STAFF FIGURE SETTING FY 2021-22 DEPARTMENT OF REVENUE (Executive Director's Office and Taxation Business Group) JBC WORKING DOCUMENT - SUBJECT TO CHANGE STAFF RECOMMENDATION DOES NOT REPRESENT COMMITTEE DECISION PREPARED BY: ALFREDO KEMM, JBC STAFF MARCH 3, 2021 JOINT BUDGET COMMITTEE STAFF 200 E. 14TH AVENUE, 3RD FLOOR · DENVER · COLORADO · 80203 TELEPHONE: (303) 866-2061 · TDD: (303) 866-3472 https://leg.colorado.gov/agencies/joint-budget-committee CONTENTS Department Overview ...................................................................................................................................... 1 Summary of Staff Recommendations ......................................................................................................... 2 Description of Incremental Changes .......................................................................................................... 2 Major Differences from the Request .......................................................................................................... 5 Decision Items Affecting Multiple Divisions ............................................................................................ 5 R2 Sales and Use Tax Simplification System Support and Maintenance .............................. 5 (1) Executive Director’s Office ........................................................................................................................ 9 Decision Items - Executive Director’s Office .......................................................................................... 9 R4 Savings from Adopting Virtual Government ..................................................................... 9 (A) Administration And Support .............................................................................................................. 11 (B) Hearings Division ................................................................................................................................. 27 (3) Taxation Business Group ......................................................................................................................... 30 Decision Items - Taxation Business Group ............................................................................................ 30 R7 Budget Savings – Taxation Business Group ..................................................................... 30 BA1 Proposition EE Funding ................................................................................................... 32 Line Item Detail - Taxation Business Group .......................................................................................... 33 (A) Administration ...................................................................................................................................... 33 (B) Taxation Services .................................................................................................................................. 36 (D) (C) Tax Conferee .................................................................................................................................. 42 (E) (D) Special Purpose .............................................................................................................................. 43 (B) (E) Taxation and Compliance Division ............................................................................................. 46 (C) (F) Taxpayer Service Division ............................................................................................................. 50 Long Bill Footnotes and Requests for Information .................................................................................. 56 Indirect Cost Assessments .............................................................................................................................. 57 Numbers Pages ................................................................................................................................................ 59 (1) Executive Director’s Office ........................................................................................................ 59 (3) Taxation Business Group ............................................................................................................ 64 Appendix A: JTC Letter to JBC on R2 SUTS Request .............................................................................. 