The Catholic University of America

 

Finance: Finance
Scholarships, Fellowships and Stipends and Their Taxability Policy

Approved by: President
History: Issued    -- November 22, 2011  
  Revised  --  
Related Policies: Undergraduate Financial Aid; Graduate Financial Aid; Non Resident Alien Payment Policy; Employment Benefits Tuition Assistance Policy; Grants and Contracts Policy
Additional References:  
Responsible Official: Controller tel. (202) 319-5031
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I.       Introduction
 
The University provides payments to students for a variety of purposes and from several funding sources. This policy defines University responsibilities relating to reporting and withholding requirements for scholarships, fellowships and other payments to students. This policy is intended to assist departments in determining whether such payments to students are truly a scholarship or fellowship, or compensation for services rendered. To be considered a scholarship or fellowship, a payment does not need to be formally designated as such. A scholarship or fellowship payment may be in the form of a reduction in the amount owed by the payee to the University for tuition, room or board, or other fees.
 
II.       Definitions
 
A.         Scholarship: Generally, a scholarship is an amount paid for the benefit of the student that aids the student in the pursuit of studies at an educational institution.
 
C.         Fellowship: Generally, a fellowship is amount paid for the benefit of an individual to aid in the pursuit of study or research, usually at the graduate level. 
 
D.         Stipend: Generally, a stipend is a scholarship, fellowship, or other payment to a student for which services are required in return, even if all candidates for a degree must perform those same services to receive the degree.
 
III.      Taxability of Payments
 
A.             U.S. Citizens or Resident Aliens
 
If a payment or portion of a payment awarded to a U.S. citizen or resident alien for the purpose of study at the University is for services rendered, then the payment is considered wages[1], is taxable and subject to normal income tax withholding requirements, and must be reported to the IRS by the University. Such payments are taxable whether or not they come in the form of a scholarship, stipend, or fellowship.
 
When a department requests payment for a student the department first must identify whether any specific duties are required to be performed in exchange for the payment. If so, the payment is taxable. Duties that give rise to the taxability of payments include teaching, research, or the completion of any other specific tasks, even if those services are required of all candidates for the degree. Accordingly, all research assistantship and teaching assistantship payments are taxable and will be included in gross taxable income.   If no duties are required in exchange for a payment, the department must certify to that effect.
 
If no services or work are required in exchange, a scholarship or fellowship will be tax-free, if all of the following criteria are met:
 
1.    Qualified Scholarship or Fellowship: The amount is used by the student to pay tuition and fees required for enrollment at the University or fees, books, supplies and equipment required by courses being taken at the University;
 
2.    Candidate for a Degree: Whether undergraduate or graduate, the recipient must be pursuing studies or conducting research at the University during the semester for which the payment is made to meet the requirements for an academic or professional degree conferred by the University.
 
3.    Purpose: The payment must be for the purpose of studying or conducting research at the University.
 
Payments for room and board, and payments of living allowances, even if paid in the context of a scholarship or fellowship, are taxable (except for room and board waivers for resident advisors living in the dormitories and similar positions).
 
Other payments generally are taxable. Students should consult IRS publication 970 for specific information.
 
NOTE: The student may or may not end up owing tax depending on his or her overall annual income.  However, that determination is the responsibility of the student as taxpayer, and does not alter the University’s obligation to report the payment(s) as taxable.
 
B.                Foreign Students and Scholars
 
This policy does not cover payments to foreign students and scholars. A scholarship, stipend or fellowship paid to a non-resident alien may or may not be taxable. While payments received as a qualified scholarship, according to the criteria above, are not taxable, a tax treaty between the alien’s country and the U.S. may override the U.S. income tax rules. Accordingly, non-resident aliens should contact the Office of International Student and Scholar Services to complete the processes necessary to take advantage of alien’s country’s tax treaties.  
 
IV.       Required Approval of Payments
 
All payments to graduate and post-graduate students, whether or not for payment of work duties required by the payment, must be processed through and approved by the Office of the Provost. 
 
All payments to undergraduate students for payment of work duties must be processed through and approved by the Office of Human Resources. All payments to undergraduate students for Scholarships must be processed through and approved by the Office of Student Financial Aid.
 
V.        Exceptions
 
Tuition reductions made to employees under the University’s Tuition Assistance Plan or the tuition exchange plan are not covered under this policy but are covered under the Tuition Assistance Policy or the Tuition Exchange Policy.
 
Room and board waivers and other payments to resident advisors and similar positions required to live on campus are generally not taxable but such payments are not covered under this policy.  
 
This policy does not cover whether stipends, fellowships or other student payments are allowable under a sponsored grant or contract. Not all awards allow for tuition remission and/or fellowships. Grant restrictions that are more restrictive than University policy will override University policy.
 
 


[1] Although services are required, the payments from two programs are specifically designated as being nontaxable Scholarships, those being the National Health Services Corp Scholarship Program under section 338 A(g)(1)(A) of the Public Health Services Act and the Armed Services Health Professions Scholarship and Financial Assistance Program under subchapter 1 of chapter 105 of Title 10 of the United States Code.