SECTION 14. — Internal Revenue Bulletin 2020-21

.01 New group exemption letters . This revenue procedure applies to all group exemption letters requested and issued after the date the final revenue procedure is published in the Internal Revenue Bulletin.

.02 Preexisting group exemption let- ters. (1) In general. Except as otherwise provided in this section 14.02, this revenue procedure applies to all preexisting group exemption letters.

(2) Certain sections applicable to pre- existing group exemption letters after a transition period. (a) In general. The following sections of this revenue procedure apply to preexisting group exemption letters one year after the date the final reve

nue procedure is published in the Internal Revenue Bulletin (transition period):

(i) Section 3.01(2) of this revenue procedure (requiring a central organization to have at least one subordinate organization to maintain a group exemption letter).

(ii) Section 3.01(3) of this revenue procedure (permitting central organizations to hold only one group exemption letter).

(b) Minimum number of subordinate organizations. If a central organization has a preexisting group exemption letter but does not have at least one subordinate organization, the central organization must add, during the transition period, at least one subordinate organization to its group exemption letter (see sections 6.02(2)(a)(iii) and 6.02(3) of this revenue procedure regarding information that must be submitted to the IRS) or notify the IRS of its intent to terminate the group exemption letter (see section 6.02(5) of this revenue procedure). The central organization may submit this information with its SGRI if its SGRI is due before the end of the transition period.

(c) More than one group exemption let- ter. During the transition period, a central organization that maintains more than one preexisting group exemption letter must terminate all but one of its preexisting group exemption letters. The central organization must determine which preexisting group exemption letter it intends to maintain and notify the IRS of its intent to terminate any additional preexisting group exemption letters (see section 6.02(5) (regarding notification of intent to terminate) of this revenue procedure).

(3) New subordinate organizations. (a) In general. This revenue procedure applies to all new subordinate organizations; no transition period is provided.

(b) Information required the first time new subordinate organizations are added to a preexisting group exemption letter. In the case of a central organization with a preexisting group exemption letter, the information the central organization was required to submit about its subordinate organizations under previous revenue procedures was different than the information required by this revenue procedure. However, this revenue procedure applies to all new subordinate organizations of a preexisting group exemption letter (see section 14.02(3)(a) of this revenue procedure).

Therefore, the first time after the effective date of this revenue procedure (see section 16 of this revenue procedure) that a central organization adds any new subordinate organizations to a preexisting group exemption letter, such central organization must provide the information required by section 5.03 of this revenue procedure about its new subordinate organizations. Upon the second, and any subsequent, addition of new subordinate organizations to the preexisting group exemption letter, such central organization must provide only the information required by section 6.02(3) of this revenue procedure.

(4) Preexisting subordinate organiza- tions. (a) In general. Except as provided in sections 14.02(4)(b) and 14.02(4)(c) of this revenue procedure, the requirements of this revenue procedure apply to preexisting subordinate organizations.

(b) Certain sections not applicable. The following sections of this revenue procedure do not apply to preexisting subordinate organizations:

(i) Sections 3.02(3), 3.02(4), and 3.02(5) of this revenue procedure (defining, and describing the applicability of, the terms “general supervision” and “control”).

(ii) Sections 3.03(2)(a)(ii), 3.02(2)(b), 3.02(2)(c), and 3.03(2)(d) of this revenue procedure (describing the matching, foundation classification, similar purpose, and uniform governing instrument requirements).

(iii) Section 3.04(3) of this revenue procedure (stating that Type III supporting organizations are not permitted to be subordinate organizations).

(iv) Section 3.05(2) of this revenue procedure (requiring that the authorization for initial inclusion in or subsequent addition to a group exemption letter described in section 3.05(1) of this revenue procedure permit the central organization to remove the subordinate organization from the group exemption letter if the subordinate organization fails to comply with the requirements of this revenue procedure).

(i) Must all be described in the same paragraph of § 501(c), though not necessarily the same paragraph as the central organization;

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(ii) If described in § 501(c)(3), may be classified in any paragraph of § 509 (including § 509(a)(3));

(iii) May have different primary purposes; and

(iv) May have unique (as opposed to “uniform”) governing instruments (charters, trust indentures, articles of association, etc.).

