Internal Revenue Dept. Ponders Fellowship Tax

Would Reduce Aids When Man Worked

Fellowships may be taxed next year. The Treasury Department, on advice of the Bureau of Internal Revenue, has ruled that some fellowships awarded by the University as well as by other colleges, foundations, corporations, and government agencies, are subject to income taxes.

The result of the action would be to reduce grants considerably. Teaching fellowships here would fall under the Bureau's ban.

The Bureau held that a grant is tax-exempt only when it is solely for an individual's training or education, and "no services are rendered as consideration therefor."

The award would be taxable if the recipient "applies his skill and training to advance research, creative work or some other project or activity."

The ruling specifically would declare taxable money awarded by the Guggenheim Foundation to a chemistry professor for study of structural chemistry, to a writer to complete a novel, to a biologist to study aquatic fungi, and to a social scientist for research on the relations betwen government and economic processes.

These cases were apparently the ones studied by the Bureau while it was formulating its proposal.

The Bureau assigned an agent to work, full time, on questions of fellowships, their recipients, the type of work they provided for, and the givers.

It contends that some universities and corporations have abused tax exemption by calling payment for services, as well as grants for study, fellowships.

Its ruling now appears so very broad that some believe it will affect all the large fellowship programs, including those of the Rockefeller Foundation, the Atomic Energy Commission, the National Research Council, and the National Science Foundation.

Many people assume the ruling, if it goes into effect will apply mainly to post doctorate research.