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Over $1.6 billion in documented revenue collections have been realized by Teradata’s state tax compliance data warehouse clients. This is new revenue directly attributed to Teradata developed and delivered applications. As described in section 4F above, the results are gained by improving the states’ capability to discover specific non-compliant taxpayers and to pinpoint pockets of non-compliance. Improving audit selection through the use of Lifestyle and Outlier models allows the tax agencies to focus on the more productive cases, increasing the return on resource investment and reducing the no-change rate. Stopping fraudulent refunds prevents millions of dollars from being paid erroneously with minimal chance of recovery, and with no investment of resources to pursue the erroneous refund. Identification of fraudulent preparers positions the tax agency to communicate with those preparers and reduce the likelihood of continued fraudulent returns under penalties of decertification or prosecution.

Beyond the direct revenue receipts have been collected by our client states using Teradata's solutions and analytical applications, additional millions of undocumented dollars have been collected or protected as a result of the improvements in audit selection, automation of ongoing programs, case management functionality, and better understanding of compliance trends.

Cost Savings: We assume the term cost savings to mean improvements to processes that save time, resources or money as opposed to direct revenue collections. While we believe that our solution has resulted in many efficiencies as often stated by our customers, “cost savings” have not been measured as a basis for calculating payment to Teradata on any of our projects. The focus has always been direct revenue, with cost savings assumed to be an additional accrued benefit to the client.

Engagement Specific Information

Oklahoma Tax Commission: OTC has realized over $41 million in direct revenue collection results as of May 20, 2011. Teradata was selected to be OTC’s Tax Compliance Solution partner and within 70 days of the project’s start date in October 2008, revenue had begun to flow in form discovery leads. The rate of collections has continued at an accelerating rate since the first taxpayer contacts on discovery leads in November 2008. These collections represent money that is collected and deposited and which has served as the calculation basis for payments to Teradata. Twelve unique discovery programs have been completed, many of which have multiple outputs. Additional discovery programs, along with scoring, ranking, and audit selection models are in process at OTC with additional revenue expectations of $20 to $30 million per year over the next five years.

Because of the revenue-focused basis of this project, cost savings were not calculated as a part of the benefits funding base. OTC believes it has become more efficient as a result of Teradata’s lead generation process, case management solution and reporting capabilities, but no attempt has been made to measure these improvements.

New Jersey Department of Taxation: With Teradata as its Taxation Data Warehouse partner, the Department has collected over $210 million through the implementation of 44 distinct Defined Business Intelligence Applications (DBIAs). New Jersey Taxation faced some unique problems in its compliance operations. Since New Jersey’s Personal Income Tax does not start with Federal AGI, Taxation faces greater challenges in ensuring accuracy and completeness of filings than other states. Each of the Personal Income Tax DBIAs had to be designed and implemented by Teradata and Taxation compliance experts to deal with reporting and filing issues unique to New Jersey. Taxation also faced challenges in the linkage between business registrations and business taxpayer filings. Again, uniquely designed Business DBIAs were developed by Teradata and Taxation to focus on those registration and reporting challenges. The addition of analytical models for scoring and ranking of leads has and will continue to contribute to the expected $3+ million per month in ongoing collections. Teradata has also implemented a Tax Preparer Fraud model at Taxation identifying preparers whose taxpayer clients are consistently outside calculated norms for their peer group. This model provides Taxation with not only the identities of the potentially fraudulent preparers, but also those taxpayer clients whose returns resulted in improper refunds.

No attempt has been made to measure cost savings on this project.

Ohio Department of Taxation: ODT desired a partner to accelerate the progress they had made with their Discovery Division to implement a complete data warehouse-based Tax Compliance Solution. With Discovery work already in progress, ODT wanted to enhance the existing programs, develop new programs and increase revenue through stronger, more accurate leads and audit selection. ODT’s vision for their total tax compliance solution includes discovery, analytics, case management, reporting, revenue tracking in a modular single sign-on, off the shelf package—the Teradata Tax Compliance Solution was their product and partner of choice. The partnership has successfully increased revenues over the established baseline by over $40 million. To date, the focus has been on Individual Income Tax programs with special emphasis on the analyses of Pass-Through Entities, Trust and Estate Filers, and Stock Option and other non-wage income taxpayers. Analytical Scoring and Ranking models have been delivered by Teradata to further improve the selection process to focus on the highest probability and return on investment cases.