[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 395-398]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6050S-3  Information reporting for payments of interest on 
qualified education loans.

    (a) Information reporting requirement in general. Except as 
otherwise provided in this section, any person engaged in a trade or 
business that, in the course of that trade or business, receives from 
any payor (as defined in paragraph (b)(2) of this section) interest 
payments that aggregate $600 or more for any calendar year on one or 
more qualified education loans (as defined in section 221(e)(1) and the 
regulations thereunder) (a payee) must--
    (1) File an information return, as described in paragraph (c) of 
this section, with the Internal Revenue Service with respect to the 
payor; and
    (2) Furnish a statement, as described in paragraph (d) of this 
section, to the payor.
    (b) Definitions. The following definitions apply for purposes of 
this section:
    (1) Interest. Interest includes stated interest, loan origination 
fees (other than fees for services), and capitalized interest as 
described in the regulations under section 221. See paragraph (e)(1) of 
this section for a special transitional rule relating to reporting of 
loan origination fees and capitalized interest.
    (2) Payor. Payor means the individual who is carried on the books 
and records of the payee as the borrower on a qualified education loan. 
If there are multiple borrowers, the principal borrower on the payee's 
books and records is treated as the payor for purposes of section 6050S 
and this section.
    (c) Requirement to file return--(1) Form of return. A payee must 
file an information return for the payor on Form 1098-E, ``Student Loan 
Interest Statement.'' A payee may use a substitute for Form 1098-E if 
the substitute form complies with the applicable revenue procedures 
relating to substitute forms.
    (2) Information included on return. A payee must include on Form 
1098-E--
    (i) The name, address, and taxpayer identification number (TIN) (as 
defined in section 7701(a)(41)) of the payee;
    (ii) The name, address, and TIN of the payor;
    (iii) The aggregate amount of interest payments received during the 
calendar year from the payor; and
    (iv) Any other information required by Form 1098-E and its 
instructions.
    (3) Time and place for filing return--(i) In general. Except as 
provided in paragraph (c)(3)(ii) of this section, the Form 1098-E must 
be filed on or before February 28 (March 31 if filed electronically) of 
the year following the calendar year in which interest payments were 
received. A payee must file Form 1098-E with the Internal Revenue 
Service according to the instructions to Form 1098-E.
    (ii) Extensions of time. The Internal Revenue Service may grant a 
payee an extension of time to file returns required in this section upon 
a showing of good cause. See the instructions to Form 1098-E and 
applicable revenue procedures for rules relating to extensions of time 
to file.
    (4) Use of magnetic media. See section 6011(e) and Sec.  301.6011-2 
of this chapter for rules relating to the requirement to file Forms 
1098-E on magnetic media.
    (d) Requirement to furnish statement--(1) In general. A payee must 
furnish a statement to each payor for whom it is required to file a Form 
1098-E. The statement must include--

[[Page 396]]

    (i) The information required under paragraph (c)(2) of this section;
    (ii) A legend that identifies the statement as important tax 
information that is being furnished to the Internal Revenue Service;
    (iii) Instructions that--
    (A) State that, under section 221 and the regulations thereunder, 
the payor may not be able to deduct the full amount of interest reported 
on the statement;
    (B) In the case of qualified education loans made before January 1, 
2004, for which the payee does not report payments of interest other 
than stated interest, state that the payor may be able to deduct 
additional amounts (such as certain loan origination fees and 
capitalized interest) not reported on the statement;
    (C) State that the payor should refer to relevant Internal Revenue 
Service forms and publications, and should not refer to the payee, for 
explanations relating to the eligibility requirements for, and 
calculation of, any allowable deduction for interest paid on a qualified 
education loan; and
    (D) Include the name, address, and phone number of the office or 
department of the payee that is the information contact for the payee 
that filed the Form 1098-E.
    (2) Time and manner for furnishing statement--(i) In general. Except 
as provided in paragraph (d)(2)(ii) of this section, a payee must 
furnish the statement described in paragraph (d)(1) of this section to 
the payor on or before January 31 of the year following the calendar 
year in which payments of interest on a qualified education loan were 
received. If mailed, the statement must be sent to the payor's last 
known address. If furnished electronically, the statement must be 
furnished in accordance with the applicable regulations.
    (ii) Extensions of time. The Internal Revenue Service may grant a 
payee an extension of time to furnish statements required in this 
section upon a showing of good cause. See the instructions to Form 1098-
E and applicable revenue procedures for rules relating to extensions of 
time to furnish statements.
    (3) Copy of Form 1098-E. A payee may satisfy the requirement of this 
paragraph (d) by furnishing either a copy of Form 1098-E and its 
instructions or another document that contains all the information filed 
with the Internal Revenue Service and the information required by 
paragraph (d)(1) of this section if the document complies with 
applicable revenue procedures relating to substitute statements.
    (e) Special rules--(1) Transitional rule for reporting of loan 
origination fees and capitalized interest. For qualified education loans 
made before January 1, 2004, a payee is not required to report payments 
of loan origination fees and capitalized interest as interest under 
section 6050S and this section.
    (2) Qualified education loan certification. If a loan is not 
subsidized, guaranteed, financed, or is not otherwise treated as a 
student loan under a program of the Federal, state, or local government 
or an eligible educational institution, a payee must request a 
certification from the payor that the loan will be used solely to pay 
for qualified higher education expenses. A payee may use Form W-9S, 
``Request for Student's or Borrower's Social Security Number and 
Certification,'' to obtain the certification. A payee may establish an 
electronic system for payors to submit Forms W-9S electronically as 
described in applicable forms and instructions. A payee may also develop 
a separate form to obtain the payor certification or may incorporate the 
certification into other forms customarily used by the payee, such as 
loan applications, provided the certification is clearly set forth. If 
the certification is not received, the loan is not a qualified education 
loan for purposes of section 6050S and this section.
    (3) Payments of interest received or collected by one or more 
persons--(i) In general. Except as otherwise provided in paragraph 
(e)(3)(ii) of this section, if a person collects or receives payments of 
interest on a qualified education loan on behalf of another person 
(e.g., a lender), the person collecting or receiving the interest must 
satisfy the information reporting requirements of this section. In this 
case, the reporting requirements do not apply to the transfer of 
interest to the other person.
    (ii) Exception. If the person collecting or receiving payments of 
interest on a

