SECTION 3. REQUIREMENTS TO

OBTAIN AND MAINTAIN A GROUP EXEMPTION LETTER

.01 Central organization. (1) Exemp- tion. (a) In general. A central organization must be—

(i) Described in § 501(c); (ii) An instrumentality; or (iii) An agency of a political subdivision.

(b) Recognition of exemption. A central organization described in § 501(c) (see section 3.01(1)(a)(i) of this revenue procedure) must obtain recognition of exemption from the IRS by filing an application or, in the case of a central organization that has had its exemption automatically revoked, by filing an application for reinstatement.

(2) Minimum number of subordinate organizations. A central organization must have at least five subordinate organizations to obtain a group exemption letter, and it must have at least one subordinate organization to maintain the group exemption letter thereafter (except as provided in section 14.02(2)(a)(i) of this revenue procedure, which provides a transition period for preexisting group exemption letters).

(3) Only one group exemption letter. A central organization may maintain only one group exemption letter (except as provided in section 14.02(2)(a)(ii) of this revenue procedure, which provides a transition period for preexisting group exemption letters).

.02 The central organization’s relation- ship with its subordinate organizations. (1) In general. A central organization must establish that each subordinate organization to be included in the group exemption letter is affiliated with the central organization (as described in section 3.02(2) of this revenue procedure) and subject to its general supervision (as described in section 3.02(3) of this revenue procedure) or control (as described in section 3.02(4) of this revenue procedure).

(2) Affiliation. A subordinate organization’s affiliation with the central organization is demonstrated by the entirety of the information required to be submitted in section 5.03 of this revenue procedure.

(3) General supervision. A subordinate organization is subject to the central organization’s general supervision if the central organization—

(a) annually obtains, reviews, and retains information on the subordinate organization’s finances, activities, and compliance with annual filing requirements (see section 7 of this revenue procedure), and

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(b) transmits written information to (or otherwise educates) the subordinate organization about the requirements to maintain tax-exempt status under the appropriate paragraph of § 501(c), including annual filing requirements (see section 7 of this revenue procedure).

(4) Control. A subordinate organization is subject to the central organization’s control if—

(a) The central organization appoints a majority of the subordinate organization’s officers, directors, or trustees; or

(b) A majority of the subordinate organization’s officers, directors, or trustees are officers, directors, or trustees of the central organization.

(5) Application. The term “general supervision” described in section 3.02(3) of this revenue procedure and the term “control” described in section 3.02(4) of this revenue procedure apply only for purposes of this revenue procedure and § 1.60332(d) of the Treasury Regulations (relating to group returns).

.03 Organizations eligible for initial inclusion in or subsequent addition to a group exemption letter as subordinate organizations. (1) In general. Unless described in section 3.04 of this revenue procedure and subject to the requirements described in section 3.03(2) of this revenue procedure, an organization described in § 501(c) may be eligible for initial inclusion in or subsequent addition to a group exemption letter as a subordinate organization.

(2) Requirements for initial inclusion in or subsequent addition to a group ex- emption letter. All subordinate organizations initially included in or subsequently added to a group exemption letter must meet the following requirements (except as provided in section 14.02(4) of this revenue procedure regarding preexisting subordinate organizations).

(a) Matching requirements. (i) Subor- dinate organizations. All subordinate organizations initially included in or subsequently added to a group exemption letter must be described in the same paragraph of § 501(c).

(ii) Central organization described in § 501(c). If the central organization is described in § 501(c), all subordinate organizations initially included in or subsequently added to a group exemption letter

must be described in the same paragraph of § 501(c) as the central organization, including a central organization that is either an instrumentality or an agency of a political subdivision and that is described in § 501(c). For example, if a central organization is described in § 501(c)(3), all the subordinate organizations initially included in or subsequently added to the group exemption letter must also be described in § 501(c)(3).

(iii) Central organization not described in § 501(c). If the central organization is either an instrumentality or an agency of a political subdivision and is not described in § 501(c), the matching requirement described in section 3.03(2)(a)(ii) of this revenue procedure does not apply. In this case, such a central organization may have subordinate organizations described in any paragraph of § 501(c), provided that the organizations are eligible to be subordinate organizations (see section 3.04 of this revenue procedure) and the subordinate organizations initially included in or subsequently added to the group exemption letter are all described in the same paragraph of § 501(c) (see section 3.03(2) (a)(i) of this revenue procedure).

(b) Foundation classification require- ment. (i) In general. Except as provided in section 3.03(2)(b)(iii) of this revenue procedure, all subordinate organizations described in § 501(c)(3) that are initially included in or subsequently added to a group exemption letter must be classified as public charities under the same paragraph of § 509(a) (but see section 3.04(3) of this revenue procedure, which provides that an organization described in § 501(c) (3) that is classified as a Type III supporting organization is not eligible to be initially included in or subsequently added to a group exemption letter as a subordinate organization).

(ii) Classification under §§ 509(a)(1) and 170(b)(1)(A). Subordinate organizations classified as public charities under § 509(a)(1) are not required to be classified under the same paragraph of § 170(b)(1) (A). For example, a central organization described in § 501(c)(3) may have subordinate organizations described in § 501(c) (3) that are classified as public charities under § 509(a)(1) but are churches described in § 170(b)(1)(A)(i), educational organizations described in § 170(b)(1)(A)

(ii), and hospitals described in § 170(b)(1) (A)(iii).

