IRS Asks 2,000 Organizations With Group Exemptions to Complete Questionnaire

On October 15, 2012, the Internal Revenue Service (IRS) began contacting more than 2,000 randomly selected tax-exempt organizations with group exemption rulings, asking them to complete a lengthy questionnaire. The organizations contacted by the IRS are all parent organizations with at least one subordinate group or chapter.

The IRS questionnaire is designed to help the IRS better understand the relationship between parent organizations, which the IRS calls "central organizations," and their subordinates and the way the subordinates are fulfilling their Form 990 filing requirements. The IRS is beginning this inquiry in part because a significant number of subordinate organizations have had their tax-exempt status revoked for failing to fulfill their Form 990 filing requirements for three consecutive years.

Subordinate organizations gain tax-exempt status through a group ruling, which subjects the subordinate organization to the same rules and procedures as the parent organization but does not require the subordinate organization to apply separately for exemption (e.g., without filing Forms 1023 or 1024). See Rev. Proc. 80-27; Publication 4573, Group Exemptions. However, the IRS may revoke a group ruling and, therefore, a parent organization's exempt status for the parent organization's failure to properly oversee the activities of its subordinates.

The IRS questionnaire is a compliance check, not an examination or audit. A compliance check is a tool used by the IRS to help educate organizations about their reporting requirements and to increase voluntary compliance. See Publication 4386, Compliance Checks. Organizations receiving a questionnaire have 60 days from the date of the cover letter to complete and submit the questionnaire to the IRS (if needed, an organization may request an additional 30-day extension).