Nebraska Department of Revenue
Report of the Results of the
Tax Amnesty Program

February 1, 2006

In accordance with LB 1017 passed by the 2004 Legislature, we herewith submit the report required by this legislation. The filing and reporting requirements outlined in the Bill were followed as required.

1. In accordance with the Bill, the proceeds in the Department of Revenue Enforcement Fund have been used to hire the following positions in 2005:

• Five Revenue Agents - These enforcement agents collect delinquent tax payments, resolve nonfiled tax returns, assess and collect underreported tax, and work to ensure that all individuals and businesses are properly licensed and complying with Nebraska tax laws.

Additional auditors and other staff are scheduled to be hired in early 2006.

2. The proceeds in the Department of Revenue Enforcement Technology Fund have been used to purchase the following items in 2005:

• Identity Systems software - This is software that will help the Department find, match, and organize data. It will enable the Department to match database records to develop leads in finding taxpayers who have not filed tax returns or who have underreported or incorrectly reported the tax information.

• Portable personal computers for staff - These computers are used by auditors and revenue agents to assist them while working at different locations. This gives our employees quick access to applications and records and enables the Department to make more compliance investigations.

• Desktop personal computers for staff - These are upgraded computers with more applications to make all work more efficient and complete.

In the spring of 2005, the Department formed a committee and issued a request for information (RFI) to determine the most effective use of the funds made available under LB1017. There were 17 respondents to the RFI, and 8 of these were chosen to make presentations. The most consistent theme suggested in the RFI responses is that a data mining/business intelligence approach would be the best use of the Department of Revenue Enforcement Technology Fund. It would provide the best return on investment for the technology fund and provide leads for the additional enforcement staff employed under the Department of Revenue Enforcement Fund. However, the consensus of the RFI respondents was that it would take additional funds, as much as $4 to $5 million, to develop a data mining/business intelligence platform for the Department of Revenue and that this platform might include only one or two tax programs.

With the information gained through the RFI process, the committee took stock of the resources available to the Department and concluded that the $500,000 in the Department of Revenue Enforcement Technology Fund would be used to build a data mining/business intelligence platform by leveraging the experience, expertise, and the computer hardware and software already present in the Department. The Department's Research staff has experience in identifying enforcement leads in limited situations. The Department's Information Technology staff has experience in building and managing a data repository and other large databases. The Department's Audit and Taxpayer Services staff also have experience in identifying areas where additional enforcement could lead to additional revenues.

The committee identified the tasks to be accomplished in order to acquire a data mining/business intelligence platform with the Enforcement Technology Fund. These include upgrading the Department's current data repository into a functional data warehouse by expanding the Department's data storage capabilities, improving the connectivity with other Department platforms, and by purchasing data mining/business intelligence software from the company already providing database software. In addition to the hardware and software for a new data warehouse, the Department identified software solutions for matching data records from different source files. This is the Identity Systems software described above. Finally, the Department has begun discussions with other state agencies for obtaining data that can be used in a data mining operation to identify potential tax revenue. The additional computers, software, equipment and data are scheduled to be acquired in early 2006.

3. The amount of new revenue obtained as a result of the new personnel and acquisitions during 2005 is broken down by tax program as follows:

The amount of new revenue obtained as a result of the new personnel and acquisitions during 2005 is broken down by instate taxpayers and out-of-state taxpayers as follows:

The amount of new revenue obtained as a result of the new personnel and acquisitions during 2005 is broken down by individual taxpayers and business enterprises as follows:

It is important to note that the above referenced numbers are amounts that have been collected as of December 31, 2005. Other tax revenue has been identified and is in various stages of the collection process.

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