Share This Page
Scholarships and Grants Paid to Nonresident Aliens
Revised: 06/06
FSS/PPS No. 03.09.06
Issue No. 2
Reviewer: Tax Specialist
Effective Date: 5/18/01 (E5Y)
Review Date: 05/11
01. PURPOSE
| 01.01 | To establish responsibility and policy regarding the payment of scholarships and fellowship grants to nonresident alien students. |
| 01.02 | To ensure that policy and procedures conforms to the Internal Revenue Code. |
02. DEFINITIONS
| 1. | An alien is a person who is not a U.S. citizen. |
| 2. | A nonresident alien is an alien who does not meet either the Green Card Test or the Substantial Presence Test. |
| 3. | Green Card Test is satisfied if a nonresident alien individual has been granted lawful permanent resident status and an alien registration card (a "Green Card") either has been issued or will be received by the individual. |
| 4. | Substantial Presence Test is satisfied when a non resident alien individual has been physically present in the U.S. (1) 31 days during the current calendar year and two preceding calendar years. A student with an "F", "J", "M", or "Q" visa is considered an exempt individual and must wait 5 calendar years before counting days for the purposes of the substantial presence test. |
03. POLICY
| 03.01 | Source of Income The Internal Revenue Service (IRS) requires that all scholarships and grants be made in accordance with IRS regulations. A scholarship or fellowship grant paid to a nonresident alien who is temporarily present in the United States may or may not be subject to income tax withholding depending on the source of funds.
| ||||||||||||||||||||||||||||||||||||||||||||||||
| 03.02 | Withholding Requirements Whether a scholarship or fellowship grant from a U.S. source is subject to tax withholding depends on the nature of the payments and whether the recipient is a candidate for a degree. The following requirements are for persons present in the United States in "F", "J", "M", or "Q" nonimmigrant status.
| ||||||||||||||||||||||||||||||||||||||||||||||||
| 03.03 | Tax Treaty Exemption for Scholarships and Grants to Non-Resident Aliens If the United States has a tax treaty with the non-resident alien's country of residence that exempts U.S. taxation on scholarships and fellowships, withholding of tax is not required on the entire amount of the scholarship or fellowship in most cases. Tax treaties for scholarships and fellowships usually have a 5 year limitation. Consult with the International Office or the Tax Specialist on the limitations of specific tax treaties. Refunds of withheld taxes will not be given by Texas State University to the student if the student claims a tax treaty exemption after tax has already been withheld. An alien student, trainee, or researcher may claim a treaty exemption by completing the proper forms as listed here and submitting them to the Tax Specialist. A Taxpayer Identification Number is required on all forms, or you cannot allow the treaty exemption. See Section 05 Procedures. | ||||||||||||||||||||||||||||||||||||||||||||||||
04. RESPONSIBLE PARTIES
| 04.01 | All non-resident alien students or recipients of scholarships, grants, awards, or compensation are required to declare their country of citizenship and U.S. immigration status upon admission to Texas State University . All students are required to abide by all rules and regulations of the University and by IRS regulations regarding taxation and reporting of compensation and non-qualifying scholarship or grant payments. |
| 04.02 | The International Office is responsible for assisting the Texas State department to determine if the nonresident alien student or scholar is studying in the U.S. on a visa type that allows him or her to receive scholarships, fellowships, grants or stipends from U.S. sources. The International Office should update the SARS database to keep the immigration field in the database current. The office should also act as a liaison between the student and the Tax Specialist to assist the non-resident alien student or scholar. |
| 04.03 | The Texas State department awarding the scholarship or grant is responsible for inquiring about the recipient's country of citizenship and U.S. immigration status before payment is requested. The department is responsible for alerting both the International Office and the Financial Aid Office that they are requesting a scholarship or grant for a nonresident alien. The Texas State department is responsible for providing information to the student so that he or she can provide any and all necessary documents to the University. |
| 04.04 | The Texas State University Tax Specialist is responsible for obtaining all forms necessary from all non-resident alien students or payment recipients as required by IRS regulations, for collecting and paying withholding tax, and for meeting all IRS reporting requirements. The Tax Specialist should also act as a liaison between the student and the Financial Aid Office to assist the non-resident alien student or scholar. |
05. PROCEDURES
| 05.01 | Payments to Non-Resident Alien Scholarship Students or Fellowship Grant Recipients: The Financial Aid Office is responsible for notifying the International Office of scholarships granted to nonresident alien students before payment is made. Scholarship payments from U.S. sources cannot be made to a nonresident alien student or scholar unless he or she is studying in the U.S. on a visa type that allows him or her to receive scholarships, fellowships, grants or stipends from U.S. sources. The International Office will verify the visa type and forward the information to the Financial Aid Office. | ||||||||||||||
| 05.02 | A nonresident alien is an alien who does not meet either the Green Card Test or the Substantial Presence Test.
| ||||||||||||||
| 05.03 | On the 12th class day of each session, the Tax Specialist will request a report from the SARS system showing scholarship payments made to nonresident alien students. The Tax Specialist will identify non-qualified scholarship payments as taxable and reportable to the IRS. The Tax Specialist will calculate and pay withholding tax to the IRS, and charge student accounts for withholding tax on non-qualifying scholarship payments. The Tax Specialist will notify the Athletic Department of withholding tax due from non-resident athletes. If the Athletic Department decides to pay the withholding tax for the foreign athletes, the Tax Specialist will calculate the withholding tax due and send a statement to the Athletic Department. |
06. MAJOR RESPONSIBILITIES ASSOCIATED WITH THIS PPS
| Major responsibilities for routine assignments associated with this PPS include the following:
|
07. CERTIFICATION OF STATEMENT
This FSS/PPS has been approved by the following individuals in their official capacities, and represents FSS policy and procedure from the date of this document until superseded.
Tax Specialist, Reviewer
Associate Vice President, Financial Services/Treasurer, Reviewer
Vice President for Finance and Support Services
| Approved: | ____________________________ |
| Approved: | ____________________________ Reviewer |
| Approved: | ____________________________ Vice President for Finance and Support Services |