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Program A: Tax Collection

Program Authorization: Title 49, Chapter 1 of the La. Revised Statutes

PROGRAM DESCRIPTION

The mission of the Office of Revenue's Tax Collection Program is to serve the citizens of Louisiana by efficiently collecting the state's tax revenue in a manner that will generate the highest degree of public confidence in the department's integrity and fairness. The need for fair and equitable administration of the state's tax laws is essential. Uniform enforcement encourages taxpayers to pay their fair share and prevents an undue burden from being placed on the honest taxpayer. In addition, the presence of an effective and visible enforcement program results in a higher level of voluntary compliance.

The goals of the Tax Collection Program are:

1. Achieve the highest degree of voluntary compliance.

2. Have an effective, efficient and modern department.

3. Provide customer-driven service.

OBJECTIVES AND PERFORMANCE INDICATORS

1. The Tax Collection Program will continue the current level of tax processing but, by 2000, reduce processing time and reduce volume of paper returns by 10% from 1996 levels.

1 The 90% accuracy rate of this entry method eliminates the need for data keying and the accompanying manual processing for these returns.

2 FY 1997-98 is the first year that taxpayers could use the Internet for filing tax returns

3 Compared to 74% in FY 1995-96 and 58% in FY 1994-95.

4 Compared to 49% in FY 1995-96 and 44% in FY 1994-95. Electronic deposit expedites the receipt of funds by four days.

5 Three new computer systems are being implemented to manage tax registration and compliance and to integrate tax systems. Each tax must be converted to all three new systems. The department anticipates that 10 taxes will be converted to the new registration systems by June 1999, with conversion to the Integrated Tax System to be accomplished by June 2000.

2. By 2000, the Tax Collection Program will reduce the amount of paper handled by 10% (from 1996 level) and speed processing of taxpayer correspondence by providing on-line correction ability in regional offices, using electronic imaging equipment to capture and retrieve documents, and transmitting intradepartmental correspondence via electronic mail.

1 By reducing the amount of paper handled, the percentage of taxpayer correspondence that is answered within 30 days or prior to the established deadline will be increased.

3. In FY 1998-99, the Tax Collection Program will implement new customer service programs, such as fax-on-demand, speaker's bureau, interactive voice-response telephone systems, and a taxpayer outreach program.

1 Fax-on-demand system allows taxpayers and tax preparers to request, via an automated telephone system, a fax copy of various tax forms and other documents that can be requested and received 24 hours a day. Providing needed tax forms via this method is cost-effective for the department because it eliminates personnel and mail-handling costs.

2 The department's website lists menu items including legislative information, current press releases, a directory of services, unclaimed property names, and information about the department. Users can also download tax forms and publications or check the answers to frequently asked questions (FAQS).

3 Tax-related information also can be accessed through the department's electronic blunting board system. Federal/state electronic filing information, Electronic Data Interchange procedures and guidelines for sales and withholding taxes, requirements for substitute forms, sales tax laws and regulations, Tax Topics newsletters, and most nonscrambled tax forms and instructions can be obtained through the system. Calls to the electronic bulletin board are expected to decrease as taxpayers elect to access department's Internet website.

4. In FY 1998-99, the Tax Collection Program will improve employee efficiency by developing local area network application and expanding employee training and development.

5. In FY 1998-99, the Tax Collection Program will reduce the taxpayer burden of department procedures by simplifying tax forms, returns, and instructions and by automating issuance of tax clearances.

6. In FY 1998-99, the Tax Collection Program will maintain existing taxpayer education programs and increase taxpayer education efforts (as measured by the percentage increase in taxpayer education efforts since FY 1997-98) by expanding the types and availability of seminars, increasing dissemination of tax publications, and increasing taxpayer-sensitive news articles.

1 For FY 1996-97 and FY 1997-98, the "number of taxpayer seminars" was calculated by multiplying the number of attendees by the number of days. The indicator is now calculated by counting only the number of taxpayer seminars. In FY 1996-97, the actual number of seminar attendees was 1,215; the estimated number for FY 1997-98 is 5,000; and the projected number of attendees for FY 1998-99 is 2,200.

7. In FY 1998-99, the Tax Collection Program will maintain existing in-house audit levels of businesses and expand field audit coverage of businesses to 1.0% by FY 1999-2000 and will participate in the International Fuel Tax Agreement.

