OFFICEOFTHENAVAJOTAXCOMMISSIONFY2016–2ndQuarterReportPage1

OFFICEOFTHENAVAJOTAXCOMMISSION

MartinE.Ashley,ExecutiveDirectorTelephone#:928/871-6992

Email:mashley@navajotax.org

FY2016SecondQuarterReport(January,February,March2016)

TABLEOFCONTENTS

PageNo.

I. EXECUTIVESUMMARY 1

II. CRITICALISSUES 2

III. PROJECTSTATUS 3

IV. BUDGETSTATUS 5

V. OPERATIONAL&PROCESSIMPROVEMENTINITIATIVESTATUS 5

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I . EXECUTIVESUMMARY

Program&Departments

1. ComplianceDepartment,LarietaTso,Sr.ComplianceOfficer(928)871-71312. AuditDepartment,LawrenceSorrell,PrincipalTaxAuditor(928)871-76063. ValuationDepartment,EthelHouse,Sr.MineralsAssessmentSpecialist(928)871-

75134. AccountingDepartment,SusieBizade,PrincipalAccountant(928)871-78885. LegalDepartment,TaxAttorney–Vacant(928)871-7507

In1974,theNavajoTribalCouncilestablishedathreemembertaxcommissiontostudysourcesofwealthandincomewithintheNavajoNationandsourcesoftaxation.BasedontheauthorityoftheNavajoTaxCommission,theOfficeoftheNavajoTaxCommissionwasfundedforthepurposetocarryoutthisauthorizationbyprovidingprofessionalmanagement,training,technicalexpertise,supervisoryandadministrativesupportintheadministrationofallNavajoNationtaxes.

TheOfficeoftheNavajoTaxCommission(ONTC)isestablishedwithintheExecutiveBranchoftheNavajoNationGovernment.Thefive-memberNavajoTaxCommissionprovidesthegeneraldirectionandguidancetotheOfficeoftheNavajoTaxCommission.TheBudgetandFinanceCommitteeofTheNavajoNationCouncilisthelegislativeoversightcommittee.

TheONTCcurrentlyhasastaffoftwenty(20)insix(6)departmentsorsectionsthatprovidethevariousfunctionswithinONTC.ThosedepartmentsareAdministration-4,Valuation-1,Accounting-2,Compliance-7,Audit-5andLegal–1.ThemostcurrentPlanofOperationwasapprovedbyNaa’bik’yatiCommitteeresolutionNABIJY-39-14.ThetotaloperatingbudgetforFY2016is$1,626,967.

I I . CRITICALISSUES1. NavajoTaxCommission(NTC)currentlyhasfourofficiallyappointedmemberswith

onevacancy.• NeedvacantpositionappointedbytheOfficeofthePresidentandVice

President.• Expectedcompletiondate,assoonaspractical.Severalfollowupmadewith

OPVPonthestatus.2. HealthyDineNationActof2014–JunkFoodTaxorUnhealthyFoodTax.ONTCand

electedofficialsarereceivingnumerouscomplaintsregardingtheimplementationof

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thistax.ONTCinitiallyreceivedsupportfromOPVPtoamendthelegislation/statutetoprovideclaritytotheimplementationandadministration.• ONTCstaffattorneydraftedtheproposedamendmentsandneedtoreviewwith

OPVPpriortoidentifyingasponsorforthelegislation.ThisisstillacontinuingrecommendationbyONTCtoamend.

3. ONTCdraftedChapterTaxOrdinancetemplate,presentedtotheNavajoTaxCommissionandreceivedacceptance,processedthroughthe2NNCSub-section164reviewandiscurrentlyatDOJ.DOJreviewedthetemplateandhasverballyinformedthatwhatTitle26isauthorizingisfortheTaxCodetobeamended.WrittenresponseandrecommendationisstillforthcomingfromDOJ.

4. TheONTCcollectsover$100millionplusintaxesfromthenineNavajoNationtaxesapproved.Ofthe$100millionplusintaxes,approximately$65-70milliongoestotheNavajoNationGeneralFund.ForFiscalYear2016theGeneralFundTaxRevenueProjectionwas$66.983million.Duetotheeconomicconditions,ONTCreexaminedtheoriginalprojectionandhasmadearevisedprojectionof$63.984millionadeclineofapproximately$3million.Basedonthisprojecteddecline,ONTCwillcontinuetomonitortheactualtaxrevenuesreceivedmonthly.

5. MaintainingorgettingoutoftheNavajoNation’sIntergovernmentalAgreement(IGA)withtheArizonaDepartmentofRevenue(ADOR)forjointenforcementoftheNavajoTobaccoProductsTax.• TheNavajoTaxCommissionhastabledthisIGAwithADORandisreconsidering.• ONTCExecutiveDirectorhasmetwithGilaRiverIndianCommunityTreasureron

theiradministrationoftobaccotax.ONTCisusinginformationprovidedtoreviewalternativestotheIGAwithADOR.

6. ONTCstaffattorneypositionisvacatedonJanuary8,2016andONTCstartedtheadvertisingtohireanotherin-housestaffattorney.ONTCisworkingwithDPMandtheOfficeoftheAttorneyGeneralonthishiring.Intheinterim,ONTCisgettingassistancefromtheOfficeoftheAttorneyGeneralonanylegalissuesthatmayarise.

