oversight

Tax Administration: Few State and Local Governments Publicly Disclose Delinquent Taxpayers

Published by the Government Accountability Office on 1999-08-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Joint Committee on
                 Taxation



August 1999
                 TAX
                 ADMINISTRATION
                 Few State and Local
                 Governments Publicly
                 Disclose Delinquent
                 Taxpayers




GAO/GGD-99-165
United States General Accounting Office                                                          General Government Division
Washington, D.C. 20548




                                    B-282522
                                    August 24, 1999

                                    The Honorable Bill Archer
                                    Chairman
                                    The Honorable William V. Roth, Jr.
                                    Vice Chairman
                                    Joint Committee on Taxation

                                    The Internal Revenue Service Restructuring and Reform Act of 1998
                                    required the Joint Committee on Taxation to study whether greater levels
                                    of compliance might be achieved by publicly disclosing taxpayers who
                                    have not filed their required federal tax returns. This report provides the
                                    information about state and local public disclosure programs that you
                                    requested to assist you in your study. Specifically, our objectives were to
                                    determine (1) which state and local governments are operating programs
                                    to publicly disclose the names of taxpayers that are delinquent in paying
                                    the income taxes they owe or do not file income tax returns, (2) the
                                    differences, if any, among these programs, and (3) state and local revenue
                                    office officials’ views on whether their disclosure programs are improving
                                    compliance. Because of your interest in the individual programs, we are
                                    also providing a description of those programs that we identified in
                                    appendix I.

                                    Consistent with your request, in this report we define public disclosure as
                                    a process for proactively publicizing the names and other identifying
                                                                                                              1
                                    information about taxpayers that are delinquent or do not file returns.
                                    Such programs represent a departure from historical practice. As
                                    described later in this report, federal and state confidentiality statutes
                                    generally prohibit the disclosure of taxpayer information.

                                    Of the state and local governments we surveyed, only four states—
Results in Brief                    Connecticut, Illinois, Montana, and New Jersey—and the District of
                                    Columbia are operating programs to publicly disclose the names and other
                                    information about individuals or businesses that are delinquent in paying
                                    income taxes. None of the programs include specific provisions for
                                    disclosing the names of taxpayers that simply fail to file their required tax
                                    returns. Instead, compliance employees are to assess taxes owed by
                                    nonfilers they have identified and then process nonfiler accounts in the

                                    1
                                    As such, these proactive programs can be distinguished from other disclosures, such as a public notice
                                    pursuant to a legal action (e.g., when a lien is placed on a taxpayer’s property).




                                    Page 1                             GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
             B-282522




             same manner as other taxpayers’ accounts. In the event that such nonfilers
             are found to be delinquent, they also become subject to public disclosure.

             The five public disclosure programs differ in regard to their legal authority
             and operations. Like the federal government, the four states and the
             District of Columbia have tax provisions that protect the confidentiality of
             taxpayer information. Two states—Connecticut and Illinois—and the
             District have enacted legislation providing explicit statutory authority for
             their programs, notwithstanding confidentiality safeguards. The two other
             states—Montana and New Jersey—have not. Officials from these two
             states said that they do not need additional statutory authority to
             implement public disclosure because a tax delinquency is a matter of
             public record after certain legal action has been taken, such as filing a
             certification of debt in superior court, which is entered into a judgment
             docket. The programs also operate differently, varying as to the
             procedures leading up to disclosure, the media through which disclosure is
             made, the type of information disclosed, and how often that information is
             updated.

             Revenue office officials from the four states and the District of Columbia
             believe that their programs have improved or will improve compliance.
             However, officials are unable to isolate the gain in revenue collections
             directly attributable to their programs. As they explained, public disclosure
             is one of many tools that revenue offices use to gain compliance. Some
             revenue office officials also noted that factors outside the control of their
             offices—notably, the economy—affect compliance.

             Like the Internal Revenue Service, state and local revenue offices have
Background   authority to collect taxes from taxpayers that they believe have not paid
             the taxes they owe, including taxpayers that are delinquent or have not
             filed their returns. The collection process followed by most revenue offices
             is phased and generally begins with an assessment of taxes owed.
             Thereafter, the office has a number of collection tools it can use to obtain
             compliance, including mailing notices to inform the taxpayer of the taxes
             that have been assessed and the procedures available for resolving the
             delinquency.