(d) Preexisting subordinate organiza- tions described in different paragraphs of § 501(c). If a preexisting group exemption letter includes preexisting subordinate organizations that are described in different paragraphs of § 501(c), the central organization must remove the preexisting subordinate organizations described in the paragraph of § 501(c) different from the paragraph in which the central organization stated that the subordinate organizations would be described in its group exemption letter request (see section 4.02(3) of Rev. Proc. 80-27) during the transition period. For example, if a central organization has a preexisting group exemption letter for subordinate organizations described in § 501(c)(3), but has subordinate organizations described in both § 501(c) (3) and 501(c)(4), the central organization must remove the subordinate organizations described in § 501(c)(4) (see section 6.02(2)(a)(ii) of this revenue procedure regarding subordinate organizations no longer to be included in a group exemption letter).

(e) General supervision or control. The definitions of “general supervision” and “control” in sections 3.02(3) and 3.02(4) of this revenue procedure do not apply to preexisting subordinate organizations. Nonetheless, a central organization that meets the requirements of section 3.02(3) or section 3.02(4) of this revenue procedure with respect to a particular preexisting subordinate organization per se exercises “general supervision” or “control,” as applicable, over that preexisting subordinate organization.

.03 Examples. The application of this section 14 is illustrated by the following examples.

(1) One preexisting group exemp- tion letter for subordinate organizations described in a different paragraph of § 501(c) than the central organization. A central organization described in § 501(c) (3) has a single preexisting group exemp

tion letter for subordinate organizations described in § 501(c)(4), as was permitted by Rev. Proc. 80-27. The central organization may continue to maintain the preexisting group exemption letter because the central organization’s preexisting subordinate organizations are not required to be described in the same paragraph of § 501(c) as the central organization (see section 14.02(4)(c)(i) of this revenue procedure). However, the central organization may not add any new subordinate organizations because, in this case, the addition of new subordinate organizations would violate the matching requirements. In particular, if the central organization added new subordinate organizations described in § 501(c)(3), the central organization would satisfy the requirement that new subordinate organizations be described in the same paragraph of § 501(c) as the central organization (see sections 3.03(2) (a)(ii) and 14.02(3)(a) of this revenue procedure) but would violate the requirement that all subordinate organizations be described in the same paragraph of § 501(c) (see sections 3.03(2)(a)(i) and 14.02(3) (a), of this revenue procedure) because the central organization would have subordinate organizations described both section § 501(c)(3) and (4). If the central organization added new subordinate organizations described in § 501(c)(4), the central organization would satisfy the requirement that all subordinate organizations be described in the same paragraph of § 501(c) (see sections 3.03(2)(a)(i) and 14.02(3)(a) of this revenue procedure) but would violate the requirement that all new subordinate organizations be described in the same paragraph of § 501(c) as the central organization (see sections 3.03(2) (a)(ii) and 14.02(3)(a) of this revenue procedure).

(2) One preexisting group exemption letter for subordinate organizations de- scribed in the same paragraph of § 501(c) as the central organization. A central organization described in § 501(c)(3) has a single preexisting group exemption letter for subordinate organizations described in § 501(c)(3). The preexisting subordinate organizations (none are private foundations) all have different foundation classifications under § 509(a), which was not prohibited by Rev. Proc. 80-27. The central organization may add new

subordinate organizations that are described in § 501(c)(3) to its preexisting group exemption letter because it satisfies the matching requirements – all of the subordinate organizations are described in the same paragraph of § 501(c) (see sections 3.03(2)(a)(i) and 14.02(3)(a) of this revenue procedure) and the central organization and all of its new subordinate organizations are described in the same paragraph of § 501(c) (see sections 3.03(2)(a)(ii) and 14.02(3)(a) of this revenue procedure). Nonetheless, if the central organization adds new subordinate organizations described in § 501(c)(3) to the preexisting group exemption letter, the new subordinate organizations must have the same foundation classification, although not necessarily the same foundation classification as the central organization (see sections 3.03(2)(b) and 14.02(3)(a) of this revenue procedure).

