25.7.3  Group Exemption Procedures  (09-20-2006)
Overview of Group Exemption Procedures

  1. A central organization that is tax exempt under IRC 501(c) may obtain recognition of exemption, on a group basis, for subordinate organizations that are under its general supervision or control. The purpose of the group exemption is to relieve subordinate organizations from filing their own exemption applications.  (12-01-2002)
Group Exemption Requirements

  1. Central organizations applying for a group exemption letter must obtain recognition of their own exempt status. The requirements for inclusion in a group exemption letter are contained in Rev. Proc. 80–27, 1980–1 C.B. 677.

  2. Central organizations must establish that the subordinates included in the group exemption letter meet all these criteria:

    1. Affiliated with it at the close of its annual accounting period.

    2. Subject to its general supervision or control.

    3. Exempt under the same paragraph of IRC 501(c), although not necessarily the same paragraph under which the central organization is exempt.

    4. Not a private foundation, as described in IRC 509(a), if the application requests exemption under IRC 501(c)(3).

    5. All on the same accounting period as the central organization, if included in a group return.

    6. Not organized and operated in a foreign country.

  3. Subordinate organizations, which are exempt under IRC 501(c)(3), are subject to the 15-month provisions of IRC 508(a) if they elect recognition from their creation date. A group exemption letter may be issued if:

    1. They have not organized one or more of the subordinates within the 15-month period before the date of application submission.

    2. All subordinates included in the application are willing to be recognized as exempt only from the date of application.

  4. To be included in the group exemption letter, each subordinate organization must authorize the central organization in writing. The authorization must be signed by a duly authorized officer of the subordinate and the letter must be retained by the central organization for as long as the group exemption is in effect.  (12-01-2002)
Area Office (AO)/Headquarters Responsibilities

  1. Prior to May 15, 1976, all group exemption applications were submitted to National Office (now referred to as TE/GE Headquarters (HQ)).

    1. Since then, all applications, except those meeting certain criteria are considered by Cincinnati or the AO which has jurisdiction for the area in which the central organization’s principal place of business is located.

    2. If the central organization changes location because new officers are installed, the AO of jurisdiction remains with the original district, unless, in the interest of efficient tax administration, the Service determines the AO should be changed.

  2. HQ or AO, as applicable, are responsible for:

    1. Issuing group exemption ruling or determination letters.

    2. Preparing the EO/BMF vouchers, EO/BMF Entity change, Form 2363–A.  (12-01-2002)
Establishing and Changing Group Exemptions

  1. The following procedures apply for establishing and changing group exemption designations on the EO/BMF.  (12-01-2002)
New Group Exemptions

  1. When a group exemption letter is ready to be issued, prepare a Form 2363A voucher in duplicate.

  2. Stamp or annotate Form 2363A in the upper margin "New Group Exemption Letter" and leave the Floating Field area (New Group Exemption Number) blank.

  3. Use Form 3210, Document Transmittal, to send the original Form 2363A to the Ogden Submission Processing Center (OSPC), along with a copy of the listing of the subordinates included in the group determinations.

    1. Include all EINs known and attach any SS–4s.

    2. Annotate the subordinate listing, " Form SS-4 previously forwarded to service center" for each entity, if appropriate.

  4. File duplicate copy of Form 2363A in the administrative case file for any follow-up action (i.e., shipment lost in transit, unpostables, etc.).

  5. Enter the following information on the Form 2363A:

    1. Parent’s name control and EIN (Document, Transaction and Definer Codes may be left blank)

    2. Appropriate Subsection Code (SS)

    3. Foundation Code (TF), if the SS is 03

    4. Appropriate Classification Code(s) (CL)

    5. Status Code and Date (ST)

    6. Appropriate Affiliation Code (AF)

    7. Ruling Date of the group ruling (RD)

    8. Type of Organization (TO)

    9. Fiscal Year (FY)

    10. File Folder Number (FF)

    11. NAICS and NTEE Code(s)

    12. Deductibility Code Year (DY)

    13. Pension Plan (PP)

    14. Between 10–35 characters in the remarks area (RM)

    15. Parent’s name, leave address area blank

    16. Appropriate Form 990 filing requirement (see (6))

    17. If appropriate, enter a Form 990-T Filing Requirement

    18. Preparer’s name and symbols

  6. Use these codes to indicate the appropriate Form 990 filing requirement:

    CODE Form 990 Filing Requirement
    Code 1 All subordinates over $25,000 gross receipt, or if unknown.
    Code 2 All subordinates under $25,000.
    Code 6 Church or integrated auxiliary of a church. Enter an asterisk (*) in the 990 box if the group ruling is for a church.


