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					Idaho State Tax Commission 
Idaho State Tax Commission
          FY2012
     JFAC Presentation
     JFAC Presentation
               y
        February 3, 2011




                           tax.idaho.gov
       Outline of Our Presentation
1. Mission and organization – Bob Geddes
2. Meeting statutory requirements
      Revenue collection – Sam Haws
      Enforcement efforts – David Langhorst
      Property tax support – Tom Katsilometes
3. Supplemental request for FY2011 – Tom Katsilometes
4. Governor’s recommendation for FY2012 – Mark Poppler
4 G        ’            d ti f FY2012



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Mission and Organization

   Bob Geddes, Chairman




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                  Our Mission
To provide courteous, quality services and to 
administer the state’s tax laws in a fair, timely, and 
cost‐effective manner to benefit Idaho citizens.




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         Idaho s Tax System
         Idaho’s Tax System

Idaho’s tax system primarily depends on the 
trust and compliance of our great citizens.
trust and compliance of our great citizens




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                     g y
                    Agency Divisions

                            Commissioners




 General              Audit &           Revenue 
                                                        Property Tax        
                                                        Property Tax
 Services            Collections       Operations    
                                                          (37 FTEs)   
(65 FTEs)           (219. 5 FTEs)       (75 FTEs)   
                                                           $2.8M
  $7.3M               $16.7M             $5.4M


                           Total FTEs – 396.5
                         l d         $32.2 million
                     Total Budget – $32 2 illi
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                                                         Commissioners




General Services
                              General              Audit &            Revenue 
                                                                                      Property Tax        
                              Services            Collections        Operations    
                                                                                        (37 FTEs)   
                             (65 FTEs)           (219. 5 FTEs)        (75 FTEs)   
                                                                                         $2.8M
                               $7.3M               $16.7M              $5.4M




   Commissioners
         l
    Tax Policy
   Information Technology
   Taxpayer Services\Communications
   Management Services
   Human Resources


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Meeting Statutory Requirements:    
      Revenue Collection
      Revenue Collection
       Sam Haws, Commissioner




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                                                          Commissioners




Revenue Operations             General 
                               Services        
                              (65 FTEs)  
                                $7.3M
                                                    Audit & 
                                                   Collections  
                                                  (219. 5 FTEs)   
                                                    $16.7M
                                                                       Revenue 
                                                                      Operations    
                                                                       (75 FTEs)   
                                                                        $5.4M
                                                                                       Property Tax        
                                                                                         (37 FTEs)   
                                                                                          $2.8M




 Maintains taxpayer name, address, and 
  identification number database
 Publishes and distributes forms and instructions
 Processes returns and payments
 Issues refunds
 P id       l      i fili     di      i      i
  Provides electronic filing and image innovations


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                      Idaho Gross Revenue
                         Fiscal Year 2010
                         Fi l Y 2010
              Fuels Tax                                               Corporate
               $232.9                                    9.1%          $136.8
                      7.9%

                                                                     W/holding
  Sales Tax
  Sales Tax                         51 1%
                                    51.1%   Income Tax
                                            Income Tax   65.7%        $991.1
                 38.1%
  $1,123.9                                   $ 1,507.5

                           2.9%                                       Individual
                                                         25.2%
                                                                        $379.6
                          Other Taxes
                            $86 4
                            $86.4
In Millions


                                  TOTAL REVENUE
                                  $2,950.7 million                         10
                                                           tax.idaho.gov
                              Doing More With Less
  Fiscal Year         Voluntary              Audit &              STC Cents Per     Number of              Items 
                     Compliance             Collections             Tax Dollar     Employees*            Processed
     2002          $2,092,097,256          $114,065,879                1.15           376                1,886,437
     2003          $2,154,350,239          $120,433,902                1.05           377                1,981,073
     2004          $2,425,394,312          $136,267,007                1.01           372                2,046,170
     2005          $2,722,262,271          $130,253,514                0.96           373                2,117,250
     2006          $2,864,221,113          $165,761,547                0.94           372                2,203,846
     2007          $3,279,377,189          $162,541,346                0.84           373                2,194,527
     2008          $3,394,158,462          $197,309,215                0.83           373                2,295,772
     2009          $2,998,735,652          $164,270,000                0.93           373                2,217,272
     2010          $2,777,284,165          $173,410,000                0.99           359                2,226,000
  Growth %               32.8%                  52.0%                 ‐13.9%         ‐4.5%                   18.0%
* Total full‐time authorized employees minus Property Tax division.