(3) Two preexisting group exemption letters for subordinate organizations described in different paragraphs of § 501(c). A central organization described in § 501(c)(3) has two preexisting group exemption letters – one for subordinate organizations described in § 501(c)(3) and one for subordinate organizations described in § 501(c)(4) – which was not prohibited by Rev. Proc. 80-27. The central organization may only keep one preexisting group exemption letter because this revenue procedure does not permit a central organization to maintain more than one group exemption letter (see sections 3.01(3) and 14.02(1) of this revenue procedure). However, this requirement does not apply until after the transition period (see section 14.02(2)(a)(ii) of this revenue procedure). During the transition period, the central organization must determine which preexisting group exemption letter it intends to keep and notify the IRS regarding which preexisting group exemption letter it intends to terminate (see section 14.02(2)(c) of this revenue procedure). Like Example 1, if the central organization chooses to maintain the group exemption letter for subordinate organizations described in § 501(c)(4), the central organization may not add any new subordinate organizations. Like Example 2, if the central organization chooses to maintain the group exemption letter for subordinate organizations described in

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§ 501(c)(3), the central organization may add new subordinate organizations but the new subordinate organizations must have the same foundation classification as each other, although not necessarily the same as the central organization. Either way, a subordinate organization that is removed from the group exemption letter may maintain its exempt status by taking an action in section 9.04(2) or section 9.04(3) of this revenue procedure (see section 9.02 of this revenue procedure regarding the effect of termination).

(4) Central organization that is not de- scribed in § 501(c) with two preexisting group exemption letters for subordinate organizations described in different para- graphs of § 501(c). Assume the same facts as Example 3 except that the central organization is an agency of a political subdivision and is not described in § 501(c). Like Example 3, the central organization may only keep one group exemption letter (see sections 3.01(3) and 14.02(1) of this revenue procedure). However, unlike Ex- ample 3, the central organization may add new subordinate organizations to whichever preexisting group exemption letter it chooses to maintain because the matching requirement described in section 3.03(2) (a)(ii) of this revenue procedure does not apply to a central organization that is an instrumentality or an agency of a political subdivision and that is not described in § 501(c) (see section 3.03(2)(a)(iii) of this revenue procedure).

(5) One preexisting group exemption letter with no subordinate organizations. A central organization described in § 501(c) (3) has a single preexisting group exemption letter for subordinate organizations described in § 501(c)(3) but currently does not have any subordinate organizations. Under this revenue procedure, a central organization must have at least one subordinate organization to maintain a group exemption letter (see section 3.01(2) of this revenue procedure). However, this requirement does not apply to preexisting group exemption letters during the transition period (see section 14.02(2)(a)(i) of this section). During the transition period, the central organization either must add at least one subordinate organization described in § 501(c)(3) to the preexisting group exemption letter or must notify the IRS of its intent to terminate the preexist

ing group exemption letter (see section 14.02(2)(c) of this revenue procedure). If the central organization adds a subordinate organization to the preexisting group exemption letter, the central organization must submit the information described in section 14.02(3)(b) of this revenue procedure. Even though the group exemption letter is a preexisting group exemption letter, after the transition period, this revenue procedure will apply to the preexisting group exemption letter as if it is a new group exemption letter described in section 14.01 of this section because there are no preexisting subordinate organizations.

(6) One preexisting group exemp- tion letter with subordinate organiza- tions described in different paragraphs of § 501(c). A central organization described in § 501(c)(3) has a preexisting group exemption letter with subordinates described in § 501(c)(3) and (4). Neither Rev. Proc. 80-27 nor this revenue procedure permit a central organization to maintain a group exemption letter for subordinate organizations described in different paragraphs of § 501(c). Assuming that the group exemption letter was intended for subordinate organizations described in § 501(c)(3), the central organization must remove the subordinate organizations described in § 501(c)(4) by submitting the information required by section 6.02(2)(a)(ii) of this revenue procedure. A subordinate organization described in § 501(c)(4) that is removed from the group exemption letter either may obtain recognition of or declare its exempt status by taking an action in section 9.04(3) of this revenue procedure (see section 9.02 of this revenue procedure regarding the effect of termination).