The 2026 tax year is ushering in several critical administrative and compliance updates from the IRS that every tax-exempt organization in Virginia and Washington DC must know. These changes affect everything from how an organization notifies the IRS of its intent to operate (Form 8976) to sweeping changes for central organizations that manage affiliated chapters (Group Exemptions). Ignoring these updates can lead to rejected filings, processing delays, or even revocation of tax-exempt status. 1. Form 8976 (Section 501(c)(4) Organizations): Mandatory E-Filing via Pay.govStarting March 9, 2026, organizations applying for recognition under Section 501(c)(4)—which includes social welfare organizations and certain advocacy groups—must submit Form 8976, Notice of Intent to Operate, exclusively through Pay.gov . The IRS has retired the legacy Electronic Notice Registration System. Filers who used the old system have only 30 days from March 9, 2026, to retrieve copies of past filings. The $50 user fee must be paid directly through Pay.gov, and only electronic submissions are accepted (no paper form exists) . 2. Revenue Procedure 2026-8: The Group Exemption OverhaulPerhaps the most significant change is the reopening and modernization of the Group Exemption program under Revenue Procedure 2026-8, effective January 20, 2026 . This impacts central organizations (e.g., national chapters of civic leagues, religious denominations) that hold a group exemption letter for their local subordinates. Key changes include: Central organizations must have at least five subordinates to obtain a new ruling . Central orgs must demonstrate “general supervision or control” over subordinates, potentially through written agreements. A new required annual filing: Supplemental Group Ruling Information (SGRI) . Compliance deadline for existing group rulings: January 22, 2027 . Failure to file SGRI or demonstrate adequate control may result in revocation of the entire group’s exemption. 3. General Compliance & GovernanceBeyond these specific form changes, the IRS continues to emphasize governance. The Form 990 remains the primary disclosure document. The IRS expects organizations to thoroughly answer questions on Part VI (Governance, Management, and Disclosure), including documenting processes for whistleblower policies, document retention, and compensation approval. For organizations with $750,000 or more in federal grants, the Single Audit rules now reflect the new procurement thresholds (micro-purchase threshold increased to $50,000) . With the political focus on the nonprofit sector, having a clean, audit-ready Form 990 is the single best defense against any future scrutiny. Given the volume of changes, from the shift in Virginia conformity to these specific IRS filing updates, professional guidance is not a luxury—it is a necessity. Nova Tax & Accounting Services is a local firm dedicated to providing Assurance and Compliance for Nonprofits . We offer Form 990 preparation, Audit & Review services, and Consulting to help you implement the internal controls and accounting systems necessary to meet these evolving standards. By partnering with us, you ensure that your organization remains compliant, transparent, and focused on its mission in 2026 and beyond.

Amidst a political climate of “saber-rattling” regarding tax-exempt organizations, leaders of nonprofits in Washington DC, Ashburn, and across Virginia are increasingly concerned about an IRS crackdown. However, a nuanced analysis of the facts reveals a more complex picture than simple headlines suggest. According to Jeffrey S. Tenenbaum, managing partner at Tenenbaum Law Group and an expert in nonprofit law, while there has been significant rhetoric, there has been no meaningful, widespread IRS crackdown threatening the tax-exempt status of most organizations . In fact, the administration has cut the number of IRS auditors, leaving very few to engage in aggressive, large-scale audits . Nevertheless, this does not mean nonprofits are off the hook. The IRS is shifting its enforcement strategy. There is a notable trend toward moving enforcement duties from the IRS to the Department of Justice, which is a significant change. “I know exactly what’s involved in litigation, and I know exactly what’s involved in an IRS audit and appeal,” Tenenbaum noted. “The two share virtually no similarity” . Litigation is far more resource-intensive and public. Furthermore, the primary administrative threats to an organization’s tax-exempt status remain threefold: (1) automatic revocation for failing to file Form 990 for three consecutive years; (2) a standard IRS audit, which has due process rights and appeals; and (3) suspension for being designated as supporting or engaging in terrorism under IRC Section 501(p) . For the vast majority of well-governed nonprofits, the most immediate and actionable threat is not a politically motivated audit, but an administrative lapse in filing. However, the IRS has also reopened and overhauled its group exemption program under Revenue Procedure 2026-8, effective January 20, 2026 . This is a major development for central organizations (like national associations or religious denominations) that oversee local chapters. The new rules impose stricter governance standards, requiring central organizations to demonstrate “general supervision or control” over subordinates, potentially through written agreements, and to file annual Supplemental Group Ruling Information (SGRI) . The compliance deadline for updating existing group exemptions is January 22, 2027 . Failure to comply could result in termination of the entire group’s exemption. For the average independent nonprofit, the path to staying audit-ready involves mastering the basics of public charity compliance. The IRS continues to prioritize governance, transparency, and accurate reporting. The introduction of the universal charitable deduction and the new 0.5% AGI floor for itemizers under the OBBBA will change donor behavior, but they do not change the organization’s filing obligation . Nonprofits must ensure their Form 990 accurately reflects executive compensation, conflict of interest policies, and program service accomplishments. The IRS uses this form as a primary screening tool for audit selection. At Nova Tax & Accounting Services, we specialize in Form 990 preparation and Assurance and Compliance for Nonprofits . We help organizations implement the internal controls and documentation practices that minimize audit risk and demonstrate the highest level of financial transparency, ensuring you are prepared for any level of scrutiny, regardless of the political climate.

One of the most overlooked but financially impactful changes in Virginia’s 2026 decoupling legislation involves the treatment of business interest expense. Under the federal Tax Cuts and Jobs Act (TCJA), IRC Section 163(j) generally limits a business’s deduction for net interest expense to 30% of its adjusted taxable income (ATI). Any interest expense that is “disallowed” under this limit can be carried forward indefinitely. For state tax purposes, many states, including Virginia, historically allowed a similar add-back and deduction for disallowed interest. However, under HB 29, Virginia has significantly tightened its rules. For tax years beginning on or after January 1, 2025, Virginia has decreased its deduction for disallowed business interest expenses from 50% to just 20% of the interest disallowed on the federal return . This means that if a Virginia business has $100,000 of interest expense disallowed federally under Section 163(j), it can only deduct $20,000 of that amount on its Virginia return, with the remaining $80,000 representing a permanent, not temporary, difference. This change dramatically increases the state tax liability for leveraged businesses, including real estate investment entities, private equity-owned portfolio companies, and capital-intensive manufacturers. The decoupling from federal interest deduction rules creates a permanent “Virginia-only” add-back, directly impacting cash flow and effective tax rates. Businesses need to model the impact of this change immediately. At Nova Tax & Accounting Services, our Accounting & Bookkeeping and tax strategy teams can help you calculate the precise impact of the Section 163(j) decoupling and explore restructuring options to mitigate its effects.