             In the case of taxpayers that do not respond, the revenue office also has
             other tools at its disposal. These include telephone calls and in-person
             visits, the placement of a lien on the taxpayer’s property, levying the
             taxpayer’s bank accounts, and ultimately the seizure and sale of the
             taxpayer’s property. To resolve delinquencies not resolved using
             traditional collection tools, revenue offices have experimented with other



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              B-282522




              less traditional tools, including public disclosure programs as defined in
              this report.

              To accomplish our three objectives, we used a combination of surveys and
Scope and     interviews with state and local revenue office officials. Initially, to
Methodology   determine which state and local governments are operating public
              disclosure programs, we developed a short survey and sent it to all 50
              states. We asked officials from revenue offices in each state whether they
              had such a program or knew of any local governments operating a
              disclosure program in their state. Because these officials identified no
              local governments with public disclosure programs, we used the 1998 State
              Tax Guide to identify cities and counties that had a local personal or
              corporate income tax, and thus potentially might be operating a program.

              As agreed with the Committee, we used this information to select no more
              than five cities and five counties per state, using population size—starting
              with the largest—as our criterion. The group included 24 cities and 8
                                                                   2
              counties in 12 states and the District of Columbia.

              Appendix II provides a list of the cities and counties we surveyed. We then
              sent surveys, which were virtually identical to the ones sent to states, to
              these governments. The response rate for surveys of states, cities, and
              counties was 100 percent.

              To determine the differences among the programs and the views of state
              and local officials on whether the programs are improving compliance, we
              conducted structured interviews by phone or in-person with officials from
              revenue offices in the jurisdictions that reported having public disclosure
              programs. To provide the most complete information possible, we also
              interviewed officials from jurisdictions reporting that they had
              discontinued or were planning to adopt a program.

              We did not verify the survey responses provided by the state and local
              revenue offices. The results of our survey of cities and counties may not be
              representative because we used a judgmental sample, focusing on the
              largest cities and counties. Also, as requested by the committee, we are not
              making any recommendations in this report.



              2
               We eliminated cities and counties, such as Baltimore, Maryland, that had a piggyback tax, i.e., income
              tax collected by the state and distributed to local governments. We also eliminated cities and counties
              that have authority to levy an income tax but did not, including cities and counties in Arkansas,
              Georgia, and Virginia.




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                          We requested and received comments on the descriptions of each state
                          and the District of Columbia’s disclosure program from cognizant revenue
                          office officials, and we incorporated their comments where appropriate.

                          We did our review from March 1999 to July 1999 in accordance with
                          generally accepted government auditing standards.

                          As of June 1999, only four states—Connecticut, Illinois, Montana, and New
Public Disclosure         Jersey—and the District of Columbia had programs operating to publicly
Programs Are in Four      disclose the names and other information about individuals or businesses
States and the District   that were delinquent in paying income taxes. All of the programs are
                          relatively new. Connecticut’s program, the first to be implemented, began
of Columbia               disclosing on the Internet in January 1997. The District of Columbia,
                          Montana, New Jersey, and Illinois programs began disclosing on the
                          Internet in October 1997,April 1998, May 1999, and September 1999,
                                       3
                          respectively. None of the other state and local governments we surveyed
                          had a public disclosure program.

                          None of the programs publicly disclose the names of taxpayers that fail to
                          file their required tax returns. Instead, revenue office employees assess
                          nonfilers the taxes they owe and process their accounts in the same
                          manner as delinquent taxpayers should the nonfilers be determined to owe
                          taxes. Generally, revenue office employees in the four states and the
                          District of Columbia compare federal and state income tax returns to
                          identify individuals that did not file their state income tax return. Identified
                          individuals are then to be assessed an estimated amount and notified
                          through traditional billing and collections procedures. Should the
                          individual then fail to pay or resolve the assessment, the account is to be
                          processed in the same manner as a delinquent taxpayer’s account, which
                          ultimately may include public disclosure.

                          In response to our survey, officials from Wisconsin and Minnesota
                          reported that public disclosure programs were either being developed or
                          considered. All of the states and the District of Columbia that have or are
                          planning programs told us that they used Connecticut’s program as a




                          3
                           The dates shown are when the governments began or planned to begin using the Internet or press
                          releases to proactively disclose the names of delinquent taxpayers. Connecticut had begun preparing a
                          list of delinquent taxpayers beginning in September 1996, which was open for public inspection at the
                          revenue office.




