§ 117. Qualified scholarships

§ 117. Qualified scholarships

(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).

(b) Qualified scholarship For purposes of this section—

(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.

(2) Qualified tuition and related expenses For purposes of paragraph (1), the term “qualified tuition and related expenses” means—

(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

(B) fees, books, supplies, and equipment required for courses of instruction at such an educational organization.

(c) Limitation

(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.

(2) Exceptions Paragraph (1) shall not apply to any amount received by an individual under—

(A) the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act,

(B) the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of chapter 105 of title 10, United States Code, or

(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).

(d) Qualified tuition reduction

(1) In general Gross income shall not include any qualified tuition reduction.

(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—

(A) such employee, or

(B) any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).

(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).

[(4) Repealed. Pub. L. 101–140, title II, § 203(a)(1), (2), Nov. 8, 1989, 103 Stat. 830]

(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; Pub. L. 87–256, § 110(a), Sept. 21, 1961, 75 Stat. 535; Pub. L. 94–455, title XIX, § 1901(b)(8)(A), (c)(3), Oct. 4, 1976, 90 Stat. 1794, 1803; Pub. L. 96–541, § 5(a)(1), Dec. 17, 1980, 94 Stat. 3205; Pub. L. 98–369, div. A, title V, § 532(a), July 18, 1984, 98 Stat. 887; Pub. L. 99–514, title I, § 123(a), title XI, §§ 1114(b)(2), 1151(g)(2), Oct. 22, 1986, 100 Stat. 2112, 2450, 2506; Pub. L. 100–647, title I, § 1011B(a)(31)(B), title IV, § 4001(b)(2), Nov. 10, 1988, 102 Stat. 3488, 3643; Pub. L. 101–140, title II, § 203(a)(1), (2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 104–188, title I, § 1703(n)(14), Aug. 20, 1996, 110 Stat. 1878; Pub. L. 107–16, title IV, § 413(a), June 7, 2001, 115 Stat. 64; Pub. L. 114–113, div. Q, title III, § 301(a), Dec. 18, 2015, 129 Stat. 3086.)

Editorial Notes

References in Text

Section 338A(g)(1)(A) of the Public Health Service Act, referred to in subsec. (c)(2)(A), is classified to section 254l(g)(1)(A) of Title 42, The Public Health and Welfare.

Section 448(e) of the Higher Education Act of 1965, referred to in subsec. (c)(2)(C), is classified to section 1087–58(e) of Title 20, Education.

Amendments

2015—Subsec. (c)(2)(C). Pub. L. 114–113 added subpar. (C).

2001—Subsec. (c). Pub. L. 107–16 designated existing provisions as par. (1), inserted par. heading, substituted “Except as provided in paragraph (2), subsections (a)” for “Subsections (a)”, and added par. (2).

1996—Subsec. (d)(2)(B). Pub. L. 104–188 substituted “section 132(h)” for “section 132(f)”.

1989—Subsec. (d)(4). Pub. L. 101–140, § 203(a)(2), amended par. (4) to read as if amendments by Pub. L. 100–647, § 1011B(a)(31)(B), had not been enacted, see 1988 Amendment note below.

Pub. L. 101–140, § 203(a)(1), amended subsec. (d) to read as if amendments by Pub. L. 99–514, § 1151(g)(2), which added par. (4), had not been enacted, see 1986 Amendment note below.

1988—Subsec. (d)(4). Pub. L. 100–647, § 1011B(a)(31)(B), substituted “there shall” for “there may” and “who are” for “who may be”.

Subsec. (d)(5). Pub. L. 100–647, § 4001(b)(2), added par. (5).

1986—Pub. L. 99–514, § 123(a), in amending section generally, substituted “Qualified scholarships” for “Scholarships and fellowship grants” in section catchline.

Subsec. (a). Pub. L. 99–514, § 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, § 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, § 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, § 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, § 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, § 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, § 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, § 1901(c)(3), struck out “a territory” after “or a State”.

Subsec. (b)(2)(B). Pub. L. 94–455, § 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.

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, § 301(b), Dec. 18, 2015, 129 Stat. 3086, provided that: “The amendments made by this section [amending this section] shall apply to amounts received in taxable years beginning after the date of the enactment of this Act [Dec. 18, 2015].”

Effective Date of 2001 Amendment

Pub. L. 107–16, title IV, § 413(b), June 7, 2001, 115 Stat. 64, provided that: “The amendments made by subsection (a) [amending this section] shall apply to amounts received in taxable years beginning after December 31, 2001.”

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103–66, §§ 13001–13444, to which such amendment relates, see section 1703(o) of Pub. L. 104–188, set out as a note under section 39 of this title.

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.

Pub. L. 100–647, title IV, § 4001(c), Nov. 10, 1988, 102 Stat. 3643, provided that: “The amendments made by this section [amending this section and section 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 Amendment

Pub. L. 98–369, div. A, title V, § 532(b), July 18, 1984, 98 Stat. 887, as amended by Pub. L. 99–514, § 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

Pub. L. 96–541, § 5(a)(2), Dec. 17, 1980, 94 Stat. 3206, 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

Pub. L. 87–256, § 110(h)(1), Sept. 21, 1961, 75 Stat. 537, 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.”

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.

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