Group Ruling Questionnaire


By Tod Wilson

The IRS is asking a group of 2,000 501(c)(3) central organizations with group exemptions to complete an on-line questionnaire in order to help the IRS better understand how these organizations function and meet their annual filing requirements. The questionnaire comes out of a report issued by the Advisory Committee on Tax Exempt and Government Entities (ACT) in June 2011, which recommended that the IRS retain the group ruling procedures but eliminate the option to file group Form 990 returns.

The first batch of questionnaires was mailed to randomly selected group exemption holders in October. Completion of the questionnaires is optional, but encouraged, and organizations have 60 days to respond to the on-line survey.

Group exemptions allow affiliates of a central organization or “parent” to qualify for tax-exemption by virtue of their relationship to that “parent” rather than applying for exemption on their own. Exemption is recognized in a “group members ruling.” Members of the group ruling, or subordinates, have the option of filing a separate Form 990 or be included in a group return with other subordinates. Subordinate organizations may file a group Form 990, which relieves the individual subordinates from the burden of filing separate returns.

The IRS hopes the questionnaire will educate all group members regarding the relationship between the central or parent organization and each of the subordinates.

The questionnaire is to be completed by the parent organization and consists of 80 questions covering the following topics:

1. Demographic information about group members
2. Communication with subordinates
3. Relationship with subordinates
4. Services provided to subordinates
5. Process by which subordinates are added to the group
6. Tax compliance
7. Annual group exemption update process

The ACT report made a number of additional recommendations to the IRS that could significantly impact organizations with group exemptions. Exempt organizations with a group ruling that receive the questionnaire may wish to contact Schneider Downs for assistance in completing the form and to discuss group ruling responsibilities.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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