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Abstract: 

An exempt organization that has—or plans to have—related organizations that are very similar to one another, and that are subject to the central’ organization’s general supervision or control (such as chapters, posts, or local affiliates of a national organization) may apply for a group exemption. A group exemption letter has the same effect as an individual exemption letter, except it applies to both the central organization and its subordinate organizations. Group exemptions are an administrative convenience for both the IRS and the organizations themselves, because subordinate organizations do not have to file—and the IRS does not have to process—separate applications for exemption. The IRS oversees more than 4,000 group exemption letters, which cover more than 440,000 subordinate organizations. Although the scope of the group exemption program is significant, the existing rules for applying for a group exemption (set forth in Rev. Proc. 80-27 and modified by Rev. Proc. 96-40 as to filing location) have been in place for two decades. The IRS has issued a proposed revenue procedure that sets forth updated procedures. Rev. Proc. 80-27 continues to apply, pending publication of the final revenue procedure in the Internal Revenue Bulletin. However, the IRS will not accept any requests for group exemption letters until publication of the final revenue procedure or other guidance in the Internal Revenue Bulletin. This article comprehensively describes current rules and procedures governing group exemptions—how to request them, maintain them, and withdraw them—proposed changes to existing regulations set forth in Notice 2020-36, and how these changes will impact existing and new group exemptions.

Keywords: Notice 2020-36; “Matching Requirement”; Requesting a Group Exemption Letter Under the PRP; Maintaining a Group Exemption; Terminating a Group Exemption Letter

Affiliations:  1: Clark Hill PLC.