Agency: Tax Commission

Line Item: Tax Administration

Background

The Tax Administration line item includes 10 program areas:

• Tax Administration;
• Auditing Division;
• Multi-State Tax Compact;
• Technology Management (DTS);
• Processing Division;
• Seasonal Employees;
• Tax Payer Services;
• Property Tax;
• Motor Vehicles; and
• Motor Vehicle Enforcement Division.

Intent Language

Under Section 63J-1-603 of the Utah Code, the Legislature intends that appropriations provided to the Utah State Tax Commission in Item 16 Chapter 10 Laws of Utah 2012, not lapse at the close of Fiscal Year 2013. The use of any nonlapsing funds is limited to the costs directly related to the modernization of tax and motor vehicle systems and processes.

Funding Detail

For more detail about a particular source of finance or organizational unit, click a linked entry in the left column of the table(s) below.

Program: Administration Division

Function

The Administration Division includes the Commissioners' and the Executive Director's Offices. Both offices provide direction and management to the department.

The Commissioners' Office:

• Develops tax policy and rules;
• Provides an appeals process with most appeals heard by administrative law judges;
• Assures agency operations are in compliance with the law;
• Keeps the public informed with tax bulletins and news releases;
• Forecasts state revenues and provides economic and statistical analyses from Tax Commission data; and
• Supervises and administers tax law of the state.

The Executive Director's section:

• Directs and coordinates day to day department operations;
• Provides oversight of employee recruitment, supervision, and training;
• Provides direction and oversight of the budget, training, goal setting and performance measurement;
• Drafts legislation, rules, and bulletins, and coordinates legislative issues;
• Develops policy and monitors compliance of data security policies to ensure that taxpayer information is protected;
• Responsible for the state's revenue collections and reporting, including distribution of revenues to local governments;
• Manages the department's internal accounting processes;
• Investigates criminal tax evasion cases;
• Manages disclosure and IRS liaison functions; and
• Provides help desk support and training to agency staff and citizens using the commission's new online computer systems.

Performance

The three top measures the Administration division cites as evidence of its success are, 1) successful oversight of the tax system implementation process, 2) timely distribution of revenue, and 3) number of tax appeal cases closed by fiscal year.

Successful Oversight of the Tax System Implementation Process

The Tax Commission has been directing nonlapsing balances towards automating its processes since FY 2006. Successful oversight and implementation of the new computer systems has been a top priority of the Administration division since inception of the project, it cites 'the percentage of target completed each month' as an important indicator of success because the replacement of computer systems is key to the agency's improvement and efficiency efforts and fulfilling its mission. In FY 2013, the focus for this project is in the Motor Vehicle and Motor Vehicle Enforcement divisions. The Administration division reports 100% of the target completed each month since FY 2008.

Timely Distribution of Revenue

Represents the role of the Tax Commission in collecting local sales taxes and distributing those taxes to the proper municipalities or counties. Local entities rely on their sales tax collections for operating cash flow and the funding their programs. This goal helps ensure that most of the funds collected each month is ready for transfer to those entities by the distribution deadlines. The Tax Commission has set a goal of achieving a timely distribution for 95% of the largest taxpayers.

Tax Appeal Cases Closed

Taxpayers have a right to appeal to the Tax Commission their state tax assessments, and local property tax appeals that the county has denied. This measurement monitors appeals activity and the cases that are closed each year.

Currently, for property tax appeals, an appeal for one year may not be concluded before the valuation notices are sent to the property owner for the following year. Since FY 2003, the cleared appeals have ranged from a low of 1,476 in FY 2005 to a high of 3,401 in FY 2010.

Funding Detail

The Administration Division is funded primarily from General Fund and Education Fund. It also has the nonlapsing funds related to the long-term project of modernizing the agency's tax and motor vehicle systems.

Program: Auditing Division

Function

The Auditing Division attempts to increase voluntary and involuntary taxpayer compliance through selective examination of taxpayer returns and supporting records. The division audits all taxes except property tax (local level), and conducts audits in-house and at taxpayers' places of business. The division emphasizes compliance audits for accurate tax return reporting, and review for possible investigation of suspected fraud and tax evasion. Through educational outreach and customer service, the division works to help taxpayers report future taxes properly.

