I.R.C. § 117(a) General Rule —
Gross income does not include any amount received as
a qualified scholarship by an individual who is a candidate for a
degree at an educational organization described in section 170(b)(1)(A)(ii).
I.R.C. § 117(b) Qualified Scholarship —
For purposes of this section—
I.R.C. § 117(b)(1) In General —
The term “qualified scholarship” means any amount received
by an individual as a scholarship or fellowship grant to the extent
the individual establishes that, in accordance with the conditions
of the grant, such amount was used for qualified tuition and related
expenses.
I.R.C. § 117(b)(2) Qualified Tuition And Related Expenses —
For purposes of paragraph (1), the term “qualified
tuition and related expenses” means—
I.R.C. § 117(b)(2)(A) —
tuition and fees required for the enrollment
or attendance of a student at an educational organization described
in section 170(b)(1)(A)(ii),
and
I.R.C. § 117(b)(2)(B) —
fees, books, supplies, and equipment
required for courses of instruction at such an educational organization.
I.R.C. § 117(c) Limitation
I.R.C. § 117(c)(1) In General —
Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that
portion of any amount received which represents payment for teaching,
research, or other services by the student required as a condition
for receiving the qualified scholarship or qualified tuition reduction.
I.R.C. § 117(c)(2) Exceptions —
Paragraph (1) shall
not apply to any amount received by an individual under—
I.R.C. § 117(c)(2)(A) —
the National Health Service Corps
Scholarship Program under section 338A(g)(1)(A) of the Public Health
Service Act,
I.R.C. § 117(c)(2)(B) —
the Armed Forces Health Professions
Scholarship and Financial Assistance program under subchapter I of
chapter 105 of title 10, United States Code, or
I.R.C. § 117(c)(2)(C) —
a comprehensive student work-learning-service program
(as defined in section 448(e) of the Higher Education Act of 1965)
operated by a work college (as defined in such section).
I.R.C. § 117(d) Qualified Tuition Reduction
I.R.C. § 117(d)(2) Qualified Tuition Reduction —
For purposes of this subsection, the term “qualified
tuition reduction” means the amount of any reduction in tuition provided
to an employee of an organization described in section 170(b)(1)(A)(ii) for
the education (below the graduate level) at such organization (or
another organization described in section 170(b)(1)(A)(ii))
of—
I.R.C. § 117(d)(2)(A) —
such employee, or
I.R.C. § 117(d)(2)(B) —
any person treated as an employee (or
whose use is treated as an employee use) under the rules of section 132(h).
I.R.C. § 117(d)(3) Reduction Must Not Discriminate In Favor Of Highly Compensated,
Etc. —
Paragraph (1) shall
apply with respect to any qualified tuition reduction provided with
respect to any highly compensated employee only if such reduction
is available on substantially the same terms to each member of a
group of employees which is defined under a reasonable classification
set up by the employer which does not discriminate in favor of highly
compensated employees (within the meaning of section 414(q)). For purposes of this
paragraph, the term “highly compensated employee” has the meaning
given such term by section 414(q).
I.R.C. § 117(d)(5) Special Rules For Teaching And Research Assistants —
In the case of the education of an individual who is
a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and
who is engaged in teaching or research activities for such organization,
paragraph (2) shall
be applied as if it did not contain the phrase “(below the graduate
level)”.
(Aug. 16, 1954, ch. 736, 68A Stat. 38; Sept. 21, 1961,
Pub. L. 87-256, Sec. 110(a),
75 Stat. 535; Oct. 4, 1976, Pub. L.
94-455, title XIX, Sec. 1901(b)(8)(A), (c)(3), 90
Stat. 1794, 1803; Dec. 17, 1980, Pub.
