Group Exemption

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Group Exemption

A determination by the IRS that several organizations have tax exempt status due to connection to a single, parent non-profit organization. It should be noted that this tax exempt status may be given even before the parent organization has received 501(c)3 status.
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IRS officials have reservations about group exemptions in general, and have suggested that the recent revocation of tax-exempt status for roughly 275,000 groups that failed to file Form 990-N returns for three consecutive years might indicate that parent organizations are not exercising control over their chapters to make sure they file the return as required.
In a report to the IRS this past summer, the Advisory Committee on Tax Exempt and Government Entities (ACT) recommended that the IRS retain the group exemption process but eliminate group returns and require every chapter or subordinate organization to file their own Form 990.

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