Group Exemptions Are Back Now After A Long Freeze

The long wait is over.

Last week, the Internal Revenue Service published the much-anticipated and greatly needed new procedures for obtaining and maintaining group tax exemptions. See Revenue Procedure 2026-8 [49 pp. PDF] (January 20, 2026); see also the companion Notice of Issuance of Revenue Procedure 2026-8 Regarding Group Exemption Letter Program  [37 pp. PDF].

These changes were more than overdue. 

Summary

The previous published guidance for handling tax-exemption applications “on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization was Revenue Procedure 80-27. It had been in place for over 45 years.

There was a thwarted and incomplete attempt over five years ago in 2020 to make necessary changes and updates, not least addressing the dramatic technological advances over the decades. In 1980 (before personal computers, much less the internet), every aspect of the initial approval process as well as later oversight activities was paper-based. Rev. Proc 80-27 [rhymes with “rock”] was way behind the actual and substantial progress the Internal Revenue Service had made towards efficiency in the electronic age.

There were other needed changes, too, reflecting the more current emphasis on accountability. The level of oversight by many central organizations for their subordinates was spotty in many cases. The government acknowledged in 2020 that it had been grappling for years with plans about how to “impose changes for nonprofits with group tax exemptions.” See Change on the Horizon for Nonprofits with Group Tax Exemptions (April 5, 2021) George E. Constantine, Esq. and  Ashleigh A Allione, Esq., Venable LLP. 

We’ve covered this story as well in real time. See Group Exemptions: New Procedure (May 2, 2019) FPLG Blog and Group Exemptions: Rules Changes Proposed (June 19, 2020) FPLG Blog.

By early 2020, the IRS was almost ready to go with a proposed new revenue procedure. The timing could not have been worse – just six weeks or so after the worst global health crisis in over 100 years enveloped us. The agency went ahead, anyway, with the publication on May 1, 2020 of Notice 2020-36,– Notice Proposing Revenue Procedure Updating Group Exemption Letter Program.

There were complications from the start. In the May 1st Notice, the government indicated that it would ask for public input, although it was not required. (The agency solicited public comments, and indeed received 29 of them over the next few months.)

Nevertheless, the May 1st Notice 2020-36, also included the curious announcement that, on June 19, 2020, the IRS would stop receiving and processing any group-exemption-letter applications. That hold would remain in place – indefinitely – until a final new revenue procedure was ready for publication.

As events unfolded, it was over five years before Treasury and the Internal Revenue Service unveiled the final version of replacement guidance: Revenue Procedure 2026-8 (January 20, 2020), effective immediately. There are a number of transition rules and “grandfather clauses” that may apply to give breathing room for certain holders of preexisting group-exemption-letters.

“Since 2020, the IRS has largely suspended the issuance of new group exemption letters,” Attorney Ellis Carter explained recently in Group Exemptions Are Back: Understanding IRS Revenue Procedure 2026-8 (January 19, 2026) Ellis Carter, Esq., charitylawyerblog.com. “Central organizations were left in limbo, with growing affiliate networks but no clear path to gain approval for new central organizations.”

Last week’s “Revenue Procedure 2026-8 signals a meaningful reopening and modernization of that system,” observed Attorney Carter Ellis, “and nonprofit leaders and advisors should take notice.” She added: “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.” 

What, Exactly, is a Group Exemption? 

By way of review and additional context, let’s revisit some basic information about this important subject as well as the available legal history, sparse though it is.

We had explained, in Group Exemptions: A Primer (April 22, 2016), that a “group exemption letter” is a “variation of the usual and customary procedure of recognizing tax-exempt status for individual organizations one-by-one. It is a mutually beneficial “accommodation”:  an “administrative convenience” which has been used for many decades in the case of affiliated groups with a central “parent” and “subordinates.”  See IRS Publication 4573 (Rev. 10-19) Group Exemptions.

“In appropriate circumstances,” the IRS will officially recognize ‘a group of organizations as tax-exempt if they are affiliated with a central organization.’” This practice came about primarily to “relieve the Service from the burden of individually processing a large number of applications involving the exempt status of organizations that are affiliated with each other, and also are organized and operated for the same purpose.”

Of course, it’s an attractive path not only for the government but for the applicants as well. The group-exemption route “relieves the need for each affiliated subordinate to apply separately for a stand-alone individual exemption.”  The group exemption letter “has the same effect as an individual exemption letter except that it applies to more than one organization.”

“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.” It’s available not only for 501(c)(3)s but also for 501(c)(4)s, 501(c)(6)s, and 501(c)(7)s.

This greatly streamlined procedure is common among large U.S. institutions including healthcare, higher education, and religious denominations. It’s popular as well for national charities with local chapters focused on particular diseases or other worthwhile causes, for professional associations, and for national sororities and fraternities with affiliates on campuses around the nation.

