rp-20-11.pdf

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26 CFR 1.61-12
(Also Part III, §§ 25A, 61, 108, 221, 222, 6511, 1.6050P-1.)

Rev. Proc. 2020-11

SECTION 1. PURPOSE

This revenue procedure establishes a safe harbor extending the relief provided
under Rev. Proc. 2015-57, 2015-51 I.R.B. 863, Rev. Proc. 2017-24, 2017-7 I.R.B. 916,
and Rev. Proc. 2018-39, 2018-34 I.R.B. 319, to additional taxpayers who took out
Federal or private student loans to finance attendance at a nonprofit or for-profit school.
Relief is also extended to any creditor that is an applicable entity, as defined by section
6050P of the Internal Revenue Code (Code) and the regulations thereunder, that
otherwise would be required to file information returns and furnish payee statements
pursuant to section 6050P of the Code for the discharge of any indebtedness within the
scope of this revenue procedure.
SECTION 2. BACKGROUND
.01 Under the Higher Education Act of 1965 (HEA), Pub. L. 89-329, the Closed
School discharge process allows the Department of Education (ED) to discharge a
Federal student loan obtained by a student, or by a parent on behalf of a student, who
was attending a school at the time it closed or who withdrew from the school within a
certain period prior to the closing date. The HEA provides statutory exclusions from
gross income for Federal student loans discharged under the Closed School discharge
process. See generally, 20 U.S.C. § 1087(c) (Federal Family Education Loan); 20

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U.S.C. § 1087dd(g) (Federal Perkins Loan); and 20 U.S.C. § 1087e(a)(1) (Federal
Direct Loan).
.02 Under the HEA, the Defense to Repayment process allows ED to discharge
a Federal Direct Loan obtained by a student, or by a parent on behalf of a student, if the
borrower establishes, as a defense against repayment, that a school’s actions would
give rise to a cause of action against the school under applicable state law. See
generally, 20 U.S.C. § 1087e(h), 34 C.F.R. § 685.206(c), § 685.222, and
§ 685.212(k)(2).
.03 Rev. Proc. 2015-57 and Rev. Proc. 2017-24 provide relief for taxpayers who
took out Federal student loans to finance attendance at a school owned by Corinthian
College, Inc. (CCI) or American Career Institutes, Inc. (ACI), respectively, and whose
loans were discharged by ED under the “Closed School” or “Defense to Repayment”
discharge process.
.04 Rev. Proc. 2018-39 provides relief for taxpayers who took out private student
loans to finance attendance at a school owned by CCI or ACI and whose loans were
discharged based on a settlement of a legal cause of action resolving various
allegations of unlawful business practices, including unfair, deceptive, and abusive acts
and practices against CCI, ACI, and certain private lenders.
.05 Rev. Proc. 2015-57, Rev. Proc. 2017-24, and Rev. Proc. 2018-39 provide
the following relief: (1) the Internal Revenue Service (IRS) will not assert that these
taxpayers must recognize gross income resulting from the discharge of these Federal
and private student loans; (2) the IRS will not assert that these taxpayers must increase
their gross income by the amount of certain tax credits or deductions related to the

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discharged Federal and private student loans; and (3) the IRS will not assert that the
creditors of these discharged loans must file information returns and furnish payee
statements under section 6050P of the Code as a result of discharging these Federal
and private student loans.
.06 Rev. Proc. 2015-57, Rev. Proc. 2017-24, and Rev. Proc. 2018-39 are limited
in application to schools owned by CCI or ACI.
.07 The Department of the Treasury (Treasury Department) and the IRS are
aware that additional taxpayers may have Federal and private student loans discharged
under the circumstances described in Rev. Proc. 2015-57, Rev. Proc. 2017-24, and
Rev. Proc. 2018-39.
.08 The Treasury Department and the IRS have determined that it is appropriate
to extend the relief provided in Rev. Proc. 2015-57, Rev. Proc. 2017-24, and Rev. Proc.
2018-39 to taxpayers who took out Federal and private student loans to finance
attendance at nonprofit or other for-profit schools not owned by CCI or ACI where the
Federal loans are discharged by ED under the Closed School or Defense to Repayment
discharge process, or where the private loans are discharged based on a settlement of
a legal cause of action against nonprofit or other for-profit schools and certain private
lenders. As in Rev. Proc. 2015-57, Rev. Proc. 2017-24, and Rev. Proc. 2018-39, the
Treasury Department and the IRS believe that most Federal and private student loan
borrowers would be able to exclude from gross income all or substantially all of the
discharged amounts based on the insolvency exclusion under section 108(a)(1)(B) of
the Code; fraudulent or material misrepresentations made by such nonprofit or for-profit
schools or certain private lenders to the students; or other tax law authority. However,

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determining whether one or more of these exclusions is available to each affected
borrower would require a fact intensive analysis of the particular borrower’s situation to
determine the extent to which the discharged amount is eligible for exclusion under
each of the potentially available exceptions. The Treasury Department and the IRS are
concerned that such an analysis would impose a compliance burden on taxpayers, as
well as an administrative burden on the IRS, that is excessive in relation to the amount
of taxable income that would result. Accordingly, the IRS will not assert that a taxpayer
within the scope of the safe harbor in this revenue procedure recognizes gross income
as a result of the discharge.
SECTION 3. SCOPE
.01 The treatment provided in section 4 of this revenue procedure applies to any
taxpayer who took out Federal or private student loans to finance attendance at a
nonprofit or for-profit school described in section 3.02 of this revenue procedure and (a)
whose Federal loans are discharged by ED based on the Closed School or Defense to
Repayment discharge process, or (b) whose private loans are discharged based on a
settlement of a legal cause of action resolving various allegations of unlawful business
practices, including unfair, deceptive, and abusive acts and practices against a nonprofit
or for-profit school or private lenders that made student loans to finance attendance at
these schools. This revenue procedure also applies to any applicable entity, as defined
by section 6050P of the Code and the regulations thereunder, that discharges these
loans.
.02 Section 3.01 of this revenue procedure applies to nonprofit schools that meet
the definition of an “institution of higher education” under 20 U.S.C. § 1001(a) or (b), or