    Enter in the shaded area to the right of the filing requirements section: "Enter 1 if N/A or 6, if a true church or unknown. " This will alert OSPC personnel that a non-integrated auxiliary of a church filing a Form 990 is given a Filing Requirement of 1, while an integrated auxiliary of a church, or if it is unknown whether an entity is integrated or non-integrated, will be given a Filing Requirement of 6.

    Code 7 501(c)(1) government instrumentality.  (12-01-2002)
Changing Group Exemptions

  1. The following procedures apply for changing group exemptions.

    IF changing… THEN…
    the group exemption prepare Form 2363A.
    an existing group exemption process Form 2363A for the central (parent) organization and affected subordinates.
    from an individual to group exemption Document Code 80 (TC 0l6).

  2. If the group ruling affects all subordinates, update all entities covered under the group ruling by using the GEN in the "From GEN" field of the Floating Field area and the Name Control and EIN of the parent. This will effect a change to all entities established with the specific GEN entered, e.g., Subsection/Classification change for all entities.


    Use the correct GEN, Name Control and EIN of the parent, as both are validated by the computer and if either does not validate, the change will be unpostable.

  3. AOs must prepare mass change Form 2363A, Document Code vouchers as follows:

    1. Floating Fields

    2. Enter new data as appropriate

    3. Fixed Fields: Leave blank (cannot be used for mass changes)

    4. Remarks Section

    5. Check Document Code 81 at the top

    6. Forward mass posting voucher under separate cover to the local Terminal Input Function

    7. In addition to the mass posting voucher, prepare another Form 2363A marked "Pilot Voucher" in the upper right-hand corner, entering the same data elements as provided in IRM (5) (to be renumbered under IRM 4.5).

  4. Only the following fields can be changed in mass:

    1. Subsection/Classification/Foundation Codes

    2. Status Code and Date

    3. New GEN with Affiliation Code entered and Ruling Date (merger)

    4. Deductibility Code and Year

    5. Activity codes (NAICS and NTEE)

    6. DOL (only if all subordinates are located within the same district)

    7. File Folder Number

    8. Abbreviation Name

    9. Fiscal Year/Month (only if all subordinates are included in a group return)  (12-01-2002)
Group Exemption Mergers

  1. Upon completion of the AOs review and approval process, forward group ruling merger correspondence, i.e., the merger of two group rulings or two group rulings merging to form a new group, to Ogden Service Center, Attn: Entity Control Function. OSPC is responsible for:

    1. Updating the BMF (except name and address changes for subordinates) to reflect the mergers.

    2. Preparing and distributing new pilot vouchers to the administrative file in Cincinnati.

  2. If a subordinate has already been recognized as exempt under IRC 501(c), the AO or HQ, applicable, will prepare Form 2363A to change the individual ruling/determination status to a group exemption status.  (12-01-2002)
OSPC Responsibilities

  1. Instructions for processing new group exemption and supplemental group ruling information at the OSPC are in the process of being revised.  (12-01-2002)
Supplemental Group Ruling Information (SGRI)

  1. To maintain a group exemption letter, the central organization must submit annually to the IRS service center, 90 days prior to the close of its annual accounting period, various statements and listings as described in Rev. Proc. 80-27. Group returns are filed at OSPC which processes EO returns.

  2. OSPC aids central organizations in this task by mailing a "List of Parent and Subsidiary Accounts" to each central organization (except Churches). This list is generated six months prior to the end of the central’s accounting period and contains:

    1. Central’s EIN, name, address, GEN and filing requirement

    2. Each subordinate’s EIN, name, address, filing requirement and status (active or inactive).

  3. Central organizations may use this listing to provide annual SGRI updates on their subordinate units. However, they may submit their own listing provided it contains all information required by Rev. Proc. 80–27.

