IRS Issues New Rules for Group Exemptions: Key Takeaways for Nonprofits

On January 20, 2026, the Internal Revenue Service issued Revenue Procedure 2026-08, significantly overhauling the rules governing nonprofit group tax exemptions. The new guidance ends a multi-year moratorium on new group exemption letters and reflects longstanding IRS concerns that prior rules were overly permissive.

The new requirements apply to both new and existing group exemptions, subject to transition and grandfather relief.

Why This Matters

Group exemptions allow national nonprofits with chapters or affiliates to avoid filing individual exemption applications. The IRS estimates more than 4,000 group exemptions covering over 400,000 organizations, making these changes broadly impactful.

Key Changes for Central Organizations

To obtain or maintain a group exemption, central organizations must now:

• Have at least five subordinate organizations to obtain a group exemption

• Maintain at least one subordinate organization at all times

• Hold only one group exemption letter

• Continue to exercise meaningful supervision or control over subordinates

New and Clarified Standards for Subordinate Organizations

The IRS introduced clearer definitions and tighter standards governing relationships between central and subordinate organizations:

• Affiliation: Determined under a new “facts and circumstances” test

• General supervision: Requires annual review of subordinate finances, activities, and compliance (Form 990 or 990-EZ required; Form 990-N is insufficient)

• Control: Established through board or officer appointment authority, leadership overlap, or a written control agreement

Additional Subordinate Requirements

Subordinate organizations must now meet several new conditions:

• Uniform purpose statements for subordinates sharing the same purpose

• No Type III supporting organizations permitted

• Separate EINs required for all subordinates

• Written authorization allowing the central organization to add or remove subordinates, with or without cause

• 501(c)(4) subordinates must file Form 8976 (Notice of Intent)

Transition and Grandfather Relief

To ease compliance:

• Existing central organizations have a one-year transition period (through January 22, 2027) for certain requirements

• Preexisting subordinate organizations are broadly grandfathered and may continue operating under prior rules (Rev. Proc. 80-27)

• New subordinates, even under existing group exemptions, must fully comply with the new rules

Special Rules for Churches

The revenue procedure includes tailored guidance for churches and church conventions, recognizing religious affiliation and providing examples of acceptable supervision structures.

Filing, Revocation, and Administrative Oversight

• Annual group updates must now be filed electronically (once IRS guidance is issued)

• Updates must include subordinates with automatic revocations

• Subordinates that lose exempt status cannot remain in or be added to a group exemption

• The IRS may terminate a group exemption if more than half of subordinates lose exempt status

Effective Date of Exemption

A newly formed subordinate added to a group exemption within 27 months of formation will have its exempt status recognized retroactively to its formation date.

What the IRS Dropped

The final rules are narrower than earlier proposals and do not require:

• Uniform governing instruments

• Identical public charity classifications under Section 509(a)

• Identical NTEE codes across subordinates

Bottom Line

Revenue Procedure 2026-08 replaces prior guidance and took effect January 20, 2026. With the moratorium lifted, the IRS is once again accepting group exemption applications—but under far more rigorous standards. Central organizations should promptly assess their structures, documentation, and oversight practices to ensure compliance during the transition period and beyond.