IRS Notice 2026-8 Finalizes Group Exemption Procedures (Rev. Proc. 2026-8)

The IRS has finalized modernized procedures for group exemption letters, responding to public comments on the 2020 proposal and publishing the final rules in Rev. Proc. 2026-8. Group applications resumed as of Jan. 20, 2026, with updated standards for how central organizations obtain and maintain group exemption letters for affiliated subordinate organizations.

Who is Affected

Central organizations described in section 501(c) that use or plan to use a group exemption letter, and subordinate organizations covered by a group exemption letter (including charities, associations, unions, and religious organizations).

Key Updates at a Glance

The IRS retained several core features of the group ruling program but added important clarifications and modernized procedures. Notable changes include minimum group size to obtain a ruling (five subordinates), a limit of one group exemption letter per central organization, clarified affiliation and supervision standards, and a new “uniform purpose statement” requirement (replacing the proposed uniform governing instrument rule).

• Affiliation and Supervision: Affiliation is shown by facts and circumstances demonstrating the subordinate is a chapter/local/post/unit. For supervision, central organizations must annually obtain, review, and retain information; copies of filed Forms 990 or 990-EZ satisfy this requirement; Form 990-N does not, so additional information must be collected from those filers. Annual compliance education is required (electronic delivery is acceptable, such as a link to Publication 557). If a subordinate is not required to file annually (e.g., certain religious organizations), supervision is satisfied through the annual education requirement.
• Control Standard: In addition to board/officer-based tests that focus on voting power, control may be established via a written agreement evidencing control over activities or operations. The revenue procedure does not set a specific threshold; the IRS will evaluate control based on facts and circumstances. Central organizations may not rely on intermediate tiers to establish supervision or control.
• Matching and Purposes: All subordinates in a group must be described in the same paragraph of section 501(c), though they need not match the central organization’s paragraph. A uniform purpose statement is required for subordinates that share the same purpose; complete uniformity of governing instruments is not required.
• Accounting Period and Revocations: Subordinates included in a group return must use the central organization’s annual accounting period. A subordinate whose exemption is automatically revoked must apply for reinstatement before joining or rejoining a group exemption letter.

Applications and Reporting, Modernized

Group applications must be submitted electronically on Form 8940 using Pay.gov, and the IRS may require additional information or corrections to pending applications. Supplemental Group Ruling Information (SGRI) has also been modernized:

• Timing: Submit annually at least 30 days and no more than 90 days before the close of the central organization’s accounting period.
• Content: When adding subordinates, confirm that the governing information “as updated” applies; report changes in purposes, character, or method of operation; include a list of subordinates that were automatically revoked. Report a formation or incorporation date only when adding a subordinate.
• Submission Method: Electronic submission is required (mail may be permitted until electronic procedures are available).

Termination and Removal

The IRS may terminate a group exemption for noncompliance by the central organization, including late SGRI filing or failure to exercise general supervision or control. If more than half of the subordinates are automatically revoked, the IRS may terminate the group exemption entirely.

Central organizations and the IRS both have roles in removing subordinates:

• The IRS may remove subordinates for specified failures and has discretionary authority for other failures to meet program requirements.
• Central organizations may remove subordinates with or without cause by notifying the IRS through SGRI and must provide at least 30 days’ notice to the subordinate.

Effective Dates of Exemption

When adding a subordinate using SGRI, if the addition occurs within 27 months of formation (and the organization was not previously recognized or included elsewhere), the effective date is the formation date; otherwise, the effective date is the SGRI submission date. For group applications, if any listed subordinate formed more than 27 months before submission and lacks prior recognition, the effective date for all listed subordinates is the submission date. Subordinates already recognized (or included in another group) retain their earlier effective date.

Transition for Preexisting Groups

There is a transition period ending Jan. 22, 2027. After that date, the new affiliation, supervision, and control provisions apply to preexisting group exemption letters and preexisting subordinate organizations. Preexisting subordinates are not required to adopt the uniform purpose statement. If a preexisting subordinate is automatically revoked and later reinstated or added back, it loses “preexisting subordinate” status for transition purposes.

What Central Organizations Should Do Now

Begin aligning governance and processes with the finalized procedures:

• Confirm Eligibility and Structure: Ensure you have at least five subordinates to apply and maintain only one group exemption letter.
• Strengthen Supervision and Control: Document affiliation; establish annual monitoring (with special attention to 990‑N filers); consider written control agreements where appropriate; provide annual compliance education.
• Align Subordinates: Verify that all subordinates share the same section 501(c) paragraph and the central organization’s annual accounting period; implement uniform purpose statements among subordinates with shared purposes.
• Modernize Workflows: Prepare for electronic Form 8940 filing; institute an annual SGRI process that meets the 30–90 day window; collect and track required SGRI data, including any automatic revocations.
• Establish Removal Protocols: Provide at least 30 days’ notice before removal and ensure authorizations permit removal with or without cause.
• Use the Transition Period: Plan to bring preexisting groups and subordinates into compliance with the new affiliation, supervision, and control standards by Jan. 22, 2027.

For help tailoring these changes to your organization and setting up compliant processes, please contact CBIZ for support.