Rev. Proc. 72-41

Section 1. Purpose

This Revenue Procedure sets forth procedures under which recognition of exemption from Federal income tax under section 501(c) of the Internal Revenue Code of 1954 may be obtained on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization. This procedure relieves each of the subordinates from filing its own application for recognition of exemption.

Sec. 2. Issuance of Group Exemption Letters

.01 Under Revenue Procedure 72-4, C.B. 1972-1, 706, and this Revenue Procedure, the Internal Revenue Service will rule on requests of central organizations for group exemption letters.

.02 A subordinate included in a group exemption letter should not apply separately for recognition of exempt status, unless it no longer wants to be included in the group exemption letter or unless it is required to do so under section 2.03 below.

.03 A subordinate described in section 501(c)(3) of the Code may not be included in a group exemption letter if it is a private foundation as defined in section 509(a) of the Code. Such an organization should apply separately for recognition of exempt status, under the procedures outlined in Revenue Procedure 72-4.

Sec. 3. Definitions

.01 A group exemption letter is a ruling issued to a central organization recognizing on a group basis the exemption under section 501(c) of the Code of subordinate organizations on whose behalf the central organization has applied for recognition of exemption in accordance with this Revenue Procedure.

.02 A central organization is an organization which has one or more subordinates under its general supervision or control.

.03 A subordinate is a chapter, local, post, or unit of a central organization. It may or may not be incorporated. A central organization may be a subordinate itself, such as a state organization which has subordinate units and is itself affiliated with a national organization.

Sec. 4. Requirements For Inclusion in a Group Exemption Letter

.01 A central organization applying for a group exemption letter must obtain recognition of its own exempt status.

.02 It must also establish that the subordinates to be included in the group exemption letter are:

1. Affiliated with it;

2. Subject to its general supervision or control;

3. Exempt under the same paragraph of section 501(c) of the Code, though not necessarily the paragraph under which the central organization is exempt; and

4. Not private foundations, if the application for a group exemption letter involves section 501(c)(3) of the Code.

.03 Each subordinate must authorize the central organization to include it in the application for the group exemption letter. The authorization must be signed by a duly authorized officer of the subordinate and retained by the central organization while the group exemption letter is in effect.

Sec. 5. Filing Application For a Group Exemption Letter

.01 A central organization seeking a group exemption letter for its subordinates must obtain recognition of its own exemption by filing an application with the District Director of Internal Revenue for the district in which is located the principal place of business or principal office of the organization. For the form of application, see section 1.501(a)-1 of the Income Tax Regulations. Any application received by the National Office or by a District Director other than as provided above will be forwarded, without any action thereon, to the appropriate District Director.

.02 If the central organization has previously obtained recognition of its own exemption, it must indicate its employer identification number (EIN), the date of the letter recognizing its exemption, and the Internal Revenue Office that issued it. It need not resubmit documents already submitted. However, if it has not already done so, it must submit a copy of any amendment to its governing instruments or internal regulations as well as any information regarding any change in its character, purposes, or method of operation. .03 In addition to the information required to obtain recognition of its own exemption, the central organization must submit to the District Director the following information on behalf of those subordinates to be included in the group exemption letter:

1. A letter signed by a principal officer of the central organization setting forth or including as attachments:

(a) Information verifying the existence of the relationships required by section 4.02;

(b) A description of the principal purposes and activities of the subordinates;

(c) A sample copy of a uniform governing instrument (charter, trust indenture, articles of association, etc.), adopted by the subordinates; or, in the absence of a uniform governing instrument, copies of representative instruments;

(d) An affirmation to the effect that, to the best of his knowledge, the subordinates are operating in accordance with the stated purposes;

(e) A statement that each subordinate to be included in the group exemption letter has furnished written authorization to the central organization as described in section 4.03 above;

(f) A list of subordinates to be included in the group exemption letter to which the Service had issued an outstanding ruling or determination letter relating to exemption; and

(g) If the application for a group exemption letter involves section 501(c)(3) of the Code, an affirmation to the effect that, to the best of his knowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as defined in section 509(a) of the Code.

2. A list of the names, mailing addresses (including Postal ZIP Code), and employer identification numbers of subordinates to be included in the group exemption letter. A current directory of subordinates may be furnished in lieu of the list if it includes the required information and if the subordinates not to be included in the group exemption letter are identified.

.04 If the central organization does not have an employer identification number, it must submit a completed Form SS-4, Application for Employer Identification Number, with its exemption application. See Rev. Rul. 63-247, C.B. 1963-2, 612.

05. Each subordinate must have its own employer identification number even if it has no employees. The central organization must submit with the exemption application a completed Form SS-4 on behalf of each subordinate not having a number.

Sec. 6. Information Required Annually to Maintain a Group Exemption Letter

.01 In order to maintain a group exemption letter, the central organization must submit annually to the Internal Revenue Service the information specified in section 6.02 below.