  4. A "List of Parent Accounts" is generated by OSPC on a monthly basis, six months prior to the end of the parent’s accounting period. This list is distributed to the OSPC Entity Control Unit, and is used to control the receipt or non-receipt of a parent organization’s SGRI submission.

  5. OSPC must correspond with the central organization, if:

    1. The supplemental information is not received within 90 days prior to the end of the parents’ accounting period.

    2. Incomplete SGRI listings are received.

  6. If a reply is not received, transfer the case to the appropriate AO. The AO must take necessary action (termination/revocation) for failure to comply with Rev. Proc. 80–27.  (12-01-2002)
Group Exemption Roster

  1. The Group Exemption Roster, Document 6023, assists Service personnel in identifying organizations covered by group exemptions and provides key exemption data. It serves as a convenient reference to outstanding group exemptions in these situations:

    1. Processing applications for exemption

    2. Preparing vouchers for the BMF System

    3. Responding to requests for group exemption information

    4. Processing unpostable returns on Form 990, Return of Organization Exempt from Income Tax.

  2. The Roster is reprinted semiannually to reflect all active parent accounts as of the date of issuance. It contains a(n):

    1. Alphabetic listing of organizations covered by group exemptions in effect during the period covered by the Roster

    2. Numerical listing in Group Exemption Number (GEN) order

    3. Table of BMF abbreviations for group exemption organizations, where applicable. It also identifies the number of organizations with the same GEN.

  3. The alphabetic listing for each group exemption includes the:

    1. Name of the organization

    2. City and State in which the central organization is located

    3. Subsection of IRC 501(c) under which the group is exempt

    4. Date of the group exemption letter

    5. Group exemption number (GEN)

    6. Parents’ EIN

    7. BMF Standard abbreviation for the organization (where applicable)

  4. The names of the central organizations have been rearranged and placed in alphabetical order as they appear on BMF.

  5. The table of BMF abbreviations lists the abbreviations in alphabetic sequence and is a cross-reference to the organization’s name as it appears in the main listing.

    TIP: Although the Group Exemption Roster is issued and distributed as a separate document, Service personnel may find it convenient to file the Roster with this IRM 7.3.3 as Appendix 1.  (12-01-2002)
Group Exemption Number (GEN) File

  1. The GEN File is a computer file maintained at the Martinsburg Computer Center (MCC) which controls the EO/BMF accounts of every parent or subordinate organization containing a GEN. It ensures that:

    1. Every group exemption has only one parent account.

    2. A subordinate account cannot be established unless a parent containing that GEN already exists.

    3. Invalid GEN’s or Affiliation Codes are not passed on to the EO/BMF.

  2. Every entity change transaction containing either a "From GEN" or "New GEN" compared to the GEN File prior to posting to the EO/BMF.

    1. Transactions failing to pass GEN File validity checks will unpost with Unpostable Code 370, and returned to the initiator.

    2. Transactions that pass GEN File validity checks will generate either new or updated accounts on the GEN File, and will post to the EO/BMF.

  3. The GEN File contains the following information:

    1. Parent EIN, Name Control, Affiliation Code and Organization Name

    2. Subordinate EIN, Name Control and Affiliation Code  (12-01-2002)
Group Returns

  1. Under conditions set forth in Reg. 1.6033–1(d), a central organization may file, in addition to its own annual information return, a group return on behalf of two or more of its subordinate organizations covered by a group exemption letter which are:

    1. Affiliated with such central organization at the close of its annual accounting period.

    2. Subject to the general supervision or control of the central organization.

    3. Tax exempt under the same paragraph of IRC 501(c), although not necessarily the same paragraph as the central organization.

    4. Filed on the basis of the established annual accounting period of the central organization.

  2. An agency of the Federal, State, or local Government, although not required to file information returns for itself, may file a group return on Form 990 on behalf of subordinates under its supervision covered by a group exemption letter.

