The Internal Revenue Service (IRS) sometimes recognizes a group of organizations as tax-exempt if they are affiliated with a central organization and have similar structures, purposes, and activities. The IRS delegates some of its responsibility to central organizations to streamline the process for organizations to be recognized as tax-exempt organizations under the 501(c)(3) tax code. This is to create an administrative convenience for the IRS and avoids the need for each of the subordinate organizations to apply for exemption individually. A group exemption letter has the same effect as an individual exemption letter.
The major benefit of being included in a group exemption is that your organization does not have to file a separate application for exemption with the IRS while still being able to verify that the organization is exempt from federal income taxes under 501(c)(3) of the Internal Revenue Code. Inclusion in the group ruling is free and less time-consuming since GCFA, not the IRS, processes the application for inclusion. Consequently, subordinates do not receive individual exemption letters directly from the IRS.
We have found that recently, grantors/vendors have switched to an automated system for electronic verification of exemption and want to see an organization listed on an IRS database. As a subordinate organization, your organization will not automatically appear on an IRS database. The IRS has two databases: (1) the IRS Select Check Tool and (2) the Exempt Organizations Business Master File (“EO BMF”). Only organizations that apply directly to the IRS appear on the IRS Select Check Tool, so as a group ruling subordinate, your organization will not appear on this list. Further, it is common for church group ruling subordinates to be left off the EO BMF because church group ruling holders are not required to file annual updates with the IRS. Because church group ruling holders are not required to submit an annual filing, we have found that the IRS does not automatically update the EO BMF even when the church group ruling holder submits information. We have found that we are able to send individual requests to the IRS and they will update the EO BMF. As part of receiving a new group ruling letter, you can ask for us to send this individual request to the IRS. Additionally, our online application contains an option to be listed on GuideStar, an online directory of U.S. charities and nonprofit organizations. Your organization’s listing on GuideStar can help verify your organization’s 501(c)(3) status with organizations like Amazon Smile, the Walmart Foundation, and Network for Good.Also, when trying to apply for grants online, we have found that organizations have the most success when they include the attached IRS Publication 4573 when emailing their group ruling letter to the grantor. Per Publication 4573, subordinate organizations are not required by the IRS to be listed on a database if their parent organization is listed. If you need to prove that GCFA in fact holds a group ruling, let us know, and we can provide a screenshot of GCFA’s listing on the IRS Select Check tool.