The government estimated in its 2020 documents that it was then supervising at least 4,000 parent/central groups with some 440,000 listed affiliates.

Legal Authority

“The issuance of group exemption letters is an administrative procedure that has been around for decades”: at least since the 1940s. These examples predate even the landmark Internal Revenue Code of 1954 which includes the overhauled framework for modern federal tax exemption, i.e., brand new section 501(c).

The earliest documented published guidance is: “Rev. Proc. 68-13, 1968-1 C.B. 764, superseded by Rev. Proc. 72-41, 1972-2 C.B. 820 [and] Rev. Proc. 77-38, 1977-2 C.B. 571.”

Then in 1980, the IRS published the first formal guidance about how to obtain and maintain a group exemption. See Revenue Procedure 80-27, mentioned above in the opening paragraphs. Until last week – with the January 20, 2026 publication of Revenue Procedure 2026-8 – it remained in place as the only official guidance.

There are no statutes. There are no regulations. There are only revenue procedures, plain and simple.

In Understanding IRS guidance – A brief primer (last revised or updated May 2025), the IRS offers help with the “puzzling” array of substatutory “guidance” on federal tax administration for “anyone not familiar with the inner workings” of it. See also About IRS Administrative Guidance Documents (last updated or reviewed December 12, 2025), Boston College Law Library [including a helpful chart.]

Note the position of the humble “revenue procedure” in the seven-layer stack of such “guidance.” It’s two rungs below the ”regulation” and the “revenue ruling.” It’s defined as a “statement of IRS practices and procedures.” which is published in the Internal Revenue Bulletin and is “authoritative if relevant.” By contrast, proposed and final Treasury regulations are published in the Federal Register.

There is no formal requirement in the case of new or amended revenue procedures for the government to offer public comment periods.  However, in 2020, the IRS solicited and received such input. Recognizing that its proposed changes would have significant effect on the current and future groups, the agency chose to model the more comprehensive, formal, and transparent process under the Administrative Procedures Act. (The APA does not apply to proposed revenue rulings or revenue procedures, but the IRS is certainly free to offer such “sunshine” benefits to its proceedings.)

Overview: From Rev. Proc. 80-27 to Rev. Proc. 2026-8

“The history of group exemption rulings reveals a long period of relative stasis followed by a sudden freeze” according to Thomas Zollars, CPA, in Analysis of Revenue Procedure 2026-8: The Modernized Framework for Group Tax Exemptions (January 15, 2026), Thomas, Zollars & Lynch, Ltd. 

1980

The baseline for this saga is Revenue Procedure 80-27, 1980-1 C.B. 677 (June 30, 1980) [7 pp. PDF]. It “set forth the first published procedures” and then “remained the primary authority, only slightly modified by Rev. Proc. 96-40 regarding public inspection requirements.”

Rev. Proc. 80-27 explained how it tightened up the eligibility requirements as well as maintenance duties over earlier revenue procedures: Rev. Proc. 68-13, superseded by Rev. Proc. 72-41;  and Rev. Proc. 77-38 which is superseded by this 1980 guidance. The purpose of Rev. Proc. 80-27 was to present a definitive set of rules, expressly discarding certain earlier – looser – requirements and practices.

“In January of 1980, the Internal Revenue Service (IRS) issued Revenue Procedure 80-27, the IRS’s prevailing authority on group exemptions. If issued a group exemption by the IRS, a set of affiliated organizations under the general supervision and control of a central organization may receive IRC § 501(c) tax-exempt status as a group.”  Group Exemptions Are Finally Getting New Guidance After 40 Years (August 4, 2020) schneiderdowns.com.

2020

Just weeks after the start of the COVID-19 pandemic, “[t]he IRS issued Notice 2020-36 in May of 2020 announcing its intention to update the 40-year-old existing revenue procedure. The government cited certain objectives for updating the 1980 guidance, including: reducing the IRS administrative burden, increasing efficiency and transparency, improving data integrity, fostering enhanced compliance, and bringing the entire program online.  See Notice Proposing Revenue Procedure Updating Group Exemption Letter Program  [63 pp. PDF, which includes beginning on p. 23, the verbatim text of the proposed revenue ruling].

The government, although requesting and receiving 29 public comments by the deadline of August 16, 2020, had earlier announced its intention to freeze the review and processing of any new group-exemption applications on and after June 17, 2020. This indefinite halt was to continue during the pendency of the consideration of the proposed revenue procedure until final new guidance was published.

