Updated Procedures for Obtaining and Maintaining Group Tax Exemption

In May 2020, the Treasury Department and the IRS released a proposed revenue procedure 2020-36 to modify and supersede existing rules set in Rev. Proc. 80-27 on group exemption applications and maintenance of a group exemption for organizations described in Section 501(c) of the Internal Revenue Code (IRC). Since many of the updated procedures differed from the original guidance, the IRS requested comments from the public. In June of 2020, the IRS stopped accepting new applications for group exemption letters. Finally, in January of 2026, the IRS published Revenue Procedure 2026-8 finalizing the updated guidance, superseding Rev. Proc. 80-27 and resuming acceptance of group exemption applications after January 20, 2026.

According to the final procedures, tax-exempt organizations seeking a new group exemption and/or maintaining an existing group exemption must consider the following:

• Minimum number of subordinate organizations is set at five to obtain a group exemption letter. The IRS explained that this requirement is due to the administrative burden that processing group applications imposes on the IRS.
• Part of the proposed regulations in 2020 was a requirement that a central organization must establish that each subordinate organization included in the group exemption is affiliated with the central organization. The new Rev. Proc. adds several examples illustrating how a central organization may demonstrate affiliation with its subordinate organizations. A new standard is established that reviews all facts and circumstances showing that the subordinate organization is a chapter, local, post, or unit of the central organization.
• Rev. Proc. 2026-8 clarifies a requirement to obtain, review, and retain information about a subordinate organization. It can be met by acquiring a copy of the Form 990, Return of Organization Exempt from Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. However, obtaining a copy of a Form 990-N will not satisfy the central organization’s requirement to obtain, review, and retain information about a subordinate organization. Subordinate organizations that file Form 990-N must provide other annual written information.
• Rev. Proc. 2026-8 expands the control standard that a central organization must establish over its subordinate organizations. It now includes using a written agreement evidencing its control over subordinate organizations’ activities and operations.
• The new regulations made changes to the “matching requirement” where previously a central organization and its subordinate organizations were required to be described in the same paragraph of Section 501(c) of the IRC. Now, the subordinate organizations are to be described in the same paragraph of Section 501(c) as one another but not required to be described in the same paragraph of Section 501(c) as their central organization.
• There is a uniform purpose statement requirement. Subordinate organizations that share the same purpose must have a uniform purpose statement in their governing instruments. If a group includes disparate types of organizations (e.g. schools and hospitals) all schools must share one uniform statement, and all hospitals must share another.
• Rev. Proc. 2026-8 established that an organization that loses its tax-exempt status by automatic revocation must reinstate before it is eligible to be a subordinate organization.
• The central organizations are permitted to remove subordinate organizations with or without cause. Central organization must give a subordinate organization at least 30 days’ notice before it can be removed from a group exemption letter.
• Rev. Proc. 2026-8 requires a central organization to submit its annual supplemental group ruling information (SGRI) at least 30 days before the close of its annual accounting period but adds that a central organization may not submit its annual SGRI more than 90 days before the close of its annual accounting period. Secondly, SGRI submissions must include a list of subordinate organizations whose tax-exempt status has been automatically revoked. Finally, as it relates to SGRI, the submissions must be made electronically. Further guidance on the electronic submission will be published.
• Final regulations include a provision that the IRS may terminate a group exemption letter with respect to all subordinate organizations for noncompliance by the central organization with the requirements in any SGRI submission and any failure to exercise general supervision or control over one or more subordinate organizations. In addition, group exemption can be terminated if more than half of subordinate organizations have had their exemption automatically revoked or fail to satisfy the uniform purpose statement or matching requirement.

Rev. Proc. 2026-8 applies to group exemption letters applied for after January 20, 2026. The new group applications must be submitted electronically on Form 8940 at pay.gov.

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