The Internal Revenue Service recently updated rules regarding group tax exemptions. As of January 20, 2026, the IRS is again accepting group exemption applications, a policy that had been stopped in June 2020 while public comments were sought to revise the process. 

Group exemption allows organizations that are under the supervision of a central organization to obtain federal tax-exempt status on a group basis, rather than applying individually. The IRS rule reopening these applications (Revenue Procedure 2026-8) also updated the procedures that a central organization must follow to obtain and maintain such a group exemption letter. 

According to the IRS, it issued this update to “reduce the administrative burden and increase the efficiency of the group exemption letter program.” The agency also seeks to improve data collection for oversight of the program, as it works to increase transparency and compliance in it. Of note, the agency specifically explained its efforts to alleviate constitutional concerns expressed by religious organizations, noting that the final rule “provides that a central organization does not have to annually obtain, review, and retain information on a subordinate organization’s finances, activities, and compliance with annual filing requirements if that subordinate organization is not required to file an annual information return or notice.” 

The revised policy requires a central organization to have at least five subordinate organizations in order to apply for a group exemption, and it must keep one of those subordinates to maintain a group exemption letter. It also further defines how groups can demonstrate affiliation and supervision, including matching 501(c), unified purpose, and accounting rules. In addition, a central organization can have no more than one group letter. The IRS is allowing a transition period until January 22, 2027, for existing group letter holders to comply with the eligibility standards, expanded documentation, annual reporting, and enhanced oversight obligations that are part of the new rule, while new group exemption applications must be submitted through Form 8940 online at Pay.gov. 

ECFA’s recently released 2026 Church & Nonprofit Tax & Financial Guide notes, “Churches that are part of a denomination are not required to file a separate application for exemption if they are covered by the group letter.” For more about such exemptions—and information and tips on a host of other tax matters—please explore that resource today!