Tax Exempt &
Government Entities
Group Exemptions
What is a group exemption letter?
The IRS sometimes recognizes a group of organizations as tax-exempt if they are afliated with a central organization. This avoids the
need for each of the organizations to apply for exemption individually. A group exemption letter has the same effect as an individual
exemption letter except that it applies to more than one organization.
What is the reason for group exemptions?
Group exemptions are an administrative convenience for both the IRS and organizations with many afliated organizations. Subordinates
in a group exemption do not have to le, and the IRS does not have to process, separate applications for exemption. Consequently,
subordinates do not receive individual exemption letters.
What types of organizations can qualify for group exemptions?
Exempt organizations that have, or plan to have, related organizations that are very similar to each other may apply for a group
exemption.
What are central and subordinate organizations?
Groups of organizations with group exemption letters have a “head” or main organization, referred to as a central organization. The central
organization generally supervises or controls many chapters, called subordinate organizations. The subordinate organizations typically have
similar structures, purposes and activities.
Example: X is a national, fraternal organization exempt under Internal Revenue Code (IRC) Section 501(c)(8). X has several state and hundreds of
local chapters that have nearly identical articles of incorporation, by-laws, purposes and activities. As the national organization, X is considered the
central organization; the state and local chapters are subordinate organizations and are covered under X’s group exemption.
What criteria must organizations meet to be included in a group exemption?
To qualify for a group exemption, the central organization and its subordinates must have a dened relationship. Subordinates must be:
• Afliated with the central organization;
• Subject to the central organization’s general supervision or control; and
• Exempt under the same paragraph of IRC 501(c), though not necessarily the paragraph under which the central organization is
exempt.
Revenue Procedure 80-27, 1980-1 C.B. 677 sets forth additional criteria.
Must the central organization be recognized by the IRS as tax-exempt before the organization can obtain a
group exemption?
No. A central organization may submit its request for a group exemption at the same time it submits its exemption application on Form
1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code; Form 1024, Application for
Recognition of Exemption Under 501(a); or Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal
Revenue Code. Although churches are not required to apply for recognition of their own status to be tax-exempt, under the procedures
for group rulings, a church must request recognition of its own exempt status to be the central organization in a group ruling.
Are there any special rules for churches?
With limited exceptions, churches are subject to the same general requirements on group rulings as other organizations. However, churches are
not required to le annual updates notifying the IRS of changes in the composition of the group.
Where does a central organization apply for exemption and submit a request for a group exemption?
A central organization submits its application for exemption, the request for a group exemption and the required user fee as directed
in the most recent revenue procedure on Exempt Organizations determination letters on exempt status (Rev. Proc. 2019-5, updated
annually).
Publication 4573 (Rev. 10-2019) Catalog Number 49351Q Department of the Treasury Internal Revenue Service www.irs.gov
roup Exemptions | 2
What must a request for a group exemption contain?
The central organization submits a letter to the IRS on behalf of itself and its subordinates. The letter includes:
a. Information verifying the existence of the required relationship;
b. A sample copy of a uniform governing instrument (such as a charter, trust indenture or articles of association) adopted by the
subordinates;
c. A detailed description of the subordinates' purposes and activities including the sources of receipts and the nature of expenditures;
d. An afrmation by a principal ofcer that, to the best of the ofcer’s knowledge, the subordinates' purposes and activities are as
stated in (b) and (c) above;
e. A statement that each subordinate to be included in the group exemption letter has furnished written authorization to the central
organization;
f. A list of subordinates to be included in the group exemption letter to which the IRS has issued an outstanding ruling or determination
letter relating to exemption;
g. If the application for a group exemption letter involves IRC 501(c)(3), an afrmation to the effect that, to the best of the ofcer’s
knowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as dened in IRC 509(a);
h. For each subordinate that is a school claiming exemption under IRC 501(c)(3), the information required by Rev. Proc. 75-50, 1975-2
C.B. 587 (as modied by Rev. Proc. 2019-22, 2019-22 I.R.B 1260) and Revenue Ruling 71-447, 1971-2 C.B. 230; and
i. A list of the names, mailing addresses (including ZIP Code), actual addresses (if different) and employer identication numbers of
subordinates to be included in the group exemption letter. A current directory of subordinates may be furnished in lieu of the list if it
includes the required information and if the subordinates not to be included in the group exemption letter are identied.