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for-profit schools that meet the definition of a “proprietary institution of higher education”
under 20 U.S.C. § 1002(b).
SECTION 4. SAFE HARBOR FOR DISCHARGED STUDENT LOANS
.01 This section 4 describes the safe harbor available for certain discharged
student loans. Taxpayers are eligible to use the safe harbor if they are within the scope
of section 3 of this revenue procedure and one of the following paragraphs of this
section 4.01.
(a) Borrowers participating in Closed School discharge process.
The Closed School discharge process allows ED to discharge a Federal student
loan obtained by a student, or by a parent on behalf of a student, who was attending a
school at the time it closed or who withdrew from the school within a certain period prior
to the closing date. The HEA provides statutory exclusions from gross income for
Federal student loans discharged under the Closed School discharge process.
A taxpayer whose Federal student loan is discharged under the Closed School
discharge process will not recognize gross income as a result of the discharge, and the
taxpayer should not report the amount of the discharged loan in gross income on his or
her Federal income tax return.
(b) Borrowers participating in Defense to Repayment discharge process.
The Defense to Repayment process allows ED to discharge a Federal Direct
Loan obtained by a student, or by a parent on behalf of a student, if the borrower
establishes, as a defense against repayment, that a school’s actions would give rise to
a cause of action against the school under applicable state law. Most of these
borrowers would be able to exclude from gross income the discharged amounts based

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on the insolvency exclusion, fraudulent or material misrepresentations, or other tax law
authority.
A taxpayer whose Federal student loan is discharged under the Defense to
Repayment discharge process will not recognize gross income as a result of the
discharge, and the taxpayer should not report the amount of the discharged loan in
gross income on his or her Federal income tax return.
(c) Borrowers participating in legal settlement discharge actions.
Federal and state governmental agencies have brought legal causes of action
that have resulted in settlements resolving various allegations of unlawful business
practices, including unfair, deceptive, and abusive acts and practices, against for-profit
schools and certain private lenders that made student loans to finance attendance at
these schools. Most of these borrowers would be able to exclude amounts discharged
as a result of these settlements from gross income based on the insolvency exclusion,
fraudulent or material misrepresentations, or other tax law authority.
A taxpayer whose private student loan is discharged based on a settlement of a
legal cause of action resolving various allegations of unlawful business practices
against nonprofit or for-profit schools or private lenders that made student loans to
finance attendance at these schools will not recognize gross income as a result of the
discharge, and the taxpayer should not report the amount of the discharged loan in
gross income on his or her Federal income tax return.
.02 Recapture of tax credits and deductions under the tax benefit rule.
The IRS will not assert that a taxpayer within the scope of this revenue procedure
must increase his or her taxes owed in the year of a discharge, or in a prior year, as a

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result of a discharge described in section 4.01 of this revenue procedure, if in a prior
taxable year he or she received an education tax credit under section 25A of the Code
attributable to payments made with proceeds of the discharged loan. In addition, the
IRS also will not assert that a taxpayer within the scope of this revenue procedure must
increase his or her gross income in the year of the discharge as a result of a discharge
described in section 4.01 of this revenue procedure, if in a prior taxable year he or she
took a deduction under section 221 of the Code attributable to interest paid on a
discharged loan or a deduction in a prior taxable year under section 222 of the Code
attributable to payments of qualified tuition and related expenses made with proceeds of
the discharged loan.
.03 Information reporting.
The IRS will not assert that a creditor that is an applicable entity, as defined by
section 6050P of the Code and the regulations thereunder, must file information returns
and furnish payee statements pursuant to section 6050P of the Code for the discharge
of any indebtedness within the scope of this revenue procedure. The filing of such
information returns with the IRS could result in the issuance of underreporter notices to
taxpayers and the furnishing of such payee statements to taxpayers could cause
confusion.
SECTION 5. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2015-57, Rev. Proc. 2017-24, and Rev. Proc. 2018-39 are amplified.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective for Federal student loans discharged by ED
in taxable years beginning on or after January 1, 2016, under the Closed School or

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Defense to Repayment discharge process, and for private student loans discharged in
taxable years beginning on or after January 1, 2016, based on a settlement of a legal
cause of action resolving various allegations of unlawful business practices, including
unfair, deceptive, and abusive acts and practices against the nonprofit or for-profit
schools or certain private lenders. Taxpayers to whom this revenue procedure applies
may claim a credit or refund for an overpayment of tax for taxable years for which the
period of limitations under section 6511 of the Code has not expired.
SECTION 7. DRAFTING INFORMATION
The principal authors of this revenue procedure are Suzanne R. Sinno and Craig
R. Wojay of the Office of Associate Chief Counsel (Income Tax and Accounting). For
further information regarding discharge of indebtedness income and exclusions, contact
Ms. Sinno or Mr. Wojay at (202) 317-4718 (not a toll-free number), and for further
information regarding information reporting, contact Danielle Pierce at (202) 317-5150
(not a toll-free number).