Revenue Department budgets IT upgrades, seeks to improve online services and cut hosting costs

The Department of Revenue told the House Appropriations Committee its FY26 budget centers on self‑generated revenues, continued operation of tax‑collection programs and an IT upgrade that officials said could reduce long‑term hosting costs.

Presenters said the department’s FY26 recommendation stands near $134.8 million and is almost entirely fee and self‑generated revenue (99.2 percent). The Tax Collection program accounts for roughly 90 percent of the total budget and houses the largest share of authorized positions.

Why it matters: The department administers revenue collection and taxpayer services that directly fund state operations. Upgrading core tax software influences refund timing, payment processing and the state’s ability to offer modern online services to individuals and businesses.

IT modernization and customer service

- Software and hosting: Secretary Richard Nelson said the department and the Office of Technology Services (OTS) manage a large integrated tax software contract. The department plans to upgrade from its current version to a newer release (presented as moving from version 12 to version 26) and said the migration will incur FY26 costs but may yield about $1.5 million per year in hosting‑cost savings once completed by enabling outsourced hosting alternatives.

- Customer experience: Nelson described a new public website with expanded self‑service so taxpayers can pay bills or access some services without a login; the department launched a chatbot to reduce call volume. He said the department negotiated lower merchant fees for credit‑card payments and broadened online options for filing amended returns and payment plans.

Staffing and collections

- Personnel: FY26 personnel services were shown as the largest expenditure category (about 57 percent of the department’s budget when salaries and related benefits are combined). The department reported 723 authorized T.O. positions, 51 vacancies (as of Dec. 30) and a historically slightly higher average salary than statewide averages.

- Revenue collection structure: The department noted a 1 percent tax deduction implemented beginning in FY23 that affects its self‑generated receipts. Presenters said interagency transfers are rising in FY26 largely because of increased transfers to OTS for technology costs and a $1.0M increase for Board of Tax Appeals administrative programs.

Legislative and operational context

Secretary Nelson said the department has pursued both taxpayer‑facing efficiencies (online tools, consolidated portals) and internal efficiencies (reexamining routine notices and unnecessary forms) to reduce taxpayer burden and staff processing costs. He described efforts to improve the department’s public rating and customer satisfaction.

What lawmakers asked and next steps

Representatives queried how collections and staffing would be affected by last year’s tax changes, the timing and expected savings of the software migration, and whether filing amended returns online would be available. The department confirmed amended returns and many other services are available online and said the software migration timeline targets FY26 implementation phases that will reduce hosting spend over time.

Sources: Abigail Chasen, House Fiscal Division; Secretary Richard Nelson, Department of Revenue.