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Business and Policy Areas
Business and Policy Areas

IRS Changes Position on Payments to Non-NRSA Fellows

May 26, 2017

In private letter ruling (PLR) 201705001, issued earlier this year, the Internal Revenue Service (IRS) determined that “amounts paid to research fellows under non-NRSA grants … are ‘wages’ for employment tax purposes, and are subject to social security taxation.”

Decades ago, in Revenue Ruling 83-89, the IRS stated that research and research training activities sponsored by National Research Service Awards (NRSA) grants do not constitute the performance of services, and therefore are not wages. In 2005, the IRS ruled in PLR 200607017 that research and related activities performed by individuals under training grants that were substantially similar to NRSA grants were also not considered wages for purposes of social security taxation.

The recent PLR (201705001) was requested by and issued to the same institution that requested and received the 2005 PLR (20060717). It revokes the former PLR and explains that the IRS has recently determined that its position in the 2005 ruling is “not in accord with the current views of the Service,” and states that prospectively, the institution must treat payments made to non-NRSA research fellows as compensatory in nature are wages for employment tax purposes, and are subject to security taxation.

While PLRs only address the facts and circumstances submitted by the requesting organization and do not function as regulations, they serve as insight into the IRS’ future interpretations of similar circumstances. In light of the IRS’ new position in PLR 201705001, research institutions should review tax reporting and withholding for non-NRSA research fellows.


Mary Bachinger
Director, Tax Policy