  3. The group return may include only those exempt subordinates that have authorized the central organization in writing to include them in the return and have filed with the central organization statements specifying their gross income, receipts and disbursements, as well as such related information as is required to be stated in the group return.

  4. The group return is filed with the Director, OSPC, which processes EO returns and has jurisdiction for the area in which the central’s principal place of business is located. Filing a group return is in lieu of filing separate returns for each subordinate included in the group return.

  5. Attached to the group return are separate schedules including Names, addresses and ElNs of subordinates:

    1. Included in the group return.

    2. NOT included in the group return.

  6. Since exempt subordinate units may elect whether or not to be included in a group return, service center procedures provide that all subordinates included in a new group exemption letter will be established on the EO/BMF with a Form 990 Filing Requirement of "1" (gross receipts are $25,000 or more) , unless the central organization specifically states that a particular subordinate is never expected to exceed the gross receipts limit. This procedure ensures that subordinate units which do not elect to be included in a group return are checked for return filings.

  7. Some central organizations generally include all exempt subordinates in a group return and operate in such a manner as to eliminate the need for separate return controls on the EO/BMF for subordinates.

  8. Service Center processing of group returns includes:

    1. Perfecting the return

    2. Posting the receipt of the group return for the central organization

    3. Posting of satisfaction of Filing Requirements (TC 590) to the EO/BMF accounts of exempt subordinate organizations included in the group return

    4. Subsequent storage and maintenance of the return.

  9. When an exempt central organization files a separate return for itself and also files a group return for its subordinates, BMF will not accept both returns unless there are separate entity records, each with a different EIN.

    1. When there is only one entity record, OSPC will prepare Form 2363A to reflect the same entity data as that found on the pilot voucher entry except that the words "Group Return" will be added to the end of the name of the organization and a separate EIN will be assigned the new entity entry.

    2. The Deductibility Code will always be Code 2, and a Filing Requirement, Code 3 (990 — Group Return). This will permit both returns to be posted to BMF, one individual and one group return, but the group return entry will not appear in the Cumulative List.  (12-01-2002)
Federally-Chartered Organizations

  1. Certain organizations covered by group exemption letters and required to file EO returns (including both central and subordinate organizations) are not included on the EO/BMF. This includes subordinate units of Federally-chartered organizations exempt under IRC 501(c)(1) which are controlled and regulated by another Government agency and subject to the supervision, periodic audit and examination procedures of the agency. In these cases, an EO/BMF account exists for the central organization only.

    1. Federal Credit Unions

    2. Federal Deposit Insurance Corporation

    3. Federal Home Loan Banks

    4. Federal Land Banks

    5. Federal Intermediate Credit Banks

    6. Federal National Mortgage Association

    7. Federal Land Bank Associations (formerly National Farm Loan Associations)

    8. Federal Reserve Banks

    9. Federal Savings and Loan Insurance Corporation (FSLIC)

    10. Public Housing Administration

  2. State and municipal instrumentalities are not tax exempt under IRC 501(c)(1).

    • IRC 501(c)(1) refers only to instrumentalities of the United States. However, sections 1079 and 2813 of Public Law 98–369 substantially changed the manner in which Congress allows exemption to corporations under IRC 501(c)(1). In order for a corporation to establish IRC 501(c)(1) exemption on or after July 18, 1984, Congress must specifically provide for the corporation’s exemption in the Internal Revenue Code or in a non-Code provision of a revenue Act. Under section 2813 of Public Law 98–369, Congress enacted IRC 501(I) in which corporations receiving IRC 501(c)(1) exemption may be listed.

  3. Organizations exempt under IRC 501(c)(1) are not subject to the Form 990 filing requirement provisions of IRC 6033 if they are corporations which are wholly owned by the united States or an agency or instrumentality thereof.  (12-01-2002)
State-Chartered Credit Unions

  1. State-chartered credit unions covered by group returns, which are included in group exemptions, may be omitted from the EO/BMF where so determined by the District Director of jurisdiction.

