IRS Group Exemption Rules

The IRS recently issued Revenue Procedure 2026-8, which updates the procedures governing group exemptions for tax-exempt organizations. A group exemption allows a central organization to obtain federal tax-exempt recognition for qualifying subordinate organizations under a single IRS ruling, eliminating the need for each subordinate to submit its own exemption application. Learn more about IRS group exemption rules and what nonprofits need to know about revenue procedure 2026-8.

For nonprofit organizations that operate through affiliated chapters, schools, local branches, or similar entities, a group exemption can provide significant administrative efficiencies. However, the updated guidance also imposes ongoing oversight, reporting, and compliance responsibilities for central organizations.

What Is a Group Exemption?

A group exemption allows a central organization to obtain an IRS ruling recognizing the tax-exempt status of qualifying subordinate organizations. The central organization is responsible for demonstrating its subordinate organizations are properly affiliated and that it exercises sufficient supervision or control over them.

To qualify for a group exemption, a central organization generally must:

Have at least five subordinate organizations at the time of application;
Exercise general supervision or control over each subordinate organization;
Maintain procedures for monitoring subordinate organizations’ activities and compliance; and,
Maintain only one group exemption covering its subordinate organizations.

Group exemptions are commonly used by membership associations, religious organizations, educational systems, and other nonprofit networks with affiliated local organizations.

Applying for a Group Exemption

Organizations seeking a group exemption must file Form 8940 electronically through the Pay.gov website and pay the applicable user fee.

The application requires the central organization to demonstrate the relationship between itself and its subordinate organizations, explain how it exercises general supervision or control, and establish that each subordinate organization qualifies for inclusion in the group exemption.

Requirements for Subordinate Organizations

Each subordinate organization must be affiliated with the central organization and subject to its general supervision or control. The central organization must have meaningful involvement in ensuring that subordinate organizations continue to operate consistently with their exempt purposes and comply with applicable IRS requirements.

In general, all subordinate organizations included in the group exemption must be described under the same paragraph of Section 501(c), although they do not need to be described under the same paragraph as the central organization. In addition, subordinate organizations with the same exempt purpose must have the same uniform purpose statement in their governing documents.

Certain organizations are ineligible for inclusion in a group exemption, including but not limited to, foreign organizations, private foundations, certain supporting organizations, and organizations whose tax-exempt status has been automatically revoked and not reinstated.

Annual Reporting and Ongoing Compliance

Maintaining a group exemption requires more than obtaining the initial IRS ruling. Central organizations have continuing reporting and oversight obligations.

Most central organizations must file Form 15644 annually to update information regarding the group exemption, including adding or removing subordinate organizations and confirming continued compliance. Churches and associations of churches are not subject to this annual filing requirement.

Central organizations also should maintain records demonstrating ongoing supervision of subordinate organizations. In practice, this includes reviewing financial and compliance information, obtaining Forms 990 or 990-EZ when applicable, collecting financial information from organizations that file Form 990-N, providing subordinate organizations with guidance regarding their tax-exempt obligations, and ensuring that subordinate organizations continue to meet the requirements for inclusion in the group exemption.

A new subordinate organization must provide written authorization permitting the central organization to include it in the group exemption and acknowledging that the central organization may remove it from the group exemption with or without cause. Subordinate organizations already included in a group exemption before January 20, 2026, are not required to provide the new written acknowledgment that the central organization may remove them from the group exemption with or without cause.

Transition for IRS Group Exemption Rules

Revenue Procedure 2026-8 provides a transition period for organizations that already had an IRS group exemption letter before January 20, 2026. Rather than requiring immediate compliance with every new requirement, the IRS generally allows these organizations, until January 22, 2027, to satisfy several of the new rules.

During this transition period, central organizations should review their existing group exemption structure to determine whether changes are necessary. This includes, but is not limited to, confirming that subordinate organizations remain properly affiliated with the central organization, are described under the same paragraph of Section 501(c), and are subject to the required level of supervision or control. Organizations maintaining multiple group exemption letters should also plan to consolidate them because only one group exemption may be maintained after the transition period.

This new guidance also provides permanent relief from certain new requirements for subordinate organizations that were already included in a group exemption before January 20, 2026. For example, these preexisting subordinate organizations are not required to adopt the uniform purpose statement otherwise required for organizations with the same exempt purpose or execute the new written authorization acknowledging that the central organization may remove them from the group exemption without cause.

Practical Steps for Nonprofits

Organizations using a group exemption should:

Review their subordinate organization structure;
Confirm that all affiliates remain eligible for inclusion;
Document supervision and oversight procedures;
Maintain required financial and compliance records;
Calendar annual Form 15644 filing deadlines, if applicable; and,
Review existing group exemptions before the January 22, 2027, transition deadline to determine whether any changes are required.

Revenue Procedure 2026-8 updates the IRS’s group exemption procedures while preserving the administrative benefits that group exemptions provide. Organizations with existing group exemptions should use the transition period to review their governance, oversight, and reporting practices, while organizations considering a new group exemption should ensure they have the systems in place to satisfy the IRS’s ongoing compliance requirements.