The rules for applying for a group exemption are set forth in Rev. Proc. 80-27, 1980-1 C.B. 677.
How does the group exemption process work?
Upon receipt of an application Form 1023, 1024 or 1024-A and a request for group exemption, the IRS rst determines whether the
central organization and the existing subordinates qualify for tax exemption. Once the IRS grants the exemption, the central organization
is responsible for:
1. Ensuring that its current subordinates continue to qualify to be exempt;
2. Verifying that any new subordinates are exempt; and
3. Updating the IRS annually of new subordinates, subordinates no longer to be included and subordinates that have changed their
names or addresses.
What is included in an annual update?
Annual updates must contain:
a. Information about changes in purposes, character or method of operation of subordinates included in the group exemption letter.
b. Lists of:
1. Subordinates that have changed their names or addresses during the year;
2. Subordinates no longer to be included in the group exemption letter because they have ceased to exist, disafliated or
withdrawn their authorization to the central organization; and
3. Subordinates to be added to the group exemption letter because they are newly organized or afliated or have newly authorized
the central organization to include them.
Each list must show the names, mailing address (including ZIP Codes), actual address (if different) and employer identication
numbers of the affected subordinates.
An annotated directory of subordinates will not be accepted for this purpose. If none of these changes occurred, the central
organization must submit a statement to that effect.
c. The same information about new subordinates that was required in the initial request. If a new subordinate does not differ in any
material respects from the subordinates included in the original request, however, a statement to this effect may be submitted in lieu
of detailed information.
G
Where does a central organization submit an annual update?
Annual updates go to:
Internal Revenue Service Center
Ogden, Utah 84201-0027
What are the filing requirements for organizations that hold group exemptions?
A group exemption letter does not change the ling requirements for exempt organizations. The central organization and the sub-
ordinates must le Forms 990, Return of Organization Exempt from Income Tax, (or 990-EZ, Short-Form Return of Organization Exempt
from Income Tax), unless they meet a ling exception. If the central organization is required to le an annual return, it must le its own
separate return but may also le a group return on behalf of some or all its subordinates. To see how the subordinates are reported on a
group return, please consult the form instructions.
How do I verify that an organization is included as a subordinate in a group exemption ruling?
The central organization that holds a group exemption (rather than the IRS) determines which organizations are included as subordinates
under its group exemption ruling. Therefore, you can verify that an organization is a subordinate under a group exemption ruling by
consulting the ofcial subordinate listing approved by the central organization or by contacting the central organization directly. You may
use either method to verify that an organization is a subordinate under a group exemption ruling.
How do donors verify that contributions are deductible under Section 170 with respect to a subordinate
organization in a Section 501(c)(3) group exemption ruling?
Subordinate units that are included in group exemption letters are not listed separately in Tax Exempt Organization Search (Publication
78 data). Donors should obtain a copy of the group exemption letter from the central organization. The central organization’s listing in
Tax Exempt Organization Search will indicate that contributions to its subordinate organizations covered by the group exemption ruling
are also deductible, even though most subordinate organizations are not separately listed in Tax Exempt Organization Search or on the
Exempt Organizations Business Master File. Donors should then verify with the central organization, by either of the methods indicated
above, whether the particular subordinate is included in the central organization's group ruling. The subordinate organization need not
itself be listed in Tax Exempt Organization Search or on the EO Business Master File. Donors may rely on central organization verication
about deductibility of contributions to subordinates covered in a Section 501(c)(3) group exemption ruling.
Where can you get more information?
You can get more information about group exemptions and the group ruling process from the IRS Exempt Organizations Ofce:
EO Website www.irs.gov/eo
Publication 557, Tax-Exempt Status for Your Organization
EO Customer Account Services
You may direct questions about group exemptions to the IRS Tax Exempt and Government Entities Customer Account Services
at 877-829-5500 (toll-free number).
If you prefer to write, you may write us at:
Internal Revenue Service
Exempt Organizations Determinations
P.O. Box 2508
Cincinnati, OH 45201
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