The RF processes payments to fellows, however fellows are not employees of the Research Foundation because they are not performing a service for the RF.
Fellowship awards are subject to SUNY academic policies and procedures, such as the Patents and Inventions Policy.
If the terms of the award require the recipient to provide a service, the person must be appointed to the Research Foundation payroll as an employee and paid a salary or wage for the service provided.
Please also provide the following:
A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.
Fellow (Graduate Student Fellow, Post Doctoral Fellow, etc.) is and individual who is performing independent research. If the fellow is a student this research would be part of his/her educational pursuits. This student is not required to perform any specific research project or under the direct supervision of any individual. They may seek advice or assistance from colleagues, or may collaborate with others in their particular discipline; but the final decisions of what to do, how to proceed, and in what direction the research is to travel rests with the fellow. There is no expectation of performing a service.
Employee (Research Assistant, Teaching Assistant, Post Doctoral Associate) who is performing a service for his/her university and for such services is compensated as is any other employee. Each of these types of employees is required to perform services in order to receive their compensation and each individual is subject to the control and supervision of the employer. Service refers to teaching, research, or other work that the recipient must agree to perform. Service does not include research initiated by the recipient or such incidental activities as preparing progress reports or giving a speech on the results of the recipient's research. A service is not constituted by a general condition that the recipient comply with degree requirements even though the person is required to teach or engage in research in order to obtain the degree.
*Prior to 1987, the Research Assistant stipend and Graduate Student Fellowship Award stipend were considered tax-free scholarships or fellowships by the Internal Revenue Service. The Teaching Assistant stipend was always considered taxable salary for services rendered.
In 1986, congress passed the Tax Reform Act of 1986 which, among many other things, stated, that effective January 1, 1987, Research Assistant stipends would be considered, and treated, as salary. Also, that piece of legislation changed the way fellowship stipends would be treated. Effective January 1, 1987, fellowship stipends would be considered, and treated as, taxable scholarships.
*“Stipend” is not a tax term. Stipends are payments typically given to individuals to help defray living or other costs, often under the assumption that they are not taxable. Frequently, stipends are not taxed, not because they are not subject to tax, but because they are not reported by payers to the recipient or the IRS on an information return or by the taxpayers on their tax returns.
Under U.S. tax law, the substance of a transaction determines how a payment is taxed, not the name or form of a payment. Therefore, the first task of payers is to classify the income character of a stipend based on the tax rules.
The U.S. Department of Labor (DOL) has developed six criteria for differentiating between an employee entitled to minimum wage or above, and a learner/trainee who may be unpaid (such as an unpaid internship). The criteria for learner/trainee are:
- The training, even though it includes actual operations of the facilities of the employers, is similar to that which would be given in a vocational school.
- The training is for the benefit of the student.
- The student does not displace a regular employee, but works under the close observation of a regular employee or supervisor.
- The employer provides the training and derives no immediate advantage from the activities of the student; and on occasion, the operations may actually be impeded by the training.
- The student is not necessarily entitled to a job at the conclusion of the training period.
- The employer and the student understand that the student is not entitled to wages for the time spent training.
An internship site should be able to answer "yes" to at least half the following questions if an unpaid internship is being contemplated. If your internships do not meet the criteria, the individuals must be classified as employees.
- Is the work that you are offering an integral part of the student's course of study?
- Will the student receive credit for the work or is the internship required for graduation?
- Does the student have to prepare a report of his/her experience and submit it to a faculty supervisor?
- Have you received a letter or some other form of written documentation from the school stating that the internship is approved/sponsored by the school as educationally relevant?
- Will the student perform work that other employees also perform, with the student doing the work for the purpose of learning and not necessarily performing a task for the employer?
- Is the student working and providing benefit to you less than 50 percent of the time and/or is the student in a shadowing/learning mode?
- Will you provide an opportunity for the individual to learn a skill, process, or other business function, or operate equipment?
- Is there educational value to the work performed, that is, is it related to the courses the person is taking in school?
- Is the individual supervised by one of your staff members?
- Is it clear that a job is not guaranteed upon completion of the training or completion of the person's schooling?