenue Procedure 2026-8 on January 15, 2026, updating the procedures required for section 501(c) organizations to obtain and maintain group exemption letters. As of January 20, the IRS has resumed accepting applications for group exemption letters, ending a nearly six-year moratorium on requests for group exemption letters.

A companion notice released on the same day discusses the comments received in response to a proposed revenue procedure contained in a 2020 notice and the modifications made in response to those comments and other changes.

Rev. Proc. 2026-8 [1] applies to group exemption letters applied for after January 20, 2026, central organizations with one or more preexisting group exemption letters, preexisting subordinate organizations, and subordinate organizations added to preexisting group exemption letters on or after January 20, 2026. It adds definitions for key terms including “affiliation,” “general supervision,” and “control” with respect to required relationships between a central organization and its subordinate organizations.

It further limits central organizations to holding only one group exemption, requires a minimum number of subordinate organizations to be covered by a group exemption, and requires subordinate organizations to be described in the same paragraph of section 501(c) and have a uniform purpose statement. [2] Rev. Proc. 2026-8 provides for transition relief for existing group exemption holders through January 22, 2027. Each of these new requirements and the guidelines for transition relief are described in further detail below.

In light of the new requirements for group exemptions, central organizations should take the following steps:

• Inventory group exemption letters and subordinate organizations: Ensure that your organization has at least one subordinate organization and determine if your organization holds more than one group exemption letter (and if applicable begin the consolidation process).
• Consider relationships: Ensure that each preexisting subordinate organization is affiliated with and subject to your general supervision or control and remove preexisting subordinate organizations that are not described in the paragraph of section 501(c) specified in the group application.
• Audit protocols: Update internal policies and subordinate organization templates to ensure the requirements of Rev. Proc. 2026-8 (e.g., uniform purpose statements, authorization) apply to all new subordinate organizations.

BACKGROUND

Group Exemptions

Certain exempt organizations, such as those described in section 501(c)(3), are required to apply for recognition of their exempt status. Others, such as social welfare organizations described in section 501(c)(4), may apply for recognition of exemption, but are not required to. For nearly 60 years, the IRS has maintained administrative procedures (the “group exemption letter program”) for obtaining recognition of exemption from federal income tax on a group basis for organizations described in section 501(c).

The group exemption letter program permits the IRS to recognize a group of subordinate organizations [3] as exempt if they are affiliated with a central organization [4] and is “an administrative convenience for both the IRS and organizations with many affiliated organizations” [5] because it relieves subordinate organizations from having to file, and the IRS from having to process, separate applications for recognition of exemption.

Notice 2020-36

For 40 years, the group exemption procedures were contained in Rev. Proc. 80-27. [6] In Notice 2020-36, [7] the IRS issued a proposed revenue procedure that would modify and supersede Rev. Proc. 80-27 and make substantial changes to the procedures set forth in Rev. Proc. 80-27 to reduce the administrative burden and increase the efficiency of the group exemption letter program, improve the integrity of data collected for purposes of program oversight, increase the transparency of the program, and increase compliance by central organizations and subordinate organizations with the requirements of the group exemption letter program.

The notice imposed a moratorium on requests for group exemption letters [8] pending publication of a final revenue procedure in the Internal Revenue Bulletin and requested comments on all aspects of the proposed revenue procedure, including grandfather and transition rules.

On January 15, the IRS issued Rev. Proc. 2026-8, which lifts the moratorium on group exemption letter applications and modifies and supersedes Rev. Proc. 80-27, and Notice 2026-8, [9] in which the IRS addressed the 29 written comments received in response to Notice 2020-36 and described modifications to the proposed revenue procedure made in response to those comments.

GROUP EXEMPTION REQUIREMENTS AND SIGNIFICANT CHANGES

Number of Subordinates and Group Exemption Letters

Before filing an application for a group exemption letter, a central organization described in section 501(c) must either be recognized by the IRS as exempt, have filed an application for recognition of exemption, or, in the case of a central organization that has had its exemption automatically revoked, have filed an application for reinstatement. [10] A central organization must have at least five subordinate organizations to apply for and obtain a group exemption letter, must have at least one subordinate organization to maintain the group exemption letter thereafter, and may maintain only one group exemption letter. [11]

Rev. Proc. 80-27 did not require a central organization to have a specific number of subordinate organizations to obtain or maintain a group exemption letter. Comments to Notice 2020-36 focused on the potential for a five-subordinate-organization requirement to obtain a group exemption letter to discourage the use of group exemptions by making it more difficult for a central organization to recruit enough subordinate organizations to obtain a group exemption letter.

Treasury and the IRS disagreed with the comment, noting that eliminating the five-organization-requirement “would render the group exemption letter program inefficient in circumstances where a group application includes fewer than five subordinate organizations.”

Treasury and the IRS also responded to comments regarding the restriction on maintaining more than one group exemption, noting that traditionally the IRS’s electronic databases have not systematically tracked more than one group exemption letter per central organization, and maintaining more than one group exemption letter may adversely affect a central organization’s ability to exercise general supervision or control over its subordinate organizations.

