Rev. Rul. 68-312
Rev. Rul. 68-312; 1968-1 C.B. 59
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Advice has been requested whether, under the circumstances described below, amounts paid to or on behalf of participants of the National Teacher Corps are excludable from gross income under the provisions of section 117(a) of the Internal Revenue Code of 1954.
The National Teacher Corps, hereinafter referred to as NTC, was established in the Office of Education by Title V-B of Public Law 89-329, 79 Stat. 1255, the Higher Education Act of 1965, to increase the educational opportunities available to children in areas having concentrations of low-income families and to encourage colleges and universities to broaden their programs of teacher preparation.
The NTC is composed of teacher-intern teams (consisting of one experienced teacher and from one to five inexperienced teacher-interns) and expenrienced teachers who serve outside the team approach.
As a prerequisite to serving in the National Teacher Corps, all participants receive approximately ten weeks of pre-service training. This training is to prepare participants for the in-service period and is structured so as to provide them with the minimum training needed to take the first steps in teaching and assisting underprivileged children. During the pre-service period, each intern receives a stipend of $75 per week plus $15 for each dependent.
The pre-service training is followed by an in-service period during which the teacher-intern teams are placed with local school districts in low-income areas, where they perform teaching and related services. They function as employees of the local school districts and are paid salaries, in part from Federal funds. Experienced teachers, whether or not using the team approach, receive amounts equivalent to those received by teachers who have similar training and experience within the local school districts. Teacher-interns receive amounts equal to the lowest rate for teaching full-time in the school system to which they are assigned, or at the rate of $75 per week plus $15 for each dependent, whichever is less.
During this in-service period, interns also pursue part-time graduate studies leading to advanced degrees at cooperating colleges and universities. The costs of tuition and other fees incident to such studies are paid by the Office of Education directly to the colleges and universities. These payments provide the interns financial assistance that aids them in obtaining graduate degrees and in meeting other educational requirements needed to qualify them as certified teachers of the underprivileged.
Subject to certain qualifications and limitations, section 117(a) of the Code provides that gross income of an individual does not include any amount received as a scholarship at an educational institution or as a fellowship grant.
Section 1.117-4 of the Income Tax Regulations provides, in pertinent part, that amounts paid or allowed to or on behalf of an individual to enable him to pursue studies or research are considered to be amounts received as a scholarship or fellowship grant for the purpose of section 117 of the Code if the primary purpose of this study or research is to further the education and training of the recipient in his individual capacity and if the amount provided by the grantor for such purpose does not represent compensation or payment for services. However, any amount or amounts paid or allowed to or on behalf of an individual to enable him to pursue studies or research is not considered to be an amount received as a scholarship or fellowship grant for the purposes of section 117 of the Code if such amount represents compensation for past, present, or future employment services, if such amount represents payment for services that are subject to the direction or supervision of the grantor, or if such studies or research are primarily for the benefit of the grantor.
The NTC pre-service training period is designed to prepare participants to render effective services in the school districts to which they will be assigned by providing them with the minimum training needed to take the first steps in teaching and assisting underprivileged children. The stipends received during this period are to compensate the recipients for participating in training that prepares them to perform services in the grantor's program. These activities are primarily for the benefit of the grantor and the amounts received are compensation for such services within the meaning of section 1.117-4 of the regulations.
During the in-service period, participants perform valuable services that benefit the school districts and help to achieve the NTC's goal of improving the educational opportunities available to children in these areas. Thus, participants are performing present employment services, and the amounts they receive are compensation for such services within the meaning of section 1.117-4 of the regulations.
Amounts paid by the Office of Education to colleges and universities on behalf of the teacher-interns pursuing studies leading to advanced degrees are made for the primary purpose of furthering the education and training of the teacher-interns in their individual capacity, and do not represent compensation for services within the meaning of the regulations. Therefore, these amounts are excludable from the teacher-interns' gross income as scholarships under the provisions of section 117(a) of the Code.
- Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available