Notice 2020-36 requested comments

on all aspects of the proposed revenue procedure because the Treasury Department and the IRS recognized that many of the updated provisions substantially differed from the procedures set forth in Rev. Proc. 80-27. The Treasury Department and the IRS also recognized that the new procedures might impose additional administrative burdens on existing central organizations and wanted to afford those organizations an opportunity to comment on the updated procedures. Notice 2020

36 specifically requested comments on the following:

• the administrative burden imposed by the collections of information in sections 3.02(3) (certain information a central organization that exercises general supervision over its subordinate organizations must annually collect from its subordinate organizations and transmit to its subordinate organizations), 3.05 (authorization for initial inclusion in or subsequent addition to a group exemption letter as a subordinate organization), and 6 (Supplemental Group Ruling Information or SGRI) of the proposed revenue procedure;

• factors indicating that a subordinate organization is affiliated with a central organization for purposes of section 3.02(2) of the proposed revenue procedure (description of affiliation); and

• whether central organizations with more than one preexisting group exemption letter would benefit from procedures permitting the consolidation or transfer of one or more preexisting group exemption letters.

SECTION III. COMMENT SUMMARY AND CHANGES TO THE PROPOSED REVENUE PROCEDURE

This section III summarizes the major provisions of the proposed revenue procedure, the substantive comments submitted in response to the proposed revenue procedure, and the material changes to the proposed revenue procedure that are incorporated in Rev. Proc. 2026-8. The Treasury Department and the IRS received 29 written comments in response to Notice 202036. The comments are available for public inspection upon request. Feedback in those comments informed the development of the finalized procedures in Rev. Proc. 2026-8.

.01 Minimum Number of Subordinate Organizations Requirement.

Section 3.01(2) of the proposed revenue procedure required a central organization to have at least five subordinate organizations to obtain a group exemption letter and at least one subordinate orga

1 Unless otherwise specified, all “Section” or “§” references are to sections of the Code.

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nization to maintain a group exemption letter thereafter. One commenter recommended eliminating the first requirement, stating that it would discourage the use of group exemptions by making it more difficult for a central organization to recruit enough subordinate organizations to obtain a group exemption letter.

The Treasury Department and the IRS disagree with this comment. As explained in Notice 2020-36, the requirement for a central organization to have a minimum number of subordinate organizations to obtain a group exemption letter is due to the administrative burden that processing group applications imposes on the IRS. Notice 2020-36 noted that the administrative burden of processing one group application is comparable to the administrative burden of processing four individual exemption applications. Eliminating the requirement that a central organization have five subordinate organizations to obtain a group exemption letter would render the group exemption letter program inefficient in circumstances where a group application includes fewer than five subordinate organizations. Accordingly, section 4.01(2) of Rev. Proc. 2026-8 retains the requirement that a central organization have five subordinate organizations to obtain a group exemption letter because it appropriately balances the burdens the IRS faces in administering the group exemption letter program and the burdens central organizations face in complying with the requirements to obtain the benefits of the group exemption letter program.

.02 Central Organizations Maintaining More Than One Group Exemption Letter.

Section 3.01(3) of the proposed revenue procedure prohibited a central organization from maintaining more than one group exemption letter. Several commenters objected to this provision, claiming that it would decrease transparency and place significant administrative burdens on a central organization, particularly if coupled with the proposed revenue procedure’s requirements involving matching, foundation classification, and uniform governing instruments.

As noted in Notice 2020-36, restricting the number of group exemption letters a central organization can maintain is necessary because traditionally, the IRS’s electronic databases have not systematically

tracked more than one group exemption letter per central organization. Moreover, maintaining more than one group exemption letter may adversely affect a central organization’s ability to exercise general supervision or control over its subordinate organizations. Accordingly, section 4.01(3) of Rev. Proc. 2026-8 continues to prohibit a central organization from maintaining more than one group exemption letter. The commenters’ concerns about the administrative burden of the prohibition on maintaining more than one group exemption letter given the proposed revenue procedure’s requirements involving matching, foundation classification, and uniform governing instruments are addressed by the revisions to those provisions discussed in sections III.08, III.09, and III.11 of this notice.

