Analysis Item 37: Board of Tax Practitioners Operating Budget and Revenue Forecast

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1 Analysis Item 37: Board of Tax Practitioners Operating Budget and Revenue Forecast Analyst: Meg Bushman Reinhold Request: Accept a report on the operating budget and revenue forecast by the Board of Tax Practitioners. Recommendation: Acknowledge receipt of the report. Analysis: During the 2017 legislative session, the Joint Committee on Ways and Means issued a budget note to the Board of Tax Practitioners asking it to return in 2018 with a report regarding the agency s operations, including its revenue, expenses, and licensee counts. This report was requested because the agency s primary source of revenue license fees continues to decline. The Board of Tax Practitioners licenses tax consultants, tax preparers, and tax preparation businesses. License fees make up about 86% of the Board s revenue. The number of licenses has declined 9% since This declining revenue has motivated the agency to cut costs and make efforts to increase its licensee base. Revenue The Board has two initiatives aimed at increasing the licensee base. The first is a partnership with the Oregon Employment Department s statewide network of Worksource Centers to promote tax preparation job opportunities. The second is an effort to encourage Oregon s community colleges to offer more basic tax courses, which are the key pre-requisites for obtaining a tax preparer license in Oregon. The Board has also overhauled the licensing exams to increase the passage rate, offer more options for taking the exam, and make the exams available in English and Spanish. The Board notes that it has not increased fees since 2008 and its fees are relatively low. While increasing fees is an option, the Board does not anticipate a need for a fee increase at this time. Budget reductions The Board has streamlined operations and reduced costs. The license application and renewal processes have been automated, allowing the Board to reduce the Licensing Specialist position from 1.00 FTE to 0.50 FTE. The Board also streamlined its compliance process favoring dispute resolution over costly legal proceedings, which along with other process improvements, allowed the Board to eliminate an additional 1.00 FTE. Finally, agency staff relocated to smaller office space to save rent. The legislatively adopted budget for the Board projected an ending fund balance of $207,815, or 4.79 months of operating expenses. Under current projections, the Board expects to end the biennium with a fund balance equal to or higher than that projected amount. The Legislative Fiscal Office recommends acknowledging receipt of the report. Legislative Fiscal Office Interim Joint Committee on Ways and Means January 2018

2 37 Oregon Board of Tax Practitioners Morse-Miller Request: Report on the Oregon Board of Tax Practitioners' operating budget and revenue forecast. Recommendation: Acknowledge receipt of the report. Discussion: The Oregon Board of Tax Practitioners (BTP) oversees Oregon tax practitioners licensing and registration and investigates consumer complaints. Due to a declining licensee base the General Government Subcommittee requested a report on BTP's operations, revenues, expenditures and licensee counts. The agency currently licenses: 1,754 tax consultants (independent and experienced tax practitioners) 1,611 tax preparers (entry-level tax practitioners requiring supervision) 1,315 businesses and branch offices The number of licensees began to decrease in the biennium. At that time, the Board reported approximately 4,430 individual licensees (compared to 3,365 today) and 1,500 businesses. Finance summary The agency is entirely funded by Other Funds, primarily from licensing fees, which comprise 86 percent of their revenue projections ($810,000) in The Board faces declining revenues as the pool of active tax consultants and tax preparers continues to shrink, down by nine percent since The agency has curtailed spending through automation of the license application and renewal process, promotion of mediation in lieu of legal proceedings and reduction of lease costs. These steps have reduced operating expenses by almost 22 percent from the Current Service Level. Given the reported changes, the agency reports sufficient revenues from its licensee base. Their projections indicate ending the biennium with a fund balance of $252,086, approximately 5.8 months of operating expenses. Stabilizing revenue The agency has developed three strategies to stabilize revenue given the licensee base decline: Partnering with the Oregon Employment Department and Oregon community colleges to promote tax preparation opportunities and offer more basic tax courses; Changing the tax practitioner licensing exams to raise the pass rate on the exam; Outsourcing exam development and administration to stabilize administration costs, improve exam quality and administer the test in both Spanish and English, which allows native Spanish speakers a better chance at passing the exam. Department of Administrative Services 37-i January 12, 2018

3 Lastly, the agency also has the ability to raise fees if necessary, a likely next step given the last fee increase happened in Annual fees are currently $80 for a Tax Preparer, $95 for a Tax Consultant and $110 for businesses. Conclusion The agency should continue to update LFO and CFO on the status of their revenue and expenditures given the changing licensee base and any potential costs of implementing the proposed revenue stabilization programs. Department of Administrative Services 37-ii January 12, 2018

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