L. 96-541, Sec. 5(a)(1), 94 Stat. 3205; July 18,
1984, Pub. L. 98-369,
div. A, title V, Sec. 532(a), 98 Stat. 887; Oct. 22, 1986, Pub. L. 99-514, title I, Sec. 123(a),
title XI, Sec. 1114(b)(2), 1151(g)(2), 100 Stat. 2112, 2450, 2506;
Nov. 10, 1988, Pub. L. 100-647,
title I, Sec. 1011B(a)(31)(B), title IV, Sec. 4001(b)(2), 102 Stat.
3488, 3643; Nov. 8, 1989, Pub. L.
101-140, title II, Sec. 203(a)(1), (2), 103 Stat.
830; Aug. 20, 1996, Pub. L. 104-188,
title I, Sec. 1703(n)(14), 110 Stat. 1755; June 7, 2001, Pub. L. 107-16, title IV, Sec. 413(a),
115 Stat. 38; Pub. L. 114-113,
Div. Q, title III, Sec. 301.)
BACKGROUND NOTES
AMENDMENTS
2015 - Subsec. (c)(2)(A)-(C). Pub. L. 114-113, Div. Q, Sec. 301(a), amended
par. (2) by striking “or” at the end of subpar. (A), by
substituting “, or” for the period at the end of subpar.
(B), and by adding subpar. (C).
2001 - Subsec. (c). Pub. L. 107-16, Sec. 413(a),
amended subsec. (c). Before amendment it read as follows:
“(c) Limitation.—Subsections (a) and (d)
shall not apply to that portion of any amount received which represents
payment for teaching, research, or other services by the student required
as a condition for receiving the qualified scholarship or qualified
tuition reduction.”
1996 - Subsec. (d)(2)(B). Pub. L. 104-188, Sec. 1703(n)(14),
substituted “section 132(h)” for “section 132(f)”.
1989 - Subsec. (d)(4). Pub. L. 101-140, Sec. 203(a)(2),
amended par. (4) to read as if amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B),
had not been enacted, see 1988 Amendment note below.
Pub.
L. 101-140, Sec. 203(a)(1), amended subsec. (d) to
read as if amendments by Pub.
L. 99-514, Sec. 1151(g)(2), which added par. (4),
had not been enacted, see 1986 Amendment note below.
1988 - Subsec. (d)(4). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted ‘there shall’ for ‘there may’ and ‘who are’ for ‘who may
be’.
Subsec. (d)(5). Pub. L. 100-647, Sec. 4001(b)(2),
added par. (5).
1986 - Pub. L. 99-514, Sec. 123(a),
in amending section generally, substituted ‘Qualified scholarships’
for ‘Scholarships and fellowship grants’ in section catchline.
Subsec. (a). Pub.
L. 99-514, Sec. 123(a), amended subsec. (a) generally.
Prior to amendment, subsec. (a) read as follows: ‘In the case of an
individual, gross income does not include -
‘(1) any amount received -
‘(A) as a scholarship at an
educational organization described in section 170(b)(1)(A)(ii), or
‘(B) as a fellowship grant,
including the value of contributed services and accommodations; and
‘(2) any amount received to cover expenses for
-
‘(A) travel,
‘(B) research,
‘(C) clerical help, or
‘(D) equipment, which are incident
to such a scholarship or to a fellowship grant, but only to the extent
that the amount is so expended by the recipient.’
Subsec. (b). Pub.
L. 99-514, Sec. 123(a), in amending subsec. (b) generally,
substituted qualified scholarship provision for former limitations
provision, which related in par. (1) to individuals who were candidates
for degrees, and in par. (2) to individuals who were not candidates
for degrees, describing in subpar. (A) conditions for exclusion and
in subpar. (B) extent of exclusion, such detailed provision now covered
in subsec. (c).
Subsec. (c). Pub.
L. 99-514, Sec. 123(a), in amending subsec. (c) generally,
substituted limitation provision for former provision relating to
Federal grants for tuition and related expenses not includable merely
because there was requirement of future service as Federal employee.
Subsec. (d). Pub.