.03 Affiliation Requirement. Section 3.02(1) and (2) of the proposed revenue procedure required a central organization to establish that each subordinate organization to be included in the group exemption letter is affiliated with the central organization and stated that 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 the proposed revenue procedure. One commenter requested more clarity regarding the standard for determining whether a subordinate organization is affiliated with a central organization. In response, section 4.02(2) of Rev. Proc. 2026-8 adds several examples illustrating how a central organization may demonstrate affiliation with its subordinate organizations, while reforming the “entirety of the information” standard regarding affiliation that is set forth in section 3.02(2) of the proposed revenue procedure into a standard that reviews all “facts and circumstances showing that [the subordinate organization] is a chapter, local, post, or unit of the central organization.”

.04 General Supervision Standard. Section 3.02(1) of the proposed revenue procedure required a central organization to have one or more subordinate organizations under its general supervision or control. Section 3.02(3) of the proposed revenue procedure stated that the general supervision requirement is satisfied if the central organization (1) annually obtains,

reviews, and retains information on the subordinate organization’s finances, activities, and compliance with annual filing requirements (in accordance with section 7 of the proposed revenue procedure), and (2) transmits written information to (or otherwise educates) the subordinate organization about the requirements to maintain tax-exempt status under the applicable paragraph of § 501(c), including annual filing requirements (in accordance with section 7 of the proposed revenue procedure). Several commenters claimed that the general supervision standard in the proposed revenue procedure was ambiguous concerning the amount and type of information a central organization must obtain, review, and retain regarding its subordinate organizations’ finances, activities, and compliance with filing requirements. One commenter requested more specificity regarding the way a central organization exercises general supervision over subordinate organizations that file Form 990-N, Electronic Notice (e-Post- card) for Tax-Exempt Organizations Not Required to File Form 990, or Form 990- EZ, Short Form Return of Organization Exempt From Income Tax .

To provide additional clarity and specificity, section 4.02(3)(b) of Rev. Proc. 2026-8 provides that a central organization satisfies the requirement to obtain, review, and retain information about a subordinate organization by acquiring a copy of the Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ that the subordinate organization filed with the IRS. However, section 4.02(3)(b) of Rev. Proc. 2026-8 also provides that obtaining a copy of a Form 990-N will not satisfy the central organization’s requirement to obtain, review, and retain information regarding the subordinate organization. Consequently, a central organization must obtain information about subordinate organizations that file Form 990-N in some other manner, such as by requiring additional annual written information from those subordinate organizations. Section 4.02(3)(c) of Rev. Proc. 2026-8 provides a separate rule for subordinate organizations that are not required to file an annual information return or notice. This new provision was added in response to different comments and is addressed in section III.07 of this notice.

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Commenters also asked about the information a central organization must transmit to subordinate organizations regarding how to maintain tax-exempt status under § 501(c)(3). Section 4.02(3)(a)(ii) of Rev. Proc. 2026-8, like section 3.02(3)(b) of the proposed revenue procedure, is intentionally broad so as to afford a central organization flexibility in meeting the general supervision standard; however, to provide additional clarity, section 4.02(3)(a)(ii) of Rev. Proc. 2026-8 specifies that electronic delivery of such information is acceptable and that the required information must be transmitted to subordinate organizations annually. Additionally, section 4.02(5) of Rev. Proc. 2026-8 contains a new example that illustrates that one way a central organization can meet the standard in section 4.02(3)(a)(ii) of Rev. Proc. 2026-8 is to provide its subordinate organizations an electronic link to the latest version of Publication 557, Tax-Exempt Status for Your Organization .

