SECTION 4. REQUIREMENTS TO

OBTAIN AND MAINTAIN A GROUP EXEMPTION LETTER

.01 General requirements. (1) Recognition of exemption. On or before the date it files a group application, a central organization described in § 501(c) must either (a) be recognized by the IRS as tax-exempt, (b) have filed an application, or (c) in the case of a central organization that has had its exemption automatically revoked, have filed 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 12.02(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 12.02(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. Each subordinate organization initially included in a group application, or subsequently added to a group exemption letter, must be (1) affiliated with the central organization, and (2) subject to its general supervision or control, as such terms are defined in this section 4.02 (except as provided in section 12.02(2)(a)(iii) of this revenue procedure, which provides a transition period for preexisting subordinate organizations). The terms “affiliated,” “general supervision,” and “control,” as used in this reve

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nue procedure, apply only for purposes of this revenue procedure and § 1.6033-2(d) (relating to group returns).

(2) Affiliated. A subordinate organization’s affiliation with the central organization is demonstrated by facts and circumstances showing that it is a chapter, local, post, or unit of the central organization. For example, a subordinate organization may demonstrate its affiliation with a central organization by (a) the inclusion of its information on a group return described in § 1.6033-2(d) that includes the four-digit group exemption number (GEN); (b) the current inclusion of the subordinate organization in a directory of subordinate organizations updated annually by the central organization; or (c) in the case of a subordinate organization that is a church or a convention or association of churches, the sharing of common religious bonds or convictions with the central organization.

(3) General supervision. (a) In general. A subordinate organization is subject to the general supervision of a central organization if the central organization:

(i) Annually obtains, reviews, and retains information on the subordinate organization’s finances, activities, and compliance with annual filing requirements; and

(ii) Annually transmits (including electronically) 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, but not limited to, annual filing requirements, if applicable.

(b) Form 990 or Form 990-EZ. A central organization may obtain the information regarding a subordinate organization required by section 4.02(3)(a)(i) of this revenue procedure by obtaining a copy of the subordinate organization’s Form 990 or Form 990-EZ. A copy of the subordinate organization’s Form 990-N is not sufficient to satisfy the requirement to obtain the information regarding the subordinate organization required by section 4.02(3) (a)(i) of this revenue procedure.

(c) Exception for subordinate organi- zations not required to file annual infor- mation returns or notices. If a subordinate organization is not required to file an annual information return or notice,

a central organization may, but is not required to, satisfy section 4.02(3)(a)(i) of this revenue procedure regarding the subordinate organization. See section 4.02(5) of this revenue procedure for an example illustrating the operation of this section 4.02(3). (4) Control. A subordinate organization is subject to the control of a central organization if:

(a) 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;

(b) The central organization appoints a majority of the subordinate organization’s officers;

(c) 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;

(d) A majority of the subordinate organization’s officers are officers of the central organization; or

(e) The central organization and the subordinate organization enter into a written agreement that evidences the central organization’s control over the subordinate organization’s activities and operations. For example, the written agreement may contain provisions that describe an alternative governance structure in which the central organization must approve the election of the subordinate organization’s directors or has the right to remove directors at any time with or without cause. Alternatively, the central organization may enter into a management agreement with the subordinate organization giving it direct control over the subordinate organization’s activities and operations.

(5) Example of general supervision when not all subordinate organizations are required to file annual information returns or notices.

(a) Central organization A is described in § 501(c)(3). A has a group exemption letter for subordinate organizations described in § 501(c)(3) that are organized and operated for charitable, educational, and religious purposes. A is a church and the subordinate organizations are churches, schools (below college level), and hospitals.

(b) A exercises general supervision over A’s subordinate organizations that are hospitals by annually obtaining, reviewing, and retaining copies of those subordinate organizations’ annual information returns and by annually providing each hospital an electronic link to the current version of Publication 557, Tax-Exempt Status for Your Organization, available on irs.gov, which provides information about the requirements to maintain tax-exempt status under § 501(c)(3) and annual filing requirements.

(c) A exercises general supervision over A’s subordinate organizations that are churches and schools by annually providing each church and school an electronic link to the current version of Publication 1828, Tax Guide for Churches & Religious Organizations, available on irs. gov, which provides information about the requirements to maintain tax-exempt status under § 501(c)(3). A is not required to annually obtain, review, or retain information on the finances, activities, and compliance with annual filing requirements of the subordinate organizations that are churches or schools because those subordinate organizations are not required to file annual information returns or notices pursuant to § 1.6033-2(g)(1)(i).