L. 99-514, Sec. 123(a), in amending subsec. (d) generally,
substituted ‘reduction’ for ‘reductions’ in heading and inserted ‘(within
the meaning of section 414(q))’ after ‘highly compensated employees’
in par. (3).
Subsec. (d)(3). Pub. L. 99-514, Sec. 1114(b)(2),
struck out ‘officer, owner, or’ after ‘with respect to any’ and ‘officers,
owners, or’ after ‘in favor of’ and inserted at end ‘For purposes
of this paragraph, the term ‘highly compensated employee’ has the
meaning given such term by section 414(q).'
Subsec. (d)(4). Pub. L. 99-514, Sec. 1151(g)(2),
added par. (4).
1984 - Subsec. (d). Pub. L. 98-369 added subsec. (d).
1980 - Subsec. (c). Pub. L. 96-541 added subsec. (c).
1976 - Subsecs. (a)(1)(A),
(b)(1), (2). Pub. L.
94-455, Sec. 1901(b)(8)(A), substituted ‘educational
organization described in section 170(b)(1)(A)(ii)’ for ‘educational
institution (as defined in section 151(e)(4))’ after ‘scholarship
at an’.
Subsec. (b)(2)(A)(iv). Pub. L. 94-455, Sec. 1901(c)(3),
struck out ‘a territory’ after ‘or a State’.
Subsec. (b)(2)(B). Pub. L. 94-455, Sec. 1901(b)(8)(A),
substituted ‘educational organization described in section 170(b)(1)(A)(ii)’
for ‘educational institution (as defined in section 151(e)(4))’ after
‘degree at an’.
1961 - Subsec. (b)(2)(A). Pub. L. 87-256 included cases where
the grantor of the scholarship or fellowship grant is a foreign government,
an international organization, or a binational or multinational educational
and cultural foundation or commission created or continued pursuant
to the Mutual Educational and Cultural Exchange Act of 1961.
EFFECTIVE DATE OF 2015 AMENDMENTS
Amendments by Pub. L.
114-113, Div. Q, Sec. 301(a), effective for amounts received
in taxable years beginning after the enactment of this Act.
EFFECTIVE
DATE OF 2001 AMENDMENT
Amendment
by section 413(a) of Pub. L. 107-16 effective
for amounts received in taxable years beginning after December 31,
2001.
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, Sec. 101(a),and
struck by Pub. L. 112-240,
Sec. 101(a)(1) (effective for taxable, plan, or limitation
years beginning after Dec. 31, 2012, and estates of decedents dying,
gifts made, or generation skipping transfers after Dec. 31, 2012),
provided that:
“(a) IN GENERAL.--All provisions of, and amendments
made by, this Act shall not apply--
“(1) to taxable, plan, or limitation
years beginning after December 31, 2012, or
“(2) in the case of title V,
to estates of decedents dying, gifts made, or generation skipping
transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal
Revenue Code of 1986 and the Employee Retirement Income Security Act
of 1974 shall be applied and administered to years, estates, gifts,
and transfers described in subsection (a) as if the provisions and
amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply
to section 803 (relating to no federal income tax on restitution received
by victims of the Nazi regime or their heirs or estates).”
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1703(o) of Pub.
L. 104-188 provides that: “this section shall take
effect as if included in the provision of the Revenue Reconciliation
Act of 1993 to which such amendment relates.”
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub.
L. 101-140 effective as if included in section 1151
of Pub. L. 99-514,
see section 203(c) of Pub. L. 101-140,
set out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011B(a)(31)(B) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514,
to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 4001(c) of Pub.
L. 100-647 provided that: ‘The amendments made by
this section (amending sections 117 and 127 of this title) shall apply
to taxable years beginning after December 31, 1987.’
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 123(a) of Pub. L. 99-514 applicable to taxable
years beginning after Dec. 31, 1986, but only in the case of scholarships
and fellowships granted after Aug. 16, 1986, see section 151(d) of Pub. L. 99-514, set out as a note
under section 1 of this title.
