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FY18 revenues $62.3M ahead of projections through April

Providence, R.I. -- The Rhode Island Department of Revenue (DOR) today released its FY 2018 Revenue Assessment Report for April 2018 today. 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. April Year-To-Date Performance. On a fiscal year-to-date basis, the April 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' (ORA) estimation methodology, with adjusted total general revenues $62.3 million more than expected total general revenues, a variance of 2.3 percent vs. the 2.0 percent variance that was recorded in March. The major contributors to this surplus are personal income tax revenues, $47.7 million more than expected; estate and transfer tax revenues, $11.3 million above expectations; insurance company gross premiums tax revenues, $10.2 million ahead of estimates; departmental receipts revenues, $7.8 million more than expected; financial institutions tax revenues, $5.2 million above expectations; and public utilities gross earnings tax revenues, $2.9 million ahead of estimates. FY 2018 year-to-date business corporation tax revenues are $19.0 million less than estimated; and sales and use tax revenues are $3.0 million below expectations. A total of nine individual revenue items exceeded their estimated values on a year-to-date basis through April.

2. April Monthly Performance. For the month of April, 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 $15.8 million more than expected total general revenues, a variance of 3.8 percent, below the 7.1 percent difference reported in March. The major contributors to this surplus are insurance company gross premiums tax revenues, $11.2 million ahead of estimates; estate and transfer tax revenues, $5.9 million above expectations; financial institutions tax revenues, $4.8 million more than expected; personal income tax revenues, $4.2 million ahead of estimates; and lottery transfer revenues, $1.1 million above expectations. These monthly revenue gains are offset by business corporation tax revenues, $12.9 million less than expected for April and public utilities gross earnings tax revenues, $2.5 million below estimates in April. A total of eleven revenue items exceeded estimates for the month of April.

Regarding April year-to-date performance, Director of Revenue Mark Furcolo made the following observations: Fiscal year-to-date revenues through April continued to outpace expectations at $62.3 million more than estimates, or 2.3 percent higher, an increase of 0.3 percentage points from the percentage variance recorded in fiscal year-to-date through March. The increase in revenues above the estimate also broadened to capture more revenue streams than just the personal income tax. Adjusted personal income tax revenues are $47.7 million above expectations, a variance of 4.5 percent. o Adjusted personal income tax withholding payments through April are $2.1 million less than estimated, or 0.2 percent, above the 0.3 percent variance recorded in FY 2018 through March. o FY 2018 through April adjusted personal income tax refunds and adjustments are $7.5 million less than expectations, a variance of 2.5 percent, a diminishment from the 5.6 percent decrease in refunds and adjustments recorded on a fiscal year-to-date basis last month. o Fiscal year-to-date through April adjusted personal income tax estimated payments revenues are $21.9 million above expectations, a variance of 11.4 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 April personal income tax final payments are $20.5 million more than expected, a variance of 11.4 percent. Income gains in 2017, likely via capital gains, have contributed substantively to this outperformance. Fiscal year-to-date adjusted estate and transfer tax revenues through April were $11.3 million more than expected or 37.5 percent, after accounting for the accrual to FY 2017 of $58.0 million of payment(s) received in July. Fiscal year-to-date 2018 includes $14.3 million in large payments received in October and April. Adjusted insurance company gross premiums tax revenues are $10.2 million more than estimates, or 26.4 percent, and include $8.5 million of historic structures tax credit redemptions. FY 2018 through April adjusted departmental receipts revenues were $7.8 million above expectations, a variance of 4.9 percent. The departmental receipts estimate was reduced by $6.2 million at the November 2017 REC. Fiscal year-to-date adjusted financial institutions tax and public utilities gross earnings tax revenues through April combined are $8.1 million more than expected or 22.1 percent. Adjusted business corporation tax revenues were $19.0 million below expectations, a variance of 18.7 percent. This decrease is primarily due to a significantly higher number of refunds being issued than was expected. FY 2018 through April sales and use tax revenues are $3.0 million less than estimated, a variance of 0.3 percent.

Regarding the April monthly performance, Director of Revenue Mark Furcolo made the following observations: April adjusted revenues exceeded expectations by $15.8 million, or 3.8 percent with strong performance in insurance company gross premiums tax, estate and transfer tax, personal income tax and departmental receipts revenues. Month of April insurance company gross premiums tax revenues are $11.2 million more than expected monthly revenues and include $8.5 million of historic structures tax credits usage. Adjusted estate and transfer tax revenues for April are $5.9 million above the monthly estimate, or 288.7 percent and include the receipt of large payment(s) of $5.1 million. April adjusted financial institutions tax revenues are $4.8 million more than expected, a variance of 141.3 percent. Month of April adjusted personal income tax revenues are $4.2 million above expectations, a variance of 2.4 percent. o April adjusted personal income tax refunds and adjustments are $4.8 million more than expected, a variance of 6.1 percent. o Month of April personal income tax final payments are $9.3 million above estimates, or 7.2 percent, likely reflective of higher than expected capital gains realizations in 2017. April adjusted departmental receipts revenues are $3.3 million more than expected with 2017 Tax Amnesty interest on overdue taxes exceeding expectations comprising nearly half of this difference. Adjusted lottery transfer revenues for April are $1.1 million above estimates, a variance of 3.2 percent. Month of April business corporation tax revenues are $12.9 million below expectations, a variance of 64.1 percent. April public utilities gross earnings tax revenues trailed the estimate by $2.5 million, a variance of 10.8 percent. This underperformance may reflect the unexpected receipt of TY 2017 final payments in March rather than April.

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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