New IRS Guidance on Group Exemptions and Overtime Deduction

The IRS has released information on the new process for obtaining group exemption letters, along with frequently asked questions (FAQs) related to the new overtime deduction.  

Updated Process for Obtaining Group Exemption Letters

On January 20, 2026, the IRS issued Revenue Procedure 2026-8, which provides long-awaited guidance on how organizations may now request group exemption determination letters. This supersedes Revenue Procedure 80-27, 1980-1 C.B. 677 (as modified), which had governed the process until the IRS paused group exemption determinations in May 2020. 

The Revenue Procedure provides direction on several key areas, including: 

• The minimum number of subordinate organizations a central organization must have to apply for a group exemption determination letter 
• Whether a central organization may have more than one group exemption 
• The type of relationship required between a central organization and its subordinate organizations 
• What types of organizations qualify as subordinate organizations 
• The process for obtaining a group exemption, which includes filing an electronic Form 8940 (revised to include group exemption determination requests) and paying a $3,500 user fee

You can review Revenue Procedure 2026-8 on the IRS website.

New Overtime Deduction FAQs

On January 23, 2026, the IRS issued FAQs regarding the new deduction for qualified overtime compensation created under the One Big Beautiful Bill Act (OBBBA). The new FAQs address topics such as:

• The definition of qualified overtime compensation for purposes of the deduction
• How employees can determine whether they are exempt from the Fair Labor Standards Act (FLSA) and therefore exempt from overtime pay
• The amount of the potential overtime deduction and whether there are limitations
• The steps an overtime-eligible employee should take if their employer doesn’t provide information about the amount of qualified overtime compensation they received

The FAQs also include links to additional IRS and Department of Labor resources on overtime pay and the FLSA.