1. NOT YOUR FATHER’S TAX DEPARTMENT: THE CHANGE WE NEED Commissioner Kevin B. Sullivan Department of Revenue Services [Revised 071514]

2. “Taxes…are dues that we pay for the privileges of membership in an organized society.” President Franklin Roosevelt “I shall never use profanity except in discussing taxes.” Mark Twain

3. TAX PRACTICE “ In the tax-law boiler room, the motto is, ‘Anything worth doing is worth overdoing’.” Michael Graetz & Ian Shapiro, Death by a Thousand Cuts (2005)

5. WHO IS DRS? WHO IS DRS? 650 employees (1/3 fewer staff) 650 employees (1/3 fewer staff) Main office: 25 Sigourney Street, Hartford – relocation planned. Main office: 25 Sigourney Street, Hartford – relocation planned. Regional offices: Bridgeport, Norwich & Regional offices: Bridgeport, Norwich & Waterbury. Waterbury. Over 4 million tax returns annually. Over 4 million tax returns annually. Over 2 million taxpayer inquiries annually. Over 2 million taxpayer inquiries annually. www.ct.gov/DRS www.ct.gov/DRS www.ct.gov/DRS

6. Governor Dannel Malloy Governor Dannel Malloy “If we always do what we’ve always done, we’ll always get what we always got.”

7. Imposing Duties, Malcolm Sparrow Compliance agencies must also be service agencies. Compliance agencies must also be service agencies. Creating Public Value, Mark Moore Government agencies need to add public value & engage public confidence. Government agencies need to add public value & engage public confidence.

8. WORKING SMARTER Automated collection scoring Automated collection scoring Employee “Bright Ideas” Employee “Bright Ideas” Web-based assistance, E-filing, self-service audits, payment plans Web-based assistance, E-filing, self-service audits, payment plans Sales tax permit renewals Sales tax permit renewals Amnesty 2013 Amnesty 2013 External publications & policy advisory boards External publications & policy advisory boards Succession planning Succession planning Tax analytics Tax analytics Virtual call-back Virtual call-back Operations concierge Operations concierge LEAN business registration LEAN business registration $500+ MILLION BENEFIT TO THE STATE

9. CHANGING TAX PROFILE FY 1993FY 2003CURRENT Income36%44%52% Sales & Use32%32%25% Corporate11% 5% 5% Motor Fuels 6% 5% 4% Cigarette 2% 3% 3% All Other Taxes 13%11% 11% Connecticut lowest business share of total taxes & tied for 2 nd most favorable total business tax burden. Council on State Taxation (COST) 2013

10. OCTOBER SURPRISE $193 million state tax amnesty

11. APRIL SURPRISE Income tax volatility nationwide January 2014 consensus revenue estimates increased January 2014 consensus revenue estimates increased Income tax estimates & finals -7% ($221 million) down over YTD 2013 Income tax estimates & finals -7% ($221 million) down over YTD 2013 Gift & estate tax -64% ($262 million) down over YTD 2013 Gift & estate tax -64% ($262 million) down over YTD 2013 Federal “fiscal cliff” echo Federal “fiscal cliff” echo Stock market “banking” Stock market “banking”

12. SIGNS OF LIFE ? “Base” tax collections over YTD 2013 improving... Withholding Withholding Sales & use tax Sales & use tax Real estate conveyance Real estate conveyance Petroleum gross receipts Petroleum gross receipts Admissions & dues Admissions & dues

13. HOT TOPICS Aerospace R&D credit reinvestment Aerospace R&D credit reinvestment Business apportionment uniformity Business apportionment uniformity Expedited sales tax collection & publication of non- registered delinquents Expedited sales tax collection & publication of non- registered delinquents Manufacturing reinvestment 100% donation exemption Manufacturing reinvestment 100% donation exemption Gift tax credit on estate taxes Gift tax credit on estate taxes No SOTS “going out of business” fee No SOTS “going out of business” fee Manufacturing apprenticeship credit pass-thru entities transfer Manufacturing apprenticeship credit pass-thru entities transfer Regulations reduction Regulations reduction Clothing & OTC sales exemptions Clothing & OTC sales exemptions Angel Investor credits extend thru 2016 Angel Investor credits extend thru 2016 Teacher pensions Teacher pensions Cigarette enforcement Cigarette enforcement

14. HOTTER TOPICS On-line sales On-line sales Expanded e-filing Expanded e-filing Tax preparer liability Tax preparer liability Tax analytics Tax analytics $75M tax gap initiative $75M tax gap initiative Tax Review Commission ? Tax Review Commission ?

15. THE CHANGE WE WANT “ We have a business in Connecticut and I wanted to let you know that two talented people in your department have helped me get back on track. They have helped me understand that taxes do not have to be trouble but a good thing to keep us all honest. It’s nice to know that you don’t have to be afraid about calling DRS.” “ We have a business in Connecticut and I wanted to let you know that two talented people in your department have helped me get back on track. They have helped me understand that taxes do not have to be trouble but a good thing to keep us all honest. It’s nice to know that you don’t have to be afraid about calling DRS.” “ I just finished paying our sales tax on-line...I just wanted you to know that your system works great. It takes me about 4 minutes to get everything in and done. Good job! Whoever is working the system, maybe you can help the government with the new health care system.” “ I just finished paying our sales tax on-line...I just wanted you to know that your system works great. It takes me about 4 minutes to get everything in and done. Good job! Whoever is working the system, maybe you can help the government with the new health care system.”