Archive for Saturday, March 10, 2001

Questions persist on IRS refund for KU

March 10, 2001


Lawmakers are practically begging higher education officials for information about whether Kansas University and other schools are in line for a multimillion-dollar refund from the Internal Revenue Service.

But higher education officials said Friday that they just don't have much to tell.

"We're working on it as best we can. But it's a lot of what-ifs," Kansas Board of Regents executive director Kim Wilcox said.

The issue has come up repeatedly as lawmakers work on the proposed budget for higher education for the fiscal year that starts July 1.

With shortfalls in Gov. Bill Graves' budget for KU and other public universities, the question of whether the funding gaps can be bridged, at least partially, with an IRS refund continue to be asked.

An IRS audit of KU has raised several issues, according to Theresa Klinkenberg, KU's director of administration.

KU Med Center, for example, treats its medical residents as employees and makes Social Security contributions for them. But a recent federal court ruling out of Minnesota says medical residents should be treated as students and therefore don't require Social Security, she said.

In addition, the audit has raised questions as to whether public universities were wrong to make Social Security contributions on the retirement plans of unclassified workers, she said. Unclassified workers generally are nonfaculty professionals.

"There are many questions in the tax laws," Wilcox said. "For which group of employees is it appropriate to withhold which group of taxes?"

How much could be recovered and when, however, is unknown at this point, Klinkenberg and Wilcox said.

The first step toward finding out could be for the state to seek a ruling from the IRS that says the federal agency agrees with the state's interpretation of the law. If it receives this ruling, the state can request a refund, possibly for the last three years of payments, Klinkenberg said.

Wilcox said the regents may end up hiring a consultant to help the state. And, he said, he hopes to have answers by the end of the legislative session next month, when lawmakers are putting the final touches on next fiscal year's budget.

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