                          Page 4                             GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
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                    model. Also, Connecticut’s tax commissioner told us that 24 other states
                                                                                        4
                    and five cities had requested information about the state’s program.

                    Officials from North Dakota reported that in September 1995, the state’s
                    Department of Revenue published a list of approximately 4,000 taxpayers
                    with unsatisfied liens dating back to 1982. However, they said that this
                    effort was discontinued in January 1997 because of publicity about its
                    many errors, such as including taxpayers that had resolved their liens.
                    Also, North Dakota’s newly elected commissioner told us he believed that
                    the disclosure unnecessarily embarrassed taxpayers.

                    Three of the programs we identified are operating under explicit statutory
Programs’ Legal     authority, and two are not. Connecticut, Illinois and the District of
Authority and       Columbia have statutes that explicitly authorize public disclosure of
Operations Differ   delinquent taxpayers. Connecticut’s statute requires tax officials to
                    maintain, and make available for public inspection, a list of delinquent
                    taxpayers. Illinois’ statute explicitly states that tax officials may disclose
                    taxpayers that are delinquent in the payment of tax liabilities. Similarly, the
                    District of Columbia’s statute grants authority for tax officials to publicly
                    disclose delinquent taxpayers.

                    New Jersey and Montana do not operate their programs under specific
                    statutory authority. Like the other three jurisdictions, New Jersey and
                    Montana have statutes designed to safeguard the confidentiality of
                    taxpayer information.

                    For example, New Jersey’s confidentiality statute explicitly provides that
                    taxpayer records and files shall be confidential and may not be disclosed.
                    However, according to state officials, another provision allows tax officials
                    to file a certificate of debt in superior court against a taxpayer, which is
                    entered into the judgment docket, thereby making the delinquency a
                    matter of public record. Since the certificate of debt is a public record,
                    revenue office officials said that they have the necessary authority to
                    publicly disclose the information included therein with regard to
                    delinquent taxpayers.

                    Montana’s confidentiality statutes also prohibit the disclosure of taxpayer
                    information. Montana officials told us that another provision provides that
                    after a warrant is filed with the clerk of the district court and included in
                    4
                    These states were Arizona, California, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan,
                    Nebraska, Nevada, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island,
                    South Carolina, South Dakota, Utah, Virginia, Washington, West Virginia, and Wyoming. The cities were
                    Birmingham, AL; Boston, MA; Juneau, AK; Milwaukee, WI; and New York, NY.




                    Page 5                             GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                                              B-282522




                                              the judgment docket, the information becomes a matter of public record
                                              and subject to public disclosure on the Internet, newspapers, or any other
                                              medium the state may choose.

                                              The programs also operate differently. As shown in table 1, they differ with
                                              respect to the procedures leading up to disclosure, the media through
                                              which the disclosure is made, the type of information disclosed, and the
                                              frequency with which information is updated.

                                              As table I also shows, four of the programs include provisions to send
                                              letters to delinquent taxpayers, warning them of impending disclosure if
                                                                                      5
                                              they do not resolve their delinquency. Additionally, the length of time to
                                              respond to the warning varies from 10 business days to 60 calendar days;
                                              all 5 governments use the Internet, while 3 also use press releases to
                                              disclose delinquent taxpayers; the number of taxpayers listed varies from
                                              50 to all that qualify, and the frequency of updates varies from monthly to
                                              periodically, as new information becomes available.


Table 1: Differences in Program Operations
                                                                                              Programs
                                                                       District of
Program procedure                                 Connecticut          Columbia            Illinois           Montana            New Jersey
Warning letter of impending disclosure sent       Yes                  Yes                 Yes                No                 Yes
Days for taxpayers to respond to warning          10 (business)        30 (calendar)       60 (calendar)      Not applicable     14 (business)
Medium of disclosure                              Internet, press      Internet            Internet and       Internet and       Internet
                                                  release and                              press release      press release
                                                  newspaper
Number of taxpayers disclosed on delinquency list 100                  All that qualify    All that qualify   50                 200
Disclosure of mailing address                     Yes                  No                  Yes                No                 No
Disclosure of court docket number                 No                   No                  No                 No                 Yes
Disclosure of type of tax                         Yes                  No                  Yes                Yes                No
Disclosure of year(s) of tax liability            No                   No                  Yes                No                 Yes
Frequency of update of delinquency list           Monthly              Periodically        Periodically       Monthly            Monthly
                                              Source: GAO surveys and structured interviews of state and local revenue office officials.




