I have read some of the discussions but nothing seems to address this situation. My client has lived in India since 2018 but is based out of Oregon. She was awarded an National Geographic explorer grant of $60,000 to do environmental research in India. According to the grant documentation the grant was for expenses for the research and if she spends it for anything else she needs to pay it back to NG. There is a strict budget she has to account for and present to NG at the end of the project when she has to present her report. NG has a right to the research and media assets created by the research with no fees as does she and if they ask her to help produce a product for NG she will be compensated for it at their normal rates and get credit for the work. They made it clear that she is not affiliated with NG and is an independent contractor. She received a 1099-NEC for 64,000 from NGS (additional funds for covid related expenses as she was stuck in India since the pandemic).
My question: it appears that the funds are restricted and an accounting must be done at the end of the project and yet they issued her a 1099NEC for the full amount indicating that it is non employee compensation for services. Reading the grant letter it appears what she gets from this is the ability to use the project results and media assets herself (say to write a book or article) and so do they. Or would this be a non taxable grant (as some of her colleagues allege) based on guidance from IRS website that the award is non discriminatory and "c. The grant's purpose is to achieve a specific objective, produce a report or similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or similar capacity, skill or talent of the grantee."? And if it is non employee comp is this subject to self employment tax? If so the SE tax bite might eat into what she has of the research funds. Any elucidation on this would be appreciated. Does not seem to be a lot of guidance out there on this kind of situation. Usually it is in conjunction with education. She already has her Ph.D.