71 HOW TO USE THIS DOCUMENT The Department Overview contains a table summarizing the staff recommended incremental changes followed by brief explanations of each incremental change. A similar overview table is provided for each division, but the description of incremental changes is not repeated, since it is available under the Department Overview. More details about the incremental changes are provided in the sections following the Department Overview and the division summary tables. Decision items, both department-requested items and staff-initiated items, are discussed either in the Decision Items Affecting Multiple Divisions or at the beginning of the most relevant division. Within a section, decision items are listed in the requested priority order, if applicable. STAFF WORKING DOCUMENT – DOES NOT REPRESENT COMMITTEE DECISION DEPARTMENT OVERVIEW The Department of Revenue administers the state’s tax laws and collects taxes, administers motor vehicle registration and titling and driver's licensing, regulates and enforces state laws for selected industries, and operates the State Lottery. The Department is divided into six divisions or business groups, four of which provide direct services to the citizens of the State, and two that provide support for the four direct-service providers. The following Divisions are included in this figure setting document: THE EXECUTIVE DIRECTOR'S OFFICE: • Provides central budgeting and fiscal note coordination, accounting and internal auditing, purchasing and contract administration, human resources, project management, and facilities safety and security; • Includes a Citizen’s Advocate who assists citizens and taxpayers with problems, grievances or inquiries, a Communications Director who is the primary contact for all media queries and requests for information, and a Legislative Liaison who directs all legislative matters for the Department; • Includes a Hearings Division for Department administrative hearings processes; • Supports the Office of Research and Analysis that develops analytical data and reports, including the Department’s annual report and monthly and quarterly sales tax reports, and estimates State of Colorado excess revenues under Article X, Section 20 of the State Constitution (TABOR); and • Is funded through direct and indirect costs charged to divisions. THE TAXATION BUSINESS GROUP: • Is responsible for the administration, collection, and enforcement of individual and corporate income taxes, sales and use taxes, gasoline and special fuel taxes, severance taxes, and all other taxes collected by the state; • Collects local sales taxes on behalf of counties, many cities, and special districts; • Provides assistance and information to taxpayers about compliance with Colorado’s tax laws; • Attempts to resolve taxpayer disputes before they reach the court system; and • Administers several pass-through fund distributions to local governments. The remaining four divisions (THE INFORMATION TECHNOLOGY DIVISION, THE DIVISION OF MOTOR VEHICLES, THE ENFORCEMENT BUSINESS GROUP, AND THE STATE LOTTERY DIVISION) are included in a separate figure setting document. 3-Mar-21 1 DOR1-fig STAFF WORKING DOCUMENT – DOES NOT REPRESENT COMMITTEE DECISION SUMMARY OF STAFF RECOMMENDATIONS DEPARTMENT OF REVENUE TOTAL GENERAL CASH REAPPROPRIATED FEDERAL FUNDS FUND FUNDS FUNDS FUNDS FTE FY 2020-21 APPROPRIATION HB 20-1360 (Long Bill) $165,571,703 $112,481,090 $45,663,858 $6,390,242 $1,036,513 579.4 Other legislation (1,292,899) (727,167) (563,617) (2,115) 0 1.5 TOTAL $164,278,804 $111,753,923 $45,100,241 $6,388,127 $1,036,513 580.9 FY 2021-22 RECOMMENDED APPROPRIATION FY 2020-21 Appropriation $164,278,804 $111,753,923 $45,100,241 $6,388,127 $1,036,513 580.9 R2 Sales and use tax simplification system support 2,169,705 2,169,705 0 0 0 4.6 R3 Information Technology reorganization & streamlining 1,245,942 839,428 406,514 0 0 0.0 R4 Saving from adopting virtual government (749,976) (558,353) (191,623) 0 0 (5.0) R5 Realign DMV spending 0 0 0 0 0 0.0 R6 Realign Specialized Business Group spending 0 0 0 0 0 0.0 R7 Budget savings - Taxation Business Group (420,722) (420,722) 0 0 0 (0.0) BA1 Proposition EE funding 50,206 50,206 0 0 0 0.9 Non-prioritized requests (472,963) 440,917 (913,880) 0 0 (5.0) Annualize prior year budget actions 3,458,425 3,022,125 436,300 0 0 7.0 Annualize prior year legislation 3,144,059 1,355,312 1,786,628 2,115 4 11.3 Technical adjustments 273,907 176,827 97,080 0 0 0.0 Indirect cost assessment 51,351 (1,460,452) 51,351 1,460,452 0 0.0 Centrally appropriated line items (11,555,957) (3,661,142) (7,909,289) (9,685) 24,159 0.0 TOTAL $161,472,781 $113,707,774 $38,863,322 $7,841,009 $1,060,676 594.7 INCREASE/(DECREASE) ($2,806,023) $1,953,851 ($6,236,919) $1,452,882 $24,163 13.8 Percentage Change (1.7%) 1.7% (13.8%) 22.7% 2.3% 2.4% FY 2021-22 EXECUTIVE REQUEST $160,644,995 $113,521,550 $38,225,194 $7,840,782 $1,057,469 595.2 Request Above/(Below) Recommendation ($827,786) ($186,224) ($638,128) ($227) ($3,207) 0.5 DESCRIPTION OF INCREMENTAL CHANGES R2 SALES AND USE TAX SIMPLIFICATION SYSTEM SUPPORT: The recommendation includes