1 Audit findings are the amount determined to be due by auditors and submitted to Audit Review for assessment. These amounts are subject to reduction by Audit Review before being assessed if errors are found, but are normally assessed as is. The assessments may then be reduced, based on additional information from the taxpayer or based on decisions by the Board of Tax Appeals or other courts.

2 The percentage of audits generating less than $5,000 is affected by the quality of the audits selected. However, it also indicates the department's emphasis on collections or taxpayer compliance. Outdoing mostly large corporations will produce fewer audits but very large assessments for each audit. Auditing smaller taxpayers to encourage compliance will produce more audits but smaller deficiencies on each audit. The department tries to balance the need for taxpayer compliance with the need to collect additional taxes.

3 In March 1997, the Income Tax Division was reorganized and divided into two divisions; the Personal Income Tax Division and the Corporation Franchise Tax Division.

4 Participation in IFTA results in fewer special fuels accounts but requires the department to audit a percentage of Louisiana resident accounts on behalf of all other IFTA states.

Field Audit Indicators: The following tables show trends in the actual field audit coverage for businesses from FY 1990-91 through FY 1996-97 and estimated field audit coverage for FY 1997-98 and FY 1998-99.

TRENDS IN FIELD AUDIT COVERAGE OF BUSINESS ACCOUNTS FOR FY 1990-91 THROUGH 1998-99

 

IN-STATE COVERAGE

OUT-OF-STATE COVERAGE

TOTAL FIELD AUDIT COVEFAGE

FISCAL YEAR

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

PERCENT AUDITED

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

PERCENT AUDITED

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

PERCENT AUDITED

FY 1990-91

200,000 1

2,277

1,14%

50,000 1

535

1.07%

250,000 1

2,812

1.12%

FY 1991-92

213,772 1

2,054

0.96%

54,200 1

739

1.36%

267,972 1

2,793

1.04%

FY 1992-93

205,572 1

2,457

1.20%

54,200 1

584

1.12%

257,772 1

3,041

1.18%

FY 1993-94

225,000 1

2,297

1.02%

55,000 1

535

0.97%

280,000 1

2,832

1.01%

FY 1994-95

225,000 1

2,041

0.90%

50,000 1

711

1.43%

275,000 1

2,752

1.01%

FY 1995-96

225,000 1

2,325

1.03%

40,000 1

938

2.00%

265,000 1

3,263

1.23%

FY 1996-97

366,323

1,982

0.55%

58,952

588

1.01%

424,975

2,570

0.61%

FY 1997-98

379,774

1,940 2

0.52% 2

61,038

1,010 2

1.66% 2

440,812

2,950 2

0.67% 2

FY 1998-99

380,000 1

2,150 2

0.57% 2

61,000 1

1,010 2

1.66% 2

441,000 1

3,000 2

0.69% 2

1 Estimated number of business accounts registered under the Field Audit Program for FY 1990-91 through FY 1995-96 and FY 1998-99.

2 Estimated number of audits and percent audited of business accounts registered under the Field Audit Program for FY 1997-1998 and FY 1998-1999.

The following table attempts to show the impact of each field auditor position. It is difficult to measure the impact of an individual auditor or auditor position because auditors often work in teams, some audits occur over more than one fiscal year, and collections related to a particular audit may be received in a different fiscal year than the one in which the audit was actually conducted. The Office of Revenue is working on the development of a more accurate way to measure the impact (cost/benefit) of an auditor position.

TRENDS IN FIELD AUDIT COLLECTIONS OF BUSINESS ACCOUNTS AND COSTS FOR FY 1991-92 - FY 1998-99

 

 

FISCAL YEAR

 

TOTAL FIELD AUDIT COLLECTIONS

NUMBER OF FIELD AUDITOR POSITONS

FIELD AUDIT

COLLECTIONS PER FIELD

AUDITOR POSITION

 

TOTAL FIELD AUDIT COST

 