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                                   Doing More With Less
                                  Total Revenues to Number of Employees
                      $4,000                                                   380


                      $3,500 
                                                                               375

                      $3,000 

                                                                               370
Revenue in Millions




                      $2,500 




                                                                                        ber of FTEs
                      $2,000                                                   365                     Total Revenues




                                                                                     Numb
                                                                                                       Number of Employees
                      $1,500 
                                                                               360

                      $1,000 

                                                                               355
                       $500 


                         $‐                                                    350
                                2002 2003 2004 2005 2006 2007 2008 2009 2010


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          Organizational Changes 
         to Maximize Performance
         t M i i P f
 Combine Taxpayer Services (TPS) and Communications 
                            ( )
    Shift 9 existing FTEs into TPS program in General Services
    Centralize customer service and improve communication
     Centralize customer service and improve communication 
 Centralize many IT functions
    Shift 16 existing Property Tax Technical FTEs into IT dept
     Shift 16 existing Property Tax Technical FTEs into IT dept.
    Improve project control and training opportunities
 Transfer Unclaimed Property to Treasury
  Transfer Unclaimed Property to Treasury
    Shifted 8 existing FTEs during FY2011 for better efficiency


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                        Revenue Deposited 
            Fiscal                    Revenue Deposited by ISTC
            Year                   Compliance                Voluntary 
Start of 
            2001                 $  91,992,927         $2,365,151,112
GenTax
            2002                 $114 065 879
                                 $114,065,879       $2,092,097,256
                                                    $2 092 097 256
            2003                 $120,433,902       $2,154,350,239
            2004                 $136,267,007       $2,425,394,312
            2005                 $130,253,514
                                 $130 253 514       $2,722,262,271
                                                    $2 722 262 271
            2006                 $165,761,547       $2,864,221,113
            2007                 $162,541,346       $3,279,377,189
            2008                 $197,309,215       $3,394,158,462
            2009                 $164,270,000       $2,998,735,652
            2010                 $173 410 000
                                 $173,410,000       $2,777,284,165
                                                    $2 777 284 165
                                                                                14
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             What is GenTax?
 The first commercial off‐the‐shelf (COTS) software 
  made specifically for government tax administration
 Idaho was the 1st U.S. state to implement GenTax in 
  2002
 GenTax is now in 17 states and 4 international 
  jurisdictions
 Project budget ‐ $14.8 million
 Project cost ‐ $14 3 million
  Project cost ‐ $14.3 million
 Estimated project cost today ‐ At least $25 million

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                                            tax.idaho.gov
 GenTax Maintenance & Upgrades

 Increasing maintenance costs
    c eas g a e a ce cos s
    Vendor agreed to lower maintenance costs in FY2010 
     and FY2011 
    From $500,000 in FY2010 to $1 million in FY2020

 F          i        d
  Future version upgrades
    Already two versions behind
    Estimated cost of next upgrade is $2 million
     Estimated cost of next upgrade is $2 million
    Build on the $100 million attributed to GenTax so far


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                                                 tax.idaho.gov
Meeting Statutory Requirements:
Meeting Statutory Requirements:
      Enforcement Efforts
    David Langhorst, Commissioner




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                                    tax.idaho.gov
                                                          Commissioners




Audit and Collections 
                               General              Audit &           Revenue 
                                                                                      Property Tax       
                               Services            Collections       Operations    
                                                                                        (37 FTEs)   
                              (65 FTEs)           (219. 5 FTEs)       (75 FTEs)   
                                                                                         $2.8M
                                $7.3M               $16.7M             $5.4M




   Income Tax Audit
     l /           d
    Sales/Use Tax Audit
   Fuels Tax Audit
   Collection & Compliance
   Tax Discovery



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                                Idaho’s Tax Gap
                                                  100%

                                    ……………                        p
                                                       Net Tax Gap
                                    Collectible
                                    ……………
                                                       Amount rec’d. through 
                                    ……………              audit/collection efforts

