The University of Louisville owes $96,000 to the Internal Revenue Service after an audit found it wasn’t paying taxes on Adidas freebies given to staffers in the athletics department.
Roughly $200,000 worth of Cards clothing — polos, workout gear and the like — handed out to coaches is a fringe benefit and taxable, according to the IRS audit of the university’s wages in 2014 and 2015. Since the clothing is not required for work and can easily be worn off the clock, U of L should’ve been considering the fair market value of the clothes to be gross income subject to tax, the audit said.
The IRS found that U of L also neglected to treat as taxable income golf club dues for four employees, worth about $25,000 a year.
John Karman, a U of L spokesman, noted that the audit was routine and that U of L has agreed to pay the additional taxes as well as any taxes triggered by the free clothes in the future. The error on country club dues was for coaches, he said.
In the report issued in January, the auditor said the university was “efficient and courteous” in its responses and the adjustments were common among government entities.
“(Tax) agents recognize that government entities do not have training on employment tax issues as they may need,” the letter said. “Our foremost goal was to educate and apply the tax laws in a fair manner.”
The IRS announced its intent to audit U of L last July in the midst of a leadership upheaval and heavy scrutiny of U of L’s finances. It requested pay documents for former president James Ramsey and other administrators, as well as head coaches.
Although the audit didn’t request any back taxes paid in connection with administrator pay, it did include some “education” about how U of L should treat the expenses for free sports tickets and spouse travel.
The auditor found that U of L should track expenses for family travel and consider it taxable income. The same goes for free Cardinals tickets, the audit said, unless a “clear business connection” can be documented.
Read the IRS report here.
Disclosures: In 2015, the University of Louisville, which for years has donated to Louisville Public Media, earmarked $3,000 to KyCIR as part of a larger LPM donation. University board member Sandra Frazier and former member Stephen Campbell have donated.