                                              5
                                               The programs provide that taxpayers can resolve their delinquencies by paying in full or negotiating
                                              payment agreements. Taxpayers may also provide evidence that the liability is an error or demonstrate
                                              that bankruptcy procedures are in process.




                                              Page 6                             GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                          B-282522




                          Revenue office officials believe that their public disclosure programs
Revenue Office            improve compliance. They base their views mostly on anecdotal evidence
Officials Believe Their   from statistics on accounts receivable and collections. Montana reported
Public Disclosure         that as of June 1999, numerous accounts receivable had been resolved
                          since the program’s inception in April 1998. Specifically, Montana said that
Programs Improve          18 payment plans had been set up, 23 accounts had been paid in full, and
Compliance                23 taxpayers had filed their returns. During this time, approximately 150
                          taxpayers had been disclosed on the Internet. The District of Columbia
                          reported that as of June 1999, it had collected $669,912 from seven
                          taxpayers after they had received warning letters that their names would
                          be disclosed on the Internet. As of June 1999, approximately 150 warning
                          letters had been sent to delinquent taxpayers. Additionally, revenue office
                          officials from Connecticut and the District of Columbia added that they
                          believe public disclosure had a salutary effect on voluntary compliance.

                          However, the state and District revenue office officials recognized that
                          such statistics were not good indicators of program impact because they
                          do not isolate the effect of public disclosure on accounts receivable and
                          collections. As they explained, public disclosure is one of many tools that
                          revenue offices use to gain compliance. For example, Montana officials
                          noted that at about the same time the first list of delinquent taxpayers was
                          published on the Internet, the state implemented an automatic phone
                          system (the predictive dialer), which enabled collectors to contact a
                          significantly greater number of taxpayers than they were previously able to
                          contact. The collectors were able to contact more taxpayers because the
                          automated phone system makes multiple calls, screening out nonreponses,
                          busy signals, and answering machines, and then directs calls that are
                          answered by the taxpayer to available collectors.

                          While District of Columbia officials were able to identify payments from
                          taxpayers that had been warned that their names would be published on
                          the Internet if they did not resolve their tax liabilities, they recognized that
                          other factors could have influenced the taxpayers’ decision to pay.

                          None of the revenue offices had undertaken a thorough evaluation of their
                          program. Such an evaluation would be expensive and, as our prior work
                                                                                              6
                          has shown, isolating the impact of such programs would be difficult.
                          Moreover, revenue office officials from New Jersey and Connecticut said
                          that factors outside of tax administration—notably, the economy—also
                          affect compliance.


                          6
                              Budget Process: Issues Concerning the 1990 Reconciliation Act (GAO/AIMD-95-3, Oct. 1994).




                          Page 7                               GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
B-282522




We are sending copies of this report to Representative Charles B. Rangel,
Ranking Minority Member, Joint Committee on Taxation, and Senator
Daniel P. Moynihan, Ranking Minority Member, Senate Committee on
Finance. We are also sending copies to the Honorable Lawrence H.
Summers, Secretary of the Treasury; the Honorable Charles O. Rossotti,
Commissioner of Internal Revenue; and the Honorable Jacob Lew,
Director, Office of Management and Budget; and other interested parties.
We will also send copies to those who request them.

If you or your staff have any questions concerning this report, please
contact me at (202) 512-9110 or A. Carl Harris, Assistant Director, at (404)
679-1900. Other major contributors to this report are acknowledged in
appendix III.




Margaret T. Wrightson
Associate Director, Tax Policy and
  Administration Issues




Page 8                    GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Page 9   GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Contents



Letter                                                                                                  1


Appendix I                                                                                             12
                         Connecticut                                                                   12
Profiles of State and    District of Columbia                                                          13
Local Governments        Illinois                                                                      15
                         Montana                                                                       16
With Public Disclosure   New Jersey                                                                    18
Programs
Appendix II                                                                                            20

Cities and Counties We
Surveyed
Appendix III                                                                                           21

GAO Contacts and
Staff
Acknowledgments
Tables                   Table 1: Differences in Program Operations                                     6




                         Page 10                  GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Page 11   GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Appendix I

Profiles of State and Local Governments With
Public Disclosure Programs

                         In this appendix, we describe each of the five public disclosure programs.
                         All the information provided in this appendix was reported by state and
                         local revenue office officials. Other than clarifying this information with
                         the appropriate officials, we did not attempt to validate its accuracy.

