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An independent audit of the department released last December blamed outdated technology and a “weak control environment” for the $526 million in tax errors made by the department in recent years.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.
“The budget surplus is surprisingly higher than we anticipated it would be,” Kauffman said. “Well, is it all just because the economy was so much better and they got more sales tax and state income tax? Or is it because there is unreconciled cash sitting in the general fund that should have gone back to counties?”