AUDIT COSTS PER $1 COLLECTED

1991-92

$67,448,783

130

$518,837

$7,486,110

$0.11

1992-93

$87,715,509

129

$679,965

$7,193,745

$0.08

1993-94

$70,269,067

120

$585,576

$8,934,459

$0.13

1994-95

$78,085,926

115

$679,008

$9,485,131

$0.12

1995-96

$67,284,495

128

$525,660

$10,671,793

$0.16

1996-97

$67,272,493

122

$551,414

$10,810,770

$0.16

1997-98 1

$67,331,654 1

128 1

$542,997 1

$11,282,114 1

$0.16 1

1998-99

$70,500,000 1

128 1

$550,000 1

$11,500,000 1

$0.16 1

1 Estimated figures for FY 1997-1998 and FY 1998-1999

ACTUAL FIELD AUDIT COVERAGE OF BUSINESS ACCOUNTS, BY TYPE OF TAX, FISCAL YEAR 1996-1997

 

IN-STATE COVERAGE

OUT-OF-STATE COVERAGE

TOTAL FIELD AUDIT COVERAGE

 

 

TYPE OF TAX

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

Corporation Income

103,014

131

0.13%

15,364

163

1.07%

118,378

294

0.25%

Corporation Franchise

103,014

130

0.13%

15,364

162

1.06%

118,378

292

0.25%

Sales

80,135

1,011

1.26%

9,739

219

2.25%

89,874

1,280

1.37%

Withholding

73,977

684

0.92%

7,778

3

0.04%

81,765

687

0.84%

Severance

1,040

19

0.83%

1,561

32

2.05%

2,601

51

1.96%

Excise

2,100

2

0.10%

697

9

1.29%

2,797

11

0.39%

Unclaimed Property

2,743

5

0.18%

8,439

0

0.00%

11,182

5

0.04%

Total Number of Business Accounts that are covered by the Field Audit Program

366,323

1,982

0.55%

58,952

588

1.01%

424,975

2,570

0.61%

ESTIMATED FIELD AUDIT COVERAGE OF BUSINESS ACCOUNTS, BY TYPE OF TAX, FISCAL YEAR 1997-98

 

IN-STATE COVERAGE

OUT-OF-STATE COVERAGE

TOTAL FIELD AUDIT COVERAGE

 

 

TYPE OF TAX

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

 

NUMBER OF ACCOUNTS

NUMBER OF ACCOUNTS AUDITED

 

PERCENT AUDITED

Corporation Income

108,653

229

0.22%

16,078

305

1.90%

124,731

834

0.67%

Corporation Franchise

108,653

229

0.22%

16,078

305

1.90%

124,731

834

0.67%

Sales

80,316

1,108

1.38%

10,197

376

3.69%

90,513

1,484

1.64%

Withholding

76,282

346

0.46%

8,291

0

0.00%

84,573

346

0.41%

Severance

1,287

26

2.03%

1,300

16

1.24%

2,587

42

1.63%

Excise

1,840

2

0.11%

655

8

1.23%

2,495

10

0.41%

Unclaimed Property

2,743

0

0.00%

8,439

0

0.00%

11,182

0

0.00%

Total Number of Business Accounts that are covered by the Field Audit Program

379,774

1,940

0.52%

61,038

1,010

1.66%

440,812

2,950

0.67%

ACTUAL FIELD AUDIT COLLECTIONS OF BUSINESS ACCOUNTS, FISCAL YEAR 1996-97

TYPE OF TAX

IN-STATE COLLECTIONS

OUT-OF-STATE-COLLECTIONS

TOTAL COLLECTIONS

 

TOTAL AMOUNT

PERCENT OF TOTAL

 

TOTAL AMOUNT

PERCENT OF TOTAL

 

