IRS Releases Group Exemption Questionnaire as Part of Compliance Check Initiative


The IRS has recently issued an extensive questionnaire, available below, aimed at understanding how associations, charities and other federally tax-exempt organizations that hold a group exemption ruling oversee their subordinates and comply with annual filing and disclosure requirements. While completing the questionnaire is technically voluntary, organizations that fail to do so may be inviting a more formal and intensive IRS examination. The form is being sent to a random selection of over 2,000 central organizations, and it must be completed online. Responses are due within 60 days of receipt of the form, but the IRS will grant another 30 days to respond if needed.

Additionally, the cover letter for the questionnaire can be accessed below, and a common questions and answers statement from the IRS about the process can be found below.

Background -

The group exemption process allows a "central organization" that is federally tax-exempt to have closely related "subordinates" also receive recognition of their federal tax-exempt status through a one-time request, without each subordinate being required to file its own application with the IRS. For example, a national organization with nationwide chapters can gain recognition of tax-exempt status for each chapter without going through the detailed application process multiple times. The rules for obtaining and maintaining this group exemption recognition are set forth in a 1980 Revenue Procedure (Rev. Proc. 80-27, 1980-1 C.B. 677). The current group exemption process envisions the central organization assuming the role of the IRS in ensuring that each of its affiliates is operating consistent with its tax-exempt status. Group rulings are available to 501(c)(3) charities, 501(c)(6) trade associations and professional societies, and virtually all other types of tax-exempt organizations that have subordinates or chapters.

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Published In: Business Organization Updates, Nonprofits Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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