GenTax® Upgrade to Version 9 Executive Sponsors Demesia Padilla, CPA Cabinet Secretary John Monforte Deputy Cabinet Secretary Greg Saunders Chief Information Officer April 18, 2012

Background GenTax® – tax system of record for New Mexico Commercial-off-the-shelf (COTS) product provide by Fast Enterprises, LLC First implemented in 2002 for Personal & Corporate Income Tax Implemented on time and on budget Currently 28 tax programs are processed in GenTax Manages tax revenue stream fluctuating between $5.5 and $6.5 billion annually

Background Accounting basis for TRD financial revenue processing Manages the revenue stream from taxpayers to beneficiaries Processes all tax returns and payments System for Tax Audit and Compliance initiatives Repository for all historical tax information Used to enforce tax code compliance and combat tax fraud

Key Points Some modules in the current version are obsolete, no longer supported, and are cumbersome to use and maintain; TRD is unable to fulfill critical user requests and implement legislative mandates Lost revenue opportunities – inability to take advantage of new additional revenues of $14.5 million due to lack of implementation of New Refunds module, Tax Payer Offset Program, Discovery product, Business Credit Manager and other modern core revenue generation functionality

Key Points Fraud Prevention – current system is unable to identity & prevent millions in fraudulent activity each year Catastrophic failure- if GenTax suffers a catastrophic failure, NM will be unable to collect and distribute $6 billion in revenues

Benefits from Upgrade Significant annual reduction of fraudulent refunds as a result of upgraded Refunds module and data exchange functionality Additional new revenues annually resulting from more efficient processing due to an upgraded Taxpayer Offset Program module Significant increase in new revenues annually resulting from implementation of GenTax integrated data warehouse (Discovery). This module increases audit, collections, non-filer recoveries, real-time fraud prevention and return validation. Alabama Audit & Compliance Division: Without Discovery in FY 2008, $10 million. With Discovery in 2010, $17.7 million Illinois Audit & Compliance Collections: $44 million collected using leads generated by Discovery California Employment Development Department (unemployment compensation): Collection increase in 2010 of $29 millioln in new revenue in FY 2010 using Discovery

Benefits from Upgrade Annual savings in support & maintenance costs by incorporating the current data warehouse functionality into GenTax Considerable annual saving to General Fund resulting from implementation of Business Credit Manager functionality. This functionality ensures that revenue due to the State is fairly collected and distributed. Greater ability to satisfy user requests & legislative mandates Greatly reduce the risk of catastrophic failure by upgrading to version 9 of GenTax

Scope Upgrade all modules of tax processing system Implement integrated data warehouse, Discovery Implement a Business Credit Manager module

Budget In Laws of 2012, Chapter 19, Section 7, Item 4, TRD received $6,230,000 Funds must me used to upgrade GenTax to the current version of the software Funds must be expended before 6/30/14

Timeline 2012-2014 Initiation Planning Implementation Closeout 4/18/12 – 5/1/12 5/1/12– 5/31/12 6/1/12– 6/30/14 6/30/14

Statewide Initiative & Compliance Governor's Priorities Balancing the Budget Produce recurring improvements to state revenue Increase in audit collections & non-filer recoveries Ensure that revenues due to the State of NM are fairly collected & distributed

Statewide Initiative & Compliance State Strategy Information Technology must drive efficient delivery of high quality government services Build upon &extend existing cost efficient solutions to the processing of Individual and Business Tax returns and processing Reduce the cost of government operations Produce recurring improvements to state revenue through the reduction of fraudulent returns Create an increase in Federal funds received Minimize the need for programmer/developer intervention in correcting data errors Consolidate enterprise information technology services Improved Refund module will allow for better management oversight, rescheduling of refund that have a change in status and better interest calculation

PCC Gates Initiation Phase - April 2012 Planning Phase - May 2012 Implementation Phase - June 2012 thru June 2014 Closeout Phase – June 2014

Summary The upgrade to GenTax Version 9 will: Increase annual revenue generation Improve Fraud detection and prevention Enhance processing and tracking of refund requests Increase annual saving through the prevention of over distribution from the General Fund Reduce overall system risk over the long term Ensure continued collection of $5.5 to $6.5 billion in annual revenues

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