I have been out of town for several days.  As I was going through my
e-mails today, I was pleased to see that our always energetic,
enterprise contracting officer had replied to Anne Womack's message
concerning scholarships.  Unfortunately, he provided erroneous
information.

We do treat the NASA training grants as fellowships because no service
is required.  IRS reporting regulation for fellowship / scholarships are
very clear and are contained on page 23 of the 1998 Instructions for
Form 1099 ( www.irs.gov).  It states that " do not use form 1099-misc to
report ... fellowships.  ...fellowship payments are not required to be
reported by you to the IRS on any form "

Because this regulation seems counterintuitive, we also discussed it
directly with the service and our CPA firm.  Fellowship / Scholarships
are not reported because the institution has no way of knowing which
portion of the scholarship is taxable and which is not.  It does become
the student's responsibility to properly report the income that is
taxable.  However, we are not ducking the question by making the student
figure it out.  We are following specific IRS regulations in dealing
with a situation that we don't have all the information.  In other
words, the institution is not in a position to know how much of the
scholarship was spent on tuition, fees, books, supplies, and equipment
which are all tax free and other things like room and board which are
taxable.

Hope this clarifies the situation.  Of course, the big problem is
figuring out if something is truly a fellowship / scholarship or payment
for services performed.

Bob E. Wolfson
Executive Director,
Old Dominion University Research Foundation
P.O. Box 6369   /   800 W. 46 th  Street
Norfolk, Virginia
(757) 683-4293 ext. 500; FAX: (757) 683-5290
e-mail: xxxxxx@odu.edu

>>> Chuck Willis <xxxxxx@POBOX.HPRF.ODU.EDU> 7/23/98 10:44:58 AM >>>
Anne,

We pay stipend students without with-holding for taxes but send them an
IRS Form-1099 at the end of year.  With the frequent tax law changes the
answer to this question changes, depending on your interpretation of the
law.  I say no, because it is a scholarship and not "work for hire", but
others have different opinions.

We (Research Foundation) duck the question by making it the students
responsibility to figure out their personal tax situation.  That is one
function of higher education, letting people learn some personal
responsibility.

When in doubt.....punt.

Chuckles
ODURF

>>> Anne Womack <xxxxxx@GRANTS.WM.EDU> 07/23/98 05:37AM >>>
 The NASA training grants for graduate students (a prefix of "NGT"
in front of the award number, always for $22,000/year now, for
three years):   Will the students have to pay income tax on their
stipend portion  ($16,000/year)?  There seems to be some confusion as
well as different methods out there.

 I will appreciate any and all responses.

Anne Womack CRA
Director of Sponsored Programs
Grants and Research Administration
The College of William & Mary
Williamsburg, VA 23187

xxxxxx@grants.wm.edu
(757)221-3967 (phone)
        -4910 (fax)