                         In January 1997, the Connecticut Department of Revenue Services began
Connecticut              publicly disclosing on the Internet (http://www.state.ct.us/drs/delinq/
                         mart100.html), newspapers, and press releases, the names of Connecticut’s
                         top 100 delinquent taxpayers, including businesses and individuals.

Legal Authority          In 1986, section 12-7a of the Connecticut Tax Code was amended to
                         require the tax commissioner to prepare a list of delinquent taxpayers and
                         make it available for public inspection.

Impetus                  Revenue office officials told us that the public disclosure program was
                         initiated as a means of applying “social” pressure to encourage people to
                         pay the taxes they owe.

Operating Procedures     Certified letters, return receipt requested, are sent each month to the top
                         200 delinquent taxpayers (those with the largest accounts that were
                         delinquent for more than 90 days), warning them of impending disclosure
                         on the Internet if they do not resolve their delinquencies within 10
                         business days. Meanwhile, officials screen the list for taxpayers whose
                                                           1
                         names should not be published. When 10 days have elapsed, officials have
                         5 days to finalize and narrow the list to the top 100. The information
                         disclosed includes the taxpayer’s name, address, amount owed (including
                         penalties and interest), and type of tax owed. It is updated monthly.

                         Disclosure is discontinued for any of the following reasons:

                       • taxpayer pays, negotiates a payment agreement, or otherwise resolves the
                         account;
                       • taxpayer’s account has appeared on the Web site for 3 or more consecutive
                         months, and the revenue office has verified that:

                             • certified letters have been undeliverable for 3 consecutive months,
                               but not “refused” by the addressee or

                             • the account is not collectible for statutory or regulation-based
                               reasons; or

                         1
                          Officials screen taxpayers’ names for those who may have voluntarily paid or are in the process of
                         resolving their delinquency, yet such transactions are not yet in the computer system.




                         Page 12                            GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                              Appendix I
                              Profiles of State and Local Governments With Public Disclosure Programs




                            • taxpayer’s account has appeared on the Web site for 4-6 consecutive
                              months, and revenue officials have verified that bankruptcy proceedings
                              have occurred.

                              Nonfilers can be included on the list after an assessment is made and the
                              account becomes delinquent. Their accounts are then processed in the
                              same manner as other delinquent accounts and are not identified as
                              nonfilers.

Problems/Complaints           Revenue office officials reported that they have not had any inaccurate
                              disclosures, complaints from taxpayers, or opposition from taxpayers or
                              interest groups.

Effect on Compliance          Revenue office officials told us that since the program’s inception, the
                              revenue office had collected $52 million in overdue tax revenues and
                              entered payment agreements totaling $12 million. Revenue office officials
                              said that they could not determine the extent to which public disclosure
                              affected collections because other collection tools could have influenced
                              taxpayers’ decisions to pay. Revenue office officials also stated that factors
                              outside the control of their offices, such as the economy, also affect
                              compliance.

Other Tools for Improving     Revenue office officials reported that they use several tools to gain
                              compliance, such as letters, liens, levies, and seizures. Additionally,
Compliance                    Connecticut has used other tools, such as a Tax Amnesty Program, a
                                                                                       2
                              Voluntary Disclosure Program, and the Nexus Project.

                              In October 1997, the District of Columbia’s Office of Tax and Revenue
District of Columbia          began publicly disclosing on the Internet (http://www.dccfo.com/
                              TAXPAYER2.htm) the names of selected uncooperative delinquent
                              taxpayers, including businesses and individuals, who owe more than
                                      3
                              $10,000.

Legal Authority               In 1947, section 47-1805.4 of the District of Columbia Code was enacted,
                              granting the District authority to disclose delinquent taxpayers.



                              2
                              The Tax Amnesty Program allowed nonfilers to come forth and pay their taxes without penalty. The
                              Voluntary Disclosure Project offers noncompliant taxpayers favorable terms to pay their back taxes.
                              The Nexus Project is an effort to identify and collect the taxes owed by nonresident taxpayers.
                              3
                               In May 1999, 94 taxpayers were listed. This represented all delinquent taxpayers that had been
                              processed to disclosure. The list included two taxpayers who owed less than $10,000, $9,743.48 and
                              $9,749.69, respectively.




