Published on 29-Sep-2011
Validated on 04 Mar 2013
New York State Tax
Entity Analytics, IBM Research, Smarter Analytics, Smarter Planet
Leadership Series, Smarter Cities
Nonie Manion took an unorthodox path to becoming head of New York State’s tax audit operation. Her eclectic experience included a leading role in expanding the use of advanced analytics to pinpoint potentially questionable tax returns–and the word seems to have gotten out.
It’s one thing to analyze questionable tax refunds after they’ve been sent out, when the only option left is to pursue them–often to no avail. It’s another to detect questionable refunds before they are sent out, preventing the waste of resources and the loss of critical tax revenue. By integrating predictive analytics directly into its processing stream, NYS Tax is preemptively identifying questionable tax returns and optimizing its approach to collecting delinquent taxes.
Leadership is: Providing a new perspective Manion’s path to directing the audit division–as both an insider and an outsider–made her uniquely suited to adapt the division’s practices through the expanded use of data. “My experience with data and developing audit applications made it obvious to me that our future was in analyzing data to identify noncompliance and pushing the results to the staff with the necessary skills to work the case.” — Nonie Manion, Director of Tax Audits, New York State Department of Taxation and Finance
Analytics need to integrate with process More sophisticated predictive modeling and advanced algorithms were essential to stopping improper refunds before they went out the door–but that was only half the equation. “Without something as simple as human task management–the ability to get cases to where they need to be fast enough, so they can be acted on–it wouldn’t have worked. In this case our previous optimization work around business process management (BPM) proved an essential foundation.” — Brian Digman, CIO, New York State Department of Taxation and Finance
Since using predictive analysis, NYS Tax has decreased the revenue drain caused by questionable refunds by $1.2 billion, with another $400 million reduction projected in savings for 2011, while increasing collections by $100 million.
- $1.2 billion reduction in improper or questionable refunds paid from the State of New York’s coffers, plus another $400 million reduction projected in 2011; - Dramatic reduction in the costs and inefficiencies associated with “pay and chase” policies; - $100 million increase in delinquent tax collections through the use of optimization algorithms; - Over a 350% increase in criminal tax fraud investigations due to greater interdepartmental collaboration on cases
IBM Smarter Planet Leadership Series Customer Reference: New York State Department of Taxation and Finance
Interviewee: Jim Lieb, Director of Architecture and Web Solutions
View this video within the Smarter Planet Leadership Series Web Portal
IBM Smarter Planet Leadership Series Customer Reference
New York State Department of Taxation and Finance
Interviewee: Jim Lieb, Director of Architecture and Web Solutions
TEXT: SMART IS… protecting taxpayer money from fraud
New York State Department of Taxation and Finance employs 6,000 people
Collecting $85 billion in yearly state taxes and penalties
And paying out in excess of $6.5 billion in taxpayer refunds
Jim Lieb: With 10 million tax returns we get about 400,000 exceptions a year, so managing that inventory
is really hard. The hardest sell we had was in the IT organization changing its own direction. Getting
buy-in for people to do something in a completely different way. it had to be demonstrated through proof
of technologies and pilot programs that the technology was ready to support this but it was also executive
leadership that drove that through to completion.
For the modernization, we had to take it down to the department of budget and to the controlling agencies
that control the money in the State of New York because it was a multi-year, multimillion dollar type of
project. How do you move from every 10-15 years doing a big modernization project and having to spend
hundreds of millions of dollars to get a new project up? We have to reduce cost, we have to raise
revenue. We also have to improve customer service. And the underlying opportunity there is by building
agility you can help all three.
We capture a lot more data than we did before. It’s over 14,000 data elements can be captured on a
personal income tax filing and it flows through the system. We wrote a single composite application that
brought all that relevant information into one screen. The exceptions were all put on work list that our
users could interact with. Now I have the information at a point in time to make the right decision.
At the point where we are about to send the money out we also send it to a secondary rules engine which
figures out whether the taxpayer had claimed certain taxable credits that they don’t really deserve. So
what happens in there is it leverages all of the historical data in our data warehouse along with all of the
dependents and dependent’s trees and stuff like that, and it figures out technically whether or not they
qualify for those types of claims. We’ve stopped a billion dollars of refunds not being sent to tax payers.
They don’t protest so you know that the analytics is really doing its job.
We are expanding it now from just transactionally with refunds but to the whole tax life cycle, to get a
better view of the whole customer all his relationships with the state so that we can then deal with the
customer from an audit perspective and a compliance perspective as his whole entity and not just the little
pieces of data that’s streamed through our system. So analytics is going to be expanded into the whole
Last year we brought up the entire metropolitan tax association tax systems leveraging a lot of these
technologies and leveraging SOA approaches and that brought in some $800 million last year.
We’ve cut down mailings to tax payers, mailing was like the third biggest cost to the IT organization. By
reducing those costs we have seen like a 30% reduction in those costs in the last two years.
We have also seen better performance of our people through the exception processing. The amount of
time it takes to do exceptions has been reduced by 60%
We got the greatest value from IBM expertise-wise on the analytics side because they have done
analytics in a lot of places. They could tell us what’s worked and what hasn’t worked and it was truly a
partnership. We’re seeing the solution moving us to from reactive to a very proactive organization where
our customers and our constituents can move forward – it is truly smarter government.
Text: The New York State Department of Taxation and Finance solution is based on:
- IBM® Tax Audio and Compliance System (TACS)
- IBM Tax Collection and Optimization System (TACOS)
- IBM Global Business Services® - Business Analytics and Optimization
- IBM Research
- IBM DB2® 9 for Linux®
- IBM WebSphere® MQ Workflow
- IBM WebSphere Application Server
- IBM WebSphere Process Server
- IBM WebSphere Business Monitor
- IBM InfoSphere™ Identity Insight
- IBM InfoSphere DataStage
Products and services used
IBM products and services that were used in this case study.
GBS BAO: Business Analytics and Optimization Strategy