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Counties get additional local option income tax funds

Statement as issued Thursday by the Indiana Department of Revenue:

(April 5, 2012) – As a result of a programming error, the state is distributing additional local option income tax (LOIT) collections to counties today. This distribution is the result of an error in the Department of Revenue’s (DOR) annual County Statistics Report provided to the Office of Management and Budget (OMB). OMB uses this report to determine LOIT distribution amounts to each county.

The error in the County Statistics Report was discovered by the Office of Management and Budget, which has been engaged in an ongoing review of Department of Revenue reports. The error resulted in counties receiving approximately $13 million per month less than they should have since January 2011.

Governor Daniels directed OMB to immediately distribute the funds to each county, with interest. The state budget agency has recertified the amounts for 2011 and 2012, and the state auditor is distributing the funds today. Ninety-one Indiana counties collect LOIT; Lake County does not. The counties and the amount each received may be found at this link: www.in.gov/sba/2591.htm.

The programming error was discovered in the generation of the County Statistics Report. Beginning in January 2011, the report failed to capture the amounts due to counties from individual taxpayers who separated their state and county estimated payments when remitting quarterly income tax estimates. Consequently, local option income taxes were under-distributed and State General Fund revenues were overstated.

Legislation was passed in 2008 requiring DOR to create an additional quarterly report for County Auditors detailing LOIT collections beginning in 2011. When changes were made to the systems for the new report, the County Statistics Report was not updated accurately to reflect all LOIT collections. A similar error occurred in 1998 when the report was first created.

The OMB review of the Department of Revenue will continue, and the OMB will be engaging an outside expert to complete an audit of DOR’s systems, processes, and procedures. The State Budget Committee will review the external audit.

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