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Revenues stay ahead of expectations in January

Providence, R.I. -- The Rhode Island Department of Revenue (DOR) today released its FY 2018 Revenue Assessment Report for January 2018. 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. January Year-To-Date Performance. On a fiscal year-to-date basis, the January 2018 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 $37.2 million more than expected total general revenues, a variance of 1.9 percent vs. the 1.1 percent variance that was recorded in December. The major contributors to this surplus are personal income tax revenues, $30.2 million more than expected; estate and transfer tax revenues, $5.2 million above expectations; departmental receipts revenues, $4.0 million more than expected; cigarette and other tobacco products tax revenues, $1.8 million ahead of estimates; public utilities gross earnings tax revenues, $1.7 million more than expected; and insurance company gross premiums tax revenues, $1.1 million ahead of expectations. FY 2018 year-to-date sales and use tax revenues are $2.5 million less than estimated, business corporation tax revenues are $2.0 million below expectations, and financial institutions tax revenues are $1.0 million less than expected. A total of seven individual revenue items exceeded their estimated values on a year-to-date basis through January.

2. January Monthly Performance. For the month of January, 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 $19.7 million more than expected total general revenues, a variance of 6.1 percent, more than twice the 2.8 percent growth reported in December. The major contributors to this overage are personal income tax revenues which are $12.6 million more than expected; departmental receipts and business corporation tax revenues, each $4.2 million above expectations; and cigarette and other tobacco product tax revenues, $2.0 million ahead of estimates. For the month of January sales and use tax revenues lagged expectations by $2.4 million, the only general revenue item that trailed expectations by more than $1.0 million. A total of seven revenue items exceeded estimates for the month of January.

Regarding January year-to-date performance, Director of Revenue Mark Furcolo made the following observations: Fiscal year-to-date revenues through January surged ahead of expectations by $37.2 million, or 1.9 percent, an improvement of 0.8 percentage points from the percentage variance recorded in fiscal year-to-date through December. Adjusted personal income tax revenues were $30.2 million above expectations, a variance of 3.8 percent. o Adjusted personal income tax withholding payments through January were $2.9 million more than estimated, or 0.4 percent, double the 0.2 percent variance recorded in FY 2018 through December. o FY 2018 through January adjusted personal income tax refunds and adjustments were $725,286 less than expectations, a variance of 1.3 percent, a reversal from the 1.6 percent increase in refunds and adjustments recorded on a fiscal year-to-date basis last month. o Fiscal year-to-date through January adjusted personal income tax estimated payments revenues were $22.4 million above expectations, a variance of 14.9 percent. The increase in estimated payments are likely due to the combination of 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 and the strong stock market performance experienced in 2017. o FY 2018 through January personal income tax final payments were $4.1 million more than expected, a variance of 13.8 percent with 2017 Tax Amnesty revenues accounting for slightly more than one-half of this difference. Fiscal year-to-date adjusted estate and transfer tax revenues through January were $5.2 million more than expected or 24.0 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 departmental receipts revenues were $4.0 million above expectations, a variance of 3.7 percent. The departmental receipts estimate was reduced by $6.2 million at the November 2017 REC. Fiscal year-to-date adjusted sales and use tax revenues were $2.5 million less than expected or 0.4 percent. The sales and use tax estimate was reduced by $6.5 million at the November 2017 Revenue Estimating Conference. Fiscal year-to-date adjusted business corporation tax revenues through January were short of expectations by $2.0 million, or 4.2 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. Fiscal year-to-date through January public utilities gross earnings tax and insurance company gross premiums tax revenues were a combined $2.8 million more than expected, a difference of 55.2 percent. Adjusted lottery transfer revenues were 0.4 percent less than expected for the FY 2018 through January period.

Regarding the January monthly performance, Director of Revenue Mark Furcolo made the following observations: January adjusted revenues led expectations by $19.7 million, or 6.1 percent with exceptional revenue performance in the personal income tax bolstered by the outperformance of departmental receipts adjusted revenues and business corporation tax adjusted revenues. Adjusted personal income tax revenues for January were $12.6 million above expectations, a variance of 8.4 percent. o January adjusted personal income tax estimated payments were $9.1million more than expectations, a variance of 16.7 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 mail checks for TY 2017 estimated payments by December 31, 2017 much of which were received and deposited in January 2018. o Month of January adjusted personal income tax refunds and adjustments were $1.4 million less than expected, a variance of 13.0 percent. o Personal income tax withholding payments adjusted revenues for January were $1.8 million above monthly expectations, a variance of 1.8 percent. January adjusted sales and use tax revenues were below expectations by $2.4 million, or 2.5 percent. Adjusted departmental receipts and business corporation tax revenues for January were each $4.2 million above estimates. January adjusted cigarette and other tobacco products tax revenues were $2.0 million more than expected or 19.0 percent. Lottery transfer adjusted revenues for January lagged expectations by $995,286, or 3.4 percent, marking the second consecutive month of underperformance for this revenue source.

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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