Notice 2020-36 generated intense interest and commentary which helpfully pointed out the proposed differences from the 1980 guidance, and weighed in on the changes under consideration. See, for example, in addition to our own real-time post, Group Exemptions: Rules Changes Proposed (June 19, 2020) FPLG Blog: 

• After 40 years, IRS updates and modifies group exemption program with proposed revenue procedure (May 8, 2020) Ernst & Young [”Capping a group exemption review project that has spanned more than a decade, the proposed revenue procedure reflects the IRS’s intent to make the group exemption process more streamlined and uniform, and to reduce administrative burden on the IRS.’]
• IRS Proposes Significant Changes to Revenue Procedure on Group Exemption Letters (May 2020) Marcus S. Owens, Esq., et al., Client Alert, Loeb & Loeb [“The Notice would supersede Rev. Proc. 80-27 (as modified by Rev. Proc. 96-40) and presents a proposed revenue procedure that, if finalized, would significantly change the requirements that have applied to group rulings since 1980.”]
• Change on the Horizon for Nonprofits with Group Tax Exemptions (April 5, 2021) George E. Constantine, Esq. and Ashleigh A Allione, Esq., Venable LLP [“The proposed revenue procedure was issued in May 2020 and currently remains pending with the IRS, leaving nonprofits questioning when these changes may become final.”]

2026

After 5-½ years, Treasury and the IRS published the new – final – guidance as  Revenue Procedure 2026-8 on January 20, 2026. Officials explained that they had considered the public comments from 2020, accepting some and making changes, and rejecting others. In the next and final section, we’ll review some of the key takeaways and list some commentary to date.

CPA Ed Zollars explained: “For practitioners,” new Revenue Procedure 2026-8  “is the first comprehensive update in over four decades, designed to align the group exemption process with modern electronic filing requirements and more stringent oversight standards.”

The Published New Revenue Procedure

The key documents dated January 20, 2026 are:

• Notice of Issuance of Revenue Procedure 2026-8 Regarding Group Exemption Letter Program [37 pp. PDF] [“This Notice discusses the comments received in response to the proposed revenue procedure regarding the group exemption letter program set forth in Notice 2020-36, 2020-21 I.R.B. 840, along with the modifications made in response to those comments and other significant revisions made to the [2020] proposed revenue procedure.”]
• Revenue Procedure 2026-8 [49 pp. PDF] (January 20, 2026), published in Internal Revenue Bulletin 2026-4 [“This revenue procedure modifies and supersedes Rev. Proc. 80-27, 1980-1 C.B. 677 (as modified by Rev. Proc. 96-40, 1996-2 C.B. 301) by setting forth updated procedures to obtain recognition of exemption from federal income tax on a group basis….”]

Rev. Proc. 2026-8 is effective immediately. This guidance will affect not only new applicants but many existing groups as well. There are certain transition accommodations.

It’s early days, but there has already been considerable interesting commentary posted, containing insights including valuable discussions of the differences between the 1980’s Rev. Proc. 80-27 and new Rev. Proc. 2026-8.

See, for example:

• Analysis of Revenue Procedure 2026-8: The Modernized Framework for Group Tax Exemptions (January 15, 2026) Ed Zollars, CPA, Thomas, Zollars & Lynch, Ltd. [Treasury and the IRS “have issued this procedure to “address long-standing” problems. Its aims include but are not limited to reducing the administrative burden and increasing the efficiency of the group exemption letter program. It is “not merely procedural but reflects a policy shift toward higher accountability,….”
• Group Exemptions Are Back: Understanding IRS Revenue Procedure 2026-8 (January 19, 2026) Ellis Carter, Esq., charitylawyerblog.com [It “ provides clearer definitions of what constitutes a central organization and a subordinate organization …. The emphasis is no longer just on formal affiliation. The IRS expects real oversight, including governance standards, financial review, and ongoing compliance monitoring.”]
• IRS Finalizes New Group Tax Exemption Procedures: Implications for Existing and Prospective Group Rulings (January 22, 2026) Franziska Hertel, et al, Alert, Ropes & Gray LLP [“This guidance modifies and supersedes Revenue Procedure 80-27 and incorporates many of the changes proposed in Notice 2020-36 while omitting some of the more burdensome proposals. Existing holders of group rulings have a one-year transition period to bring themselves and existing subordinates into compliance with the new guidance, with certain exceptions.”]

Each of these three articles includes helpful “key takeaway” summaries.

The few selections mentioned here are the tip of the iceberg. It’s early days still: more insights are sure to appear soon.

Conclusion

The worst of the pandemic subsided long before federal tax officials published new Rev. Proc. 2026-8 last week.

There are legitimate questions around why the IRS, which had been planning for a revamp of Rev. Proc. 80-27 for some years ahead of its presentation of Proposed Rev. Proc, 2020-36, took more than five years to complete this project.

– Linda J. Rosenthal, J.D., FPLG Information & Research Director