Relationship

Each subordinate organization initially included in a group application, or subsequently added to a group exemption letter, must be affiliated with the central organization and subject to its general supervision or control.[12] While these are not new requirements, Rev. Proc. 2026-8 now adds definitions for the terms “affiliation,” “general supervision,” and “control,” which were not included in Rev. Proc. 80-27 and which, according to the IRS, caused confusion and created a lack of consistency for both the IRS and central organizations applying for and maintaining a group exemption.

Affiliation

A subordinate organization’s affiliation with a central organization is demonstrated by facts and circumstances showing that it is a chapter, local, post, or unit of the central organization. [13] Rev. Proc. 2026-8 includes a “facts and circumstances” standard and several examples illustrating how a central organization may demonstrate affiliation with its subordinate organizations.

For example, a subordinate organization may demonstrate its affiliation with a central organization by the inclusion of the subordinate organization’s information on a group return, [14] the current inclusion of the subordinate organization in a directory of subordinate organizations updated annually by the central organization, or, in the case of a subordinate organization that is a church or a convention or association of churches, the sharing of common religious bonds or convictions with the central organization.

Supervision

A subordinate organization is subject to the general supervision of a central organization if the central organization:

• Annually obtains, reviews, and retains information on the subordinate organization’s finances, activities, and compliance with annual filing requirements; and
• Annually transmits (including electronically) written information to, or otherwise educates, the subordinate organization about the requirements to maintain its exempt status including, but not limited to, annual filing requirements (if applicable). [15]

A central organization may obtain information regarding a subordinate organization’s finances, activities, and compliance with annual filing requirements by obtaining a copy of the subordinate organization’s Form 990 or Form 990-EZ (this requirement is not applicable to subordinate organizations that are not required to file an annual information return or notice such as churches).

Rev. Proc. 2026-8 contains examples relating to how an organization can meet the supervision standard noting, for example, that a central organization can meet the requirement that it transmit written information to subordinate organizations regarding how to maintain exempt status by annually providing subordinate organizations an electronic link to the current version of IRS Publication 557, Tax-Exempt Status for Your Organization.

Control

A subordinate organization is subject to the control of a central organization if:

• The central organization appoints the subordinate organization’s directors or trustees who possess a majority of the voting power with respect to the subordinate organization’s governance;
• The central organization appoints a majority of the subordinate organization’s officers;
• The subordinate organization’s directors or trustees possessing a majority of the voting power with respect to the subordinate organization’s governance are directors or trustees of the central organization;
• A majority of the subordinate organization’s officers are officers of the central organization; or
• The central organization and the subordinate organization enter into a written agreement that evidences the central organization’s control over the subordinate organization’s activities and operations. [16]

The proposed revenue procedure contained in Notice 2020-36 focused on voting power or overlap between the central organization and subordinate organizations’ officers, directors, or trustees. Rev. Proc. 2026-8 confirms an additional means of establishing central organization control over a subordinate organization—using a written agreement evidencing the central organization’s control over the subordinate organization’s activities and operations. Whether a written agreement sufficiently establishes control depends on the facts and circumstances.

Eligibility for Inclusion

Initial Inclusion or Subsequent Addition

All subordinate organizations initially included in a group application, or subsequently added to a group exemption letter, must meet the following requirements [17]:

• Matching requirement for subordinate organizations. Each subordinate organization under a group exemption letter must be described in the same paragraph of section 501(c). However, subordinate organizations are not required to be described in the same paragraph of section 501(c) as the central organization.
• Uniform purpose statement requirement. Subordinate organizations that share the same purpose must have a uniform purpose statement in their governing instruments. If one or more subordinate organizations covered by a group exemption letter has a purpose that is different from the purpose of other subordinate organizations covered by the letter, only those subordinate organizations that share a purpose must include the same uniform purpose statement in their governing instruments. The uniform purpose statement must generally describe the purpose of the subordinate organizations.
• Annual accounting period requirement. Subordinate organizations included in a group return filed by a central organization must be on the same annual accounting period as the central organization.

A subordinate organization must authorize in writing the central organization to include the subordinate organization in a group application or add the subordinate organization to an existing group exemption letter. [18] The authorization document must acknowledge that the central organization may remove the subordinate organization from the group exemption letter with or without cause and it must be signed by an officer of the subordinate organization with authority to legally bind the subordinate organization.

Treasury and the IRS acknowledged comments objecting to the matching requirement, but noted the requirement was intended to improve the central organization’s ability to exercise general supervision or control over its subordinate organizations. However, Rev. Proc. 2026-8 does not include a further provision contained in the proposed revenue procedure that would have required subordinate organizations described in section 501(c)(3) to be classified as public charities under the same section of section 509(a) unless an exception applies.

The proposed revenue procedure would have also required all subordinate organizations under a group exemption letter to have a primary purpose that is described by the same National Taxonomy of Exempt Entities code; that provision was not included in Rev. Proc. 2026-8.

