State in which taxable excess scholarship should be declared

[4kidsdad]

<p>

Should the scholarship be considered to be “earned” in Massachusetts?

Good question. No I don’t think so for non-resident on taxable scholarships that are NOT derived from any “teaching, research or other services.” See <a href=“http://www.mass.gov/dor/businesses/help-and-resources/legal-library/directives/directives-by-years/1990-1999-directives/directive-95-9-tax-treatment-of-scholarships.html[quote]For”>http://www.mass.gov/dor/businesses/help-and-resources/legal-library/directives/directives-by-years/1990-1999-directives/directive-95-9-tax-treatment-of-scholarships.html

For</a> non-residents, however, the tax treatment of scholarship and grant amounts is limited. Non-residents are taxed only on items of gross income that are derived from or effectively connected with any trade or business, including 1) any employment carried on by the taxpayer in the commonwealth; 2) the participation in any lottery or wagering transaction within the commonwealth; or 3) the ownership of any interest in real or tangible personal property located in the commonwealth. G.L. c. 62, § 5A(a). While G.L. 62, § 5A mentions items of gross income from “sources within the commonwealth,” the statute defines “sources” in terms of activities that occur in Massachusetts. Therefore, scholarship and grant amounts that are derived from or effectively connected with “teaching, research or other services” carried on by a non-resident in Massachusetts are includable in Massachusetts gross income and subject to Massachusetts personal income tax, regardless of whether such amounts are paid by a granting organization located within or without Massachusetts. The location of the payor or grantor is irrelevant. It is where the activities are carried on by the grantee that determines taxability of such amounts. Scholarship and grant amounts that are received by a non-resident and specifically designated for use for living expenses, however, are not subject to Massachusetts personal income tax, since they are not connected to an activity specified in G.L. c. 62, § 5A(a).

</p>