The IRS is again accepting group tax exemption applications. Learn what’s changed, what’s required, and who should take a closer look.
The IRS has resumed accepting applications for group tax exemptions. Previously, on June 17, 2020, the IRS suspended the processing of group rulings pending the issuance of final revenue procedures.
Revenue Procedure 2026-8, issued on January 20, 2026, details the official protocols required for obtaining and maintaining a group ruling.
What is a group tax exemption request?
A group tax exemption request is a process where a parent or central organization applies for its affiliated or subordinate organizations to be recognized as tax-exempt under a single application.
This is commonly used by national organizations with multiple chapters, religious bodies with local congregations, or tax-exempt parent organizations with at least five tax-exempt controlled subsidiaries.
| Topic | New Rules (Rev. Proc. 2026-8) |
Old Rules (Rev. Proc. 80-27) |
|---|---|---|
| Status of guidance | Rev. Proc. 2026-8 supersedes Rev. Proc. 80-27 and modernizes the entire framework | In effect for over 40 years with minimal updates |
| Acceptance of new applications | IRS resumed accepting applications January 20, 2026 | Applications suspended June 17, 2020, following Notice 2020-36 |
| Filing method | Electronic filing required via Form 8940 on Pay.gov | Paper filings permitted; no standardized electronic process |
| Minimum number of subordinates to obtain exemption | At least five subordinate organizations required to obtain a group exemption | At least one subordinate |
| Minimum number of subordinates to maintain exemption | Central organization must maintain at least one subordinate at all times | Not expressly required |
| Number of group exemption letters allowed | Central organization may maintain only one group exemption letter (subject to transition relief) | Central organizations could maintain multiple group exemptions |
| Affiliation standard | Defined facts and circumstances test with examples (e.g., chapters, locals, units, subsidiaries) | Required control of the subordinate organization by the central organization |
| General supervision requirement | Explicit annual duties: obtain, review, and retain financial/activity/compliance data and educate subordinates on exemption requirements | Required oversight by the central organization of the subordinates to enable their compliance with exemption requirements |
| Control standard | Central organization must demonstrate control of subordinates | Broad concept with little specificity |
| Uniform §501(c) classification for subordinates | All subordinates must fall under the same 501(c) paragraph | All subordinates were required to fall under the same 501(c) paragraph |
| Uniform purpose statement | Subordinates must share the same tax-exempt mission or purpose | Not required |
| Accounting period alignment | Subordinates must share the same annual accounting period as the central organization | Subordinates were required to have the same accounting period |
| Written authorization by subordinates | Subordinates must authorize the central organization in writing to add/remove them from the group exemption | Similar group exemption requirement |
| Annual information collection from subordinates |
Central organization must annually report to the IRS supplemental group ruling information, in particular the subordinates being added or removed from the group exemption Note: This reporting must be done at least 30 days but not more than 90 days before the central organization’s year-end |
Similar requirement |
| Excluded organizations | Exclusions, including private foundations, Type III supporting orgs, §501(c)(29) entities, foreign orgs, and revoked orgs that haven’t be reinstated | Similar group exemption exclusions |
| Transition relief | One-year transition period through January 22, 2027, for existing group exemptions and subordinates | Not applicable |
Pros of a group tax exemption request
Streamlined tax exemption process
Instead of each subordinate organization filing its own application for tax-exempt status with the IRS, the group exemption request allows them to be covered under one central application, saving time and administrative effort.
Cost savings
Filing fees and professional service costs can add up if each entity applies individually. Group exemption helps reduce these costs, making it more financially efficient.
Consistency across entities
A group exemption enables all subordinates to adhere to the same organizational standards and compliance requirements set by the central body, helping maintain consistency, uniformity, and control.
Easier oversight
The central organization can easily monitor and support the compliance, reporting, and governance of its subordinates, reducing the risk of inadvertent violations.
Faster onboarding of new entities
New subordinates can be added to the exemption more quickly, allowing for greater flexibility and responsiveness as the organization grows.
Consolidated Form 990 for all subordinates
A Group Form 990 is filed for all subordinates. This allows for a more efficient and impactful Form 990 presentation to the public
Cons of a group tax exemption request
Centralized responsibility
The central organization or parent is responsible for confirming that all subordinates maintain their tax-exempt status and comply with all tax reporting requirements.
Complex initial application
The initial group exemption application can be more complex and time-consuming to prepare, as it involves gathering information and documentation for all subordinates.
Ongoing compliance and updates
The central organization must annually update the tax authority about changes in the group’s structure, including new and removed subordinates or changes in operations.
Important notes for religious organizations
- The IRS has issued more than 4,000 group exemption rulings, covering more than 400,000 nonprofit organizations across the country. Religious organizations have long been among the most significant users of the group ruling structure, with some central organizations having more than one group exemption letter.
- Religious or other organizations maintaining more than one group exemption letter must relinquish all or all but one of its existing group exemption letters before the end of the transition period — which is January 20, 2027.
- One common misconception is that being included in a group exemption automatically frees a subordinate religious organization from annual filing requirements. This is not always the case — many church-related organizations still need to file Form 990, if their activities are substantially “lay related.”
Is a group tax exemption right for your organization?
A group tax exemption request can be a powerful tool for organizations with multiple subordinates, offering efficiency, cost savings, and streamlined oversight. However, it also requires careful management, as the central organization assumes significant responsibility for compliance and reporting. Each organization should consider its structure, resources, and capacity for centralized administration before pursuing this route.
The new provisions of group exemptions are complex. CLA provides trusted advisors to guide you with the information you need to make informed decisions. If you’re considering a group ruling, or have a current group ruling and need to discuss transition processes and compliance with the new rules, please reach out today.