What Nonprofits Need to Know About the Return of 501(c)(3) Group Exemptions
Quick Summary
The IRS is once again accepting applications for group exemptions, which can allow a central nonprofit organization to extend its tax-exempt status to qualifying affiliated organizations. The new rules create several requirements for both central organizations and affiliates, including rules related to purpose statements, matching 501(c) classifications, annual reporting, and the level of supervision or control a central organization must maintain.
For organizations that already have—or are considering—a group exemption, now is a good time to review their structure and affiliate relationships to make sure they meet the updated IRS requirements.
What is a 501(c)(3) group exemption?
On January 20, 2026, the IRS published new rules regarding group exemptions. Under Internal Revenue Code Section 501(c)(3), qualifying nonprofit organizations may be exempted from federal income tax. Under this “group exemption” principle, the IRS allowed certain nonprofit central or “parent” organizations to apply for tax-exempt status on behalf of a group of other nonprofits, commonly called “affiliates.”
These group exemptions are especially useful for nonprofit organizations with multiple chapters or separate organizations that are affiliated with the central entity. Under a group exemption, the individual affiliate nonprofits are not required to each submit an application for exemption. Instead, they are covered by the central organization’s application and tax exemption.
However, in 2020, the IRS discontinued this program and stopped accepting group exemption applications.
Is the IRS accepting group exemption applications again?
Yes. That moratorium has now been lifted.
Central organizations with at least five affiliates are again permitted to apply for group exemption letters online at the IRS website, pay.gov, through IRS Form 8940 Schedule Q.
The updated rules for group exemptions can be found in Revenue Procedure 2026-08.
Below, we have summarized several of the new rules affecting both central organizations and affiliate nonprofit organizations included in group exemptions.
What this means for you: If your organization oversees multiple affiliated nonprofits, the return of the group exemption process may provide an alternative to having each affiliate apply for tax-exempt status separately.
Do affiliates need to use the same purpose statement?
When adding new affiliates to a central organization’s group exemption, new affiliates that share the same purpose must have the same uniform purpose statement included in their governing documents.
These governing documents include the affiliate’s bylaws, articles of incorporation, charter, etc. For example, all new affiliates that are schools must have the same uniform purpose statement in their governing documents.
Importantly, the uniform purpose requirement does not apply to organizations that were pre-existing affiliates on a group exemption letter prior to the publication of the new rules on January 20, 2026.
What this means for you: Before adding a new affiliate, review its governing documents to make sure its purpose statement satisfies the new uniformity requirement.
Do the central organization and affiliates need to be the same type of 501(c) organization?
Central organizations should also keep in mind the matching requirement for group exemptions.
The IRS rules require that all affiliates included in a single group exemption must be described in the same paragraph of IRC § 501(c) as the central organization indicated on the group application filed with the IRS.
For example, if the central organization designated IRC § 501(c)(4) on its group application, the group exemption could not include a horticultural organization described under § 501(c)(5).
Alternatively, if the central organization chose IRC § 501(c)(3) on its group application, that group exemption could include both a religious organization and an educational organization, since both types of entities are described under IRC § 501(c)(3).
Is there a deadline for existing group exemptions to meet the matching requirement?
Yes. This requirement comes with a grace period for pre-existing group exemptions until January 22, 2027.
Group exemptions that existed prior to January 20, 2026, have until January 22, 2027, to remove any affiliates from the group exemption that are exempt under a paragraph of IRC § 501(c) different from the paragraph of § 501(c) designated by the central organization on the group application.
What this means for you: Organizations with an existing group exemption should review the tax-exempt classification of every affiliate well before January 22, 2027, to identify any affiliates that may no longer qualify to remain in the group.
When does the central organization need to file its annual report?
A core requirement of maintaining a group exemption is the filing of an annual report by the central organization with the IRS showing any updates to the central organization’s list of affiliates.
The new rules relax the filing deadline for this annual report. It must now be filed between 90 and 30 days prior to the central organization’s fiscal year end, compared with 90 days before the fiscal year end under the old rules.
Central organizations that are churches are exempt from this annual filing requirement.
What this means for you: Central organizations that are subject to the annual reporting requirement should update their compliance calendars to reflect this new filing window.
What relationship must exist between the central organization and its affiliates?
A second core requirement of group exemptions is the relationship between the central organization and each affiliate included in the group exemption.
The general rule is that, to be included in the group exemption, each affiliate organization must be subject to either the general supervision or control of the central organization.
The new rules published by the IRS provide helpful definitions for these two terms.
What does “general supervision” mean?
General supervision means that the central organization annually both:
Reviews the affiliate’s finances and activities; and
Educates the affiliate about the requirements for maintaining its tax-exempt status.
The first requirement can be met by the central organization reviewing an affiliate’s Form 990 or Form 990-EZ, but not Form 990-N.
What does “control” mean?
The central organization has the required degree of control over the affiliate if:
The central organization has the power to appoint a majority of the affiliate’s directors; or
The central organization and the affiliate sign a written agreement showing the central organization’s control over the affiliate.
What this means for you: A shared name or informal affiliation may not be enough. Central organizations should be able to demonstrate the required level of supervision or control over each affiliate included in the group exemption.
Can an affiliate with a previously revoked tax-exempt status join a group exemption?
The new rules also provide that affiliates that have previously had their tax-exempt status automatically revoked by the IRS are no longer eligible to be included in a group exemption.
In addition, the IRS can terminate the entire group exemption if more than half of the affiliates included in the group exemption have had their exemptions automatically revoked by the IRS.
What this means for you: Before adding or continuing to include an affiliate, central organizations should confirm the affiliate’s tax-exempt status and compliance history.
What do these new group exemption rules mean for nonprofits?
Overall, the re-introduction of the group exemption has the power to save countless nonprofit organizations the considerable time and money required for individual exemption applications.
However, both central and affiliate organizations must ensure that all IRS requirements are satisfied in order to maintain that valuable group exemption.
For organizations considering a new group exemption—or reviewing an existing one—the practical next step is to evaluate the organization’s current affiliates, governing documents, tax classifications, reporting procedures, and supervision or control structure under the new IRS rules.
Disclaimer: This article and all other content on this website are not legal advice and may not be understood to be legal advice. To obtain legal advice regarding group exemption questions, please contact our offices at (918) 392-1956 or through the Contact Us page.