Some commenters suggested that a subordinate organization should only be required to inform the central organization that it has complied with its filing obligations once every three years because § 6033(j)(1)(B) provides for the automatic revocation of tax-exempt status of certain organizations upon the failure to file a required information return or notice for three consecutive years. This suggestion is not adopted in Rev. Proc. 2026-8 because the Treasury Department and the IRS believe that the requirement that a central organization annually obtain, review, and retain information on its subordinate organizations helps ensure the subordinate organizations are complying with their filing requirements.

.05 Control Standard. Section 3.02(4) of the proposed revenue procedure provided that a subordinate organization is subject to a central organization’s control if (1) the central organization appoints a majority of the subordinate organization’s officers, directors, or trustees; or (2) a majority of the subordinate organization’s officers, directors, or trustees are officers, directors, or trustees of the central organization. Some commenters claimed that this control standard

was overly rigid and that compliance with it would be burdensome, particularly for a central organization with numerous subordinate organizations. One commenter asked that the final revenue procedure consider alternative governance structures that also demonstrate control by the central organization, such as cases in which the central organization must approve the election of the subordinate organization’s directors. Another commenter stated that the proposed control standard was at odds with principles of union democracy and that it directly contradicts provisions of the Labor-Management Reporting and Disclosure Act ² that require officers of covered unions to be elected by a secret ballot of members.

The Treasury Department and IRS agree that the control standard should not be rigid to the point of being burdensome and should be generally compatible with principles of union democracy and alternative governance structures. To provide additional flexibility to the control standard, section 4.02(4)(e) of Rev. Proc. 2026-8 adds a third way for a central organization to establish control over a subordinate organization. The central organization can establish control over the subordinate organization using a written agreement evidencing its control over the subordinate organization’s activities and operations. Rev. Proc. 2026-8 does not set forth a specific level of control that must be established in the written agreement. Whether the written agreement sufficiently establishes control depends on the facts and circumstances. This expansion of the control standard should alleviate the concerns expressed by commenters regarding alternative governance structures and the Labor-Management Reporting and Disclosure Act. Specifically, the expansion permits central organizations to use a written agreement that describes an alternative governance structure to establish control over subordinate organizations that use that alternative governance structure. This expansion also permits a central organization to establish control over its subordinate organizations using a written agreement addressing aspects of

the subordinate organization’s activities and operations without interfering with the election of union officers.

A commenter suggested that any reference in the control standard to “a majority of officers, directors, or trustees” must be limited to those officers, directors, and trustees that have voting power because, in the commenter’s view, voting power evinces control. The Treasury Department and the IRS generally agree with this comment. Accordingly, section 4.02(4) (a)-(d) of Rev. Proc. 2026-8 provides that a subordinate organization is subject to a central organization’s control if (1) the central organization appoints the subordinate organization’s directors or trustees who possess a majority of the voting power with respect to the subordinate organization’s governance, (2) the central organization appoints a majority of the subordinate organization’s officers, (3) the subordinate organization’s directors or trustees possessing a majority of the voting power with respect to the subordinate organization’s governance are directors or trustees of the central organization, or (4) a majority of the subordinate organization’s officers are officers of the central organization.

.06 Use of Intermediate Subordi- nate Organizations to Establish General Supervision or Control.

Several commenters suggested that the final revenue procedure allow a central organization to exercise general supervision or control over subordinate organizations through intermediate subordinate organizations. The Treasury Department and the IRS do not agree with these comments. A central organization is directly responsible for ensuring its subordinate organizations are entitled to federal tax-exempt status, and allowing a central organization to establish general supervision or control through intermediate subordinate organizations would run the risk of undermining this fundamental aspect of the group exemption letter program. Further, the use of intermediate subordinate organizations would create administrative complexities for the IRS in the event a group exemption letter is the subject of an examination.

2 Labor-Management Reporting and Disclosure Act of 1959, Public Law 86-257, 73 Stat. 519 (codified as amended in Title 29 of the United States Code).

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of Rev. Proc. 2026-8 requires subordinate organizations to be described in the same paragraph of § 501(c) as one another, but subordinate organizations are not required to be described in the same paragraph of § 501(c) as their central organization.

