IRS Group Exemption: Filing, Annual Returns, and Revocation

An IRS group exemption lets a parent nonprofit obtain tax-exempt recognition for all of its affiliated chapters or local units in one filing, instead of making each one apply on its own. The central organization submits a single application covering at least five subordinates, and the IRS issues one group exemption letter that covers everyone on the list.¹ Since January 20, 2026, the program has run under Revenue Procedure 2026-8, which replaced Rev. Proc. 80-27, moved filing online, and tightened the annual reporting rules.²

Who Can Get a Group Exemption

The central organization is the parent body. To file, it must already hold IRS recognition of tax-exempt status, have a pending application, or (if previously revoked) have applied for reinstatement.³ A central organization can hold only one group exemption letter at a time.¹

At the initial application, the group needs at least five subordinates. After the letter is issued, one subordinate is enough to keep it active.¹ Every subordinate must be affiliated with the central organization and subject to its general supervision or control.

All subordinates under a single letter must be described under the same paragraph of Section 501(c), though that paragraph does not have to match the central organization’s own classification.³ A 501(c)(4) parent, for instance, can hold a group exemption for 501(c)(3) subordinates, as long as every subordinate on the list is a 501(c)(3).

Each subordinate needs its own Employer Identification Number before it can be added. The central organization can obtain EINs on the subordinates’ behalf, but every unit must have one in hand at the time of the application.¹ Subordinates that share a purpose must also include a uniform purpose statement in their governing documents.

Organizations That Cannot Be Included

Rev. Proc. 2026-8 excludes five categories of organizations from serving as subordinates:¹

Foreign organizations, meaning any entity organized in a foreign country.
Private foundations, defined as any 501(c)(3) organization classified as a private foundation under Section 509(a).⁴
Type III supporting organizations under Section 509(a)(3).
Qualified nonprofit health insurance issuers described in Section 501(c)(29).
Automatically revoked organizations that have not yet been reinstated.

The private foundation exclusion catches applicants off guard most often. If a subordinate on the list is classified as a private foundation, the IRS will reject that subordinate, though the rest of the application can move forward.

How to File

Applications now go in electronically on Form 8940, Schedule Q, through Pay.gov. The old process of mailing a letter to the IRS office in Cincinnati is gone.⁵ The user fee is $3,500, paid at submission.

The application must include:

The specific paragraph of Section 501(c) under which the subordinates are described.
A description of the subordinates’ purposes, activities, sources of income, and how they spend their funds.
Written authorization from every subordinate allowing the central organization to include it in the group exemption. The authorization must also acknowledge that the central organization can remove the subordinate later.⁵
A sample of the subordinates’ governing instruments showing the uniform purpose statement.
EINs for both the central organization and every subordinate.¹
An election as to whether the central organization will file a consolidated Form 990 covering some or all subordinates.

If the central organization does not yet have its own exemption, it needs to file a separate Form 1023 (for 501(c)(3) status) or Form 1024 (for other categories) before or at the same time. Those forms cover only the central organization’s own status, not the group.⁶

Once the IRS receives the Form 8940 and fee, an agent reviews the structure and legal compliance of the central organization and its subordinates. Review can take several months, depending on complexity and follow-up requests. When the letter issues, the group receives a unique Group Exemption Number (GEN) that subordinates use to demonstrate their tax-exempt status.

The Annual Supplemental Group Ruling Information Filing

The group exemption is not a one-time approval. Each year, the central organization must submit Supplemental Group Ruling Information (SGRI) to the IRS. The window is narrow: the SGRI must arrive at least 30 days before the close of the central organization’s annual accounting period, but no more than 90 days before.¹ Missing the window puts the entire group’s status at risk.

The SGRI must include:

Subordinates that changed their name or mailing address during the year.
Subordinates no longer included in the group exemption.
Subordinates whose exemptions were automatically revoked.
Subordinates being added, with their formation dates, EINs, and written authorizations.
Any changes in the purposes or operations of the subordinates.¹

Annotated directories don’t count. Each list must include the name, mailing address, and EIN for every affected subordinate. Extra updates can be submitted at any time outside the annual window.

Annual Returns: Group Return or Individual Filings

A group exemption letter removes the need for each subordinate to file its own application for recognition. It does not remove annual return obligations. The central organization can file a group return (Form 990) covering two or more subordinates, or each subordinate can file its own return.⁷ A subordinate included in the group return should not also file separately. A subordinate left out of the group return must file on its own unless an exception applies, such as the one for churches.

Subordinates in the group return must all be affiliated with the central organization at the end of its tax year, subject to its general supervision or control, still covered by the group exemption letter, and using the same annual accounting period as the central organization.⁸ That last item is where many groups stumble. A subordinate with a different fiscal year cannot be pulled into the group return and must file individually.

Each year, every subordinate in the group return must give the central organization a fresh written authorization, signed under penalties of perjury, confirming that the authorization and the underlying information are true and complete.⁸ The group return uses the standard Form 990; Form 990-EZ is not permitted. If the central organization must also file its own return, that filing stays separate.

Automatic Revocation for Missed Returns

If a subordinate fails to file a required annual return or notice for three consecutive years, its tax-exempt status is automatically revoked by operation of law.⁹ Revocation takes effect on the filing due date of the third missed return. The organization is then no longer exempt from federal income tax, has to file corporate income tax returns, and cannot receive tax-deductible contributions.¹⁰

A revoked subordinate cannot simply be put back on the group roster. Under the Pension Protection Act of 2006, the only route back is for the subordinate to file its own individual application for reinstatement.¹¹ That reinstatement takes months and carries its own filing fee. A central organization that lets subordinates go quiet for three years can end up with a stack of revoked chapters that each have to be reinstated one by one.

Transition Rules for Existing Group Exemption Holders

Groups that held letters under Rev. Proc. 80-27 are not starting over, but they do need to come into line with the new rules. Rev. Proc. 2026-8 gives preexisting holders until January 22, 2027, to meet the updated requirements on affiliation, general supervision and control, and matching 501(c) classification across subordinates.²

Preexisting subordinates do not have to retroactively adopt the uniform purpose statement. The other structural requirements apply to every group once the transition period closes. Legacy holders should audit their subordinate rosters before that date and drop or reclassify any units that no longer fit.

1
Internal Revenue Service. Revenue Procedure 2026-8
2
Internal Revenue Service. Notice of Issuance of Revenue Procedure 2026-8 Regarding Group Exemption Letter Program
3
Internal Revenue Service. Group Exemption Rulings and Group Returns
4
Office of the Law Revision Counsel. 26 USC 509 – Private Foundation Defined
5
Internal Revenue Service. Instructions for Form 8940 (12/2025)
6
Internal Revenue Service. Instructions for Form 1023 – Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
7
Internal Revenue Service. Exempt Organizations Annual Reporting Requirements – Overview – Returns by Members of Group Ruling
8
Internal Revenue Service. Instructions for Form 990 Return of Organization Exempt From Income Tax
9
Office of the Law Revision Counsel. 26 USC 6033 – Returns by Exempt Organizations
10
Internal Revenue Service. Automatic Revocation of Exemption
11
Internal Revenue Service. Automatic Revocation of Exemption for Nonfiling – Treatment of Revoked Subordinate in a Group Ruling