                              Page 13                            GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                           Appendix I
                           Profiles of State and Local Governments With Public Disclosure Programs




Impetus                    Revenue office officials told us that the public disclosure program was
                           initiated as another tool to encourage taxpayers to pay the taxes they owe.
                           They also told us that they were impressed with Connecticut’s public
                           disclosure program.

Operating Procedures       When an account is delinquent for at least 90 days, a certified letter is sent,
                           warning the taxpayer that failure to work with the Office of Tax and
                           Revenue within 30 days to resolve the delinquency could result in public
                           disclosure. After the disclosure, a copy of the Internet screen is mailed to
                           the delinquent taxpayer. The information disclosed includes the taxpayer’s
                           name (including the responsible officer(s) for businesses) and the amount
                           owed. The delinquency list is updated periodically as new information
                           becomes available.

                           Disclosure is not made (or discontinued if already made) for any of the
                           following reasons:

                       •   taxpayer makes payment arrangements,
                       •   revenue office determines that a mistake was made in calculating the tax,
                       •   taxpayer enters bankruptcy proceedings, or
                       •   taxpayer provides evidence that he is not the responsible officer of a
                           business.

                           Nonfilers can be included on the list after an assessment is made and their
                           accounts become delinquent. Their accounts are then processed in the
                           same manner as other delinquent accounts and are not identified as
                           nonfilers.

                           Additionally, the Office of Tax and Revenue publishes a separate list on the
                           Internet of taxpayers it is unable to locate after exhaustive investigation.
                           The public is invited to advise the Office of Tax and Revenue of the
                           whereabouts of these taxpayers.

Effect on Compliance       Revenue office officials told us that they have not conducted an overall
                           evaluation of their disclosure program because of staff limitations. They
                                                            4
                           told us that in fiscal year 1999, the revenue office collected $669,912 after
                           sending warning letters and $70,587 after disclosure on the Internet.
                           However, revenue office officials recognized that other factors could have
                           influenced the taxpayers’ decisions to pay.



                           4
                               As of June 1999.




                           Page 14                       GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                                Appendix I
                                Profiles of State and Local Governments With Public Disclosure Programs




Problems/Complaints             Revenue office officials reported that they were aware of only one instance
                                where inaccurate information was disclosed on their Web site. In this case,
                                an individual was inappropriately identified as the responsible officer of a
                                business. After providing information proving that he was not the
                                responsible officer, the revenue office corrected the mistake. Officials said
                                that they had not received any complaints about the public disclosure
                                program or any opposition from interest groups.

Other Tools for Improving       The disclosure program is one of many tools the District uses to improve
                                compliance and collect unpaid taxes. Other tools include telephone
Compliance                      contacts, letters, liens, and seizures.

                                In September 1999, the Illinois Department of Revenue plans to disclose on
Illinois                        the Internet (http://www.revenue.state.il.us/) and through press releases,
                                the names of all delinquent taxpayers, including businesses and
                                individuals, who have final liabilities greater than $10,000 for longer than a
                                period of 6 months.

Legal Authority                 Section 39b54 of the Illinois Civil Administration Code, enacted in August
                                1998, with an effective date of January 1999, provides Illinois’ authority for
                                its public disclosure program.

Impetus                         Revenue office officials told us that the public disclosure program was
                                initiated to decrease the amount of accounts receivable. The revenue
                                office was also influenced by Connecticut’s public disclosure program.

Operating Procedures            Certified letters are sent to those taxpayers with delinquent accounts of at
                                least 6 months, warning them that their names will be published on the
                                Internet if they do not make payment arrangements or resolve their
                                accounts. Taxpayers have 60 days to respond. The information to be
                                disclosed includes the taxpayer’s name; amount owed; mailing address;
                                type of tax owed; tax period; and for corporations, the president’s name.
                                While the legislation stipulates an annual list, the program administrator
                                said that names will be removed periodically, as accounts are paid, and
                                that new names will be placed on the list only once a year.

                                Disclosure may be discontinued for any of the following reasons:

                            •   account is paid in full,
                            •   payment arrangements are made,
                            •   old payment agreements are brought into compliance, or
                            •   legal proceedings (i.e., administrative hearings, civil court, or bankruptcy)
                                are under way.



                                Page 15                       GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                            Appendix I
                            Profiles of State and Local Governments With Public Disclosure Programs




                            Nonfilers can be included on the list after an assessment is made and their
                            accounts become delinquent. Their accounts are then processed in the
                            same manner as other delinquent accounts and are not identified as
                            nonfilers.