TOTAL AMOUNT

PERCENT OF TOTAL

Corporation Income/Franchise

$6,371,088

21.38%

$26,229.783

69.99%

$32,600,871

48.46%

Sales

$16,587,093

55.66%

$9,878,976

26.37%

$26,466,069

39.34%

Withholding

$1,626,800

5.46%

$0

0.00%

$1,626,800

2.42%

Severance

$72,292

0.24%

$1,341,474

3.58%

$1,413,766

2.10%

Excise

$46,351

0.16%

$23,983

0.06%

$70,334

0.10%

Individual Income

$3,091,613

10.38%

$0

0.00%

$3,091,613

4.60%

Unclaimed Property

$2,003,040

6.72%

$0

0.00%

$2,003,040

2.98%

TOTAL

$29,798,277

100.00%

$37,474,216

100.00%

$67,272,493

100.00%

ESTIMATED AUDIT COLLECTIONS OF BUSINESS ACCOUNTS, FISCAL YEAR 1997-98

TYPE OF TAX

IN-STATE COLLECTIONS

OUT-OF-STATE COLLECTIONS

TOTAL COLLECTIONS

TOTAL AMOUNT

PERCENT OF TOTAL

TOTAL AMOUNT

PERCENT OF TOTAL

TOTAL AMOUNT

PERCENT OF TOTAL

Corporation Income/Franchise

$4,565,870

31.18%

$32,489,860

61.67%

$37,055,730

55.03%

Sales

$9,970,936

68.07%

$19,600,598

37.21%

$29,571,534

43.91%

Withholding

$28,234

0.20%

$0

0.00%

$28,234

0.05%

Severance

$33,406

0.23%

$593,126

1.13%

$626,534

0.93%

Excise

$49,622

0.32%

$0

0.00%

$49,622

0.08%

Individual Income

$0

0.00%

$0

0.00%

$0

0.00%

Unclaimed Property

$0

0.00%

$0

0.00%

$0

0.00%

TOTAL

$14,648,070

100.00%

$52,683,584

100.00%

$67,331,654

100.00%

8. In FY 1998-99, the Tax Collection Program will maintain productive enforcement and collection efforts and will increase these efforts by 25% by collecting delinquent taxes, automating the district delinquent/warrant assignment process, increasing lien and levy actions, and increasing criminal investigations.

RESOURCE ALLOCATION FOR THE PROGRAM

SOURCE OF FUNDING

The sources of funding for this program include state general fund direct, self-generated revenues, statutory dedications and federal funds. The Office of Revenue's self-generated revenues are derived from collection services for the New Orleans Exhibition Hall, other collection fees, late payment audit fees, and audit fees. The statutory dedication is the Refund Offset Fund. (Per R.S. 39:32B.(8), see table below for a listing of expenditures out of each statutory dedicated fund.) The federal funds are used to enforce the Federal Motor Carriers Act and the International Fuel Tax Agreement.

ANALYSIS OF RECOMMENDATION

GENERAL FUND

TOTAL

T.O.

 

DESCRIPTION

 

 

 

 

 

$40,884,537

$61,326,353

943

 

ACT 18 FISCAL YEAR 1997-1998

 

 

 

 

 

 

 

 

 

BA-7 TRANSACTIONS:

$0

$171,197

0

 

Carryforward for acquisitions

 

 

 

 

 

($500,000)

$290,461

0

 

Act 809 of 1997 - reduced State General Fund by $500,000 and increased Self-generated funds by $790,461 for the Unclaimed Property Activity

 

 

 

 

 

$40,384,537

$61,788,011

943

 

EXISTING OPERATING BUDGET - December 10, 1997

 

 

 

 

 

$0

($171,197)

0

 

Non-Recurring Carryfoward for Acquisitions

$0

($2,200,000)

0

 

Non-Recurring Carryforward from Prior Year Computer System Redevelopment (Tax Re-Engineering) Project

($244,555)

($244,555)

0

 

Non-Recurring Adjustment(s) for the distribution to Parishes for Mail Order Sales Taxes

$0

$552,427

0

 

Equipment/Major Repairs Adjustment(s)

$475,154

$633,539

0

 

Annualization of 1997-'98 Merit Pay Adjustment(s)

$466,957

$622,609

0

 

1998-'99 Merit pay Adjustment(s)

($1,294,960)

($1,294,960)

(33)

 

Personnel Reduction(s)

$581,306

$775,075

0

 

Attrition Adjustment(s)

($172,505)

($172,505)

0

 

Retirement Rate Adjustment(s)

$7,893

$7,893

0

 

Adjustment(s) for Civil Service, Training and Other Statewide Interagency Transfer Activities

($823,151)

($823,151)

0

 

Reductions in various Expenditure Categories; Including Reductions to fully fund Salaries

($323,798)

($323,798)

0

 

Risk Management Adjustment(s)

($547)

($547)

0

 

Rent in State-owned Buildings Adjustment(s)

($4,737)

($4,737)

0

 

Maintenance of State-owned Buildings Adjustment(s)

$2,644

$2,644

0

 

UPS Fees

$8,569

$8,569

0

 

Legislative Auditor Fees

$510,065

$672,111

0

 

Adjustment that provides for projected increase in maintenance costs for existing computer hardware and software equipment. The estimate

 

 

 

 

is based upon industry quotes and historical trend. This includes maintenance costs for equipment with expiring warranties.

