Legislative Hearing - December 6, 2011 Update of Tax Analytics and Tax Compliance

Tax Analytics and Tax Compliance is facilitated by a variety of ongoing and new initiatives at the Department Integrated Tax System (all major tax types) –Implementation of GenTax has allowed us to leverage technology to better focus compliance (voluntary and audits), streamline processes, and create consistency across tax types –Final phase to go live will be February 2012 Enhancing Individual Income Tax Taxpayer Assistance: –Rewritten our income tax telephone scripts so taxpayers can get the assistance they need to help them comply with their filing requirements easier and more efficiently –Developed a new “Where’s My Refund” on-line application so taxpayers can easily check the status of their refund with better status indicators Tax Analytics and Compliance Facilitation

Internal Audit Committee: –Developing Agency Risk Assessment & Communication Plan –Revamping Internal Audit Plan, Schedule and Resources –Introduced a “whistle blower” hotline for employees Internet Redesign: –Simplifying navigation that will allow users to get information quickly and easily –Rewriting and better organizing content –Enhancing the search functionality and providing an updated look and feel Tax Analytics and Tax Compliance Facilitation

Continuous Improvement Program: –Instilling a culture of continuous improvement thought process within the Department of Revenue, following the Governor’s plan of Better Government for a Better Minnesota Electronic Check Presentment (Award): –Electronic means of presenting paper checks to the bank for deposit –A check image is presented instead of the physical check –Eliminates the need to encode, endorse, and courier physical checks –Extends deposit/clearing window with the bank Tax Reform: –The Department is currently looking at ways to reform our tax system –Initiating town hall meetings across Minnesota to listen to citizen’s ideas on how to make our tax system better and more competitive Tax Analytics and Tax Compliance Facilitation

e-Services: –New e-Services system through our new integrated tax system (Gen Tax) –Provides taxpayers to view all of their account information –Provides more flexible security –Provides taxpayers with “web-messaging” functionality directly through the system –Provides more flexibility for the taxpayer to do business 24x7 –Demonstration scheduled for legislative staff and interested legislators on December 14 2:00 – 3:00 p.m. in Room 123 of the State Office Building eCRV: –Convert the Certificate of Real Estate Value (CRV) from paper form to an electronic data collection process –Current paper process is costly and time-consuming for county staff and added burden on state staff for reviewing, managing and archiving paper e-Services

RFP Key Dates: –April 11, 2011 Solicitation notice in State Register –May 3, 2011 Optional pre-proposal contractor meeting –May 9, 2011 Deadline for submitting questions to MMD –June 27, 2011Deadline for submitting proposals –June 28, 2011Proposals evaluation commences –August 24, 2011DOR Evaluation Team 3 turns in scores –October 2011Other Teams Complete Scoring –November 2011Contracts Negotiated/Signed –December 2011 DOR engaging approved vendors Update on Tax Analytics

During the RFP Process, DOR: –Created an Analytics Steering team –Provided analytics educational sessions to key DOR staff –Held brainstorming sessions on potential analytics application areas –Contacted other states to discuss their use of analytics –Conducted extensive research and review of multiple years of Tax Analytics presentations from Federation of Tax Administrators –Will discuss a number of potential projects with vendors now that contracts are finalized –We are anticipating reviewing the products offered in three conceptual areas: –(a) Return processing—New processes analytics offers for return processing and selection for review for refund distribution –(b) audit selection criteria and approaches that are different from what we do today –(c) ways to use analytics to make our current selection more effective and efficient. Update on Tax Analytics

–Master contract awards for tax analytics include: –Accenture –Chainbridge Software –Deloitte Consulting –Fast Enterprises –IBM –Public Consulting Group –Revenue Solutions –SAS Institute –Tax Management Associates –Teradata Government Systems

Update on Tax Compliance Initiative Fiscal YearsApprop. Actual Expenditures Target Revenues Actual Revenues Return on Investment FY2012/ * *6 to 1** * Actual through October 31, 2011 ** Target ROI –In terms of dollars collected, the pace of collection has been slow. Most compliance initiatives start slow and the pace picks up as the initiative gets fully operational. –For previous compliance initiatives, the related planning and implementation/hiring began in May/June for the following fiscal year. –The current initiative became operational in September/October; about three months off pace but too early to sound alarm bells and we are eager to fold expanded tax analytics into the initiative as soon as practicable.

–DOR estimated the Federal Reciprocal Agreement process would be built into our new integrated tax system by April, 2012 –At this time we are on track with this date Next Steps: –Continue working with MMB to develop the needed integration –Continue working with US Department of Treasury on a MOU –We do not anticipate any delays Federal Reciprocal Agreement Update

Questions?