Total tax liability under law                          Amount rec’d. by state 
                                                       voluntarily and on time




                                                  0%

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From Tax Gap to Compliance Initiative

    “Theoretical” Tax Gap Estimate: $76.5 million

    “Practical” Tax Gap Estimate: $64.5 million

    “G       ’ Ch ll     ”
     “Governor’s Challenge”: 
           Trial run 
           4‐year phase‐in

    Legislative Approval: Implement July 1, 2010

    Goals/Expectations:
     Goals/Expectations: 
           Increase annual revenue $67 million in 4 years
           Cost/Benefit: ROI >7 to 1

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      FY2010 Compliance Initiative
      FY2010 Compliance Initiative
 FY2010 (Phase 1):
  FY2010 (Phase 1):
    $1.5 million in Budget Stabilization Funds used to hire 
     41 temporary staff.
    Goal: $10 million in additional recoveries by June 30, 
     2010.
 Phase 1 Results:
    $1,392,166 in expenditures.
    $20.5 million in recoveries.
    Return on Investment of 14.72 to 1.

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      FY2011 Compliance Initiative
      FY2011 Compliance Initiative

 FY2011 (Phase 2):
  FY2011 (Phase 2):
   $1.642 million in one‐time General Funds used to hire 
    48 temporary staff
    48 temporary staff.
   Recovery goal for entire fiscal year was established at 
    $11,465,000.
   Staff increases would be implemented quarterly when 
    established benchmarks are achieved. 



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                                                tax.idaho.gov
   FY2011 Compliance Initiative Plan
   FY2011 Compliance Initiative Plan
                 Hires     Benchmark
Quarter 1:        20       $1,266,000
Quarter 2:
Quarter 2:        10       $3 293 333
                           $3,293,333
Quarter 3:        11       $5,167,333
Q t 4
Quarter 4:         7       $9 172 000
                           $9,172,000




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                               tax.idaho.gov
 FY2011 Compliance Initiative Results
  July                     $1,115,185
  August                   $2,725,506
  September                $1,742,159
  October                  $2,058,765
  November                 $2,038,943
  December                 $2,569,252

Total through 12/31/2010   $12,249,810


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                                tax.idaho.gov
FY2011 Recoveries by Tax Type
FY2011 Recoveries by Tax Type
                       All Other
                        1.11%




          Fuel Distrib.
            17.25%
            17 25%                 Individual
                                     26.61%



         Wi hh ldi
         Withholding
                                            Business
           29.51%
                                             6.90%

                                Sales
                               18.62%
                               18 62%




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     FY2012 Compliance Initiative Plan
                h
               Phase 3 A
 M k FY2011 t           t ff         t
  Make FY2011 temporary staff permanent

   Governor’s recommendation of $2,776,500 (LBR 6‐131)
   48 FTEs for a full year
   Expected recoveries of $15,950,000
                            $




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                                           tax.idaho.gov
     FY2012 Compliance Initiative Plan
                h
               Phase 3 B
 Fund an additional 48 temporary staff
  Fund an additional 48 temporary staff

    Governor’s recommendation of $2,385,800 (LBR 6‐131)
                                    $
    Assumes quarterly implementation strategy
    E      d        i    f $17 027 050
     Expected recoveries of $17,027,050




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                                            tax.idaho.gov
  Future Compliance Initiative Plans
  Future Compliance Initiative Plans

 FY2013 Plan Phase 4:
  FY2013 Plan Phase 4:
   Make FY2012 temporary staff permanent
   Fund an additional 35 temporary staff
    Fund an additional 35 temporary staff

 FY2014 Plan Phase 5:
  FY2014 Plan Phase 5:
   Make FY2013 temporary staff permanent




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                                            tax.idaho.gov
            p
         Compliance Initiatives: ROI
  STATE, YEAR         COST       ADDED REVENUE    RETURN ON 
                                                 INVESTMENT
                                                     (ROI)

  Idaho, 2003       $926,000      $12,000,000+       13 to 1


Minnesota, 2003    $10,300,000    $97,200,000       9.4 to 1


  Kansas, 2005
        ,          $ ,
                   $1,440,000
                         ,        $ ,    ,
                                  $15,000,000       10.4 to 1


