ACE and 41 other higher education groups are
calling on Congress to ensure that emergency student financial aid grants
authorized by the CARES Act are not taxed.
In a letter to the House Ways and Means and the
Senate Finance committees, the groups expressed increasing concern over the
harm that taxing these grants would do to the very students they are intended
to help. The CARES Act allocates approximately $12.5 billion to institutions
through the Title IV student financial aid distribution system, half of which
must be distributed directly to students.
Among the expenses these grants are meant to
cover are food, housing, course materials, technology, health care, and
childcare. The IRS code maintains that scholarship or grant aid not spent on
"qualified tuition and related expenses" is potentially subject to
taxation.
In addition, because the Department of
Education has clarified that these funds must first go to the students as cash
grants, the groups believe that even grant awards that a student uses to make a
tuition payment could also be taxable.
The letter goes on to say that they believe
this is an unintended consequence, and that 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.”
ACE also joined the
National Association of College and University Business Officers and six other
associations on
a letter to the Treasury Department to ensure that the
CARES Act’s emergency grant aid is not treated as taxable income or traditional
educational grant aid. However, it appears that the Treasury Department does
not believe it has the statutory authority on its own to exclude this grant aid
from taxability, so Congress must act.