IRS Reopens Group Exemption Program: What Nonprofits Need to Know

IRS Reopens and Updates the Group Exemption Program:  What Nonprofits Need to Know

January 23, 2026

Article Summary

• The IRS is again accepting group exemption applications beginning in January 2026.
• Central organizations must apply electronically and meet updated eligibility standards.
• The IRS now expects stronger oversight and accountability over affiliated organizations.
• Organizations with existing group exemption letters should review their structures during the transition period through early 2027.
• Proper planning in 2026 can help avoid future compliance issues.

Key Updates for Nonprofits Under Revenue Procedure 2026-8

After several years of uncertainty, the IRS has officially reopened and modernized the group exemption letter program with the release of Revenue Procedure 2026-8, effective January 20, 2026. This new guidance replaces rules that dated back to 1980 and updates how national and umbrella organizations obtain and maintain group tax-exempt status for their local affiliates.

For nonprofits that operate through chapters, local units, or affiliated organizations, these changes are important and may require planning in 2026.

What Is a Group Exemption Letter?

A group exemption letter allows the IRS to recognize tax-exempt status for a central organization and its subordinate organizations under a single ruling. When properly structured, the subordinate organizations do not need to file their own exemption applications with the IRS.

Group exemptions are commonly used by national charities with local chapters, religious denominations, professional associations, and similar nonprofit networks.

Why the IRS Updated the Group Exemption Rules

The IRS paused the group exemption program in 2020 after determining that the existing guidance was outdated and did not fully reflect how modern nonprofit organizations operate. Revenue Procedure 2026-8 is the result of a multi-year review process and is intended to modernize the program, clarify expectations, and strengthen oversight.

When Did the IRS Resume Accepting Group Exemption Applications?

Beginning in January 2026, the IRS resumed accepting newgroup exemption applications for the first time since mid-2020. Central organizations seeking a new group exemption must apply electronically using Form 8940.

To qualify, a central organization generally must have at least five subordinate organizations at the time of application. This reflects the IRS’s view that group exemption treatment should be reserved for established nonprofit networks rather than isolated or informal arrangements.

Oversight and Control Requirements for Central Organizations

A central theme of the new guidance is the IRS’s renewed focus on active supervision and control by the central organization.

To maintain a group exemption, the central organization must be able to demonstrate that it has an ongoing and substantive relationship with each subordinate organization, exercises oversight of activities, and maintains a level of control that allows it to ensure compliance with tax-exempt requirements.

What the IRS Means by Supervision and Control

Supervision and control may take many forms depending on the organization’s structure. Examples include governance authority, approval rights over key activities, standards for operations, or the ability to remove an organization from the group. These relationships are evaluated based on the facts and circumstances and must exist in practice rather than solely in written documents.

Which Organizations Can Be Included in a Group Exemption?

Not every organization can be covered by a group exemption. In general, subordinate organizations must be organized in the United States, share the same type of tax-exempt purpose as the central organization, and be formally affiliated with and subject to the oversight of the central organization.

Annual Reporting and Ongoing Compliance Requirements

Maintaining a group exemption now comes with greater ongoing responsibilities for the central organization.

Each year, the central organization must provide updated information to the IRS regarding its subordinate organizations, including confirming which organizations are included in the group, identifying organizations added or removed during the year, and confirming continued eligibility.

Information Central Organizations Must Submit Each Year

The annual update generally must be submitted 30 to 90 days before the end of the central organization’s fiscal year and will be submitted electronically once IRS systems are fully implemented. Central organizations must also review meaningful annual information from their subordinates rather than relying solely on minimal electronic notices.

How Revenue Procedure 2026-8 Affects Existing Group Exemption Letters

Organizations that already have group exemption letters are not required to reapply immediately. However, the IRS has made clear that existing groups are expected to transition to the updated standards.

A transition period runs through early 2027, during which central organizations should review their governance, documentation, and oversight practices to confirm alignment with the new requirements.

Steps Nonprofits Should Take in 2026

Nonprofits that rely on group exemption structures may want to use 2026 as a planning year to review governance documents, evaluate supervision practices, confirm information-gathering procedures, and identify affiliates that may no longer meet updated eligibility standards.

Final Thoughts on the IRS Group Exemption Changes

Revenue Procedure 2026-8 confirms that group exemption letters remain available—but only where central organizations demonstrate meaningful oversight and accountability. With thoughtful planning and proactive compliance, nonprofits can continue to benefit from group exemption arrangements while meeting the IRS’s updated expectations.

If you have questions about how these changes may affect your organization, or if you would like assistance reviewing or implementing group exemption requirements, we welcome you to reach out to our nonprofit tax team for guidance.  Larson and Company has developed a suite of services specifically to serve the needs of nonprofit organizations.

Frequently Asked questions about group exemption for nonprofits

Is the IRS accepting group exemption applications again in 2026?
Yes — beginning in January 2026 the IRS resumed accepting new group exemption applications.

What are the new requirements under Revenue Procedure 2026‑8?
Central organizations must apply electronically, meet updated eligibility standards, and demonstrate stronger oversight and accountability of affiliates.

How many subordinate organizations are required for a group exemption?
A central organization generally must have at least five subordinate organizations to qualify.

What level of control must a central organization have over affiliates?
It must show meaningful supervision and control through an ongoing substantive relationship that ensures compliance with tax‑exempt requirements.

Do existing group exemption letters need to be updated or reviewed?
Existing letters don’t have to be refiled immediately, but organizations should review structures during the transition period through early 2027 to align with new standards.

What annual reporting is required to maintain group‑exempt status?
Central organizations must annually submit updated information about which subordinates are included, plus any additions or removals and their continued eligibility.

When should nonprofits take action to comply with the new IRS rules?
Nonprofits should use 2026 to plan — reviewing governance, oversight practices, information‑gathering procedures, and affiliate eligibility to meet updated requirements