Washington, 2009   $10,700,000    $67,800,000       6.3 to 1
                                   (projected)

New Mexico, 2009   $5,000,000     $29,000,000        6 to 1
                                   (projected)



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                                                 tax.idaho.gov
                  p
    Governor’s Compliance Initiative
 Results:
    CI 2010: $20.5 million    ROI: 14.72 to 1
    CI 2011: $12.3 million    ROI: > 20 to 1
    Already met goal for FY2011
 Conclusions:
    Not one‐time increases
    Ongoing sustainable annual revenue
     Ongoing, sustainable annual revenue
    Stay the course, implement Phase 3


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                                                 tax.idaho.gov
Property Tax Support/Supplemental 
        Request for FY2011
        Request for FY2011
    Tom Katsilometes, Commissioner




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                                     tax.idaho.gov
                                                              Commissioners




Property Tax Division
                                   General              Audit &           Revenue 
                                                                                          Property Tax       
                                   Services            Collections       Operations    
                                                                                            (37 FTEs)   
                                  (65 FTEs)           (219. 5 FTEs)       (75 FTEs)   
                                                                                             $2.8M
                                    $7.3M               $16.7M             $5.4M




 Ensure fair, equitable, and accurate property tax 
  assessments
 Appraise operating properties
 Provide training for county elected officials and
  Provide training for county elected officials and 
  employees
 Administer the Circuit Breaker program
 Oversee budget and levy for taxing districts


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  HB 698 ‐ 2010 Legislative Session
  HB 698 2010 Legislative Session

 Intent – reduce ProVal maintenance (updates) by 
  $ ,
  $50,000.

 Funding won’t be restored until Tax Commission
  Funding won t be restored until Tax Commission 
  shows progress in resolving issue of perceived 
  unfair competition between vendors of property 
  tax administration software.


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                                         tax.idaho.gov
  Property Tax Division/County Tax 
  Property Tax Division/County Tax
     Administration IT Options
 We’ve formed a committee to research options for 
  property tax administration systems.
  property tax administration systems
 The committee consists of County Assessors, Clerks, 
  Treasurers, Commissioners, and Tax Commission Staff. 
 The co‐chairs are: IAC Executive Director, Ada County 
  Assessor, and Tax Commission Property Tax Division 
  Administrator.
  Ad i i t t
 Committee members represent multiple varieties of 
  software.
                                                              34
                                              tax.idaho.gov
         Request for Information 
         Request for Information
The committee will produce and review a request for 
The committee will produce and review a request for
information (RFI).  The RFI will be given to software 
vendors to help the committee find solutions that 
exist or can be developed by in‐house staff.
Examples are:
      Use proven solutions in other states
      Reconfigure software to make it Idaho specific
          h                      dd l       h
       Purchase programming and develop in‐house 
      Continue use of existing systems

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                                                 tax.idaho.gov
                     Next Steps
                     Next Steps

After the RFI is reviewed:
After the RFI is reviewed:
   1. The committee will determine the best option.
      The committee will seek funding options, which will 
   2. The committee will seek funding options, which will
      have to be investigated.
   3. RFI will then go to a request for proposal (RFP) and 
       h bd
      the bid process.
   4. Tax Commission staff will work with the successful 
      solution.
   5. Counties will begin converting to the new system.


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                                                 tax.idaho.gov
Supplemental Request for FY2011 
Supplemental Request for FY2011 ‐
       Restoring $50,000

We’re requesting that you restore the $50,000 for 
ProVal maintenance to retain our access to current 
  updates until we can implement an overall tax 
         d               f         l
        administration software solution. 