    1. IRC 501(c)(14) provides exemption from federal income tax for credit unions without capital stock which are organized and operated for mutual purposes and without profit. State law determines whether organizations are credit unions for exemption purposes under IRC 501(c)(14). Generally, an organization which is formed under a State credit union law, and is subject to the supervision of a State agency, such as a State Banking Commissioner, is considered by the Service to be a State-chartered credit union.

    2. State-chartered credit unions are authorized in all States (except Alaska, Delaware, Hawaii, Nevada, South Dakota, Wyoming and the District of Columbia).  (12-01-2002)
State-Chartered Credit Union

  1. Rev. Rul. 60–364, 1960–2 C.B. 382 provides that a state agency may file a Form 990, group information return, for the exempt state-chartered credit unions under its supervision and control.

    1. The parent organizations filing group returns are usually controlling state agencies who are neither entitled to exemption under IRC 501(a), nor required to file Forms 990 on their own behalf. Most, but not all, state agencies filing a group return for credit unions in their states have obtained a group exemption from the Service.

    2. This presents an exception to other parent organizations which file group returns, since other parent organizations are assigned group exemption numbers and are required to file Forms 990 for themselves, in addition to any group return filed on behalf of their subordinates.

  2. Controlling state agencies that elect to file group returns for their state-chartered credit unions are processed on the EO/BMF according to whether or not the state has been issued a group exemption by the Service

    1. Group returns filed by states which have received group exemptions are processed by OSPC in the same manner as normal group returns, except that OSPC assigns a Form 990 Filing Requirement of " 3" (group return filer), and adds the words "group return " to the end of the parent’s name line.

    2. Group returns filed by states that have not received group exemptions are processed according to whether the parent organization has an account established on the EO/BMF.

    IF… THEN…
    Group returns filed by States that Assign these accounts a…
    do not have accounts on the EO/BMF are established on the MF via IDRS with Transaction Code 000, Form 990 Filing Requirement of "01" and add "group return" to the EO/BMF following the name line.
    have accounts on the EO/BMF are updated on the MF via IDRS with Transaction Code 016, Form 990 Filing Requirements of "01" and also add " group return" to the name line.

Exhibit 25.7.3-1  (12-01-2002)
State Chartered Credit Unions Group Exemptions and Group Returns

(Reference: Section 11.7.2)

Alabama X 1422   X   X  
Alaska (SEE NOTE BELOW)              
Arizona X 2111   X   X  
Arkansas     X   X   X
California X 1526   X   X  
Colorado X 1948   X   X  
Connecticut     X X     X
Delaware (SEE NOTE BELOW)              
District of Columbia (SEE NOTE BELOW)              
Florida X 2106   X   X  
Georgia X 1986   X     X
Hawaii (SEE NOTE BELOW)              
Idaho X 1231     X X  
Illinois X 3149     X X  
Indiana X 2000   X   X  
Iowa X 1369   X   X  
Kansas     X   X   X
Kentucky     X   X X  
Louisiana X 2026   X     X
Maine X 2048   X   X  
Maryland X 3189   X   X  
Massachusetts     X   X X  
Michigan X 1359   X     X
Minnesota X 708   X   X  
Mississippi X 2099   X     X
Missouri X 1984   X   X  
Montana X 2206   X     X
Nebraska X 1143     X X  
Nevada (SEE NOTE BELOW)              
New Hampshire X 3028   X   X  
New Jersey X 1332   X     X
New Mexico X 2397   X   X  
New York     X   X X  
North Carolina X 2032   X   X  
North Dakota     X   X   X
Ohio X 1990   X   X  
Oklahoma X 2407   X   X  
Oregon X 728   X   X  
Pennsylvania X 885   X   X  
Rhode Island     X   X   X
South Carolina X 1953   X     X
South Dakota (SEE NOTE BELOW)              
Tennessee X 1182   X     X
Texas X 2742   X   X  
Utah X 1349   X     X
Vermont     X   X   X
Virginia X 3194   X   X  
Washington X 1269     X X  
West Virginia X 2179     X X  
Wisconsin X 2157     X   X
Wyoming (SEE NOTE BELOW)              


State Chartered Credit Unions NOT Authorized

More Internal Revenue Manual