On January 16, 2026, the Department of Treasury and the IRS released Notice 2026-8 and Revenue Procedure 2026-8 and resumed (effective January 20, 2026) the nearly 5 ½ year suspension on issuing new group tax exemption rulings. By applying for and obtaining a group ruling, a central organization may include subordinate organizations in its own tax exemption ruling, bypassing the step of applying for separate tax exemption from the IRS for subordinates. Group rulings are especially common in large tax-exempt systems, including health care, educational, and religious organizations.
The new revenue procedure provides updated guidance for existing and future holders of group rulings. This guidance modifies and supersedes Revenue Procedure 80-27 and incorporates many of the changes proposed in Notice 2020-36 while omitting some of the more burdensome proposals. Existing holders of group rulings have a one-year transition period to bring themselves and existing subordinates into compliance with the new guidance, with certain exceptions.
Key Takeaways
Applications reopened and e-filing required. The IRS has resumed accepting group ruling applications. Applications must be submitted electronically using IRS Form 8940 through Pay.gov, along with a user fee of $3,500.
Eligibility thresholds and one-letter limit. A central organization must have at least five subordinates to obtain a group ruling and at least one subordinate to maintain it, and may only hold one group exemption letter at a time.
Affiliation, supervision, and control clarified. Revenue Procedure 80-27 required that subordinates be “affiliated” with the central organization and subject to its “general supervision or control,” but offered limited guidance on these concepts. The new guidance adds definitions and examples to clarify these terms.
- Affiliation may be demonstrated by facts and circumstances showing that a subordinate is a chapter, local, post, or unit of the central organization. Examples include the inclusion of the subordinate’s information on an IRS group return, listing the subordinate in a directory of subordinates that is updated annually, or in the case of churches, common religious bonds or convictions shared with the central organization.
- General supervision is established if the central organization annually obtains, reviews, and retains information concerning the subordinate’s finances, activities, and compliance with annual filing requirements and educates the subordinate about how to maintain tax-exempt status. The requirement to solicit financial information can be satisfied by the central organization obtaining a copy of the subordinate’s IRS Form 990 or Form 990-EZ. If a subordinate is not required to file an IRS return, the central organization is not required to obtain and review financial information.
- Control is demonstrated if the central organization appoints the subordinate’s directors or trustees with majority voting power or a majority of the subordinate’s officers. Control also exists if a majority of the subordinate’s directors, trustees, or officers are also directors, trustees, or officers of the central organization. Alternatively, the two organizations may enter into a written agreement evidencing the central organization’s control over the subordinate’s activities and operations.
- The guidance makes clear that a central organization may not rely upon an intermediate subordinate to establish general supervision or control, which may pose challenges for satisfying the control test in multi-level systems. However, because only general supervision or control by the central organization must be established, some central organizations may opt to satisfy the less demanding (although more administratively burdensome) general supervision standard.
Same 501(c) paragraph for subordinates. Consistent with existing guidance, all subordinates included in a single group ruling must be described in the same paragraph of section 501(c). However, subordinates need not be described in the same paragraph as the central organization, nor, in the case of section 501(c)(3) subordinates, do they all need to share the same public charity classification.
Certain organizations not eligible as subordinates. Foreign-organized entities, private foundations, Type III supporting organizations, and qualified nonprofit health insurance issuers described in section 501(c)(29) may not be included as subordinates. If an organization’s exemption has been automatically revoked for failure to file IRS returns, the organization’s exemption must be reinstated through application with the IRS before it may be included as a subordinate in a group ruling.
Uniform purpose statement requirement. Subordinates that share the same purpose must include a uniform purpose statement in their governing documents to be eligible for initial inclusion in or addition to a group ruling.
Annual reporting requirements. Central organizations (except churches or conventions or associations of churches) must continue to submit information to the IRS annually about their subordinates, such as additions, deletions, changes to name or address, and organizations whose tax exemption was automatically revoked. Now captioned “supplemental group ruling information” (SGRI), this annual update must be submitted electronically at least 30 days, but no more than 90 days, before the close of the central organization’s tax year.
Authorization requirement. A subordinate must provide written authorization, signed by one of its officers, for the central organization to include it in a new or existing group ruling. The written authorization must also acknowledge that the central organization may remove the subordinate from the group ruling with or without cause.
Effective date of inclusion in a group ruling. If a newly formed subordinate is being added to a group ruling, its effective date of tax exemption is the date of its formation, provided it was formed within 27 months of the date it was added to the group ruling; otherwise, its effective date of tax exemption is the submission date of the SGRI. If a subordinate is moving from one group ruling to another, or is joining a group ruling upon giving up its own separate IRS determination letter, the new guidance clarifies that the subordinate retains its earlier effective date of tax exemption.
Requirements for holders of existing group rulings – transition period and exceptions
- Organizations that currently hold group rulings have until January 22, 2027 to comply with the new requirements, including ensuring that by the end of the transition period (1) they have no more than one group exemption letter, (2) they have at least one subordinate, (3) they satisfy the new guidance for establishing affiliation and general supervision or control over pre-existing subordinates, and (4) that all subordinates are exempt under the same section of 501(c).
- Pre-existing subordinates are exempt from certain requirements, including (1) the uniform purpose statement requirement, (2) the prohibition on Type III supporting organizations and qualified nonprofit health insurance issuers being eligible subordinates, and (3) the requirement that the subordinate provide written acknowledgement to the central organization that they may be removed from the group ruling with or without cause.