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                                         tax.idaho.gov
   Idaho State Tax Commission
       Budget for FY2012
       Budget for FY2012
Governor Otter s Recommendation
Governor Otter’s Recommendation




                                           38
                           tax.idaho.gov
               FY2012 Budget 
FY2012 Base                                    $30,360,100
     Inflation                        $      89,000
     Replacement Items                $
                                      $    124,100
     Interagency Items                $   (238,700)

FY2012 M i
FY2012 Maintenance                             $30,334,500
                                               $30 334 500
     Agency Reorganization            $            0
     Phase 2 Made Permanent           $ ,       ,
                                      $  2,776,500
     Phase 3 Compliance Temps         $  2,385,800
     Replace Main Phone System        $      817,600
     Omnibus Decisions Reduction      $    (745,600)

FY2012 Governor Rec.                           $35,568,800
        Legislative Budget Book Pages 6‐128 to 6‐132
        Legislative Budget Book Pages 6 128 to 6 132
                                                                       39
                                                       tax.idaho.gov
               g      p
     FY2012 Budget Components

 Personnel 73 5%
  Personnel  73.5%       $ 26 151 300
                         $ 26,151,300

 Operating 25 1%
  Operating  25.1%       $   8,920,700
                         $ 8 920 700

 C it l          1 4%
  Capital         1.4%   $      496,800
                         $ 496 800

 Total        100.0%
      l                  $ 35,568,800
                         $


                                                          40
                                          tax.idaho.gov
      Where Does Operating Go?
         FY2012 Estimate (millions)
   Facilities leases                  $2.0
   Software\hardware maintenance      $1.6
   Interagency shared costs (SWCAP)   $1.3
   Postage costs                      $1.2
   T      l
    Travel costst                      $0.9
                                       $0 9
   All other                          $1.3 
   Maintenance Budget
    Maintenance Budget                 $8 3
                                       $8.3
   One‐time items                     $0.6
   Total Budgetg                      $8.9
                                                        41
                                        tax.idaho.gov
               Replacement Items
                    $124,100
                    $124 100
 Dedicated funds only

 Replace only critical equipment as it fails or as it
  Replace only critical equipment as it fails or as it 
  becomes unable to meet minimum performance 
  standards

 Safety concerns with vehicles more than 10 years 
  old and that have more than 140,000 miles
  old and that have more than 140 000 miles



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                                                tax.idaho.gov
               FY2012 Line Items
 Agency Reorganization                 $                    0
    No net cost involved
 Phase 2 Made Permanent                $    2,776,500
    48 temp positions to permanent
     48 temp positions to permanent
    Results shown on separate slide
 Phase 3 Compliance Temps              $    2,385,800
    Additional 48 temp positions
    Requires additional office space
 Replace Main Office Phone System
  Replace Main Office Phone System      $        817,600
                                        $        817 600
 General Fund Reductions               $      (745,600) 


                                                                 43
                                               tax.idaho.gov
  FY2012 Compliance Initiative Plan
  FY2012 Compliance Initiative Plan
            Phase 3 A

 Make FY2011 temporary staff permanent


   Governor’s recommendation of $2,776,500 (LBR 6‐131)
                                   $ , ,    (         )
   48 FTEs for a full year
   Expected recoveries of $15,950,000



                                                           44
                                           tax.idaho.gov
   FY2012 Compliance Initiative Plan
   FY2012 Compliance Initiative Plan
             Phase 3 B

 Fund an additional 48 temporary staff

    Governor’s recommendation of $2,385,800 (LBR 6‐131)
    Assumes quarterly implementation strategy
    Expected recoveries of $17,027,050




                                                           45
                                           tax.idaho.gov
                            y
   Business Case for Phone System
 Current system doesn’t have capacity to support the 
  Compliance Initiative for FY2012
 Replace end‐of‐life equipment in Boise office
    12‐year‐old system is no longer supported
    Includes: phone switch, over 500 phones, inbound call 
     routing, predictive dialer, and voice mail
           g, p                ,
 Key services are at risk of extended outages
    Outbound collections (with dialer)
    Inbound taxpayer assistance
 Dialer failed Dec. 27.  Using temporary solution

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                                                    tax.idaho.gov
   Reductions per Omnibus Decisions
              ($745,600)
 ($542,000)    Lease phone system replacement 
                versus original request to purchase

 ($153,600)    Postpone the purchase of vehicles 
                to be used by new audit personnel
                            y           p

 ($  50,000)   Reduce postage/printing expenditures 
                through greater use of Internet to 
                th    h     t        fI t     tt
                provide forms and information

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                                          tax.idaho.gov
Questions?




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             tax.idaho.gov

				
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