Category Archives: Taxation

I.R.S. Paid $20 Million to Collect $6.7 Million in Tax Debts

Source: Patricia Cohen, New York Times, January 10, 2018

Private debt collectors cost the Internal Revenue Service $20 million in the last fiscal year, but brought in only $6.7 million in back taxes, the agency’s taxpayer advocate reported Wednesday. That was less than 1 percent of the amount assigned for collection. What’s more, private contractors in some cases were paid 25 percent commissions on collections that the I.R.S. made without their help, according to the annual report by Nina E. Olson, who heads the Taxpayer Advocate Service, an independent office within the I.R.S. While Republicans have been the most vocal proponents of privatizing public services, congressional Democrats are equally responsible for the I.R.S.’s program. Despite the pointed failure of similar efforts in the past, Congress passed a law in 2015 requiring the I.R.S. to use outside contractors to make a dent in the $138 billion that taxpayers owe the government. The outsourcing began last April. Since then, the report stated, “the I.R.S. has implemented the program in a manner that causes excessive financial harm to taxpayers and constitutes an end run around taxpayer rights protections.” …

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I.R.S. Enlists Debt Collectors to Recover Overdue Taxes
Source: Jessica Silver-Greenberg and Stacy Cowley, New York Times, April 20, 2017

The Internal Revenue Service is about to start using four private debt-collection companies to chase down overdue payments from hundreds of thousands of people who owe money to the federal government, a job it has handled in house for years.  Unlike I.R.S. agents, who are not usually allowed to call delinquent taxpayers by telephone, the outside debt-collection agencies will have free rein to do so. Consumer watchdogs are fearful that some of the nation’s most vulnerable taxpayers will be harassed and that criminals will take advantage of the system by phoning people and impersonating I.R.S. collectors. …

IRS Debt Collection Program May Lead to Confusion, Help Scammers
Source: AJ Walker, NBC Connecticut, February 14, 2017

NBC Connecticut Troubleshooters caught up with officials from the IRS to find out more about their new debt collection program and how they’re going to protect taxpayers from getting scammed. This spring, debt collectors hired by the IRS will start making collection calls to go after money on old tax debts. This could lead to confusion as the fake IRS debt collection scam call is one of the number one scams in the country. In the past, the IRS has repeatedly said they will never call you collect money. Instead, they send a letter. This change could open the door to crooks who might see this as opportunity to reach out to more people using the IRS’s name. It’s too early to gauge how the ongoing phone scam will impact real IRS debt collection call efforts. But people targeted by the scheme say it will be confusing. … The collection program came about because a law called the FAST Act passed in 2015 requiring the Internal Revenue Service to use private debt collectors to go after tax money on older accounts. The money would help pay the FAST Act’s $305 billion price tag to fund transportation and infrastructure. … However, this isn’t the first time the agency has tried to use debt collectors. In 2006 the IRS hired Pioneer, CBE Group and a company called Linebarger Goggan Blair & Sampson to try to collect an additional $1.4 billion in past due taxes. It fired the debt collectors in 2009 saying it wasn’t cost effective to use private collectors and the “work is best done by IRS employees.” … However, one IRS debt collector has recently been accused of not acting in peoples best interest. Pioneer was mentioned in lawsuits filed by the Illinois Attorney General and the Consumer Finance Protection Bureau accusing the business and its parent company Navient of taking advantage of borrowers. …

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Ige appoints new director for troubled state tax department

Source: Kevin Dayton, Honolulu Star Advertiser, December 6, 2017
 
Gov. David Ige today named Linda Chu Takayama as the new director of the state Department of Taxation in an effort to quickly replace outgoing director Maria Zielinski in what has emerged as a pivotal position in Ige’s administration.  Takayama is a lawyer who now serves as Ige’s director of the state Department of Labor and Industrial Relations, and previously served as state insurance commissioner. Zielinski abruptly resigned effective Tuesday in the wake of a report that revealed state tax officials instructed a supposedly independent consultant on which subjects it should address in its monitoring reports on the progress of a new $60 million tax computer system. … Ige is under intense pressure to efficiently execute the $60 million contract to replace the tax department’s old computer system. State government has had an embarrassing history of botched computer projects dating back to previous administrations, and the computer system for collecting state taxes is a critical piece of state infrastructure.  The project has already stirred controversy. Randy Perreira, executive director of the Hawaii Government Employees Association, wrote to Gov. David Ige on Oct. 31 to object to the decision to take control of the project away from Zielinski and TSM Program Manager Robert Su earlier this year. …

How you buy affects what you get: Technology acquisition by state governments

Source: Kawika Pierson & Fred Thompson, Government Information Quarterly, June 24, 2016

Abstract:
Research suggests that governments should rely on standardized information technology solutions rather than custom built ones. We find that, for many categories of taxes, states that have contracted out the development of their tax-processing systems to providers offering standardized solutions see statistically and economically significant increases in collections relative to states that have not. We find no evidence that financial administration expenditures increase for these states. At the same time, there are several categories of taxes where we do not find a positive impact. We reconcile these findings by developing a qualitative argument that standardized solutions in tax administration may be most effective for the types of taxes that are the most difficult to enforce.

