Iowa State paid $254,770 in back taxes last year to comply with a 22-month Internal Revenue Service audit that ended in August.

The taxes were assessed in six areas, four of which dealt directly with the ISU Athletic Department.

The IRS did not hand down any penalties or demand that the university pay interest on the outstanding amounts because ISU did not intentionally avoid paying the taxes, said Paul Tanaka, head of University Legal Services.

“This is a pretty good indication that we’re in good shape,” he said. “We have been making every effort to comply with the law.”

The audit, which covered fiscal years 1994 and 1995, was a “coordinated examination” of the university’s entire tax-payment system, said ISU controller Johnny Pickett.

Before 1992, the IRS audited only segments of universities and other large non-profit organizations, taking just a few days at a time, but the recent audit started in October 1996 and was not completed until August 1998.

“We have had periodic audits of various different aspects of tax compliance,” she said. “[Now], they’ve gone to a new theory that they would audit everything about a university’s tax compliance at one time.”

In addition to administration and academic records, the audit covered the ISU Foundation, ISU Press, ISU Research Park, Alumni Association and Iowa State Daily.

Other universities also have paid sizable back taxes as a result of the new auditing strategy by the IRS, Tanaka said.

“The assessments at other universities have been in the multimillion dollar range,” he said.

Stephanie Fox, manager of Accounting Services, said the initial assessments at the University of Wisconsin were $81 million, and assessments at the University of Michigan were $7.7 million.

These are the areas in which ISU was required to pay back taxes, according to the controller’s office:

• Courtesy cars, $78,501. The Athletic Department used an outdated method of determining whether the use of cars furnished by local dealers was taxable, Tanaka said. By law, the use of donations such as cars is personal — and taxable — unless it can be established as a business use.

Tanaka said the IRS did not think ISU had established this fact.

• Employee settlements, $63,298. A group of former ISU assistant football coaches filed a personal injury lawsuit against the university to settle their contracts, Tanaka said.

The IRS determined that ISU erred in failing to classify a portion of the settlement as taxable.

• Additional compensation, $48,298. In 1994, the Athletic Department paid coaches for outside promotional work without withholding part of that salary for taxes. The problem was fixed in 1995, but the IRS asked that the missing 1994 taxes be paid, Tanaka said.

• Non-resident aliens, $45,901. Taxes must be withheld from the salaries and scholarships of students who are residents of certain countries not covered by U.S. tax treaties.

The IRS found that ISU had not withheld enough tax from payments to about 1 percent of non-resident aliens at the university, Pickett said.

• Country club dues, $15,253. Some university fund raisers receive complementary memberships at the Ames Golf and Country Club, which they use to entertain possible donors, Tanaka said.

“Our view is that was being done for business reasons,” he said, but the IRS determined that the memberships had a potential for personal use and thus were taxable.

• Spousal travel, $3,519. The IRS decided that airline tickets given to spouses of Athletic Department employees were taxable income, Tanaka said.

The university, probably through an accounting mistake, did not pay the taxes when it should have, he said.