.03 Organizations eligible for initial inclusion in a group application, or subse- quent addition to a group exemption letter, as subordinate organizations.

(1) In general. An organization described in § 501(c) is eligible for initial inclusion in a group application, or subsequent addition to a group exemption letter, as a subordinate organization if it meets the requirements of section 4.03(2) of this revenue procedure and is not described in section 4.04 of this revenue procedure.

(2) Requirements for initial inclusion in a group application, or subsequent addition to a group exemption letter, as a subordinate organization. In addition to being affiliated with the central organization and subject to its general supervision or control, all subordinate organizations initially included in a group application, or subsequently added to a group exemption letter, must meet the requirements of this section 4.03(2) (except as provided in sections 12.02(2) and 12.02(3) of this revenue procedure, regarding requirements applicable to preexisting subordinate

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organizations after a transition period and requirements not applicable to preexisting subordinate organizations).

(a) Matching requirement. All subordinate organizations under a group exemption letter must be described in the same paragraph of § 501(c). Subordinate organizations are not required to be described in the same paragraph of § 501(c) as the central organization.

(b) Uniform purpose statement require- ment. Subordinate organizations that share the same purpose must have a uniform purpose statement in their governing instruments (for example, a charter, trust indenture, articles of association, etc.). If one or more subordinate organizations covered by a group exemption letter have a purpose that is different from the purpose of other subordinate organizations covered by the letter, the subordinate organizations that share a purpose must include the same uniform purpose statement in their governing instruments. For example, if a group exemption letter includes subordinate organizations that are schools and hospitals, the subordinate organizations that are schools must include the same uniform purpose statement in their governing instruments and the subordinate organizations that are hospitals must include the same uniform purpose statement in their governing instruments. The uniform purpose statement must generally describe the purpose of the subordinate organizations.

(c) Annual accounting period require- ment. Subordinate organizations included on a group return filed by the central organization on behalf of those subordinate organizations must be on the same annual accounting period as the central organization (see § 1.6033-2(d) for information on filing group returns).

.04 Organizations not eligible for ini- tial inclusion in a group application, or subsequent addition to a group exemption letter, as subordinate organizations. The following organizations cannot be initially included in a group application, 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, pursuant to § 509(a)(3)(B) (iii), is operated in connection with one or more organizations described in § 509(a) (1) or (2) (that is, an organization classified as a Type III supporting organization under § 509(a)(3) and § 1.509(a)-4(i));

(4) A qualified nonprofit health insurance issuer described in § 501(c)(29); and

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

.05 Continued inclusion in a group exemption letter. A subordinate organization initially included in a group application, or subsequently added to a group exemption letter, must continue to satisfy sections 4.02, 4.03, and 4.04 of this revenue procedure to remain a subordinate organization under the group exemption letter.

.06 Authorization for initial inclusion in a group application, or subsequent addition to a group exemption letter, as a subordinate organization.

(1) In general. A subordinate organization must authorize the central organization to include the subordinate organization in a group application or to add the subordinate organization to an existing group exemption letter. This authorization must be in writing, and it must be signed by an officer of the subordinate organization with personal knowledge of the facts and with authority to legally bind the subordinate organization.

(2) Removal. The authorization described in this section 4.06 must acknowledge that the central organization may remove the subordinate organization from the group exemption letter with or without cause, in accordance with section 8.02(2) of this revenue procedure. .07 Employer identification numbers (EINs). A central organization, and each subordinate organization, must have its own EIN. The central organization must obtain an EIN prior to filing its application, and each subordinate organization (or the central organization on a subordinate organization’s behalf) must obtain an EIN prior to its initial inclusion in a group application or subsequent addition to a group exemption letter. If, pursuant to § 1.6033-2(d), a central organization elects to file a group return for two or

more subordinate organizations, the central organization must obtain an EIN (separate from the central organization’s EIN) that is issued solely for the purpose of the group return.

.08 Annual information return or notice. A central organization generally must file its own annual information return or notice unless an exception applies. Each subordinate organization initially included in a group application, or subsequently added to a group exemption letter, generally must also file an annual information return or notice or have its information included in a group return described in § 1.6033-2(d) filed by the central organization unless an exception applies.