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Policy: IV.G.3

Issued: January 24, 1994

Owner: Investment & Tax Services

Latest Revision:

GUIDELINES FOR FELLOWSHIP DISCLOSURE

1.0 Purpose

This policy describes the general guidelines for disclosing fellowships.

2.0 Policy [Top]

2.1 Fellowship Disclosure

The IRS defines scholarships (grants made to students to further their education) and fellowships (grants to any individual to pursue additional study or training) to be "true" scholarships and fellowships, as long as they are not compensation for services.

According to Internal Revenue Service (IRS) guidelines, true fellowships cannot be granted on the condition of receiving services. If the fellowship is granted on such a condition, for example the teaching of a course, the individual should be classified as an employee and payment must be made through the payroll system and subject to appropriate taxes and withholdings.

The IRS tax code permits the exclusion of scholarships or fellowships from income up to the amount used for the payment of course-related expenses (i.e. tuition, fees, books, supplies and equipment). Stipends or living allowances paid as part of a scholarship or fellowship are considered taxable income subject to federal and state income taxes. The University is required to withhold federal taxes on such payments only to nonresident alien recipients not claiming treaty benefits. However, all recipients are required to report their scholarships and fellowships to the IRS by filing a yearly tax return, and to pay the requisite taxes.

Prior to authorizing payments to a fellowship recipient over and above amounts for tuition and fees that are not paid through Payroll, the department or school must complete the Fellowship Disclosure Form for the recipient. The University regards the payment of a fellowship stipend as proof that the department has complied with this requirement. This form should be completed each time a recipient receives a new fellowship, and should be maintained for a period of five years.

The department or school may be liable for any penalties resulting from an Internal Revenue Service (IRS) audit, if it has not complied with this procedure.

See also:

Procedure 4-80, "Completing Fellowship Disclosure Form."

2.2 Related Topics

See also:

3.0 Definitions [Top]

4.0 References [Top]

5.0 Approvals and Revisions [Top]


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