A Group Exemption Letter (GEL) is a special communication from the Internal Revenue Service of its ruling or determination granting tax exempt status to a central organization, on group basis, under 26 U.S.C.аза501(c). By virtue of a GEL, subsidiary organizations of the group affiliated to the concerned central organization also get the tax exempt status, provided the said parent body has applied on their behalf for group exemption.
To obtain a GEL, at the first instance the flagship organization must alone apply for and obtain own Tax Exemption Letter recognizing its tax exempt status under 501 (c) (3). Thereafter the central organization may apply for GEL for any one or more subsidiaries wishing to function under the umbrella of its exemption. With the grant of group exemption, the central organization passes on to its associate concerns the benefit of tax exempt status under 501 (c) (3), who can continue to enjoy the same as long as they comply with the IRS guidelines set by the central organization.
The distinct advantage that GEL offers to subordinates is that they can avoid the burden of filing individually applications for exemption with separate fees. Moreover, they are also spared of the mandatory four year waiting period. Further, by virtue of the group exemption, subsidiaries also like the parent outfit enjoy the privilege of tax deductible donations.
(More:http://www.irs.gov/pub/irs-tege/eotopica87.pdf
http://www.irs.gov/irm/part25/ch07s03.html)
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