LITTLE ROCK — The Arkansas Scholarship Lottery is getting a tax refund from the IRS.
The state Lottery Commission announced an agreement Monday under which the Internal Revenue Service will refund $104,570 in penalties the agency assessed the state in 2011 based on what the IRS initially determined were late payments of taxes withheld from lottery awards in 2010, after the program’s September 2009 startup.
With the help of North Little Rock lawyer Carrold E. Ray Jr., the lottery program convinced senior IRS officials that the federal agency should have given the fledgling state lottery program enough time to master the specifics of changing IRS regulations at the time.
“Taxes were submitted, and they were submitted promptly, they just were not submitted within 24 hours,” as a strict interpretation of IRS rules dictated, lottery spokeswoman Julie Baldridge said Monday.
“The decisions (to reverse the penalties) were not made based on a set of written parameters … but by people at a high enough level” who agreed with an interpretation of agency rules that suggested the state should have been granted a longer learning curve, Baldridge said. “They paid back not only the amount of the penalty but also fees. We didn’t really lose anything, except time.”
The amount recovered would amount to 52 college scholarships, based on new award amounts adopted by the Legislature this year for the fall semester, she said.
At its meeting Monday, the Lottery Commission commended Ray, who also is a CPA with a master’s degree in tax law, for work he did on the lottery program’s behalf for free.