While the majority of funding for the State of Maine Grant Program comes from state appropriations, FAME also provides grants through revenues generated by Maine’s College Savings Program, the NextGen College Investing Plan®. During the calendar year 2006, you received a grant from FAME’s NextGen Scholarship account. Accordingly, you were designated as a beneficiary on the account. As a result, you have received the 1099Q from Maine College Savings Program.
This grant was designed to be treated as a qualified scholarship as defined by the Internal Revenue Code. If your grant was used for tuition, fees, books, supplies and equipment required for your enrollment at your institution, you do not have to report the funds identified on the 1099Q on your federal or Maine state income tax returns. Please be sure to read the Important Information paragraphs listed below regarding reporting and tax consequences that may apply to you.
If you have any questions, contact us at 1-800-228-3734 or .
IRS Form 1099Q Reporting: Federal regulation requires that states report distributions made from its qualified tuition program on IRS Form 1099Q (Qualified Tuition Program Payments). The State of Maine Grant, funded by NextGen dollars, you received is treated as a distribution from a FAME NextGen Account; therefore, you can expect to receive IRS Form 1099Q on or before February 2, 2007 from the Program Manager, Merrill Lynch. If the funds were used for qualified higher education expenses, the amount of the gross distribution representing the amount you received from the grant shown on the IRS Form 1099Q (box 1) does not have to be included as part of your taxable income.
Tax Consequences: The grant can be used for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible post secondary institution. However, if you were not enrolled at least half-time, any portion of the award used as payment for room and board costs, will be subject to federal and/or state income tax; you must report such amounts to the Internal Revenue Service when filing your tax return. FAME has instructed your educational institution that these grant monies may not be used to pay for room and board expenses.
If you were not a candidate for a degree, any portion of the grant award used to pay for qualified higher education expenses may not be eligible for a federal and/or state tax exempt treatment.
Notwithstanding the design of the program, the Internal Revenue Service could take the position that 529 grant awards are subject to federal income taxation in the year the grant is awarded. Recipients should consult their own tax advisor regarding the federal and state tax treatment of grants.
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