The IRS has issued new rules for group exemptions under Revenue Procedure 2026-8. Learn how the updated procedures affect nonprofit organizations, compliance requirements, and oversight responsibilities.
The IRS has officially updated the rules governing nonprofit group exemptions after more than five years without issuing new group rulings. Revenue Procedure 2026-8 introduces revised procedures for obtaining and maintaining group exemption letters, bringing significant changes to compliance, oversight, and reporting requirements.
These updates aim to modernize how the IRS oversees nonprofit networks while improving transparency, efficiency, and accountability among organizations operating under a shared tax-exempt structure.
Why the IRS Updated Group Exemption Rules
In 2020, the IRS paused the issuance of new group exemption letters and announced plans to update the process. The agency explained that modernization was necessary to:
• Reduce administrative burdens
• Improve oversight and compliance
• Increase transparency in nonprofit operations
• Strengthen the accuracy of IRS oversight data
After nearly five and a half years, the IRS resumed issuing group exemptions with new procedures that took effect on January 20, 2026.
Existing group rulings have a transition period until January 22, 2027 to comply with the updated requirements.
What Is a Group Exemption?
A group exemption allows a central nonprofit organization to obtain tax-exempt status for a group of affiliated subordinate organizations.
Instead of each affiliate applying separately for tax-exempt recognition using Form 1023, the central organization applies once and receives a group exemption letter that covers eligible subordinates.
This structure is commonly used by organizations with multiple chapters, affiliates, or local branches.
Benefits of group exemptions include:
• Reduced administrative workload
• Simplified IRS recognition processes
• Centralized oversight of affiliates
However, the IRS expects the central organization to maintain meaningful oversight of all subordinates included in the group.
Key Requirements Under Prior Procedures
Previous rules were outlined in Revenue Procedure 80-27. Many of those requirements remain in place, including:
• Each subordinate must have its own organizing documents and EIN
• All subordinates must qualify under the same section of IRC 501(c)
• Subordinates cannot be private foundations
• Subordinates cannot be organized outside the United States
• All subordinates must use the same accounting period
• Subordinates generally should not apply separately for tax-exempt recognition while included in a group exemption
• The central organization must obtain a separate EIN for filing a group return
These core requirements still apply under the updated procedures.
Major Changes Under Revenue Procedure 2026-8
The updated rules introduce several new requirements designed to strengthen oversight and compliance.
Minimum Number of Subordinates
New group exemption rulings must include at least five subordinate organizations.
Existing group exemptions must maintain at least one subordinate.
Single Group Exemption Rule
A central organization may not maintain more than one group exemption at the same time.
Eligibility of the Central Organization
The central organization must:
• Already have tax-exempt status
• Have a pending exemption application
• Or have filed for reinstatement if its status was automatically revoked
Affiliation and Oversight Requirements
Each subordinate organization must be affiliated with the central organization and subject to either:
General supervision, meaning the central organization regularly reviews activities, finances, and compliance, or
Control, meaning leadership overlaps or formal agreements grant operational authority to the central organization.
Written Authorization from Subordinates
The central organization must maintain written authorization from each subordinate confirming:
• Agreement to be included in the group exemption
• Permission for the central organization to remove the subordinate if necessary
No Oversight Through Intermediaries
Central organizations cannot establish supervision or control through intermediate organizations.
Applying for a Group Exemption
Organizations must now submit group exemption applications electronically using Form 8940 through Pay.gov.
The current user fee for the application is $3,500.
New Annual Reporting Requirement: SGRI
Central organizations must submit Supplemental Group Ruling Information (SGRI) annually to maintain the group exemption.
This filing must occur:
• At least 30 days before the end of the organization’s accounting period
• No more than 90 days before that date
The SGRI must report:
• New subordinate additions
• Removed organizations
• Changes in name or address
• Changes in purpose or operations
• Subordinates whose tax-exempt status has been automatically revoked
Churches and associations of churches are exempt from this reporting requirement.
IRS Authority to Terminate Group Exemptions
The IRS may terminate a group exemption letter if:
• The central organization fails to meet compliance requirements
• The SGRI filing is late or missing
• The organization fails to supervise subordinates
• The group contains fewer than one subordinate organization
• More than half of the subordinates lose tax-exempt status
Individual subordinates may also be removed from a group exemption if they fail to comply with IRS rules or become ineligible.
Transition Period for Existing Group Exemptions
Existing group exemptions must comply with the new procedures by January 22, 2027.
During this transition period, central organizations should review their group structures and verify that subordinate organizations meet the updated requirements.
If a subordinate’s tax-exempt status is revoked, it is removed from the group and loses its status as a preexisting subordinate permanently.
Compliance Steps for Central Organizations
To prepare for the new rules, central organizations should:
Confirm the central organization’s tax-exempt status
Ensure only one group exemption is maintained
Verify that the group includes at least one subordinate
Review eligibility of all subordinate organizations
Establish consistent oversight procedures
Ensure supervision or control requirements are met
Maintain written authorization agreements
Monitor SGRI filing deadlines
Track annual compliance requirements
Maintain communication with subordinate organizations
Revenue Procedure 2026-8 restores the ability to obtain group exemptions while strengthening the oversight responsibilities of central organizations. Although group exemptions still provide valuable administrative efficiency, they now require more structured reporting and supervision.
Nonprofit organizations operating with affiliated networks should use the transition period to review their structures, update documentation, and ensure compliance with the new IRS requirements.
Proactive preparation will help organizations continue benefiting from group exemption status while meeting the IRS’s enhanced transparency and accountability standards.
