Notice 97-73
PURPOSE
This notice describes the information reporting requirements for 1998 under section
6050S of the Internal Revenue Code (as enacted by the Taxpayer Relief Act of 1997, Pub. L.
No. 105- 34, section 201(c), 111 Stat. 804 (the Act)) that apply to certain educational
institutions in connection with the Hope Scholarship Credit and the Lifetime Learning
Credit. The Treasury Department intends to issue regulations on the information reporting
required under section 6050S. Pending the issuance of those regulations, this notice
describes who must report information, and the nature of the information that will be
required to be reported under section 6050S for 1998.
BACKGROUND
A. THE HOPE SCHOLARSHIP AND LIFETIME LEARNING CREDITS.
Section 201(a) of the Act, 111 Stat. 799, added section 25A to the Code. Section 25A
allows certain taxpayers who pay qualified tuition and related expenses to an eligible
educational institution to claim a Hope Scholarship Credit or a Lifetime Learning Credit
against their federal income tax liability. The Hope Scholarship Credit is available for
qualified tuition and related expenses paid after December 31, 1997, in taxable years
ending after that date for education furnished in academic periods beginning after
December 31, 1997. The Lifetime Learning Credit is available for qualified tuition and
related expenses paid after June 30, 1998, in taxable years ending after that date for
education furnished in academic periods beginning after June 30, 1998. The term
"academic period" includes a semester, trimester, quarter, or any other period
designated as a period of instructional time by the educational institution. For this
purpose, an academic period begins on the first day of classes, and does not include
periods of student orientation, counseling, or vacation.
For a taxpayer to be eligible for the Hope Scholarship Credit or the Lifetime Learning
Credit, qualified tuition and related expenses must be paid by the taxpayer to an eligible
educational institution for the taxpayer, the taxpayer's spouse or any dependents.
Payments by a taxpayer's dependents are to be treated as having been made by the taxpayer.
The Hope Scholarship Credit is available only for the qualified tuition and related
expenses of students enrolled at least half-time in the first two years of postsecondary
education and can be claimed in no more than two years for each student.
Qualified tuition and related expenses are the tuition and fees an individual is
required to pay in order to be enrolled at or attend an eligible educational institution.
Amounts paid for any course or other education involving sports, games, or hobbies are not
eligible for the credit, unless the course or other education is part of the student's
degree program. Charges and fees associated with room, board, student activities,
athletics, insurance, books, equipment, transportation, and similar personal, living, or
family expenses are not qualified tuition and related expenses.
An eligible educational institution is a college, university, vocational school, or
other postsecondary educational institution that is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088) and, therefore, is eligible to participate in the
student aid programs administered by the Department of Education. This category includes
virtually all accredited public, nonprofit, and proprietary postsecondary institutions.
Notice 97-60, 1997-46 I.R.B. 8, provides additional information about the Hope
Scholarship Credit and the Lifetime Learning Credit.
B. INFORMATION REPORTING RELATING TO QUALIFIED TUITION AND RELATED EXPENSES.
Section 6050S(a) requires eligible educational institutions that receive payments of
qualified tuition and related expenses or make reimbursements or refunds of qualified
tuition and related expenses to submit an annual information report to the Service with
respect to each student on whose behalf the payments are received or the reimbursements or
refunds are made. Section 6050S(a) also requires each person engaged in a trade or
business who makes a reimbursement or refund of qualified tuition and related expenses to
submit an annual information report to the Service with respect to each student on whose
behalf the reimbursements or refunds are paid. The terms "eligible educational
institution" and "qualified tuition and related expenses" have the same
meanings for purposes of section 6050S as they do for purposes of the Hope Scholarship
Credit and the Lifetime Learning Credit.
Section 6050S(b) provides that the return of information must be in the form prescribed
by the Secretary and contain:
(1) the name, address, and taxpayer identification number (TIN) of the individual with
respect to whom the qualified tuition and related expenses were received or the
reimbursement or refund was paid,
(2) the name, address, and TIN of any individual certified by the individual named in
the first item as the taxpayer who will claim that individual as a dependent for purposes
of the deduction under section 151 for any taxable year ending with or within the year for
which the information return is filed,
(3) the aggregate amount of payments of qualified tuition and related expenses received
by the eligible educational institution or the aggregate amount of reimbursements or
refunds (or similar amounts) paid during the calendar year with respect to the individual
named in the first item, and
(4) such other information as the Secretary may prescribe.
Section 6050S(d) provides that every person required to make an information return
under section 6050S(a) shall furnish to each individual whose name is required to be
included in the return a written statement showing the name, address, and phone number of
the reporting person's information contact, and the aggregate amounts required to be
included in the return.
DISCUSSION
A. WHO MUST FILE FOR 1998.
For 1998, an eligible educational institution that receives payments of qualified
tuition and related expenses in 1998 must file an information return with the Service with
respect to each student on whose behalf payments were received. An eligible educational
institution that makes reimbursements or refunds of tuition or related expenses to a
student during 1998, that equal or exceed payments of qualified tuition or related
expenses received on behalf of that student during 1998, is not required to file an
information return or furnish a statement with respect to that student for 1998.