Performance

The coverage areas for the Auditing Division include about 1.2 million income tax returns and about another 0.8 million business returns.

The division wants to ensure that those being audited believe they are treated fairly in the audit process. Surveys are provided at the end of every audit, allowing taxpayers to provide input to the quality of the audit process. Input can be provided anonymously or taxpayers can identify themselves when providing feedback. The following chart details audit satisfaction on a scale from one to five. A rating of five indicates the taxpayer "strongly agrees" with the statement, "overall, I was satisfied with the manner in which the audit was conducted," and a rating of one means the taxpayer "strongly disagrees" with the statement.

The Auditing Division also considers indicative of its success the number of new accounts discovered (sales and corporate) from auditing activities. Efforts are taken to identify taxpayers that are not in compliance with state filing requirements. This measurement shows the results of those activities from year to year.

Another measurement of performance success is whether the number of income tax audits performed is increasing. The Auditing Division sets goals for each of their sections at the beginning of the year with the expectation that this goal will be met each year. The division internally monitors progress throughout the year to ensure that the audit targets are met. The table below represents indexes of the number of income tax audits performed and the hours spent on income tax.

Funding Detail

The Auditing Division is funded mostly from the General Fund, the Education Fund, and the Tax Commission Administrative Charge Restricted Account.

Program: Multi-State Tax Compact

Function

The Multi-State Tax Compact (MTC) is a group of state governments working together to help make state tax systems fair, effective, and efficient for interstate and international commerce. It is also an effort to protect state tax sovereignty.

The Compact's two primary projects are the Joint Audit Program and the National Nexus Program.

Joint Audit Program. Reviews a business' sales and corporate income tax filings for several states at the same time. Accordingly, the audit program encourages compliance with state tax laws, generates tax revenues for states, contributes to uniformity in taxpayer treatment, and helps states learn about new industry conditions and circumstances.

National Nexus Program. Encourages voluntary disclosure and discovers businesses that are not filing returns with states. The Nexus program facilitates an exchange of information between states to identify business reporting or filing inconsistencies among these states.

Statutory Authority

Although the State is not required to be a member of the MTC, in Utah Annotated Code Title 59, Chapter 1, Section 801 the Legislature enacted into law Utah's participation in this compact.

Performance

The Tax Commission utilizes the work of the MTC in that assessments from MTC audits amounted to $1.4 million in FY 2008, $3.9 million in FY 2009, $2.5 million in FY 2010, and $2.4 million in FY 2011.

Funding Detail

Funding for the Multi-State Tax Compact is from the General Fund, the Education Fund, and the Tax Commission Administrative Charge Restricted Account. Annual expenditures represent membership dues to the Multi-State Tax Compact and multi-state audit services that are provided by that organization.

Program: Technology Management

Function

The Department of Technology Services (DTS) now operates and maintains the Tax Commission's automated systems. It also develops and installs new automated systems to meet specialized demands. In addition, DTS provides service to internal customers through a system-wide "help desk."

Background

The Tax Commission continues to modernize tax and motor vehicle systems and processes. New funding to replace the state's core tax systems was initiated in 2006 with a one-time appropriation of $7 million to DTS. During the 2007 General Session, project funding included $5 million as part of the total payment towards replacing the existing system, and during the 2008 General Session another $6 million was appropriated for the project. The total vendor cost to replace the existing core systems was $22.5 million, with $4.5 million of this stemming from savings from other areas of the Tax Commission's appropriations. This project has included the replacement of the automated systems used to process, record, and distribute sales tax, income tax, employer withholding tax, corporate tax, motor and special fuel taxes, and other miscellaneous taxes.

Chronology of Implementation:

• January 2007 - Replacement of the income tax system
• March 2008 - Sales tax system
• March 2009 - Corporate withholding, streamlined sales tax
• April to December 2009 - Taxpayer Access Portal for Income & Sales
• January 2010 to June 2012 - Fuel taxes and miscellaneous taxes
• FY 2012 - Several additional "Miscellaneous" tax systems have been updated
• July 2012 to October 2013 - Motor Vehicle and Motor Vehicle Enforcement systems
• November 2013 - November 2014 - Imaging and remittance processing

Other initiatives pursued by the Tax Commission include the expanded use of online filing, scanning or image-lifting technology to electronically extract return information, and designing systems so that "data warehousing" of taxpayer information can be accomplished. Strategic use of new technologies allows the agency to improve its processes and assists in providing quality customer service to taxpayers and vehicle owners.

