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Nonprofit Law/Payment of Scholarship


QUESTION: What IRS reporting requirements does a 501(c)(7)fraternity has with regards to the payment of a scholarship directly to a recipient?

ANSWER:  Links to Latest Published  Form 990 Series Forms and- Instructions
(990/990-EZ/990-N) are available at
and explains which 990 series return to file.

Also, specifically as to scholarships, the IRS has instructed
"Do not use Form 1099-MISC to report scholarship or fellowship
grants. Scholarship or fellowship grants that are taxable to the
recipient because they are paid for teaching, research, or other
services as a condition for receiving the grant are considered
wages and must be reported on Form W-2. Other taxable scholarship
or fellowship payments (to a degree or nondegree candidate) are not
required to be reported by you to the IRS on any form."

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

---------- FOLLOW-UP ----------

QUESTION: Am I to understand that the 501(c)(7)organization does NOT have to report at all to the IRS your answer the same for scholarship checks made payable only to the scholarship recipient and the college is not made aware of the scholarship?

Your understanding is in accordance to the published IRS instructions that I sent to you earlier.
If, however, the 501(c)(7) organization has given the scholarship in exchange for any goods or services that the recipient provided to the organization, let me know, as then the answer is different.

The Internal Revenue Code at section 102(a) provides that gifts are not income.  "Gross income does not include the value of property acquired by gift..."
Gifts do not require any reporting.

hen such payments are not income, there is no report (such as a
099-Misc) required to be filed with the IRS.  See
ttp:// which is the IRS'
nstructions for form 1099-Misc and the title is "Instructions for
orm 1099-MISC Miscellaneous Income".  As a gift is not income, it
ould not be miscellaneous income".

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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