.09 Foundation Classification Require- ment.

Section 3.03(2)(b) of the proposed revenue procedure provided that 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), unless an exception applies. Several commenters stated that this “foundation classification requirement” accomplished little, due to the exceptions, and that it would increase administrative burdens in some instances. The Treasury Department and the IRS agree with this comment. Accordingly, Rev. Proc. 2026-8 does not include a foundation classification requirement.

.10 Similar Purpose Requirement. Section 3.03(2)(c) of the proposed revenue procedure contained a “similar purpose requirement” that required all subordinate organizations under a group exemption letter to have a primary purpose that is described by the same National Taxonomy of Exempt Entities (NTEE) code. One commenter contended that the requirement would place unnecessary burdens on organizations and potentially limit participation in the group exemption letter program.

The Treasury Department and the IRS have determined that the similar purpose requirement contained in the proposed revenue procedure would not facilitate a central organization’s exercise of general supervision or control over its subordinate organizations as was originally intended. Subordinate organizations under many group exemption letters have different purposes, and a central organization would have a strong incentive to select a NTEE code that describes a wide variety of purposes in order to comply with a similar purpose requirement. Furthermore, a similar purpose requirement is unnecessary because other provisions of Rev. Proc. 2026-8 adequately facilitate

.07 Concerns by Religious Organiza- tions Regarding General Supervision or Control.

Several religious organizations objected to the general supervision or control standards in section 3.02(3) and (4) of the proposed revenue procedure, claiming the standards would impermissibly interfere with their religious practices because their religious beliefs require self-governance and autonomy at the local level. These commenters argued that the proposed revenue procedure would prevent them from participating in the group exemption letter program, in violation of the First Amendment and the Religious Freedom Restoration Act. ³

In response to the comments from these religious organizations, section 4.02(3)(c) of Rev. Proc. 2026-8 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. Under these circumstances, a central organization satisfies the general supervision standard in section 4.02(3)(a) of Rev. Proc. 2026-8 by annually transmitting written information to, or otherwise educating, the subordinate organization about the requirements to maintain tax-exempt status under the applicable paragraph of section 501(c), including, but not limited to, annual filing requirements, if applicable. Section 4.02(5)(c) of Rev. Proc. 2026-8 adds an example to further clarify this point. The Treasury Department and the IRS believe these commenters’ concerns are alleviated by the aforementioned revisions to the general supervision standard of section 4.02(3) of Rev. Proc. 2026-8, because they can participate in the group exemption letter program by satisfying the general supervision standard, rather than the more onerous control standard.

Some religious organizations objected to the use of the term “subordinate organization,” stating that the term does not accurately reflect their organizational structure. Rev. Proc. 2026-8 continues to use the term “subordinate organization”

because the group exemption letter program has referred to organizations as subordinate organizations for many decades and changing the term now would likely cause confusion. The use of this nomenclature for purposes of the group exemption letter program does not have any impact on the federal tax treatment of the organizations that choose to participate in the group exemption letter program.

.08 Matching Requirement for a Cen- tral Organization Described in § 501(c).

Section 3.03(2)(a)(i) of the proposed revenue procedure retained the “matching requirement” found in Rev. Proc. 80-27, which required all subordinate organizations initially included in, or subsequently added to, a group exemption letter to be described in the same paragraph of § 501(c). Section 3.03(2)(a)(ii) of the proposed revenue procedure added an additional matching requirement that required all subordinate organizations initially included in, or subsequently added to, a group exemption letter to be described in the same paragraph of § 501(c) as the central organization, including a central organization that is described in § 501(c) and is an instrumentality or an agency of a political subdivision. Section 3.03(2)(a) (iii) of the proposed revenue procedure provided that this additional matching requirement would not apply if the central organization is an instrumentality or an agency of a political subdivision but is not described in § 501(c). Several commenters expressed support for the additional matching requirement, but others objected to it.