All of these improvements will provide better tools to assist taxpayers in tax compliance and make the processing and verification of taxpayer information more efficient. Improvements are expected to continue until all systems and processes have been updated. It should be noted that Technology Management employees are now classified as part of the Department of Technology Services workforce.

Performance

The Technology Management Division deals with systems that handle over 2 million electronically filed documents, as well as upkeep and management of the databases related to over 7 million tax returns, payments, and transactions each year.

Performance measures for the Technology Management Division are presented within the DTS budget. Click here for the link to the DTS performance measures.

Funding Detail

The Technology Management Division is funded from 4 primary sources, the General Fund, Education Fund, Transportation Fund and the Tax Commission Administrative Charge Restricted Account.

Program: Tax Processing Division

Function

The Tax Processing Division designs and produces both on-line and paper tax forms, instructions, and publications for taxpayer use. It collects and records tax payments and taxpayer information, processes paper and electronic tax documents, and maintains archival records. This division is using updated technologies provided by new systems to image documents. Copies of returns, payments, and correspondence can now be accessed in real time, as compared to the prior microfilm and manual retrieval process.

Performance

The Processing Division deals with approximately 3 million paper and electronic returns and payments, which includes review of electronic submissions and processing, entering data, scanning documents, and archiving of paper documents.

1. Indicative of the Processing Division's accountability are the dates by which all timely-filed income tax returns are entered and checks deposited. The goal is to record and deposit these funds as quickly as possible to keep account information current. Processing completion dates can vary from year to year based upon a number of factors, including the timing of when the majority of the workload is received.
If the processing time for any timely filed return exceeds 45 days after the date of filing, the Tax Commission has to include an interest payment on the balance of the return of 2 percent.
2. A measure of efficiency for the division is the percent of income tax refund requests processed within 15 working days. Once taxpayers file their returns, if they are due a refund, they would like it in a timely manner. This measurement shows how well the division did compared to the 15 working day target. An exception to the 15-day target is any tax return that goes to edit for further research or requires follow-up with the taxpayer.
   

3. A measure the division recently began tracking is the percent of the business tax returns filed electronically. An on-line return application for all business taxes is now available using a Taxpayer Access Portal (TAP). Once taxpayers use the online applications, they tend to continue filing that way. This requires less resources to handle and enter paper returns. Increased efficiency and reduced costs are realized with a high percentage of electronic tax filings.

Funding Detail

The Processing Division is funded by the General Fund, Education Fund, Transportation Fund, and the Tax Commission Administrative Charge Restricted Account.

Program: Seasonal Employees

Function

Seasonal employees are a factor in the efficient operation of the Tax Commission. Commission workloads vary sharply throughout the year. For instance, the Processing Division utilizes temporary employees during high volume document filing periods, such as the spring for income tax returns and each quarter for business tax returns.

Funding Detail

The seasonal budget is primarily comprised of General Fund and Education Fund. 100% of this budget goes to hiring temporary employees during the peak income tax processing period (around April 15th). On an average annual basis, the budgeted seasonal employee costs $22,195 in wages and $3,052 in benefits.

Program: Tax Payer Services

Function

Through outreach and education programs, Taxpayer Services promotes voluntary compliance with Utah tax statutes. Its employees respond to written, phone, or in-person requests from taxpayers, assisting them in meeting their requirements and in resolving tax issues by providing timely and accurate information. The program also uses the Treasury Offset Program to garnish federal refunds of delinquent Utah taxpayers from the following year. The division also outsources debt collection of accounts that are not in litigation, under a payment agreement, assigned to a collector for active collection, or whose outsourcing would be in violation of state or federal law.

Performance

The Taxpayer Services Division deals with 1.4 million taxpayers directly and indirectly. The top three measures the division uses to monitor performance are 1) Cost of Collection relative to Delinquent Dollar Collected 2) Number of Delinquent Cases Cleared to Zero, and 3) Collection to Receivables Ratio in Days.

The division strives to maintain low ratio of expenses to the delinquent dollars collected. This is monitored to ensure that this low expense to revenue ratio is maintained.

