Kokomo Tribune; Kokomo, Indiana

Local News

February 25, 2013

Dept. of Revenue requests $10 million

State revenue department moves to improve local tax distributions

— INDIANAPOLIS — The Indiana Department of Revenue has requested nearly $10 million in additional funding to hire more staff and upgrade its technology to do a better job of tracking and distributing the more than $1.5 billion in income tax revenues owed to local governments each year.

The request, included in the House’s two-year budget plan, comes in response to past revelations that the department lost track of $526 million in corporate and income tax revenues, including $206 million owed to cities and counties.

But some legislators and local government officials fear the department’s proposed fixes may not go far enough. They’re pushing for additional remedies to make sure the dollars owed to local governments get there in a full and timely manner.  

Among the changes they’re advocating: A faster turnaround of the local option income tax revenues collected by the state, and a tracking system that relies more on employers that withhold income tax dollars from paychecks and less on the workers who may fail to report them.

“We want to make sure every dollar collected by the state goes back to local government where it’s owed,” said Goshen Mayor Allan Kauffman, a member of a task force created last year by the State Budget Agency to look at how the state collects and distributes local tax revenues.

Ninety-one of Indiana’s 92 counties have adopted at least one of the local option income tax rates, known as the LOITs, that were first approved by the state in 1974. Local communities have become increasingly dependent on the revenues, especially since property taxes were capped in 2008.

State Sen. Brandt Hershman, the Republican chairman of the Senate Tax and Fiscal Policy Committee, has authored a bill that came out of the work of the task force. It would require the state to provide more information about how it determines the LOIT dollars sent back to local governments, and it creates a mechanism for the state to release those LOIT dollars more quickly.  

One of the goals, Hershman said, is to “give local units of government a greater degree of confidence and a better understanding of the challenges we face.”

Hershman said the bill is a start toward correcting much larger issues in the Department of Revenue, which has been operating with what he called “an antiquated system” of technology that may cost up to $50 million to replace.

An independent audit of the department released last December blamed outdated technology and a “weak control environment” for the $526 million in tax errors made by the department in recent years.

Those errors included $206 million that had been earmarked to be distributed to Indiana counties, but never was. The money was discovered last April, four months after the department found $320 million in corporate tax collections that had been accumulating in an orphaned bank account since 2007. The same audit discovered additional errors with 55,000 taxpayer accounts and 2,880 tax refund requests that were never processed.

There’s new management in place at the department. But Kauffman said those revelations have undermined the confidence that local officials have in the state to accurately assess what local governments are owed in LOIT dollars.

Kauffman represented the Indiana Association of Cities and Towns on the task force that looked at how the state collected and distributed local taxes. The Indiana Association of Counties was represented by Allen County Auditor Tera Klutz. She agrees with his concerns.

“[Revenue department officials] must work with local governments to make the system work better,” she said.  “And there has to be more transparency on their part.”

Hershman’s bill doesn’t include language that Kauffman wanted to see. He wants the state revenue department to start tracking the actual dollars paid to the state each month by employers that withhold local income taxes from their employees, and to put that money into a separate account apart from the state’s general fund.

Using information supplied by employers would be a better system, he argues, than what currently exists. The state pulls that information off the personal income tax forms that taxpayers are supposed to file with the state each year.

The current system creates a long lag time between when the state collects the LOIT dollars and when it’s paid out to local governments. It also raises concerns about people, such undocumented workers, who don’t file a state tax return. The taxes those people have paid stay with the state.

The state revenue department contends that it would take both a change in the law and a massive upgrade in technology to put into place what Kauffman wants.

Bob Dittmer, spokesman for the department, said in an email that the department “would like to have the capability to cross check individual returns with employer submitted data, however that is simply beyond our current capability.”

He noted that the state is moving toward more electronic filing, both by individual taxpayers and employers and that with the increase in electronic filing, the state may be able to put a better tracking system in place.

“It is certainly a capability we want to develop going forward,” Dittmer said, “But not one that can be implemented without significant investment.”

Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.

For more on this story and other local news, subscribe to The Kokomo Tribune eEdition, or our print edition

1
Text Only | Photo Reprints
Local News
  • NES plans kindergarten round-up Northwestern Elementary School is planning its kindergarten round-up for 8 a.m. to 2 p.m. Thursday. To qualify for kindergarten enrollment, a child must be 5 years old on or before Aug. 1. Parents must bring their child's birth certificate, immunizat

    April 19, 2014

  • NSC establishes number of transfers Northwestern School Corp. has decided how many transfer students the district can accept next school year in compliance with the state's relatively new open enrollment law. This is the first time Northwestern has announced vacancies at each grade lev

    April 19, 2014

  • Kokomo man heading to 'Hoosier Millionaire' finale Rick Rhodes is still having a hard time believing his good fortune. On Thursday, the 53-year-old Kokomo man walked away with $13,500 after beating out five other contestants on the “Hoosier Millionaire” live road show in Fort Wayne. “I’m still in sho

    April 18, 2014

  • Dual Credit classes KACC 02 Dual credits give high school students head start on college More area students are enrolling in dual credit classes as a way to get an early start on their college degrees and prepare for the rigor of higher education while still in high school. In the past five years, the number of college credits earned by

    April 18, 2014 3 Photos

  • Email, Internet knocked out at Miami Co. Courthouse PERU -- Basic government services were put on hold for the second time in nearly two months in Miami County after a massive server failure once again knocked out Internet and email access in most departments and offices. The crash hit early last week

    April 18, 2014

  • Early voting underway in Miami Co. PERU -- Miami County officials are reminding residents that early voting is now open for the primary election. Early voting started April 8 and will end May 5, one day before Election Day. Early voting is open from 8 a.m. to 4 p.m. every weekday at t

    April 18, 2014

  • Jackson Street Commons veterans home grand opening set for May 22 Jackson Street Commons, a home for veterans near downtown Kokomo, will host a grand opening May 22. The new $3.6 million facility, located at 322 E. Jackson St., provides permanent housing to 27 previously homeless veterans, said Judy Dennis, executi

    April 18, 2014

  • YMCA nearing design phase completion Development and design of the new 73,000 square foot YMCA should be completed in the next 30 days, YMCA of Kokomo Executive Director David Dubois told the Kokomo Common Council Monday. Dubois said he hopes to begin construction on the new facility by

    April 18, 2014

  • NHS, PJHS named four-star schools Northwestern High School and Peru Jr. High School have found their place among the top schools in the state, with the Indiana Department of Education recognizing them as four-star schools Tuesday. A total of 311 elementary, middle and high schools we

    April 18, 2014

  • NWS-PT041614 Flora Doc1.jpg [Duplicate] The doctor is still in after health group's departure FLORA -- The safe at a downtown bank building, once used for protecting cash and valuables, is now stocked with medical supplies. The former bank office on East Main Street became Flora Family Medicine last month after it was made possible for one lo

    April 18, 2014 2 Photos

Latest news
Featured Ads
Only on our website
AP Video
Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Raw: Church Tries for Record With Chalk Jesus Raw: Faithful Celebrate Good Friday Worldwide Deadly Avalanche Sweeps Slopes of Mount Everest Police Arrest Suspect in Highway Shootings Drought Concerns May Hurt Lake Tourism Vermont Goat Meat Gives Refugees Taste of Home Calif. Investigators Re-construct Fatal Bus Cras Mayor Rob Ford Launches Re-election Campaign Appellate Court Hears Okla. Gay Marriage Case
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Obituaries