.02 The central organization must submit annually within 45 days after the close of its annual accounting period the information set out below to the Philadelphia Service Center, 11601 Roosevelt Boulevard, Philadelphia, Pennsylvania 19155, Attention: EOR Branch. This information was previously required to be submitted to the National Office of the Internal Revenue Service:

1. Information regarding all changes in the purposes, character, or method of operation of subordinates included in the group exemption letter.

2. Lists of (1) subordinates which have changed their names or addresses during the year, (2) subordinates no longer to be included in the group exemption letter because they have ceased to exist, disaffiliated, or withdrawn their authorization to the central organization, and (3) subordinates to be added to the group exemption letter because they are newly organized or affiliated or they have newly authorized the central organization to include them. A separate list must be submitted for each of the three categories set out above. Each list must show the names, mailing addresses (including Postal ZIP Codes), and employer identification numbers of the affected subordinates. An annotated directory of subordinates will not be accepted for this purpose. If there were none of the above changes, the central organization must submit a statement to that effect.

3. The information required by section 5.031(a) through (g) above, with respect to subordinates to be added to the group exemption letter. However, if the information upon which the group exemption letter was based is applicable in all material respects to such subordinates, a statement to this effect may be submitted in lieu of the information required by paragraph (a) through (d) of section 5.031.

.03 Submission of the information required by this section does not relieve the central organization or any of its subordinates of the duty to submit such additional information as a District Director may require to enable him to determine whether the conditions for continued exemption are being met. See sections 6001 and 6033 of the Code and the regulations thereunder.

Sec. 7. Termination of Group Exemption Letter

.01 Termination of a group exemption letter will result in nonrecognition of the exempt status of all included subordinates. To reobtain recognition of exempt status in such cases, each subordinate must file an exemption application under the procedures outlined in Revenue Procedure 72-4 or a new group exemption letter must be applied for under this Revenue Procedure.

.02 If a central organization dissolves or ceases to exist, the group exemption letter will be terminated, notwithstanding that the subordinates continue to exist and operate independently.

.03 Failure of the central organization to submit the information required by section 6 above, or, if required, to file an annual return on Form 990, Return of Organization Exempt From Income Tax, or to otherwise comply with section 6001 or 6033 of the Code and the regulations thereunder, may result in termination of the group exemption letter on the grounds that the conditions required for the continuance of the group exemption letter have not been met. See Rev. Rul. 59-95, C.B. 1959-1, 627.

.04 The dissolution of a subordinate included in a group exemption letter will not affect recognition of the exempt status of the other included subordinates.

.05 If a subordinate covered by a group exemption letter fails to comply with section 6001 or 6033 of the Code and the regulations thereunder (for example, by failing to file Form 990, if required) and the Service terminates its recognition of the subordinate's exempt status, a copy of the termination letter to the subordinate will be furnished to the central organization. The group exemption letter will no longer be applicable to such subordinate, but will otherwise remain in effect. (It should be noted that if Form 990 is required to be filed, failure to file such return on time may also result in the imposition of a penalty of $10 for each day the return is late, up to a maximum of $5,000. See section 6652 of the Code and the regulations thereunder.)

Sec. 8. Revocation of a Group Exemption Letter

.01 If the Service determines, under the procedures described in section 11 of Revenue Procedure 72-4 that a central organization no longer qualifies for exemption under section 501(c) of the Code, the group exemption letter will be revoked. The revocation will result in nonrecognition of the exempt status of all included subordinates. To reobtain recognition of exempt status in such cases, each subordinate must file an exemption application under the procedures outlined in Revenue Procedure 72-4, or a new group exemption letter must be applied for under this Revenue Procedure.

.02 If the Service determines, under the procedures described in section 11 of Revenue Procedure 72-4, that a subordinate included in a group exemption letter no longer qualifies for exemption under section 501(c) of the Code, the central organization and the subordinate will be notified accordingly, and the group exemption letter will no longer apply to such subordinate, but will otherwise remain in effect.

.03 If a subordinate organization has been disqualified for inclusion in a group exemption letter as described in paragraph .02 of this section and thereafter wishes to reobtain recognition of exempt status, the central organization should, at the time it submits the information required by section 6 above, submit detailed information relating to the subordinate's qualification for reinclusion in the group exemption letter.

Sec. 9. Instrumentalities or Agencies of Political Subdivisions

An instrumentality or agency of a political subdivision that exercises control or supervision over a number of organizations similar in purposes and operations, each of which may qualify for exemption under the same paragraph of section 501(c) of the Code, may obtain a group exemption letter covering those organizations in the same manner as a central organization. However, the instrumentality or agency must furnish evidence that it is a qualified governmental agency. Examples of organizations over which governmental agencies exercise control or supervision are Federal credit unions, State chartered credit unions, and Federal land bank associations.

Sec. 10. Effect on Other Documents.

Revenue Procedure 68-13, C.B. 1968-1, 764, is superseded.

Sec. 11. Effective Date

This Revenue Procedure is effective September 11, 1972, the date of its publication in the Internal Revenue Bulletin.