The divison also tracks the number of delinquent cases cleared to zero. This measurement keeps track of progress the division is making on working and clearing accounts with taxpayers that have outstanding, and overdue tax balances. Goals are set each year, with actual results being monitored each month.

This measurement shows how many days on average it takes before a delinquent account is collected. The sooner accounts are worked, the more likely the account can be cleared up, so a lower number is desirable. While the division can influence this result, economic factors, resources and taxpayer ability to pay can all impact this ratio.

Funding Detail

The Taxpayer Services Division is funded primarily with General Fund, Education Fund, and the Tax Commission Adminstrative Charge Restricted Account.

Program: Property Tax Division

Function

The Property Tax Division appraises and audits complex natural resource extraction and transportation related properties in the state, as well as properties that cross county or state lines. Such properties include those owned by airlines, motor carriers, railroads, and utilities.

The division works with local officials to assure equitable and accurate assessment and taxation under local property tax systems. It also administers the Truth-In-Taxation law.

Statutory Authority

The Utah Constitution, Article XIII, Section 6, Paragraph 3 provides authority for the State Tax Commission to assess, adjust, and equalize property values and to revise local property tax levies when necessary. The Property Tax Division also draws authority from the Property Tax statute contained in Utah Annotated Code Title 59, Chapter 2.

Performance

The top three performance measures the Property Tax Division considers as indicative of its success are, 1) Timely Completion of Valuation of Centrally Assessed Companies, 2) the Percent of Counties NOT Received Correction Action Orders, and 3) Personal Property Audits per Auditor per Year.

Timely Completion of Valuation of Centrally Assessed Companies

This measurement shows what percentage of the centrally assessed companies valuations were completed on time. The assessment must be completed on time so counties and local entities can establish their budgets. Centrally assessed company valuations are considered on time when completed by May 31.

FY 2013 Centrally Assessed Valuations:

• Businesses - 724
• Land Assessments - 1181

Percent of Counties NOT Received Correction Action Orders

All counties must be in compliance with statutory requirements, otherwise the Tax Commission must issue corrective action orders to bring them into compliance.

Personal Property Audits per Auditor per Year

The Personal Property Tax section performs audits for counties. This measurement is used to monitor the workload of that section's staff.

FY 2013 Results:

• Personal property audits: 1,288
• Training hours to county employees - 12,677

Funding Detail

The Property Tax Division's financing comes mainly from the Education Fund. A portion of funding comes from a dedicated credit property assessment fee authorized by UCA 59-2-703 and 59-2-705.

Program: Motor Vehicles

Function

The Division of Motor Vehicles (DMV) administers statewide vehicle title, registration, and related functions. It implements motor vehicle policy and procedure and helps maintain the State's motor vehicle computer system. Also, the DMV provides training to all customer service agents, manages a telephone section for statewide assistance, processes impound and revocation information, and manages vehicle-related appeals. Additionally, the DMV administers the International Registration Plan and the International Fuel Tax Administration Plan.

Utah Code 59-2-406 authorizes the Tax Commission to contract with county governments, at the counties' option, to provide local customer services for the combined collection of the county's fee-in-lieu and Title 41 Motor Vehicle Fees. Several counties have elected to retain those functions. Fees for the reciprocal services provided between the State and counties are established in statute. Subsection 406 (3) sets the reimbursement fee and instructs that an adjustment be made each year based on the prior year's consumer price index change. The approval of fees is made by the Legislature.

Statutory Authority

Utah Annotated Code Title 41 covers the State's motor vehicle laws. Title 41, Chapter 1a is the primary section adminstered by the Motor Vehicle Division, which includes registration requirements and motor vehicle fees. The Motor Vehicle Division also draws authority from Title 41, Chapter 22 to administer Off-Highway vehicle registration requirements, and Title 73, Chapter 18 to administer Boat Registration and Fee requirements.

Performance

The top three measures used by the Motor Vehicles division to assess performance are, 1) Average Wait Time to Maximum Wait Time, 2) Percent of Renewals Completed Online, and 3) successful development, testing, and implementation of new computer systems.

1. Timely assistance in Motor Vehicle Offices is important to citizens, and average wait times are monitored on an ongoing basis. This gauge is used to monitor the trend in wait times and adjust staffing as necessary.
   

