What is a Group Exemption Letter?

Answer: The IRS sometimes recognizes a group of organizations as tax-exempt if they are affiliated with a central organization. This avoids the need for each of the organizations to apply for exemption individually. A group exemption letter has the same effect as an individual exemption letter except that it applies to more than one organization. Exempt organizations that have or plan to have related organizations that are very similar to each other may apply for a group exemption.

Groups of organizations with group exemption letters have a "head" or main organization, referred to as a central organization. The central organization generally supervises or controls many chapters, called subordinate organizations. The subordinate organizations typically have similar structures, purposes, and activities.

To qualify for a group exemption, the central organization and its subordinates must have a defined relationship. Subordinates must be:

Affiliated with the central organization; Subject to the central organization's gen- eral supervision or control; and
Exempt under the same paragraph of IRC 501(c), though not necessarily the paragraph under which the central organization is exempt.

A church with a parent organization may wish to contact the parent to see if it has a group ruling. If the parent holds a group ruling, then the IRS may already recognize the church as tax exempt. Under the group exemption process, the parent organization becomes the holder of a group ruling that identifies other affiliated churches or other affiliated organizations. A church is recognized as tax exempt if it is included in a list provided by the parent organization.

If the church or other affiliated organization is included on such a list, it does not need to take further action to obtain recognition of tax-exempt status. An organization that is not covered under a group ruling should contact its parent organization to see if it is eligible to be included in the parent's application for the group ruling. For general information on the group exemption process. For more information, refer to Revenue Procedure 80-27, 1980-1 C.B. 677.