Qualified Scholarship Exclusion

§ 117. Qualified scholarships(a) General ruleGross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii). (b) Qualified scholarshipFor purposes of this section—(1) In generalThe term “qualified scholarship” means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses. (2) Qualified tuition and related expensesFor purposes of paragraph (1), the term “qualified tuition and related expenses” means—(A) tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii), and (B) fees, books, supplies, and equipment required for courses of instruction at such an educational organization. (c) Limitation(1) In generalExcept as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction. (2) ExceptionsParagraph (1) shall not apply to any amount received by an individual under—(A) the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act, (B) the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of chapter 105 of title 10, United States Code, or (C) a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in such section). (d) Qualified tuition reduction(1) In generalGross income shall not include any qualified tuition reduction. (2) Qualified tuition reductionFor purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of—(A) such employee, or (B) any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).