[[Page 397]]

qualified education loan on behalf of another person (e.g., a lender) 
does not possess the information needed to comply with the information 
reporting requirements of this section, the other person must satisfy 
the information reporting requirements of this section.
    (4) Reporting by foreign persons. A payee that is not a United 
States person (as defined in section 7701(a)(30)) must report payments 
of interest it receives on a qualified education loan only if it 
receives the payment--
    (i) At a location in the United States; or
    (ii) At a location outside the United States if the payee is--
    (A) A controlled foreign corporation (within the meaning of section 
957(a)); or
    (B) A person 50 percent or more of the gross income of which, from 
all sources for the three-year period ending with the close of the 
taxable year preceding the taxable year in which interest payments were 
received (or for such part of the period as the person was in 
existence), was effectively connected with the conduct of a trade or 
business within the United States.
    (5) Governmental units. A governmental unit, or an agency or 
instrumentality of a governmental unit, that receives from any payor 
interest payments that aggregate $600 or more for any calendar year on 
one or more qualified education loans is a payee, without regard to the 
requirement of paragraph (a) of this section that the interest be 
received in the course of a trade or business.
    (f) Penalty provisions--(1) Failure to file correct returns. The 
section 6721 penalty may apply to a payee that fails to file information 
returns required by section 6050S and this section on or before the 
required filing date; that fails to include all of the required 
information on the return; or that includes incorrect information on the 
return. See section 6721, and the regulations thereunder, for rules 
relating to penalties for failure to file correct returns. See section 
6724, and the regulations thereunder, for rules relating to waivers of 
penalties for certain failures due to reasonable cause.
    (2) Failure to furnish correct information statements. The section 
6722 penalty may apply to a payee that fails to furnish statements 
required by section 6050S and this section on or before the prescribed 
date; that fails to include all the required information on the 
statement; or that includes incorrect information on the statement. See 
section 6722, and the regulations thereunder, for rules relating to 
penalties for failure to furnish correct statements. See section 6724, 
and the regulations thereunder, for rules relating to waivers of 
penalties for certain failures due to reasonable cause.
    (3) Waiver of penalties for failures to include a correct TIN--(i) 
In general. In the case of a failure to include a correct TIN on Form 
1098-E or a related information statement, penalties may be waived if 
the failure is due to reasonable cause. Reasonable cause may be 
established if the failure arose from events beyond the payee's control, 
such as a failure of the payor to furnish a correct TIN. However, the 
payee must establish that it acted in a responsible manner both before 
and after the failure.
    (ii) Acting in a responsible manner. A payee must request the TIN of 
each payor if it does not already have a record of the payor's correct 
TIN. If the payee does not have a record of the payor's correct TIN, 
then it must solicit the TIN in the manner described in paragraph 
(f)(3)(iii) of this section on or before December 31 of each year during 
which it receives payments of interest. If a payor refuses to provide 
his or her TIN upon request, the payee must file the return and furnish 
the statement required by this section without the payor's TIN, but with 
all other required information. The specific solicitation requirements 
of paragraph (f)(3)(iii) of this section apply in lieu of the 
solicitation requirements of Sec.  301.6724-1(e) and (f) of this chapter 
for the purpose of determining whether a payee acted in a responsible 
manner in attempting to obtain a correct TIN. A payee that complies with 
the requirements of this paragraph (f)(3) will be considered to have 
acted in a responsible manner within the meaning of Sec.  301.6724-1(d) 
of this chapter with respect to any failure to include the correct TIN 
of a payor on a return or

[[Page 398]]

statement required by section 6050S and this section.
    (iii) Manner of soliciting TIN. A payee must request the payor's TIN 
in writing and must clearly notify the payor that the law requires the 
payor to furnish a TIN so that it may be included on an information 
return filed by the payee. A request for a TIN made on Form W-9S, 
``Request for Student's or Borrower's Social Security Number and 
Certification,'' satisfies the requirements of this paragraph 
(f)(3)(iii). A payee may establish a system for payors to submit Forms 
W-9S electronically as described in applicable forms and instructions. A 
payee may also develop a separate form to request the payor's TIN or 
incorporate the request into other forms customarily used by the payee, 
such as loan applications.
    (4) Failure to furnish TIN. The section 6723 penalty may apply to 
any payor who is required (but fails) to furnish his or her TIN to a 
payee. See section 6723, and the regulations thereunder, for rules 
relating to the penalty for failure to furnish a TIN.
    (g) Effective date. The rules in this section apply to information 
returns required to be filed, and information statements required to be 
furnished, after December 31, 2003.

[T.D. 8992, 67 FR 20904, Apr. 29, 2002]