City of Willmar abolishes assessor’s office, Kandiyohi County to take over

Source: Shelby Lindrud, West Central Tribune, May 16, 2016

Starting July 5, Kandiyohi County will provide assessing services for the city of Willmar, as the Willmar City Council approved resolutions to abolish the city assessor’s office and enter into an agreement with Kandiyohi County during Monday’s city council meeting. … The two city employees who worked in the assessor’s officer were offered employment with the county and have until Tuesday to make their decision. … If one or both of the city’s appraisers want to stay with Willmar, the AFSCME contract gives employees of abolished departments the opportunity to move to other positions within the city, which could cause the lay off of other city employees. The two current city appraisers and one former spoke at the meeting, all asking for the council to reconsider the abolishment. … As part of the agreement with Kandiyohi County, Willmar will pay approximately $375,000 total to the county for assessing services in 2016 and 2017. As part of the agreement, the city will also give the county the city assessor’s computers, a police squad to be used by the county assessing staff for transportation and would pay the wages and benefits of an Assessor II for several weeks if the county needs to hire someone before July 5 to handle the added workload from the city’s business. …

Privatized housing program paying off for University System of Georgia

Source: Dave Williams, Atlanta Business Chronicle, May 10, 2016

A student housing privatization initiative launched this school year by the University System of Georgia is paying early dividends. Four of seven campuses that participated in the program during the 2015-16 term saw increases in occupancy of student housing, with Columbus State University jumping from 90 percent occupancy to 99 percent, Jonathan Lucia, who manages the student housing portfolio for the university system told members of the Board of Regents Tuesday. … The university system signed a $517 million agreement with Corvais Campus Living in November 2014 to develop 3,753 new beds and manage 6,195 existing beds at nine institutions, a privatization initiative expected to save money and, thus, help maintain the affordability of student housing. Lucia said the program is projecting a 3.3 percent reduction in operating costs during its first year, savings made possible by using LED lighting technology, working with Georgia Power Co. to qualify for discounted educational utility rates and through Corvais’ ability to tap into its national purchasing power.

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Developer picked for Georgia higher-ed privatization deal
Source: Jill Nolin, American School & University, November 14, 2014

Corvias beat out Balfour Beatty Campus Solutions LLC and Education Realty Trust Inc. for the job.
The University System of Georgia has selected Corvias Campus Living to develop and manage nine of the system’s campuses under a $517 million deal. A first phase will include 3,683 new beds and 6,195 existing beds, comprising more than 3 million square feet of space, according to a release sent on behalf of Corvias. The agreement is for the next 65 years. Corvias beat out Balfour Beatty Campus Solutions LLC and Education Realty Trust Inc. for the job, the Atlanta Business Chronicle reported. Corvias started its student housing division in 2012 in Cary, N.C. Georgia voters recently approved tax exemptions for private entities that run housing and parking operations for the university system….

Bill would extend college tax exemption to private developers
Source: Janel Davis, Atlanta Journal-Constitution, February 26, 2014
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The state House passed a bill Wednesday that could let developers get a property tax exemption when they take over operations of university system dorms….

Universities seek housing privatization
Source: Janel Davis, Atlanta Journal-Constitution, January 20, 2014
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The University System of Georgia wants to get out of the student housing business, and officials want a tax exemption to help them do it. The plan would involve the University System’s Board of Regents shifting a collection of campus dorms to a private company in a long-term lease deal. The system would retain ownership of the buildings and land, but the company would operate and maintain the facilities. To sweeten the deal, the University System is pushing for an extension to private companies of the property tax exemption that currently exists for the properties on the campuses of the state’s public institutions. Extending that exemption — which is part of the overall plan to privatize student housing — would require a statewide referendum. Legislation is expected to be filed on Tuesday to begin the process of getting the exemption issue on the November ballot….

Tax contractor got inside information: emails

Source: Susanne Cervenka, Asbury Park Press, November 22, 2015

The government emails sought by a grand jury investigating Monmouth County’s new tax program show that confidential internal communications were shared with a private vendor before it won a major contract, an Asbury Park Press investigation found. Months before Realty Appraisal Co. won a $560,000 revaluation contract with Ocean Township, a key member in the private company received emails from Monmouth County Tax Administrator Matthew S. Clark about the township’s preparations for the work, according to the government emails obtained by the Press. … The 284 pages of emails reveal a relationship between Clark and Rubenstein, whose company in recent years has won nearly nine out of 10 municipal contracts to appraise properties in Monmouth County even before the new Assessment Demonstration Program, or ADP, began.