An institution is not required to provide a report with respect to a student whose
tuition and related expenses were waived in their entirety or paid entirely with
scholarships because it will have received no payments of qualified tuition and related
expenses on behalf of such a student.
Persons, other than eligible educational institutions, engaged in a trade or business
and making reimbursements or refunds of qualified tuition and related expenses will not be
required to file information returns or furnish statements of reimbursements or refunds
for 1998.
For purposes of providing these information reports, an eligible educational
institution should provide reports on students who are enrolled in the institution for any
academic term beginning in 1998. An institution should determine its enrollment for each
term as of any of the following three dates:
(a) 30 days after the first day of the academic term;
(b) a date during the term on which enrollment data must be collected for purposes of
the Integrated Postsecondary Education Data System administered by the Department of
Education; or
(c) a date during the term on which the institution must report enrollment data to the
State, the institution's governing board or some other external governing body.
An institution should provide a single information report for each student on whose
behalf qualified tuition and related expenses have been received in 1998 even if the
institution receives more than one payment on that student's behalf during 1998.
B. INFORMATION REQUIRED FOR 1998.
Eligible educational institutions required under this notice to file information
returns for 1998 must properly complete Form 1098-T, Tuition Payments, for each student
with respect to whom information reporting is required. For 1998, a properly completed
Form 1098-T filed with the Service must include:
(1) the name, address, and TIN of the eligible educational institution,
(2) the name, address, and TIN of the individual with respect to whom payments of
qualified tuition and related expenses were received during 1998,
(3) an indication as to whether the individual named in the second item was enrolled
for at least half the full-time academic workload during any academic period commencing in
1998, and
(4) an indication as to whether the individual named in the second item was enrolled
exclusively in a program or programs leading to a graduate-level degree, graduate-level
certificate, or other recognized graduate-level educational credential.
For purposes of section 25A and the reporting required under section 6050S, a student
will be considered to be enrolled at least half-timeif the student is enrolled for at
least half the full-time academic workload for the course of study the student is pursuing
as determined under the standards of the institution where the student is enrolled. The
institution's standard for a full-time workload must equal or exceed the standards
established by the Department of Education under the Higher Education Act and set forth in
34 C.F.R. section 674.2(b).
Although in the future institutions will be required to provide the additional
information specified in section 6050S (e.g., the amount of qualified tuition and related
expenses received and/or reimbursed), the IRS will not impose penalties on an institution
that does not provide this information for 1998.
C. WHEN TO FILE
The information returns required under section 6050S for 1998 must be sent to the
Service by March 1, 1999.
D. MANNER OF FILING
Eligible educational institutions may file the information returns required by section
6050S for 1998 on paper or by magnetic media. Additional guidance will be issued providing
further information on how to file returns by magnetic media. In addition, the Service is
exploring electronic filing options and will issue further guidance when such options
become available.
E. STATEMENTS TO BE PROVIDED TO STUDENTS
Each eligible educational institution must provide each student with respect to whom an
information return is filed a statement containing the same information that is provided
to the Service on the information return required by section 6050S. In addition, the
statement provided to the student must contain the phone number of the individual serving
as information contact at the eligible educational institution that made the return. The
statement with respect to qualified tuition and related expenses paid in 1998 must be
provided to the student by February 1, 1999. The statement may be a copy of Form 1098-T or
an acceptable substitute statement.
F. COLLECTING INFORMATION
The Service is developing an optional Form W-9S for use in collecting information for
the purpose of complying with section 6050S. Eligible educational institutions will be
able to use the form to collect a student's name, address, and TIN. The form is being
designed so that it can also be used to collect any information necessary to meet the
information reporting requirements associated with the student loan interest deduction
provided by new section 221. Eligible educational institutions will be able to collect
information from students for 1998 information reporting purposes on a paper or an
electronic version of Form W-9S (or an acceptable substitute). The eligible educational
institution also may collect the necessary information by using its own forms and
procedures.
Eligible educational institutions that are also federal, state or local government
agencies are required to provide certain disclosures under the Privacy Act when collecting
social security numbers from individuals. See 5 U.S.C. section 552a. The Form W-9S will
contain a Privacy Act disclosure statement.
G. WAIVER OF PENALTIES.
The Treasury Department intends to issue regulations under sections 6050S providing
guidance on how institutions are to comply with the requirements of the statute. Until the
regulations are adopted, no penalties will be imposed under sections 6721 and 6722 for
failure to file correct information returns with the Service or to furnish correct
statements to the individuals with respect to whom information reporting is required under
section 6050S. Furthermore, even after the regulations are adopted, no penalties will be
section under sections 6721 and 6722 for failure to file correct information returns or
furnish correct written statements for 1998 as required by 6050S if the institution made a
good faith effort to file information returns and furnish statements in accordance with
this notice.
DRAFTING INFORMATION
The principal author of this notice is John McGreevy of the Office of the Assistant
Chief Counsel (Income Tax & Accounting). For further information regarding this notice
contact him on (202) 622-4910 (not a toll-free call).
Date Published: 12-03-97