Higher Education Emergency Grants Frequently Asked Questions

Summary

IRS Fact Sheet FS-2022-11, dated February 2022, revises its frequently asked questions on the Higher Education Emergency Grants. The update adds Questions 8 and 9, which say higher education institutions have no information reporting requirements under section 6041 when they use these federal funds to pay students' overdue balances for tuition and fees, and that those payments are not included in students' gross income, so Forms 1099-MISC are not required. The background section describes how CARES Act sections 3504, 18004 and 18008 let institutions use funds for students and for institutional expenses, and notes that recipients must pay no less than 50 percent of section 18004 funds to students as emergency grants.

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IRS revises frequently asked questions for the Higher Education Emergency
Grants

FS-2022-11, February 2022

This Fact Sheet updates frequently asked questions (FAQs) for the Higher Education Emergency Grants. The updates
provide information about higher education institutions not having information reporting requirements under section
6041 when using these federal funds to pay students’ overdue balances for tuition and fees. These payments are not
included in students’ gross income.

This update adds new FAQ Questions 8 and 9.

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as
possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they
may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue
Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate
statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability.
Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that
provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the
extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to
enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these
FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that
version if they later need to do so.

More information about reliance is available.These FAQs were announced in IR-2022-34.

Higher Education Emergency Grants Frequently Asked Questions

Background
Sections 3504, 18004, and 18008 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on
March 27, 2020, allow higher education institutions to use certain funds allocated by the Department of Education to
support students and higher education institutions with expenses and financial needs related to the coronavirus
(COVID-19) pandemic.

Section 3504 of the CARES Act allows higher education institutions to use additional supplemental educational
opportunity grant funds they receive through subpart 3 of Part A of the Higher Education Act of 1965 (HEA) to award
emergency financial aid grants to support undergraduate and graduate students experiencing "unexpected expenses
and unmet financial need" as the result of the COVID-19 pandemic.

Section 18004 of the CARES Act directs the Secretary of Education to allocate funds out of the Higher Education Relief
Fund to higher education institutions to directly support students facing urgent needs related to the COVID-19
pandemic, and to support institutions as they cope with the immediate effects of the COVID-19 pandemic, including
school closures. These funds may be used:
    1. to defray the institutions' expenses, including lost revenues and payroll for employees and
    2. for "emergency financial aid grants to students for expenses related to the disruption of campus operations due
       to the COVID-19 pandemic (including eligible expenses under a student's cost of attendance, such as food,
       housing, course materials, technology, health care, and child care)."

Recipient higher education institutions must pay no less than 50 percent of these funds to students as emergency
financial aid grants.

Section 18008 of the CARES Act directs the Secretary of Education to allocate additional funds to Howard University and
Gallaudet University to directly support students facing urgent needs related to the COVID-19 pandemic, and to support
these institutions as they cope with the immediate effects of the COVID-19 pandemic, including school closures. These
funds may be used:

    1. by the institutions to help defray their expenses and
    2. for "grants to students for expenses directly related to" the COVID-19 pandemic and for expenses "caused by
       the disruption of university operations" resulting from the COVID-19 pandemic.

Section 314 of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA), enacted as
Division M of the Consolidated Appropriations Act, 2021, (December 27, 2020), allocates additional funds to higher
education institutions in order to prevent, prepare for, and respond to the COVID-19 pandemic. Under section 314(c)(3)
of the CRRSAA, these additional funds can be used to provide financial aid grants to students which may be used for any
component of their costs of attendance or for emergency costs that arise due to the COVID-19 pandemic, such as food,
housing, health care (including mental health care), or child care. Recipient higher education institutions must pay no
less than 50 percent of these funds to students as emergency financial aid grants.

