131National Taxpayer Advocate 2021 Purple Book
MISCELLANEOUS RECOMMENDATIONS
Legislative Recommendation #59
Amend IRC §§ 108(a) and 6050P to Provide That Gross Income
Does Not Include, and the Department of Education Is Not
Required to Report, Income From the Cancellation of Student
Loans Under the Coronavirus Aid, Relief and Economic
Security Act
PRESENT LAW
Creditors that forgive a debt of $600 or more generally are required to report the forgiveness to the IRS
on Form 1099-C, Cancellation of Debt.
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Taxpayers generally must include the forgiven debt in income.
2
IRC § 108 provides certain exceptions from this general rule. Additional exclusions appear in statutes outside
of the IRC.
3
Some of the longstanding exceptions, such as for bankruptcy or insolvency, apply to taxpayers in dicult
economic conditions.
4
Congress has enacted additional exceptions during dicult economic periods.
5
Similarly, Congress enacted Section 1106(i) of the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) to exclude cancelled Paycheck Protection Program (PPP) loans from income.
6
e IRS notied
lenders they should not issue Forms1099-C regarding forgiven PPP loans.
7
Beyond cancellation of debt, Congress has allowed taxpayers to exclude from income other payments or
benets they receive during dicult times. For example, taxpayers were not required to include in income
the Economic Stimulus Payments they received in 2008.
8
e same is true of the Economic Impact Payments
they received in 2020.
9
Other payments taxpayers receive, such as “qualied disaster relief payments” and
certain compensatory damages, are likewise not included in income.
10
See
See
6
See
.
.
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Miscellaneous Recommendations132
MISCELLANEOUS RECOMMENDATIONS
Section 3508(c) of the CARES Act requires the Department of Education to cancel education loans of
students who withdraw from an institution of higher education as a result of a qualifying emergency.
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e
CARES Act does not contain any provision excluding these forgiven student loans from income.
REASONS FOR CHANGE
Allowing taxpayers whose student loans are forgiven under Section 3508 of the CARES Act to exclude the
forgiven debt from income is consistent with Congress’s longstanding approach of providing tax relief to
taxpayers who are experiencing nancial diculty. Such an exclusion would place taxpayers whose student
loans are forgiven under Section 3508 of the CARES Act on the same footing as taxpayers whose loans are
forgiven under Section 1106(i) of the Act.
RECOMMENDATION
• Amend IRC §§ 108 and 6050P to provide that gross income does not include, and the Department
of Education is not required to report, income from forgiveness of student loans discharged under
section 3508(c) of the CARES Act.
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