Group Exemptions Are Back: Understanding IRS Revenue Procedure 2026-8

For organizations that rely on group exemption letters, the release of Revenue Procedure 2026-8 is not just another technical update. It is a significant development after a program that has effectively been on hold for many years.

Since 2020, the IRS has largely suspended the issuance of new group exemption letters. Central organizations were left in limbo, with growing affiliate networks but no clear path to gain approval for new central organizations. Revenue Procedure 2026-8 signals a meaningful reopening and modernization of that system, and nonprofit leaders and advisors should take notice.

Background: Group Exemptions Have Been Frozen

Group exemption letters allow a central organization to obtain and maintain tax-exempt recognition for multiple subordinate organizations under a single IRS determination. These structures are common among faith-based organizations, membership associations, and other federated nonprofit systems.

For many years, the IRS declined to issue new group exemption letters, citing administrative constraints and the need to rethink oversight and compliance. During that period, organizations were forced to choose between delaying expansion or requiring each subordinate to file its own Form 1023 or Form 1024. Some groups shifted to permitting chapters structured as single member LLCs. That pause made group exemptions feel like a relic of the past.

Revenue Procedure 2026-8 changes that.

What Revenue Procedure 2026-8 Does

Revenue Procedure 2026-8 updates and replaces prior guidance governing rulings and determination letters under Section 501(c), including group exemption letters. It modernizes the procedural framework and clarifies expectations for both central organizations and subordinates.

Most importantly, it confirms that the IRS is once again prepared to administer the group exemption program, with clearer rules and stronger compliance standards.

Central Organizations and Subordinates

The revenue procedure provides clearer definitions of what constitutes a central organization and a subordinate organization. A central organization must be a tax-exempt entity that exercises general supervision or control over its subordinates. Subordinate organizations must be affiliated with and subject to that supervision or control.

The emphasis is no longer just on formal affiliation. The IRS expects real oversight, including governance standards, financial review, and ongoing compliance monitoring.

Applying for and Maintaining a Group Exemption

The IRS continues to require a minimum number of subordinates to obtain a group exemption initially. The central organization must have at least five subordinate organizations at the time of application. To maintain the group exemption, at least one subordinate must remain eligible and affiliated.

The revenue procedure also places increased focus on annual responsibilities. Central organizations are expected to maintain accurate records of subordinates, review their activities and finances, and ensure that each organization continues to operate consistently with its exempt purpose.

This reflects a broader shift toward accountability. Group exemptions are no longer treated as a one-time determination but as an ongoing compliance relationship.

Eligibility Limits Remain Important

Not all organizations can be included in a group exemption. Certain types of entities, including foreign organizations and private foundations, remain ineligible. Each subordinate must independently satisfy the requirements of Section 501(c), even though it does not file its own application.

Central organizations should not assume automatic eligibility. Careful screening remains essential.

Why This Matters Now

Because the group exemption program has been dormant for so long, many organizations stopped planning around it altogether. Revenue Procedure 2026-8 reopens the door, but with higher expectations and clearer guardrails.

For organizations with national or regional networks, this guidance creates an opportunity to streamline exemption while reinforcing governance and compliance. It also creates risk for organizations that treat group exemptions casually or fail to maintain meaningful oversight.

The Bottom Line

Revenue Procedure 2026-8 represents a major shift after years of uncertainty. The IRS is signaling that group exemptions are back, but only for organizations prepared to manage them responsibly.

If your organization operates through affiliates, chapters, or subordinate units, now is the time to review governance documents, oversight practices, and compliance systems. Group exemption status can be a powerful tool, but only if it is actively maintained.

As always, careful planning on the front end can prevent significant problems later.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.