Section 277 of the COVID-related Tax Relief Act (COVID Relief Act), enacted as Subtitle B of Title II of Division N of the
Consolidated Appropriations Act, 2021, provides that a student does not include in gross income the emergency
financial aid grants awarded to him or her under section 3504 or 18004 of the CARES Act, or any other financial aid grant
from a Federal agency, State, Indian tribe, institution of higher education, or scholarship-granting organization (including
a tribal organization) for the purpose of providing financial relief to students enrolled at institutions of higher education
in response to a qualifying emergency, as defined in section 3502(a)(4) of the CARES Act. Section 3502(a)(4) of the
CARES Act defines a qualifying emergency as an event related to the COVID-19 pandemic. In addition, section 277 of the
COVID Relief Act provides that for purposes of the Lifetime Learning Credit, American Opportunity Tax Credit, or the
amount of a tuition and fees deduction, a student does not reduce an amount of qualified tuition and related expenses
by the amount of an emergency financial aid grant.

Section 2003 of the American Rescue Plan Act of 2021 (ARP), enacted on March 11, 2021, allocates additional funds to
higher education institutions through the HEA, discussed above. These funds may be used to provide financial aid grants
to students for any component of their costs of attendance or for emergency costs that arise due to the COVID-19
pandemic, such as food, housing, health care (including mental health care), or child care. These financial aid grants to
students are to be provided in accordance with section 314(c)(3) of the CRRSAA.

Q1. I am a student who received an emergency financial aid grant under section 3504, 18004, or 18008 of the CARES
Act for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on
account of the COVID-19 pandemic. Is this grant includible in my gross income? (updated May 18, 2021)
A1. No. Emergency financial aid grants under the CARES Act for unexpected expenses, unmet financial need, or expenses
related to the disruption of campus operations on account of the COVID-19 pandemic, such as unexpected expenses for
food, housing, course materials, technology, health care, or child care, are not included in your gross income.

Q2. I am a student who received an emergency financial aid grant under section 314 of the CRRSAA or section 2003 of
the ARP for a component of the cost of my attendance or for unexpected expenses, unmet financial need, or expenses
related to the disruption of campus operations on account of the COVID-19 pandemic. Is this grant includible in my
gross income? (added May 18, 2021)

A2. No. Emergency financial aid grants under the CRRSAA or the ARP for a component of the cost of your attendance or
for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account
of the COVID-19 pandemic, such as food, housing, health care (including mental health care), or child care, are not
included in your gross income.

Q3. I am a student who received an emergency financial aid grant from a Federal agency, State, Indian tribe,
institution of higher education, or scholarship-granting organization (including a tribal organization) because of an
event related to the COVID-19 pandemic. Is this grant includible in my gross income? (added updated May 18, 2021)

A3. No. Emergency financial aid grants made by a Federal agency, State, Indian tribe, institution of higher education, or
scholarship-granting organization (including a tribal organization) because of an event related to the COVID-19 pandemic
are not included in your gross income.

Q4. I received an emergency financial aid grant as described in Q1, Q2 or Q3 above and used some of it to pay for
course-related books, supplies, and equipment that are now required for online learning because my college or
university campus is closed. The books, supplies, and equipment do not have to be purchased from my college or
university. Can I claim a tuition and fees deduction for these expenses, or treat the cost of these items as a qualifying
education expense for purposes of claiming the American Opportunity Credit or the Lifetime Learning Credit?
(updated May 18, 2021)

A4. You may claim the American Opportunity Credit for these expenses if you otherwise meet the requirements for the
credit. You cannot claim a Lifetime Learning Credit or a tuition and fees deduction for the expenses because you are not
required to purchase the books, supplies, and equipment from your college or university. For additional information on
these credits and the tuition and fees deduction, see Publication 970, Tax Benefits for Education, available on
IRS.gov/pub970.

