Taxability of Student Travel (Policy 1.10.2)

Payments and Reimbursements

A payment or reimbursement to a student for travel represents either a “business expense” expense for the University or a “fellowship, scholarship, or award” (“FSA”) payment to the student. Determination of the type of payment or reimbursement is required to determine the proper tax treatment of the payment or reimbursement.  Properly documented business expenses are non-taxable payments or reimbursements to the recipient. FSA payments may represent taxable income to the student (and in cases of non-U.S. persons may also require withholding and reporting).

Qualified Business Expenses

In order for student travel payments or reimbursements to be considered University related “business travel” expenses, the purpose of the payment must represent a reimbursement for business expenses incurred for travel made on behalf of the University (i.e., the University is the primary beneficiary of the student’s travel).  This type of payment meets the business connection requirement of the IRS definition of an Accountable Plan and is not taxable to the recipient.

Fellowship, Scholarship, or Award (“FSA”) Payments

Payments for student travel generally benefit both the student and the University.  In order to determine the classification of the payment or reimbursement, the primary beneficiary of the student travel must be identified as follows:

• Student is primary beneficiary.  Based on the facts and circumstances, a determination is made showing the purpose for the payment is for educational assistance to aid the student in the pursuit of study or independent research.
• University is primary beneficiary.  Based on the facts and circumstances, a determination is made showing the purpose for the payment is to reimburse the student for business expenses incurred on behalf of the University. The University has a clear business interest in paying the student’s travel expenses (i.e., the student is playing a leadership role at the conference attended, or is representing the University at the conference, or attends the conference to support the faculty member’s research).

Fellowship, scholarship, or award payments are not required to be reported for tax purposes when the recipient is a U.S. Person (United States Citizen, United States Permanent Resident, or Resident Alien for tax purposes).  These payments may represent taxable income to the recipient. Fellowship, scholarship, or award payments made to international students who are nonresident aliens for tax purposes will be subject to withholding and reporting on Form 1042-S.