AUGUSTA, Maine — Mainers who owe state taxes or have been avoiding filing a tax return will be subject to an extensive computerized effort to get them to pay what they owe as part of the proposed state budget. But the new tools given Maine Revenue Services under the proposal are also raising concerns about oversight of the expanded efforts.
“When they talk about vendors, and having vendors do this work, and the authority the vendors will have, I want to make doubly sure that there are protections in place,” said Rep. Peggy Rotundo, D-Lewiston.
Rotundo authored an amendment to the state budget which requires that Maine Revenue Services report to the Taxation Committee and the Appropriations Committee by Oct. 1, 2009, on what provisions are in place to assure the information generated by the “data warehouse” authorized and funded in the budget is used only for tax purposes and personal privacy is protected.
“There are a number of members of the committee that are concerned,” said Sen. Joe Perry, D-Bangor, co-chairman of the Taxation Committee. “Obviously there have to be adequate safeguards, but I am confident that will be dealt with.”
He said Maine Revenue Services has a number of safeguards in place to protect its data, but said the increasing use of outside vendors to collect taxes raises legitimate concerns that those companies provide the same level of security as the state.
In the proposed budget, Maine Revenue Services is given some expanded tools to go after Mainers who owe taxes and have not paid them. A state tax official said one estimate shows Maine may be losing as much as $90 million a year in unpaid taxes.
Currently when the revenue service seeks to attach a taxpayer’s bank account, it sends paper notices to financial institutions in the area where the taxpayer lives seeking information on whether that taxpayer has an account at that institution.
“All we are doing here is automating the process so we search for all possible accounts a taxpayer may have,” Jerome Gerard, the acting state tax assessor, said in an interview. The state tax assessor is the administrative head of Maine Revenue Services.
He said the computer searches authorized in the draft budget would bring in additional tax revenues that are identified as owed because all financial institutions in the state would be queried electronically whether they had accounts for a particular taxpayer.
The agency would contract with an outside vendor to do the actual searches and follow up collection activity.
“And that started several of us to have concerns about the process of using outside contractors,” Rotundo said.
Gerard said he understands why lawmakers are concerned, but said the procedures in place now will be used both for the expanded search for accounts electronically and the data mining project authorized during the final hours of budget deliberations.
He said the Internal Revenue Service audits state data security, both computer hardware and software to make sure the information it shares with the state is as secure as possible. The IRS also requires training of staff in maintaining confidentiality and mechanisms to track any access to the data to make sure it is for legitimate purposes.
“We have very significant layers of security,” Gerard said. “It is extensive. The IRS would not entrust us with their data if there was any question at all that we were not properly safeguarding it.”
He said the contracts with vendors will have similar stringent security requirements. He said the data will be kept at Maine Revenue Services, and only the specific information on a taxpayer needed to collect taxes that are owed will be given the vendors to use in their collection effort.
Gerard also defended the data mining project, saying it will bring in at least $7 million in additional revenue in the second year of the budget and will also have the security procedures.
“We know we have a problem of nonfilers,” he told the committee. “People who should file and pay Maine taxes, but do not.”
Gerard said the data mining project would use information the agency currently has access to, but not in a form easily searched. For example, he said, if a person owns property in Maine and has a professional license of some type, it is likely they should be filing a tax return.
“The IRS estimates that about 11 percent of their revenues are lost each year to nonfilers,” Gerard said. He said one estimate is that Maine is losing about 8 percent of its revenue. He said that could be between $80 million and $90 million a year.
Gerard promised lawmakers they will get a report on how much new revenue is actually collected because of the expanded efforts.