Purpose:

To inform agencies of the procedures to process nonresident alien Student and Exchange Visitor Information System (SEVIS) payments using the Scholarship (SCL) company in PayServ.

Affected Employees:

SUNY nonresident alien students who receive a SEVIS reimbursement payment.

Background:

The U.S. Department of Homeland Security (DHS) uses SEVIS to maintain information on:  Student and Exchange Visitor Program (SEVP)-certified schools, F-1 and M-1 students who come to the United States to attend those schools, U.S. Department of State-designated Exchange Visitor Program sponsors and J-1 visa Exchange Visitor Program participants. 

In 2004, Congress mandated all nonimmigrant students and exchange visitors must pay the I-901 SEVIS Fee, which funds SEVP and SEVIS. As part of a negotiated agreement this fee is reimbursed to GSEU F-1 or J-1 visa holders. 

According to Internal Revenue Code Section 117, payment of a qualified scholarship to a nonresident alien is not reportable and is not subject to Federal income tax withholding. To be considered for a qualified tax-exempt scholarship, the amount paid to an individual must be used for tuition and fees required for enrollment or attendance at an educational organization, as well as for fees, books, supplies, and equipment required for courses of instruction at the educational organization. IRS regulations require that records must be kept demonstrating that qualified scholarship funds were expended for qualified tuition and required fees.

That portion of a scholarship paid to a nonresident alien which does not constitute a qualified scholarship (i.e. “unqualified”) is subject to withholding and reporting requirements. A scholarship is considered unqualified if the amount paid to an individual is used for travel, room and board, or the SEVIS reimbursement fee. Such payments are reportable on Form 1042-S and may be subject to nonresident alien tax withholding. The withholding rate on an unqualified scholarship is 14% or the income tax treaty rate on nonresident aliens temporarily in the United States on “F,” “J,” “M”, or “Q” visas; nonresident alien individuals in any other immigration status or employees without a Tax ID Number (TIN) are subject to 30% withholding.

OSC Actions:

A new earn code SVS has been created so that the SEVIS reimbursement payment can be made on the SCL company.

Agency Actions:

Agencies are responsible for appointing a nonresident alien student to the Scholarship Company (SCL). To do so, the agency must use the following process:

• If the student already has an active record in a SCL company no action is required.
• If the student does not have a record in PayServ, the agency must process a Hire transaction, either online or through the Automated Interface process, appointing the student to the new 28XX5 DeptID using the Position Number assigned to the DeptID.
• If the student already has a record in PayServ with a different company other than SCL, the agency must process the transaction as a Concurrent Hire in the next available Employee Rcd Number, appointing the student to the appropriate 28XX5 DeptID and using the Position Number assigned to that DeptID.
• PayServ will not allow Rehire where the Company differs from the prior row; therefore, the agency cannot use an existing Record Number to rehire a student to process this payment. A Rehire can be used only after a nonresident alien scholarship record has been created and terminated. If the student does not have a valid Social Security Number (SSN), the SSN field must remain blank. 
• No Pay Change Request is required.
• Enter the Tax Data as indicated below.
• Enter the Time Entry payment as indicated below.

Tax Information

Agencies must populate the Employee Tax page as follows:

Federal Tax Data

• Company: SCL (default)
• Insert a Row
• Effective Date: Must be a date after hire date
• Form Version: W-4 2020 or Later
• Special Tax Withholding Status: Nonresident alien
• Tax Status: Single 

The following fields default and have no effect on the tax calculation for scholarship payments:

• Multiple Jobs or Spouse Works: Unchecked
• Dependent Amount: $0.00
• Other Income: $0.00
• Deductions: $0.00
• Extra Withholding: $0.00

Note: Federal income tax on scholarship payments is calculated at zero percent when there is a scholarship income tax treaty between the United States and the student's country of residence. For countries that do not have a scholarship income tax treaty with the United States, Federal income tax is withheld at 14% provided the nonresident alien is in the U.S. temporarily on an "F," "J," "M", or "Q" visa.

• If the student has all required paperwork (i.e. SSN/ITIN and Form W-8BEN) The following Tax Treaty/Non-Resident Data fields must be populated:
  • Country: Students country of residence
  • Elig Income CD: Schol/Fell
  • Treaty ID: Select appropriate Treaty ID. Normally a TIAS code or Income 15 
  • Date of Entry: Date of Entry to the U.S.
  • Treaty Expiration Date: Populates automatically when Treaty ID is entered
  • From W-8 Received: Select Yes
  • From W-8 Effective Date: from Form W-8BEN (must be prior to pay period end date)
• If the student does not have valid paperwork (i.e. No Form W-8BEN), tax will be calculated at 14%. The following Tax Treaty/Non-Resident Data fields must be populated: 
  • Country: Students country of residence
  • Elig Income CD: Schol/Fell
  • Treaty ID: Select appropriate Treaty ID. Normally a TIAS code or Income 15 
  • Date of Entry: Date of Entry to the U.S.
  • Treaty Expiration Date: Populates automatically when Treaty ID is entered
  • From W-8 Received: Select No
• If the student does not have valid SSN/ITIN, tax will be calculated at 30%. The following Tax Treaty/Non-Resident Data fields must be populated: 
  • Country: Students country of residence
  • Elig Income CD: Schol/Fell
  • Treaty ID: 30% W/H RT 
  • Date of Entry: Date of Entry to the U.S.
  • Treaty Expiration Date: Populates automatically when Treaty ID is entered
  • From W-8 Received: Select No

State Tax Data:

No action required.

Local Tax Data:

No action required.

Time Entry Payments:

To pay the SEVIS reimbursement to eligible students a time entry file should be submitted using the new SVS earn code.

General Deductions:

There will be no deductions taken from these payments.

Questions:

Questions regarding this bulletin may be emailed to the Tax and Compliance mailbox.