Amendment by section 1114(b)(2) of Pub. L. 99-514 applicable to years
beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub. L. 99-514, set out as a note
under section 414 of this title.
Amendment by section 1151(g)(2) of Pub. L. 99-514 applicable, with certain
qualifications and exceptions, to years beginning after Dec. 31, 1988,
see section 1151(k) of Pub. L. 99-514,
as amended, set out as a note under section 79 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Section 532(b) of Pub.
L. 98-369, as amended by Pub. L. 99-514, Sec. 2, Oct. 22,
1986, 100 Stat. 2095, provided that: ‘The amendment made by this section
(amending this section) shall apply to qualified tuition reductions
(as defined in section 117(d)(2)
of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)) for education furnished
after June 30, 1985, in taxable years ending after such date.'
Provisions of subsec. (d) treated as in effect
on and after Jan. 1, 1984, in case of education described in section
127(c)(8) of this title, see section 1(g)(5) of Pub. L. 98-611, set out as a note
under section 127 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 5(a)(2) of Pub.
L. 96-541 provided: ‘The amendment made by paragraph
(1) (amending this section) shall apply to taxable years beginning
after December 31, 1980.’
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub.
L. 94-455 applicable with respect to taxable years
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note
under section 2 of this title.
EFFECTIVE DATE OF 1961 AMENDMENT
Section 110(h)(1) of Pub.
L. 87-256 provided that: ‘The amendments made by
subsections (a), (b), and (c) of this section (amending this section
and sections 871 and 872 of this title) shall apply to taxable years
beginning after December 31, 1961.’
NONENFORCEMENT OF AMENDMENT MADE BY SECTION
1151 OF PUB. L. 99-514 FOR
FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L.
99-514 or the amendments made by such section, see
section 528 of Pub. L. 101-136,
set out as a note under section 89 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC
LAW 99-514 IN RELATION TO TREATY OBLIGATIONS OF UNITED STATES
For nonapplication of amendment by section 123(a)
of Pub. L. 99-514 to
the extent application of such amendment would be contrary to any
treaty obligation of the United States in effect on Oct. 22, 1986,
with provision that for such purposes any amendment by title I of Pub. L. 100-647 be treated as if
it had been included in the provision of Pub.
L. 99-514 to which such amendment relates, see section
1012(aa)(3), (4) of Pub. L. 100-647,
set out as a note under section 861 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1,
1989
For provisions directing that if any amendments
made by subtitle A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177)
or title XVIII (Sec. 1800-1899A) of Pub.
L. 99-514 require an amendment to any plan, such
plan amendment shall not be required to be made before the first plan
year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out
as a note under section 401 of this title.
ISSUANCE OF FINAL REGULATIONS
Secretary of the Treasury or his delegate to issue
before Feb. 1, 1988, final regulations to carry out amendments made
by section 1114 of Pub. L. 99-514,
see section 1141 of Pub. L. 99-514,
set out as a note under section 401 of this title.
TRANSITIONAL RULES FOR TREATMENT OF CERTAIN
REDUCTIONS IN TUITION
Section 1853(f) of Pub.
L. 99-514 provided that:
‘(1) A tuition reduction plan shall be treated
as meeting the requirements of section
117(d)(3) of the Internal Revenue Code of 1954 (now 1986)
if -
‘(A) such plan would have met
the requirements of such section (as amended by this section but without
regard to the lack of evidence that benefits under such plan were
the subject of good faith bargaining) on the day on which eligibility
to participate in the plan was closed,
‘(B) at all times thereafter,
the tuition reductions available under such plan are available on
substantially the same terms to all employees eligible to participate
in such plan, and
‘(C) the eligibility to participate
in such plan closed on June 30, 1972, June 30, 1974, or December 31,
1975.