Ineligibility of Certain Organizations for Initial Inclusion or Subsequent Addition

The following organizations cannot be initially included in a group application, or subsequently added to a group exemption letter, as subordinate organizations:

• Foreign organizations [19]
• Private foundations [20]
• Type III supporting organizations [21]
• Qualified nonprofit health insurance issuers [22]
• An organization that has had its exemption automatically revoked and has not had its exemption reinstated after filing an application for reinstatement

Annual Information Requirements

Each year, a central organization must submit supplemental group ruling information (SGRI) electronically to the IRS at least 30 days, but no more than 90 days, before the close of the central organization’s annual accounting period information. [23] This annual SGRI requirement is permissive and not mandatory for churches and associations of churches.

The SGRI must include:

• Changes in the purposes, character, or method of operation of all subordinate organizations
• Lists of certain other changes (i.e., name or mailing address changes, subordinates no longer included in the group exemption letter, subordinate organizations whose exemptions have been automatically revoked, and subordinate organizations that are being added to the group exemption letter)
• If applicable, a statement by the central organization that it has no reportable changes

Treasury and the IRS declined to create an additional procedure to approve group exemption letter modifications as requested by one commenter because such a procedure would be inconsistent with the IRS’s general position not to rule on modified activities of tax-exempt organizations. [24]

Application, Termination, and Removal of Subordinate Organizations

Rev. Proc. 2026-8 includes detailed guidance addressing how central organizations may apply for group exemption letters, circumstances under which a group exemption letter will be terminated, and when the IRS will remove a subordinate organization from a group exemption letter. Group applications must be submitted electronically on Form 8940 at www.pay.gov, along with all information, documentation, and other materials required by Form 8940 and the instructions thereto, including the appropriate user fee. [25]

Among the listed reasons that the IRS may terminate a group exemption letter are where the central organization fails to submit timely and complete SGRI or if more than half of the subordinate organizations fail to satisfy the matching or uniform purpose statement requirements. [26]

The IRS may also remove individual subordinate organizations from a group exemption letter in certain cases, including if the IRS determines that the subordinate organization is described in a paragraph of section 501(c) that is different from the paragraph in which the central organization stated that the subordinate organizations would be described in its group application.

Effect of Nonacceptance, Nonissuance, Termination, or Removal

If the IRS does not accept a group application because it lacks information required by the revenue procedure or if the IRS declines to issue a group exemption letter in the interest of sound tax administration, the IRS will not recognize the exemption of any organization included in the group application as a subordinate organization unless the IRS previously issued a determination letter to a subordinate organization individually and that determination letter is still effective on the date of nonacceptance or nonissuance. [27]

An organization that is included as a subordinate organization in a group application that is not accepted or for which the IRS declines to issue a group exemption letter, is a subordinate organization under a group exemption letter that is terminated, or is a subordinate organization that is removed from a group exemption letter may obtain recognition of exemption by:

• Applying for recognition of exemption and receiving a favorable determination;
• Being included by the same central organization in a new group application, if the group exemption letter is issued;
• Being included by a different central organization in a new group application, if the group exemption letter is issued;
• In circumstances where a subordinate organization is removed from a group exemption letter, being added back to the group exemption letter from which it was removed; or
• Being added to a group exemption letter maintained by a different central organization.

Organizations that are not required to apply for recognition of exemption and that have not had their exemption automatically revoked under section 6033(j) may also obtain exemption under the options above or may self-declare their exempt status without recognition from the IRS.

EFFECTIVE DATES AND TRANSITION RULES

Rev. Proc. 2026-8 applies to group exemption letters applied for after January 20, 2026, central organizations with one or more preexisting group exemption letters, preexisting subordinate organizations, and subordinate organizations added to preexisting group exemption letters on or after January 20, 2026.

The revenue procedure also provides transition relief, under which the following requirements of the revenue procedure do not apply to preexisting group exemption letters and preexisting subordinate organizations during the period that begins on January 20, 2026 and ends on January 22, 2027 [28]:

• A central organization must have at least one subordinate organization to maintain a group exemption letter;
• A central organization can maintain only one group exemption letter;
• The revised affiliation and general supervision or control requirements; and
• All subordinate organizations initially included in a group application, or subsequently added to a group exemption letter, must be described in the same paragraph of section 501(c).

During the transition period, a central organization may achieve compliance with the requirements subject to transition relief through SGRI submissions. Additionally, the following requirements of Rev. Proc. 2026-8 do not apply to preexisting subordinate organizations:

• Subordinate organizations sharing the same purpose must have a uniform purpose statement
• A Type III supporting organization cannot be a subordinate organization
• A qualified nonprofit health insurance issuer cannot be a subordinate organization
• An authorization for initial inclusion in a group application, or subsequent addition to a group exemption letter, must acknowledge that the central organization may remove the subordinate organization from the group exemption letter with or without cause