2. Online renewal options are continuously promoted , since those transactions require less staffing resources and reduced wait times in the offices for those that must come to the office. Additional office space and staffing has been avoided as a significant increase in the use of online renewal options has been realized.

   Although largely dependent upon the demand side, the division tracks internet renewals and considers the increasing use of internet and on-the-spot transactions as indicative of its effort to improve efficiency.

   

3. Motor Vehicles is currently one of two divisions phasing in new computer systems, which will continue through FY 2014. Successful development, testing and implementation of its computer systems is a third performance measure cited to gauge succes. Having the necessary work completed at every benchmark date is critical for the successful implementation of the system that is necessary for a successful motor vehicle function of the state.

   The division provided the following goals for this measurement:

   • FY2013: System definition, development, and testing is completed according to project plans and timeline. Progress towards goals are monitored weekly.
   • FY2014: System development is completed, testing is completed, training is provided, and the new system is implemented per project schedule. System is operational and implemented on due date. Employees are trained by due date. Any critical issues found during implementation are worked on and fixed within one month of rollout.
   • Target completion date is October 2013.

   FY 2013 Reults: The major system development, testing, training was completed by the target date of October 14th. The new system was successfully rolled out statewide and went into production in all branch offices on October 15th. The new system provides improvements to internal processes as well as customer service functionality. While minor issues were expected, no major problems were discovered after deployment. This was a major undertaking, with a system that impacts every citizen in the state who owns a vehicle. Development of a new and modernized motor vehicle will provide new technologies and related beneifts to the state for years to come.

Funding Detail

Program: Motor Vehicle Enforcement Division

Function

The Motor Vehicle Enforcement Division (MVED) protects Utah citizens from motor vehicle fraud and attempts to foster a healthy motor vehicle sales environment. Officer duties include title, odometer and motor vehicle dealer fraud investigations, regulatory licensing enforcement, VIN inspections, registration enforcement, and investigation of consumer complaints against licensed dealers, commercial auto theft, and salvage vehicle fraud.

Statutory Authority

Utah Annotated Code Title 41 covers the State's motor vehicle laws. Title 41, Chapter 3 is the primary section adminstered by the MVED. The Chapter specifies motor vehicle business regulations.

Performance

The division tracks the total number of motor vehicle crime investigations each year in order to assess the work load and output of investigative staff.

Each year, MVED officers recover more stolen vehicles than other law enforcement officers because of an emphasis on vehicle enforcement. The following graph shows the number of stolen vehicles recovered over time.

The Motor Vehicle Enforcement division is currently one of two divisions phasing in new computer systems, which will continue through FY 2014. Successful development, testing and implementation of its computer systems is a third performance measure cited to gauge succes. The division provided the following goals for this measurement:

• FY2013: System definition, development, and testing is completed according to project plans and timeline. Progress towards goals are monitored weekly.
• FY2014: System development is completed, testing is completed, training is provided, and the new system is implemented per project schedule. System is operational and implemented on due date. Employees are trained by due date. Any critical issues found during implementation are worked on and fixed within one month of rollout.
• Target completion date is October 2013.

FY 2013 Results: The major system development, testing, training was completed by the target date of October 14th. The new system was successfully rolled out statewide and went into production in all branch offices on October 15th. The new system provides improvements to internal processes as well customer service functionality. While minor issues were expected, no major problems were discovered after deployment. This was a major undertaking, with a system that impacts every citizen in the state who owns a vehicle. Development of a new and modernized motor vehicle will provide new technologies and related benefits to the state for years to come.

Funding Detail

The greatest portion of the Motor Vehicle Enforcement Division's (MVED) funding is in the form of dedicated credits. The temporary permit fee issued by vehicle dealers upon sale of a vehicle generates the greatest amount of revenue for MVED's dedicated credits. Senate Bill 106 of the 2007 General Session removed the temporary permit fee from statute. The Motor Vehicle Enforcement Division is now authorized to request modification of this fee in the budget process to cover division cost increases, as well as compensation package costs that must be paid from these fees. During the 2009 General Session, the Legislature authorized this fee to increase from $8 per transaction to $12.

80 percent of the division's budget is allocated to personnel services for the enforcement of the state's vehicle registration laws, fraud and theft detection, and the oversight functions assigned to the division related to the motor vehicle industry.