$19,162

$19,162

0

 

Provides for projected increased computer network linking costs. The funding continues the interfacing effort among the regional district

 

 

 

 

offices with the headquarter's mainframe. The T1 speed line interfacing allows regional office access to the image processing and in-state

 

 

 

 

and out-of-state remote offices to be access supported. The initial phase of this system replaced in Fiscal Year 1997 a model that was

 

 

 

 

saturated to capacity

$24,457

$24,457

0

 

Automatic reallocation within the various job training series of the program

$0

$28,922

0

 

Increase federal funding authority for participation in the International Fuel Tax Agreement (IFTA) and the Federal/State Motor Tax Com-

 

 

 

 

pliance Project

 

 

 

 

 

$39,616,491

$59,899,969

910

 

TOTAL RECOMMENDED

 

 

 

 

 

($768,046)

($1,888,042)

(33)

 

DIFFERENCE (TOTAL RECOMMENDED AND EXISTING OPERATING BUDGET)

The total means of financing for this program is recommended at 97.0% of the existing operating budget. It represents 85.4% of the total request ($70,157,011) for this program. The decrease in the total recommended level is primarily due to the nonrecurring of funds from the prior year computer system redevelopment project. The position reductions are due to the elimination of thirty-three (33) vacant positions. The elimination of the vacant positions along with the attrition adjustment and the reduction in other line items are recommended to provide the necessary adjustments needed to fully fund the 910 recommended positions.

PROFESSIONAL SERVICES

$171,890

 

Other Professional Services for maintenance modifications to tax programs and software support

$273,000

 

Other Professional Services for on-going tax system re-engineering and technology modernization. Facilitate, consult, and direct as the moderator for the design of a data model fully attributable with operational data and process models

$34,000

 

Other Professional Services for reporting of information technology to include statistical analysis of revenue streams and taxpayer behavior, develop forecasting and statistical control procedures, determine economic applications of the new Office of Revenue data base, assist and train in microcomputer applications

$10,000

 

Other Professional Services for quantitative and fiscal analysis of financial models submitted by taxpayer corporations and other quantitative and administrative consultation

$10,000

 

Other Professional Services for tax advice and counsel regarding cases of litigation, etc.

$42,327

 

Other Professional Services for media preparation and placement for major initiatives such as but not limited to informing the public on new ways to file tax returns and check the status of refunds

$10,000

 

Other Professional Services for computer related and tax specific services

$7,000

 

Other Professional Services for legal assistance on personnel matters, e.g. appeals, Equal Employment Opportunity Commission complaints, and harassments

 

 

 

$558,217

 

TOTAL PROFESSIONAL SERVICES

OTHER CHARGES

$4,300,000

 

On-going system re-engineering and technology modernization

$127,225

 

Legislative Auditor expenses

 

 

 

$4,427,225

 

TOTAL OTHER CHARGES

 

 

 

 

 

Interagency Transfers:

$95,738

 

Payments to the Department of Civil Service

$29,363

 

Payments for Uniform Payroll System expenses

$119,386

 

Maintenance of State-owned Buildings

$94,052

 

Rent in State-owned Buildings

$4,511

 

Division of Administration-Office of Information Services computer line usage

$900

 

Division of Administration-Louisiana Public Finance Authority-LPFA interest

$326,810

 

State Treasurer-banking fees

$9,178

 

Comprehensive Public Training Program-personnel training services

 

 

 

$679,938

 

TOTAL INTERAGENCY TRANSFERS

ACQUISITIONS AND MAJOR REPAIR

$1,323,849

 

Funding for replacement of inoperable or obsolete equipment. This equipment includes laser printers, computers, office furniture, image workstations and microfilm reader/printers.

 

 

 

$1,323,849

 

TOTAL ACQUISITIONS AND MAJOR REPAIRS


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