Q5. I received an emergency financial aid grant as described in Q1, Q2 or Q3 above and used some of it to pay for
course-related books, supplies, and equipment that are now required for online learning because my college or
university campus is closed. The books, supplies, and equipment must be purchased from my college or university.
Can I claim a tuition and fees deduction for these expenses, or treat the cost of these items as a qualifying education
expense for purposes of claiming the American Opportunity Credit and the Lifetime Learning Credit? (updated May
18, 2021)

A5. You may claim the American Opportunity Credit or the Lifetime Learning Credit for these expenses if you otherwise
meet the requirements for the credit you are claiming. In addition, if you do not claim one of the credits, you can claim a
deduction for tuition and fees for these expenses paid on or before December 31, 2020. The tuition and fees deduction
is not available for tax years beginning after December 31, 2020.
Q6. Do higher education institutions have any requirements under Internal Revenue Code section 6041 to report
information on Form 1099-MISC for emergency financial aid grants awarded to students under section 3504, 18004, or
18008 of the CARES Act, or otherwise in response to the COVID-19 pandemic (including under other provisions of the
CARES Act, section 314 of the COVID Relief Act, or section 2003 of the ARP)? (updated May 18, 2021)

A6. No, higher education institutions do not have information reporting requirements under section 6041 with respect
to the emergency financial aid grants. These grants are not included in students' gross income, as described in A1, A2,
and A3 above. Because the grants are not income, section 6041 does not apply to them, and higher education
institutions are not required to file or furnish Forms 1099-MISC, Miscellaneous Income, reporting the emergency
financial aid grants.

Q7. For tax year 2021, do higher education institutions have any requirements under Internal Revenue Code section
6050S to report information on Form 1098-T for emergency financial aid grants awarded to students under section
3504, 18004, or 18008 of the CARES Act, or otherwise in response to the COVID-19 pandemic (including under other
provisions of the CARES Act, section 314 of the COVID Relief Act, or section 2003 of the ARP)? (updated May 18, 2021)

A7. Yes, for tax year 2021, in certain cases, higher education institutions have information reporting requirements under
section 6050S for payments made with emergency financial aid grants. As described in A4 and A5 above, a student may
claim a deduction or one of the education credits if the student and the expenses otherwise qualify for the deduction or
credit. Any amounts that qualify for the deduction or credit are known as “qualified tuition and related expenses”
(QTRE) and trigger the reporting requirements of section 6050S. Accordingly, higher education institutions must report
total QTRE, including QTRE paid with emergency financial aid grant funds, in Box 1 of Form 1098-T, Tuition Statement.
Higher education institutions do not need to separately identify the portion of QTRE paid with the emergency financial
aid grants anywhere on Form 1098-T and they do not need to report the grants themselves in Box 5 of Form 1098-T. This
is the case regardless of whether the higher education institution:

    1. paid the emergency financial aid grants to the students, who then used grant money to pay for QTRE or
    2. applied grant money directly to a QTRE on a student’s account.

Q8: I am a student at a higher education institution and my institution is using federal funds under the CARES Act, the
CRRSAA, or the ARP to cancel or discharge my overdue balances, such as for tuition and fees. Is the amount of the
discharge includible in my gross income? (added February 15, 2022)

A8. No. If your institution is using federal funds to cancel or discharge your overdue balance for tuition and fees, your
debt is being paid by the Federal government and such payment generally would be included in your gross income.
However, because your debt is being paid by the Federal government in response to the COVID-19 pandemic, the
amounts paid by the Federal government, including grants used to pay an overdue balance for tuition and fees owed to
the institution, are not included in your gross income.

Q9. Do higher education institutions have any requirements under Internal Revenue Code section 6041 to report
information on Form 1099-MISC if the institutions use federal funds under the CARES Act, the CRRSAA, or the ARP to
pay the students’ overdue balances for tuition and fees? (added February 15, 2022)

A9. No. Higher education institutions do not have information reporting requirements under section 6041 when using
these federal funds to pay students’ overdue balances for tuition and fees. These payments are not included in students’
gross income. Because the payments are not income, section 6041 does not apply to them, and higher education
institutions are not required to file or furnish Forms 1099-MISC, “Miscellaneous Income,” reporting the payments.
IRS-FAQ


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