Queen’s Park chases used car buyers who were undercharged taxes

Source: Richard J. Brennan, Toronto Star, September 30, 2015

The Ontario government is chasing motorists who purchased used vehicles in the spring and didn’t pay enough tax — ranging from $100 to $500 for most — through no fault of their own. The government says because of a computer error by CarProof, some 6,500 motorists who purchased used vehicles between May 1 and 27 were charged less retail sales tax than actually owed, totalling $2.4 million. CarProof is a private company that provides a history on used vehicles and assigns values to them. … In the legislature, New Democrat MPP Catherine Fife blamed the government’s “appetite for privatization” for the “costly computer error” and said it’s unfair to leave car purchasers “on the hook.” Sousa’s office stated that as soon as ServiceOntario became aware of this error in late May it notified the finance ministry and “our government immediately took the necessary steps to resolve the situation,” adding the finance ministry, along with government services and transportation, has put in a review process to ensure the error is not repeated. Sousa’s office explained the glitch was caused by formatting issues “which caused the system to generate the incorrect value for the sold used cars when the file was uploaded into government systems.” …

Should Luzerne County employees compete with the private sector for their work?

Source: Jennifer Learn-Andes, Times-Leader, July 7, 2015

Outsourcing? Privatization? Luzerne County Councilman Jim Bobeck said the concept he’s pushing for is neither of those because he wants to open up some county work to outside bidders while still giving employees who perform that work a shot at submitting their own proposal to keep it. Known as “managed competition,” the technique has been used by some governments across the country as a way to shop around for other prices and options. …. He cited county tax assessment as an example of a service that could benefit from the new concept, saying there have been “issues” regarding the department’s performance….. Bobeck acknowledged some collective bargaining agreements may set limitations or outright prohibit privatization. For example, the contract with prison workers, which runs through 2018, says the county cannot privatize or attempt to privatize the facility during the length of the agreement. However, the county may be free to “try and test” managed competition when agreements expire or if agreements allow, he said. A few contracts leave the door open to privatization but require the county to schedule a meeting for the union and a new outside provider to discuss possibilities about a future relationship between them…..

Are PILOTs Property Taxes for Nonprofits?

Source: Fan Fei, James R. Hines Jr., Jill R. Horwitz, National Bureau of Economic Research (NBER), NBER Working Paper No. w21088, April 2015
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From the abstract:
Nonprofit charitable organizations are exempt from most taxes, including local property taxes, but U.S. cities and towns increasingly request that nonprofits make payments in lieu of taxes (known as PILOTs). Strictly speaking, PILOTs are voluntary, though nonprofits may feel pressure to make them, particularly in high-tax communities. Evidence from Massachusetts indicates that PILOT rates, measured as ratios of PILOTs to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percent higher property tax rate is associated with a 0.2 percent higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percent higher PILOT rate is associated with 0.8 percent reduced real property ownership by local nonprofits, 0.2 percent reduced total assets, and 0.2 percent lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes.

New Jersey town takes the taxing out of tax collection

Source: John Breeden II, GCN, December 20, 2013

…If enough residents don’t pay their taxes or their municipal bills, it can strangle a small government. Municipalities do have some tried and true ways to recoup those fees, including the auction of tax liens, where investors can purchase county-held tax certificates representing unpaid taxes and fees. But setting up an auction of thousands of liens is time consuming and expensive for small governments. Plus, live auctions further delay the payment of delinquent taxes and fees. Moving the process online can greatly reduce administrative costs, increases the pool of bidders, and can help local governments more quickly recoup taxes and fees. …

… To combat the overhead involved in the in-person auctions, Red Bank contracted with Realauction.com to move the entire process online. Realauction.com is a seven-year-old company that is currently working in Florida, New Jersey, Maryland, Colorado and Arizona and the cities of Detroit and Chicago. In New Jersey, Red Bank was the first municipality to come onboard, but now many others are joining up. …

…Realauction.com has developed software to meet the needs of specific counties. One program automates the creation of a notice of sale for foreclosed properties. Another calculates the amount due on each tax lien, tracks payments electronically and notifies the municipality when funds have settled. The system processes receipts, notifications and title orders on hundreds of tax liens simultaneously, the company said, accomplishing these tasks in a matter of hours rather than days. Crum said that security is not a big problem because the documents are public records. However, bidders’ information like their Social Security numbers pass through a one-way gateway to the website during sign up and are kept in an encrypted vault that can’t be accessed remotely. …