Government transformation apparently failed to change franchise tax

Governor Hutchinson touted state government transformation under scrutiny at a joint legislative meeting this morning.

There is a discussion of the results of previous legislative audits that the expense savings weren’t that great, job cuts weren’t significant, and real estate redesigns produced tiny lease savings ( not counting the significant moving costs), but emptied some state buildings as the state decided to fill buildings that did not need to be purchased (and incurred a $ 43 million debt to to buy.)

So there is that. There is now a specific example of an apparent “transformation” effort that will require correction of the legislation.

My advice :

Have you been following the wreckage of the franchise tax train in the state?

They transferred it to DFA, which crashed and burned so badly that they shut down the phones for about a month. Now they are returning it to the Secretary of State, having apparently completely waived any jurisdiction over the DFA.

I would like to know how much money was spent on this failed transfer

At the top you can see the notice sent last year by the Ministry of Finance and Administration stating that due to the transformation law DFA would take over the collection and processing of the state franchise. from January 1. Some 150,000 businesses pay franchise tax. , a minimum of $ 150.

It seems that the new process did not go well.

See these two opinions which suddenly appeared on the websites of the Secretary of State and the FDFA.

Which give? I went to see Scott Hardin, spokesperson for DFA and received this response yesterday afternoon.

DFA continues to work in cooperation with the State Secretariat regarding the franchise tax. The DFA system remains operational and continues to collect franchise tax. However, there could be a change in the future. It would be premature to speculate on details before the introduction of a law.

But, I said, your own website says a change is expected next week. Said Hardin:

That’s right. However, we anticipate that a bill will be introduced to formalize this.

I have yet to receive a response to a question to Secretary of State John Thurston’s office.

Fortunately, however, today I received a state tax newsletter from the law firm of Dover Dixon Horne. She, too, has discovered the abrupt end of a so-called state transformation effort.

New guidelines on the Arkansas Department of Finance and Administration (DFA) Franchise Tax website indicates that the window for making franchise tax payments through the DFA system will close early in the morning of March 12 and that payments can be made through the Secretary of State’s system from March 15. Taxpayers who have not yet paid may wish to wait and pay through the State Secretariat system.

As we covered last fall, the Arkansas franchise tax administration had migrated from the Secretary of State to the DFA, as one of the administrative changes in the tax reform legislation of 2019. The idea is that there will be savings in scale and more efficient enforcement if all state taxes are administered together by the DFA.

In practice, DFA’s takeover of the tax administration for franchises involved migrating the franchise tax to the Arkansas Taxpayer Access Point (ATAP) electronic tax file and records system. DFA. ATAP needed much more information about a taxpayer and their owners than the Secretary of State has historically demanded, which has raised concerns among taxpayers. Other implementation issues may also arise.

The website notice reads: “Effective March 15, 2021 at 8:00 am, ALL franchise taxes will be paid to the Secretary of State. NOTE: Franchise tax deposit / payment via ATAP will no longer be available from March 12, 2021 at 3:00 a.m. “

At this time, information about the change is limited. We may update this post with additional information if it becomes available.

Efficiency of scale and effective practices? There has apparently been a quick determination that speech is cheap, implementation is not.

Someday we may learn how much was spent on this transformation, now being transformed back.

UPDATE: A businessman shared his personal experience with me:

Personally, I went to DFA and had someone walk me through the new process to pay $ 150 for two different deposits. I even offered to give them a check at the window and was told I still had to fill in all of this information, so I went back to do it online. I did this online on about my 5e to try. And there you have it, yesterday I was told his back to the Sec d’Etat which has been very easy over the years.

AMY FECHER: Defend transformation.

This morning, Amy Fecher, director of the transformation agency, answered questions at a joint meeting of the joint audit committee and the Senate committee of state agencies. She challenged some aspects of the findings of the legislative joint audit, released in November.

Senator Jason Rapert wonders point after point on the claims of what has been saved and evokes the upheaval of the departments. “What bothers me the most as a legislator is that information was withheld and there was no good working relationship. [between departments and legislative audit]. Fecher insisted that departments turned over “large amounts of documentation” to auditors after Rapert said the audit “undermined” the transformation claims.

Other lawmakers have also complained about the lack of information from state agencies and questioned the savings claimed. Several questions focused on the state’s $ 25 million purchase of the Verizon building in Riverdale in 2018, which incurred bond debt owing. Mike Preston championed it as a good deal based on rental costs for state agencies, but lawmakers said it didn’t explain the vacant buildings left behind, moving costs and other factors . He recognized something he hesitated to acknowledge, namely that the building was purchased to attract an industrial prospect (Raytheon) that did not materialize. He never explained why the state had not taken an option on the building if the prospect landed, rather than buying it outright.

The auditors noted that reductions in appropriations do not necessarily result in reduced expenses and provided this graphic illustration.

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About Natalee Broderick

Natalee Broderick

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