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

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

2. Tax Analytics and Compliance Facilitation 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

3. Tax Analytics and Tax 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

4. 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

5. e-Services 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 onDecember 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

6. Update on Tax Analytics 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, 2011 Deadline for submitting proposals • June 28, 2011 Proposals evaluation commences • August 24, 2011 DOR Evaluation Team 3 turns in scores • October 2011 Other Teams Complete Scoring • November 2011 Contracts Negotiated/Signed • December 2011 DOR engaging approved vendors

7. 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.

8. 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

9. Update on Tax Compliance Initiative • 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. ** Target ROI * Actual through October 31, 2011

10. Federal Reciprocal Agreement Update • 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

11. Questions?