Agency: Tax Commission

Line Item: Tax Administration

Intent Language

Under Section 63J-1-402 of the Utah Code, the Legislature intends that any remaining amount of the $73,554,400 provided by the Laws of Utah 2008 Chapter 2, Senate Bill 1, State Agency and Higher Education Base Budget Appropriations, Item 77, for the Utah State Tax Commission not lapse at the close of FY 2009. The use of any nonlapsing funds is limited to costs directly related to the modernization of tax and motor vehicle systems and processes.

In addition to future fiscal years, the Legislature intends that the Motor Vehicle Temporary Permit fee increase approved by the Executive Appropriations Committee apply for FY 2009.

Funding Detail

Program: Administration Division

Function

The Administration Division includes the Commissioners' and the Executive Director's Offices. Both offices provide direction and leadership 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; and
• Forecasts state revenues and provides economic and statistical analyses from Tax Commission data.

The Executive Director's section:

• Directs and coordinates day to day department operations;
• Provides oversight of employee recruitment and supervision, classification,
• training, and payroll;
• Provides direction and oversight of the budget, training, goal setting and performance measurement;
• Drafts legislation, rules, and bulletins, and coordinates legislative issues;
• Oversees facility operations and security;
• Tracks the state's revenue collections, including distribution of revenues to local governments, and manages the Department's internal accounting processes;
• Enforces criminal tax evasion cases; and
• Manages disclosure and IRS liaison functions.

Funding Detail

State funds account for most of the Administration Division's financing. With 58 budgeted full-time-equivalent employees, the Division's primary category of expenditure is personal services. During the 2008 Second Special Session, the Legislature authorized use of $5 million one-time funding from the Sales & Use Tax Administrative Fee account, which replaced a $5 million one-time decrease in General Funds. The increase in nonlapsing balance at the end of FY 2008 was due to timing of payments made to the contractor for the tax system modernization effort.

Program: Auditing Division

Function

The Auditing Division increases voluntary taxpayer compliance through selective examination of taxpayer returns and supporting records. It audits all taxes except property tax, and conducts audits in-house and at taxpayers' places of business. The Division emphasizes compliance audits for investigation of suspected fraud and tax evasion. Through educational outreach and customer service, the Division works to help taxpayers report future taxes properly.

Funding Detail

The three largest sources of finance for the Auditing Division are the General Fund, Uniform School Fund, and the Sales and Use Tax Administrative Fees Account. The funding from the sales and use tax fee stems from the Commission practice of keeping a percentage of total sales tax collected for local entities to offset the costs of collection.

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 as 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. The 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. The 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.

Funding Detail

Funding for the Multi-State Tax Compact is made up entirely of General Fund, Uniform School Fund, and the Sales and Use Tax Administrative Fees Account. Annual expenditures represent membership dues.

Program: Technology Management

Function

The Department of Technology Services (DTS) now operates and maintains the Tax Commission's 60 different 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.'

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 is $22.5 million, with $4.5 million of this stemming from savings from other areas of the Tax Commission's appropriations. This project will include 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 fuel taxes. Replacement of the income tax system was implemented in January 2007; implementation of the sales tax system occurred in March 2008, and implementation of the corporate withholding, streamlined sales tax, and fuel taxes occurred in March 2009.

A new delinquent tax collection tracking system has improved collection tools and processes. The new motor vehicle system allows the on-line and immediate update of vehicle information. The Salt Lake motor vehicle offices are now using an automated line-management system to expedite the traffic flow through those offices.

Other initiatives pursued by the Tax Commission include the expanded use of on-line filing, scanning or image-lifting technology to electronically extract return information, and designing systems so that "data warehousing" of taxpayer information can be accomplished.

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 for several more years and until all systems and processes have been reviewed for update. It should be noted that Technology Management employees are now classified as part of the Department of Technology Services workforce.

Funding Detail

In addition to the General Fund, Uniform School Fund, and Sales and Use Tax Administrative Fees Account, the Transportation Fund is a major source of financing for technology management.

Program: Tax Processing Division

Function

The Tax Processing Division disseminates tax forms, instructions, and publications to citizens. It collects and records tax payments and taxpayer information, processes paper and electronic tax documents, and maintains archival records. About 3 million transactions are processed through this division each year.

Funding Detail

The main funding sources for the Tax Processing Division are the General Fund, Uniform School Fund, Transportation Fund, and Sales and Use Tax Administrative Fees Account. The majority of the Division's expenditures are on personal services and current expense, with postage and mailing making up a large portion (about $1.46 million in FY 2008) of current expense.

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

For the past three years, the Tax Commission was authorized 16 full-time-equivalent seasonal employees. To increase efficiency, the Legislature authorized a reduction in the size of the seasonal staff by half. The program is funded by a mix of General Fund, Uniform School Fund, and the Sales and Use Tax Administrative Fees Account.

Program: Tax Payer Services

Function

Tax Payer Services promotes voluntary compliance with Utah tax statutes, through outreach and education programs. Its employees respond to written, phone, or in-person requests from taxpayers, assisting them in resolving tax issues by providing timely and accurate information. They use the case management tools of the new tax systems to help increase collection efficiency. The program also uses the Treasury Offset Program to garnish federal refunds of approximately 6,662 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.

Funding Detail

Like many of the other programs under the Tax Commission, the majority of the funding mix for Taxpayer Services is General Fund, Uniform School Fund, and the Sales and Use Tax Administrative Fees 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.

Funding Detail

The Property Tax Division's primary financing source is the Uniform School 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 computer users, manages a telephone section for statewide assistance, 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 and reimbursement of fees are made by the Legislature.

Funding Detail

In addition to the General Fund and Transportation Fund, dedicated credit revenue makes up a large portion of the Division's funding. The two largest dedicated credit sources are property assessment fees and electronic payment fees, which totaled about $2.3 million and $4.2 million, respectively, in FY 2009.

Program: Motor Vehicle Enforcement Division

Function

The Motor Vehicle Enforcement Division (MVED) protects Utah citizens from motor vehicle fraud and fosters 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.

Funding Detail

The greatest portion of the Motor Vehicle Enforcement Division's funding is in the form of dedicated credits. Of all division dedicated credits, the temporary permit fee generates the greatest revenue, about $2.3 million in FY 2009. 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 of the Legislature modification of this fee in the budget process to cover division cost increases including compensation package costs. During the 2009 General Session, the Legislature authorized this fee to increase from $8 per transaction to $12.