April 5, 2002
Contributed by CEO Message
"These should be the final agreements we will need to make with the IRS to bring closure to all of the tax issues raised regarding the Trust's management in the late 1990s," said KS Chief Executive Officer Hamilton I. McCubbin. "My recommendation to the Trustees was that the closing agreements represent fair resolution to these issues, and the Board has approved the recommendation. We are all eager to put this behind us and move forward with our strategic plan to educate more Hawaiian children." The closing agreements cover KS non-profit educational support subsidiaries KAA and Ke Ali'i Pauahi Foundation (KAPF), as well as the for-profit entity Pauahi Holdings Corporation, Inc. through KAA as successor-in-interest. The closing agreements resolve tax issues for years that included a reorganization that resulted in the transfer of certain assets from Pauahi Holdings Corporation to KAA. Under the agreements, KAA will pay the IRS approximately $17 million (plus interest) to correct information from a previously filed tax return and the for-profit subsidiaries will pay about $55.5 million in taxes (plus interest) to settle all other tax matters. In the course of its discussions with the IRS, KS also agreed to request Probate Court permission to transfer the majority of KAA's assets to KS and to allow KAA to then merge with KAPF. KAA and KAPF are both non-profit subsidiaries established to support Kamehameha Schools' efforts to extend the educational legacy of Bernice Pauahi Bishop. Generally, these closing agreements will become effective when the assets are transferred and the merger is completed. We have agreed with the IRS to refrain from discussing the details of the Closing Agreement for the time being, but I would like to reiterate that the agreement resolves the outstanding issues remaining from questions raised about trust operations in the late 1990s. We are pleased to put this chapter behind us now. Kamehameha is moving forward! Hamilton I. McCubbin, CEO
Kamehameha Schools’ policy is to give preference to applicants of Hawaiian ancestry to the extent permitted by law.
