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General revenues finish December $17.1M ahead of expectations

Providence, R.I. -- The Rhode Island Department of Revenue today (DOR) released its FY 2018 Revenue Assessment Report for December 2017. The Revenue Assessment Report, which is issued on a monthly basis, compares the adjusted general revenues by revenue source on a fiscal year-to-date and monthly basis to expected general revenues by revenue source. Expected general revenues are estimated by the DOR's Office of Revenue Analysis from the revenue estimates adopted at the November 2017 Revenue Estimating Conference (REC). The methodology underlying the Office of Revenue Analysis' estimates is contained in the report.

1. December Year-To-Date Performance. On a fiscal year-to-date basis, the December 2017 report shows that adjusted total general revenues are ahead of expected total general revenues, based on the revenue estimates adopted at the November 2017 REC and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues $17.1 million more than expected total general revenues, a variance of 1.1 percent, about twice the percentage variance that was recorded in November. The major contributors to this surplus are personal income tax revenues, $17.6 million more than expected; estate and transfer tax revenues, $5.7 million above expectations; and insurance company gross premiums tax revenues and public utilities gross earnings tax revenues, each $1.1 million ahead of expected levels. FY 2018 year-to-date business corporation tax revenues are $6.4 million less than expected, the only revenue item more than $1.0 million below expectations. A total of five individual revenue items exceeded their estimated values on a year-to-date basis through December.

2. December Monthly Performance. For the month of December, the report shows that adjusted total general revenues are ahead of expected total general revenues, based on the revenue estimates adopted at the November 2017 REC and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues $8.6 million more than expected total general revenues, a variance of 2.8 percent, a decrease from the 4.9 percent reported in November. The major contributors to this overage are personal income tax revenues which are $16.3 million more than expected; and insurance company gross premiums tax revenues, $1.0 million above expectations. For the month of December cigarette and other tobacco product tax revenues lagged expectations by $2.4 million; departmental receipts were $2.0 million below expectations; estate and transfer tax revenues were $1.6 million less than expected; the lottery transfer lagged expectations by $1.3 million; and sales and use tax revenues trailed the expected amount by $1.2 million. A total of five revenue items exceeded estimates for the month of December.

Regarding December year-to-date performance, Director of Revenue Mark Furcolo made the following observations: Fiscal year-to-date revenues through December were ahead of expectations by $17.1 million, or 1.1 percent, an improvement of 0.5 percentage points from the percentage variance recorded in November. Adjusted personal income tax revenues were $17.6 million above expectations, a variance of 2.7 percent. o Adjusted personal income tax withholding payments through December were $1.1 million more than estimated, or 0.2 percent. It should be noted that the revenue estimate for personal income tax withholding payments was revised upward by $13.2 million at the November 2017 REC. o FY 2018 through December adjusted personal income tax refunds and adjustments were less than $1.0 million more than expectations, a variance of 1.6 percent, down from the 7.5 percent variance recorded in November. o Fiscal year-to-date through December adjusted personal income tax estimated payments revenues were $13.2 million above expectations, a variance of 13.9 percent. The increase in estimated payments may be due to the recently passed Tax Cuts and Jobs Act of 2017 which caps the state and local tax deduction at $10,000 for tax years beginning after December 31, 2017. o FY 2018 through December personal income tax final payments were $3.9 million more than expected, a variance of 14.7 percent. Fiscal year-to-date adjusted business corporation tax revenues through December were short of expectations by $6.4 million, or 13.7 percent. Some of this shortfall may be due to the change in the due date of final returns for tax years beginning on or after January 1, 2016. Adjusted departmental receipts revenues were $192,545 below expectations, a variance of 0.2 percent. The departmental receipts estimate was reduced by $6.2 million at the November 2017 REC. Fiscal year-to-date through December public utilities gross earnings tax and insurance company gross premiums tax revenues were a combined $2.2 million more than expected, a difference of 53.9 percent. Fiscal year-to-date adjusted estate and transfer tax revenues through December were $5.7 million more than expected or 29.3 percent, after accounting for the accrual to FY 2017 of $58.0 million of payment(s) received in July. The estate and transfer tax revenue estimate was increased by $16.2 million at the November 2017 REC. Adjusted lottery transfer revenues were 0.1 percent more than expected for the FY 2018 through December period.

Regarding December monthly performance, Director of Revenue Mark Furcolo made the following observations: December adjusted revenues led expectations by $8.6 million, or 2.8 percent with exceptional revenue performance in the personal income tax offsetting weakness in revenues from cigarette and other tobacco product taxes, departmental receipts, estate and transfer taxes, the lottery transfer, and sales and use taxes. Adjusted personal income tax revenues for December were $16.3 million above expectations, a variance of 11.6 percent. o December adjusted personal income tax estimated payments were $16.8 million more than expectations, a variance of 63.1 percent. The recent passage of the federal tax reform bill, which caps the state and local tax deduction at $10,000 for tax years beginning after December 31, 2017, may have caused taxpayers to shift scheduled TY 2017 estimated payments from January 2018 to December 2017. o Month of December adjusted personal income tax refunds and adjustments were $2.2 million less than expected, a variance of 37.8 percent. o Personal income tax withholding payments adjusted revenues for December were $3.4 million below monthly expectations, a variance of 2.9 percent. December adjusted sales and use tax revenues were below expectations by $1.2 million, or 1.4 percent. Adjusted lottery transfer and departmental receipts revenues for December were respectively $1.3 million and $2.0 million below estimates. November adjusted cigarette and other tobacco products tax revenues were $2.4 million less than expected or 19.3 percent. Estate and transfer tax revenues for December lagged expectations by $1.6 million, or 41.1 percent, marking the first significant monthly underperformance this revenue source has had since August 2017.

The entire report can be found on the Department of Revenue's web site, www.dor.ri,gov, under the Revenue Analysis header on the State Reports tab.

Questions or comments on the report should be directed to Paul Grimaldi, Chief of Information and Public Relations by e-mail at paul.grimaldi@revenue.ri.gov or by phone at (401) 574-8766.

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