(iii) Publicly supported subordinate organizations. Because public support under §§ 509(a)(1) and 170(b)(1)(A)(vi) or under § 509(a)(2) is determined annually (and therefore may change), subordinate organizations that are classified as a publicly supported organizations either under §§ 509(a)(1) and 170(b)(1)(A)(vi) or under § 509(a)(2) will be considered, for purposes of section 3.03(2)(b)(i) of this revenue procedure, to be classified in the same paragraph of § 509(a).

(iv) Foundation classification of the central organization may differ from the foundation classification of its subordinate organizations. Subordinate organizations described in § 501(c)(3) are not required to be classified under the same paragraph of § 509(a) as the central organization. For example, a central organization that is classified as a Type III supporting organization under § 509(a)(3) may have a group exemption letter with subordinate organizations classified under § 509(a)(1).

(c) Similar purpose requirement. The primary purpose of all the subordinate organizations described in § 501(c) (other than § 501(c)(3)) initially included in or subsequently added to a group exemption letter must be described by the same NTEE code.

(d) Uniform governing instrument. All subordinate organizations must adopt a uniform governing instrument (charter, trust indenture, articles of association, etc.). Representative instruments are not acceptable for this purpose. However, if a group exemption letter includes subordinate organizations described in § 501(c) (3) with different purposes, the governing instrument describing each distinct charitable, educational, scientific, etc. purpose must be a uniform governing instrument. For example, if a group exemption letter includes subordinate organizations that are schools and hospitals, all the subordinate organizations that are schools must adopt a uniform governing instrument describing their educational purpose and all the subordinate organizations that are hospitals must adopt a uniform governing instrument describing their charitable purpose.

.04 Organizations not eligible for ini- tial inclusion in or subsequent addition to

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include its name, address, and EIN; and information establishing that it is described in section 3.01(1)(a) of this revenue procedure. A central organization that has not obtained recognition of exemption at the time it requests a group exemption letter, as required by section 3.01(1)(b) of this revenue procedure, may submit such request concurrently with its own application, or, in the case of a central organization that has had its exemption automatically revoked, its application for reinstatement (see section 4.02(7)(a)(ii) of Rev. Proc. 2020-5 (or its successor) and section 3.01(1)(b) of this revenue procedure).

.03 Information about the subordinate organizations. (1) In general. The central organization must include the following statements, representations, and information on behalf of its subordinate organizations:

(a) Information verifying that each subordinate organization is affiliated with and subject to the central organization’s general supervision or control (see section 3.02 of this revenue procedure). (b) A representation that the subordinate organizations are all described in the same paragraph of § 501(c) as the central organization (see sections 3.03(2)(a)(i) and 3.03(2)(a)(ii) of this revenue procedure) or, if the central organization is either an instrumentality or an agency of a political subdivision and is not described in § 501(c), the paragraph of § 501(c) in which all subordinate organizations are or will be described (see sections 3.03(2)(a) (i) and 3.03(2)(a)(iii) of this revenue procedure).

(c) If the subordinate organizations are or will be described in § 501(c)(3), the foundation classification of all the subordinate organizations (see section 3.03(2) (b) of this revenue procedure).

(d) A representation that no subordinate organization is organized in a foreign country (see section 3.04(1) of this revenue procedure).

(e) If the subordinate organizations are or will be described in § 501(c)(3), a representation that no subordinate organization is classified as a private foundation under § 509(a) or a Type III supporting organization under § 509(a)(3) (see sections 3.04(2) and 3.04(3) of this revenue procedure).

a group exemption letter as subordinate organizations. The following organizations are not eligible to be initially included in or subsequently added to a group exemption letter as subordinate organizations:

(1) An organization that is organized in a foreign country.

(2) An organization described in § 501(c)(3) that is classified as a private foundation under § 509(a).

(3) An organization described in § 501(c)(3) that is classified as a Type III supporting organization under § 509(a) (3).

(4) A qualified nonprofit health insurance issuer (QNHII) described in § 501(c) (29).

(5) An organization that has had its exemption automatically revoked and that has not yet had its exemption reinstated after filing an application for reinstatement.

.05 Authorization for initial inclusion in or subsequent addition to a group ex- emption letter as a subordinate orga- nization. (1) In general. A subordinate organization must authorize the central organization in writing to include the subordinate organization in the request for the group exemption letter or to add the subordinate organization to an existing group exemption letter. The authorization must be signed by a duly authorized officer of the subordinate organization.

(2) Removal. The authorization described in section 3.05(1) of this revenue procedure must acknowledge that the central organization may remove the subordinate organization from the group exemption letter if the subordinate organization fails to comply with the requirements of this revenue procedure.

(3) Retention of the authorization by the central organization. The authorization described in section 3.05(1) of this revenue procedure must be retained by the central organization while the group exemption letter is in effect with respect to the authorizing subordinate organization.

.06 Employer identification numbers (EINs). The central organization and each subordinate organization must have its own EIN. The central organization must obtain its own EIN prior to filing an application, and each subordinate organization (or the central organization on a subordi

nate organization’s behalf) must obtain its own EIN prior to initial inclusion in or subsequent addition to a group exemption letter.

.07 Annual information return or no- tice. A central organization and all subordinate organizations initially included in or subsequently added to a group exemption letter must comply with the annual filing requirement described in section 7 of this revenue procedure.