‘(2) For purposes of applying section 117(d)(3) of the Internal Revenue Code of
1954 (now 1986) to all tuition reduction plans of an employer with
at least 1 such plan described in paragraph (1) of this subsection,
there shall be excluded from consideration employees not included
in the plan who are included in a unit of employees covered by an
agreement that the Secretary of the Treasury or his delegate finds
to be a collective bargaining agreement between employee representatives
and 1 or more employers, if, with respect to plans other than plans
described in paragraph (1), there is evidence that such benefits were
the subject of good faith bargaining.
‘(3) Any reduction in tuition provided with respect
to a full-time course of education furnished at the graduate level
before July 1, 1988, shall not be included in gross income if -
‘(A) such reduction would not
be included in gross income under the Internal Revenue Service regulations
in effect on the date of the enactment of the Tax Reform Act of 1984
(July 18, 1984), and
‘(B) such reduction is provided
with respect to a student who was accepted for admission to such course
of education before July 1, 1984, and began such course of education
before June 30, 1985.’
NATIONAL RESEARCH SERVICE AWARDS
Pub. L. 95-600,
title I, Sec. 161(b), Nov. 6, 1978, 92 Stat. 2810, as amended by Pub. L. 96-167, Sec. 9(b), Dec.
29, 1979, 93 Stat. 1278; Pub.
L. 96-541, Sec. 5(b), Dec. 17, 1980, 94 Stat. 3206; Pub. L. 97-248, title II, Sec. 285,
Sept. 3, 1982, 96 Stat. 569; Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,
provided that:
‘(1) General rule. - Any amount paid to, or on
behalf of, an individual from appropriated funds as a national research
service award under section 472 of the Public Health Service Act (section
289l-1 of Title 42, The Public Health and Welfare) shall be treated
as a scholarship or fellowship grant under section
117 of the Internal Revenue Code of 1986 (formerly I.R.C. 1954).
‘(2) Effective date. - The provisions of subsection
(b) shall apply to awards made during calendar years 1974 through
1983.’
SCHOLARSHIP PROGRAMS FOR MEMBERS OF THE UNIFORMED
SERVICES
Pub. L. 93-483,
Sec. 4, Oct. 26, 1974, 88 Stat. 1458, as amended Pub. L. 94-455, title XXI, Sec. 2130,
Oct. 4, 1976, 90 Stat. 1922; Pub.
L. 95-171, Sec. 5, Nov. 12, 1977, 91 Stat. 1355; Pub. L. 95-600, title I, Sec. 161(a),
Nov. 6, 1978, 92 Stat. 2810; Pub. L.
95-615, title I, Sec. 6, Nov. 8, 1978, 92 Stat. 3098; Pub. L. 96-167, Sec. 9(a), Dec.
29, 1979, 93 Stat. 1278; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
‘(a) In General. - Any amount received from appropriated
funds as a scholarship, including the value of contributed services
and accommodations, by a member of a uniformed service who is receiving
training under the Armed Forces Health Professions Scholarship Program
(or any other program determined by the Secretary of the Treasury
or his delegate to have substantially similar objectives) from an
educational institution (as defined in section
151(e)(4) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)) (see section 170(b)(1)(A)(ii)
of this title) shall be treated as a scholarship under section 117
of such Code (this section), whether that member is receiving training
while on active duty or in an off-duty or inactive status, and without
regard to whether a period of active duty is required of the member
as a condition of receiving those payments.
‘(b) Definition of Uniformed Services. - For purposes
of this section, the term ‘uniformed service’ has the meaning given
it by section 101(3) of title 37, United States Code.
‘(c) Effective Date. - The provisions of this section
shall apply with respect to amounts received during calendar years
1973, 1974, and 1975, and, in the case of a member of a uniformed
service receiving training after 1975 and before 1981 in programs
described in subsection (a), with respect to amounts received after
1975 and before 1985.’
(Section 6 of Pub.
L. 95-615, which reenacted Sec. 4(c) of Pub. L. 93-483 without change, to
cease to have effect on the day after Nov. 8, 1978, see section 210(a)
of Pub. L. 95-615,
set out as a note under section 61 of this title.)
