A host of higher education groups, including the American Council on Education, have written to congressional leaders asking them to ensure that the emergency student financial aid grants authorized by the coronavirus stimulus package, or the CARES Act, are not subject to taxation.
Under the act, $6.28 billion was awarded to college and universities “to provide emergency financial aid grants to students for expenses related to the disruption of campus operations due to coronavirus.” These funds were made available April 9.
The letter said a section of the Internal Revenue Code says that scholarship or grant aid not spent on “qualified tuition and related expenses” is potentially subject to taxation. It also said that the Treasury Department does not believe it can exclude coronavirus emergency student grants from taxation.
“As a result, we fear that students who spend this emergency grant aid to help cover permitted essential, non-qualified ‘tuition and related expenses’ will later be taxed on that aid,” said the groups in the letter. “Taxing this emergency aid would undermine the benefit of the grants to students and negate the intent of Congress in authorizing the aid to help the most vulnerable students. We believe that this is an unintended consequence.”
Congress needs to act swiftly to pass legislation making the necessary statutory changes to ensure that such awards will not be counted as taxable income, said the groups.
In addition to the council, signatories to the letter include Achieving the Dream, American Indian Higher Education Consortium, Association of Community College Trustees, EDUCAUSE and Hispanic Association of Colleges and Universities.