Effect on Compliance        Revenue office officials told us that it is too early to determine the full
                            impact of the program. However, they reported that after sending warning
                            letters to 5,200 delinquent taxpayers since March 1999, $2.9 million had
                            been collected, $918,000 in payment agreements had been made, and
                            $453,000 in accounts receivable were resolved (i.e., the taxpayer
                                                                          5
                            demonstrated that amount was not owed).

Problems/Complaints         Revenue office officials reported that they have not had any opposition
                            from interest groups. They have received some letters of complaint from
                            businesses with the same or similar names as delinquent taxpayers.

Other Tools for Improving   Revenue office officials reported that they use other tools to gain
                            compliance, such as letters, liens, levies, and seizures. Other tools include
Compliance                  denying the issuance or renewal of licenses and utilizing private collection
                            agencies.

                            In April 1998, the Montana Department of Revenue began publicly
Montana                     disclosing on the Internet (http://www.state.mt.us/revenue/del._tax_
                            accts.html) and through press releases, the names of Montana’s top 50
                            delinquent taxpayer accounts, including businesses and individuals.

Legal Authority             Montana does not have a statute that specifically addresses public
                            disclosure. However, according to Montana officials, section 15-1-704 of
                            Montana’s Tax Code allows the department of revenue to file a warrant
                            with the district court to be included in the judgment docket, which makes
                            the delinquency a matter of public record.

Impetus                     The public disclosure program was initiated in an effort to improve
                            compliance. Also, revenue office officials told us that they were impressed
                            by Connecticut’s public disclosure program.

Operating Procedures        If taxpayers do not pay their taxes within 30 days of the due date, the
                            Department of Revenue notifies the delinquent taxpayer, either by
                            telephone or mail, that unless payment is received within 30 days of the
                            date of the notice, a warrant of distraint may be issued and filed in the
                            district court. The filing of warrants with the clerk of the district court to
                            5
                                As of May 21, 1999.




                            Page 16                       GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                           Appendix I
                           Profiles of State and Local Governments With Public Disclosure Programs




                           be included in its judgment docket is the basis of Montana’s disclosure
                           program; as such, legal action renders a delinquency a matter of public
                           record. The information disclosed includes the taxpayer’s name, city and
                           state of residence, tax type, and amount owed. The information is to be
                                              6
                           updated monthly.

                           Public disclosure is discontinued for any of the following reasons:

                       •   payment plan is established,
                       •   return is filed,
                       •   revenue office accepts an offer-in-compromise,
                       •   taxpayer files for bankruptcy, or
                       •   taxpayer is on the list for 6 months.

                           Nonfilers can be included on the list after an assessment is made and their
                           accounts become delinquent. Their accounts are then processed in the
                           same manner as other delinquent accounts and are not identified as
                           nonfilers.

Effect on Compliance       Since the program’s inception, revenue office officials reported that as of
                           June 1999,

                       •   23 taxpayers paid in full,
                       •   18 negotiated payment plans,
                       •   23 filed outstanding returns, and
                       •    2 filed amended returns.

                           The revenue office officials told us that they had collected $367,839 as a
                           result of these actions. They recognized that other factors may have
                           contributed to the taxpayers’ decisions to pay or resolve their
                           delinquencies. For example, Montana officials noted that at about the
                           same time the first list of delinquent taxpayers was published on the
                           Internet, the state implemented an automatic phone system (the predictive
                           dialer), which enabled collectors to contact a significantly greater number
                           of taxpayers.

Problems/Complaints        Revenue office officials stated that in one instance, inaccurate information
                           was disclosed on the Internet. In that case, the amount of taxes owed was
                           overstated because the tax rate was applied incorrectly. The state has
                           received few complaints from taxpayers and no opposition from interest

                           6
                            The March 1999 listing had not been updated as of July 15, 1999. According to the program
                           administrator, failure to update the Internet listing was an oversight.




                           Page 17                            GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                            Appendix I
                            Profiles of State and Local Governments With Public Disclosure Programs




                            groups. One local attorney tried to organize citizens in opposition to the
                            Internet program, but he was unable to gain much support, according to
                            revenue office officials.

Other Tools for Improving   Revenue office officials reported that they use other tools to gain
                            compliance, including telephone contacts, letters, warrants of distraint
Compliance                  (liens), levies, and offers-in-compromise.

