NOT YOUR FATHER’S NOT YOUR FATHER’S TAX DEPARTMENT:TAX DEPARTMENT:

THE CHANGE WE NEEDTHE CHANGE WE NEED Commissioner Kevin B. SullivanCommissioner Kevin B. Sullivan

DepartmentDepartment of Revenue Servicesof Revenue Services

[Revised 071514][Revised 071514]

““Taxes…are dues that Taxes…are dues that we pay for the privileges of we pay for the privileges of membership in an organized society.”membership in an organized society.”

President Franklin RooseveltPresident Franklin Roosevelt

““I shall never use profanity except in I shall never use profanity except in discussing taxes.”discussing taxes.”

Mark TwainMark Twain

TAX PRACTICETAX PRACTICE““In the tax-law boiler room, the In the tax-law boiler room, the motto is, ‘Anything worth doing is motto is, ‘Anything worth doing is worth overdoing’.” worth overdoing’.”

Michael Graetz & Ian Shapiro, Michael Graetz & Ian Shapiro, Death by a Death by a Thousand CutsThousand Cuts (2005) (2005)

WHO IS DRS?WHO IS DRS?

650 employees (1/3 fewer staff)650 employees (1/3 fewer staff) Main office: 25 Sigourney Street, Hartford – Main office: 25 Sigourney Street, Hartford –

relocation planned.relocation planned. Regional offices: Bridgeport, Norwich & Regional offices: Bridgeport, Norwich & WaterburyWaterbury..

Over 4 million tax returns annually.Over 4 million tax returns annually. Over 2 million taxpayer inquiries annually.Over 2 million taxpayer inquiries annually.

www.ct.gov/DRSwww.ct.gov/DRS

Governor Governor Dannel Malloy Dannel Malloy

““If we always doIf we always do

what we’ve always done,what we’ve always done,

we’ll always getwe’ll always get

what we always got.”what we always got.”

Imposing DutiesImposing Duties, Malcolm Sparrow, Malcolm Sparrow Compliance agencies must also be service Compliance agencies must also be service

agencies.agencies.

Creating Public ValueCreating Public Value, Mark Moore, Mark Moore Government agencies need to add public Government agencies need to add public

value & engage public confidence.value & engage public confidence.

WORKING SMARTERWORKING SMARTER Automated collection scoringAutomated collection scoring Employee “Bright Ideas”Employee “Bright Ideas” Web-based assistance, E-filing, self-service Web-based assistance, E-filing, self-service

audits, payment plansaudits, payment plans Sales tax permit renewalsSales tax permit renewals Amnesty 2013Amnesty 2013 External publications & policy advisory boardsExternal publications & policy advisory boards Succession planningSuccession planning Tax analyticsTax analytics Virtual call-backVirtual call-back Operations concierge Operations concierge LEAN business registrationLEAN business registration

$500+ MILLION BENEFIT TO THE STATE

CHANGING TAX PROFILECHANGING TAX PROFILE

FY 1993FY 1993 FY 2003FY 2003CURRENTCURRENT

Income 36% 44% 52%Sales & Use 32% 32% 25%Corporate 11% 5% 5%Motor Fuels 6% 5% 4%Cigarette 2% 3% 3%All Other Taxes 13% 11% 11%

Connecticut lowest business share of total taxes & tied for 2nd most favorable total business tax burden. Council on State Taxation (COST) 2013

OCTOBER SURPRISEOCTOBER SURPRISE

$193 million state tax $193 million state tax amnestyamnesty

APRIL SURPRISEAPRIL SURPRISEIncome tax volatility nationwideIncome tax volatility nationwide

January 2014 consensus revenue January 2014 consensus revenue estimates estimates increasedincreased

Income tax estimates & finals Income tax estimates & finals -7% ($221 -7% ($221 million) down million) down over YTD 2013over YTD 2013

Gift & estate tax Gift & estate tax -64% ($262 million) -64% ($262 million) downdown over YTD 2013 over YTD 2013

Federal “fiscal cliff” echoFederal “fiscal cliff” echo Stock market “banking”Stock market “banking”

SIGNS OF LIFE ?SIGNS OF LIFE ?

““Base” tax collections Base” tax collections over YTD 2013 improving . over YTD 2013 improving . . . . . Withholding Withholding Sales & use tax Sales & use tax Real estate conveyance Real estate conveyance Petroleum gross receiptsPetroleum gross receiptsAdmissions & dues Admissions & dues

HOT TOPICSHOT TOPICS Aerospace R&D credit reinvestmentAerospace R&D credit reinvestment Business apportionment uniformityBusiness apportionment uniformity Expedited sales tax collection & publication of Expedited sales tax collection & publication of

non-registered delinquentsnon-registered delinquents Manufacturing reinvestment 100% donation Manufacturing reinvestment 100% donation

exemptionexemption Gift tax credit on estate taxesGift tax credit on estate taxes No SOTS “going out of business” fee No SOTS “going out of business” fee Manufacturing apprenticeship credit Manufacturing apprenticeship credit

pass-thru entities transfer pass-thru entities transfer Regulations reductionRegulations reduction Clothing & OTC sales exemptionsClothing & OTC sales exemptions Angel Investor credits extend thru 2016Angel Investor credits extend thru 2016 Teacher pensionsTeacher pensions Cigarette enforcementCigarette enforcement

HOTTERHOTTER TOPICSTOPICS On-line salesOn-line sales Expanded e-filingExpanded e-filing Tax preparer Tax preparer

liability liability Tax analyticsTax analytics $75M tax gap initiative$75M tax gap initiative Tax Review Commission ?Tax Review Commission ?

THE CHANGE WE WANTTHE CHANGE WE WANT ““We have a business in Connecticut and I We have a business in Connecticut and I

wanted to let you know that two wanted to let you know that two talented people in your department have talented people in your department have helped me get back on track. They have helped me get back on track. They have helped me understand that taxes do not helped me understand that taxes do not have to be trouble but a good thing to have to be trouble but a good thing to keep us all honest. It’s nice to know keep us all honest. It’s nice to know that you don’t have to be afraid about that you don’t have to be afraid about calling DRS.”calling DRS.”

““I just finished paying our sales tax on-line...I just I just finished paying our sales tax on-line...I just wanted you to know that your system works great. It wanted you to know that your system works great. It takes me about 4 minutes to get everything in and takes me about 4 minutes to get everything in and done. Good job! Whoever is working the system, done. Good job! Whoever is working the system, maybe you can help the government with the new maybe you can help the government with the new health care system.”health care system.”