I I I . PROJECTSTATUS

1. ONTCAuditstaffpreparedtheauditscheduleforFY2016thatreflects26auditstobeperformedthisfiscalyear,two(2)HOT,6(6)FET,6(6)SEVand12(12)Sales.AuditDepartmentconducted5taxpayeraudits(5SalesTax)thisquarter.AuditDepartmentissuedoneFieldAuditAssessmentstotaling$72,062andalsoreceivedtwoFieldAuditAssessmentCollectionstotaling$79,344.

2. ONTChasadialogwiththeArizonaDepartmentofRevenue(ADOR)regardingtheTobaccoProductsTaxdiscussingreconciliationofallretailersonADOR’sandONTC’slist.On-goingdiscussionwithADORonrenewingtheIntergovernmentalAgreementwasbroughtbeforetheNTC.

3. ONTCstaff(ComplianceDepartmentandValuationDepartment)continuedtoprovideprocurementclearancesthatarerequestedandreviewofthe3,500plustaxpayerfiles.ComplianceDepartmentperformed5,018deskauditsthisquarterfortheeighttaxes.Compliancestaffalsoperformed22officeauditsandissued204assessmentsandissued80FETrefunds.

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4. ComplianceDepartmenthasprocessed99%fortheFETLicensesfor2016.CompliancestaffalsoprovidededucationtothepublicandpotentialtaxpayersonadailybasisregardingNavajoNationtaxesandassisted4,524clients.Compliancestaffmadepresentationsattworequestedworkshops.

5. ONTCprovidedanoverviewoftheresponsibilitiesithasincarryingoutadministrationofthenineNavajoNationtaxesattheExecutiveBranchplanningsession.ThisoverviewincludedhowtheoperationsrelatetothefourstrategicplanningpillarsandthenineprioritiesestablishedbytheExecutiveBranchandtheLegislativeBranchforFiscalYear2016.TheoverviewofoperationsresultedinanallocationfromtheExecutiveBranchtocoverONTCoperationsinFY2016.

6. ONTC,asof2ndquarterFY2016,collectedatotalof$56.2millionintaxrevenues;thisrepresents53%ofthetotalFY2016TaxRevenueProjection.Oftheentiretaxrevenuescollected,$33.2millionisconsideredNavajoNationGeneralFundRevenueandrepresents50%oftheGeneralFundRevenueProjection.

7. ONTCinlieuofTaxAttorneystaffaddressed6taxpayerappeals,comprising2assessments.

8. ONTCinlieuofTaxAttorneystaffclosed4casesandopened2newcases.9. ONTCprovidedtheFiscalYear2017PreliminaryTaxRevenueProjectionstothe

OfficeoftheControllerandthereisadecreasefromFiscalYear2016of$6.9million.10. ValuationsDepartmentiscontinuingparameterresearchforTaxYear2016

valuations,continuingtoupdateallPITformsandprovideonONTCwebsiteandalsomailouttoPITtaxpayers.ValuationsDepartstaffattendedUtahTaxCommissionsannualmeetingwithoil&gasoperators.

11. TheNavajoTaxCommission(NTC)heldameetingonMarch8,2016primarilytodiscussreorganization,restructurerecommendationfortheOfficeoftheController(OOC)andtheOfficeofManagementandBudget(OMB).TherestructureofOOCandOMBwasrecommendedtoincludeONTCasONTCisresponsibleforbringinginrevenuestotheNavajoNation.TherecommendationbytheNTCisbeingfinalizedtobesenttoOOCandOMB.

12. ONTCExecutiveDirectorservedontheTitle26AmendmentTaskForce.ThetaskforcepreparedapowerpointpresentationontherecommendationforRegionalizationandtheOfficeofGovernmentDevelopmentandtheDivisionofCommunityDevelopmentmadepresentationsatvariouscommunitymeetings.ExecutiveDirectorcontinuestoparticipateintheTaskForcemeetings.

13. NavajoNationCouncilresolutionCS-39-15approvingtheFiscalYear2016NavajoNationComprehensiveBudgetincludedExhibit“H”ConditionofAppropriations(COA).ONTCisresponsibleforCOA#2and#3andhaspreparedresponsestothetwoassigned.

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IV. BUDGETSTATUS1. GeneralFund

Personnel $1,397,523 Balance: 58%Operating $229,444 Balance: 59%Personnel: 18Active 2Vacant 20Budgeted

2. FederalHighwaysAdministration(FHWA)GrantOperating $0 Balance: 0%

GrantExpired: 9/30/2015

V. OPERATIONAL&PROCESSIMPROVEMENTINITIATIVESTATUS1. ONTCtocoordinatewithotherdepartmentsanddraftproceduresregardingthe

ProcurementClearanceReviewwithinONTCtoexpediteorimprovetheProcurementClearancereviewprocess.

2. ONTCattemptedtogetadditionalfundsintheFY2016Budgetfor:a. MineralsAssessmentSpecialisttoassistwiththeadministrationofthe

PossessoryInterestTaxcurrentlyhandledbyonestaff.b. Hireaconsultanttoevaluateourinternalprocessestoidentifyareasof

improvementtofurthermaximizetaxrevenues.c. Purchasesoftwarespecificallytocaptureallincomingtaxrevenuesfurthering

theeaseofreportgenerationforvariousrequests.ONTCisusingMSAccessdatabasetorecordincomingtaxrevenuedatathatissubjectto“lossordamage”ifnotproperlysecured.

d. Initiateanoff-sitesecurestorageofourtaxrevenuedataandrecordstopreventlossduetoinfrastructuralissuesrelatedtosecuritybreachortechnologicalfailures.

Therequestdidnotgetfundedsoitisdifficulttofullyaddresstheoperational&processimprovementwithoutfunding.Requestforfundingtheseweremadeinthepastaswell.