                            In May 1999, the New Jersey Division of Taxation began publicly disclosing
New Jersey                  on the Internet (http://www.state.nj.us/treasury/taxation/jdgdiscl.htm), the
                            names of New Jersey’s 100 businesses and 100 individuals that owe the
                            most.

Legal Authority             New Jersey does not have a provision that expressly authorizes a public
                            disclosure program. According to New Jersey officials, the filing of a
                            certificate of debt under section 54:49-12 forms the basis of New Jersey’s
                            public disclosure program. When the clerk files the certificate in the
                            judgment docket, the information contained therein becomes public
                            record.

Impetus                     Revenue office officials told us that the public disclosure program was
                            initiated in an effort to collect outstanding tax liabilities. Also, they were
                            influenced by the reported success of Connecticut’s public disclosure
                            program.

Operating Procedures        The public disclosure program is not initiated until after standard
                            collection tools are used, including sending the taxpayers a statement of
                            account, bill, notice of assessment, and a letter warning that failure to
                                                                         7
                            resolve their delinquency in 30 or 90 days will result in the filing of a
                            certificate of debt. After the certificate of debt is filed, taxpayers may be
                            subject to actions, such as levy, seizure, and/or referral to the Attorney
                            General. Finally, delinquent taxpayers are warned, through certified mail,
                            that failure to resolve their delinquency within 14 days may result in the
                            disclosure of their certificate of debt information on the Internet. The 100
                            individuals and 100 businesses that owe the most are disclosed. The
                            information disclosed includes the taxpayer’s name; trade name (if a
                            business); city; date and amount of the certificate of debt; and the court
                            docket number. The information is updated monthly.




                            7
                                Businesses are given 30 days, while individuals are given 90.




                            Page 18                                GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
                              Appendix I
                              Profiles of State and Local Governments With Public Disclosure Programs




                              Disclosure is discontinued if the taxpayer

                            • shows proof of bankruptcy proceedings,
                            • enters into a deferred payment arrangement or closing agreement, or
                            • pays all tax liabilities.

                              Also, taxpayers that have not paid outstanding liabilities or entered into a
                              deferred payment arrangement or closing agreement may be removed to
                              make room for the posting of new names. Such taxpayers may be re-
                              posted at any time until the delinquencies are resolved.

                              Nonfilers can be included on the list after an estimated assessment is made
                              and a certificate of debt is filed. Their accounts are then processed in the
                              same manner as other delinquent accounts and are not identified as
                              nonfilers.

Effect on Compliance          A revenue office official told us $695,991 had been collected as of July 27,
                              1999. However, he also stated that it is too soon to quantify the full effects
                              of the program.

Problems/Complaints           Officials reported that they had received no complaints from taxpayers or
                              opposition from interest groups.

Other Tools for Improving     Revenue office officials told us that the disclosure program is only one of
                              many tools the state uses to improve compliance and collect unpaid taxes.
Compliance                    Other tools include project letters, field investigations, certificates of debt,
                              levies, seizures, and office and field audit programs. The revenue office has
                              also used private collection agencies and a special project group that
                              focuses upon noncompliants in the cash economy, as less traditional tools.




                              Page 19                       GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Appendix II

Cities and Counties We Surveyed


              State          City                       County
              Alabama        Birmingham
              California     Los Angeles
                             San Francisco
                             District of Columbia
              Delaware       Wilmington
              Indiana                                   Allen
                                                        Elkhart
                                                        Marion
                                                        St. Joseph
                                                        Vanderburgh
              Kentucky       Lexington
                             Louisville
                                                        Fayettte
                                                        Jefferson
              Michigan       Detroit
                             Flint
                             Grand Rapids
                             Pontiac
                             Warren
              Missouri       Kansas City
                             St. Louis
              New Jersey     Newark
              New York       New York
                             Yonkers
              Ohio           Akron
                             Cincinnati
                             Cleveland
                             Columbus
                             Toledo
              Oregon         Portland
                                                        Multnomah
              Pennsylvania   Philadelphia
                             Pittsburgh




              Page 20        GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
Appendix III

GAO Contacts and Staff Acknowledgments


                  Margaret T. Wrightson (202) 512-9110
GAO Contacts      A. Carl Harris (404) 679-1900

                  In addition to those named above, Catherine Myrick, Lisa Moore, Stuart
Acknowledgments   Kaufman, and Shirley Jones made key contributions to this report.




                  Page 21                  GAO/GGD-99-165 Public Disclosure of Delinquent Taxpayers
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