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October 2020 Revenue Assessment Report available

Providence, R.I. -- The Rhode Island Department of Revenue (DOR) today released its FY 2021 Revenue Assessment Report for October 2020. The Revenue Assessment Report, which is issued monthly, 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 revised FY 2021 revenue estimates adopted at the May 2020 Revenue Estimating Conference (REC). The methodology underlying the Office of Revenue Analysis' estimates is contained in the report. The data contained in this report was made available to the principals of the November 2020 REC prior to the occurrence of the conference and thus incorporated into the revised FY 2021 estimates adopted at the conference.

October Year-To-Date Performance. On a fiscal year-to-date basis, the October 2020 report shows that adjusted total general revenues are ahead of expected total general revenues, based on the revised FY 2021 revenue estimates adopted at the May 2020 REC and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues $110.7 million more than expected total general revenues, a variance of 9.8%. The strongest driver of this outperformance are excise taxes, including sales and use taxes, revenues, which are up $63.2 million, or 14.0%, over expectations. Adjusted personal income tax revenues for the fiscal year-to-date through October are $37.9 million more than expected, a variance of 9.0%. General business taxes adjusted revenues are $11.6 million ahead of the estimate, or 10.7%, while other taxes revenues are $4.3 million more than expected, a variance of 23.3%, and departmental receipts adjusted revenues are $5.4 million below expectations, or 7.9% on a fiscal year-to-date basis. Finally, the lottery transfer through October is $788,710 below expectations, a 1.2% difference.

1. Fiscal Year-to-Date Through October Summary of Findings:

Regarding the October year-to-date performance, Acting Director of Revenue James E. Thorsen made the following observations: Fiscal year-to-date adjusted total general revenues through October increased to $110.7 million ahead of expectations based on the FY 2021 revised estimates adopted at the May 2020 REC, a variance of 9.8%. Adjusted personal income tax revenues through October are $37.9 million above the estimate, a variance of 9.0%, led by strong personal income tax withholding payment revenues, which may have benefitted from the $600 per week enhanced unemployment benefits received in July 2020 and the $300 per week enhanced unemployment benefits paid in September. The $23.0 million outperformance of personal income tax withholding revenues was supported by solid gains relative to expectations in both personal income tax estimated and final payments revenues, which on a combined basis were $31.8 million above the estimate, a difference of 38.6%. Personal income tax refunds and adjustments exceeded the estimate in FY 2021 through October by $17.0 million or 52.7% as refunds accelerated in October potentially due to the overpayment by pass through entities of shareholder personal income taxes. FY 2021 year-to-date adjusted sales and use tax revenues through October were ahead of expectations by $53.4 million, or 13.4%, likely a reflection of the increased spending capability of consumers as a result of the enhanced unemployment benefits and the federal COVID-19 relief payments. Fiscal year-to-date through October sales and use tax revenues generally reflect June through September 2020 sales activity. Adjusted insurance company gross premiums tax revenues were above expectations by $12.6 million in FY 2021 year-to- date with gross premiums taxes paid by both non-health and health insurers exceeding their respective estimates. Fiscal year-to-date through October cigarette and other tobacco products (OTP) excise tax revenues are $9.5 million more than estimated, a variance of 20.7%, with cigarette excise tax revenues $8.5 million above expectations. The outperformance of cigarette and OTP excise tax revenues could be due to the banning of flavored tobacco and cigarettes in Massachusetts effective June 1, 2020. Combined public utilities gross earnings tax and financial institutions tax adjusted revenues are $6.1 million above expectations on a fiscal year-to-date basis through October while estate and transfer tax adjusted revenues are ahead of the estimate by $3.9 million, or 30.8%, for the same period. Fiscal year-to-date business corporation tax revenues are $7.0 million less than the estimate, a variance of 15.5%. This shortfall may be due to the stronger than expected receipt of business corporation tax payments in FY 2020, which have left C-corporations overpaid relative to potential TY 2020 liability. Adjusted departmental receipts revenues through October are 7.9% below expectations or $(5.4 million) while the lottery transfer through October is below expectations by less than $1.0 million, a variance of 1.2%, mostly due to the underperformance of casino gaming relative to the estimate.

October Monthly Performance. For the month of October, the October 2020 report shows that adjusted total general revenues are ahead of expected total general revenues, based on the revised FY 2021 revenue estimates adopted at the May 2020 REC and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues $6.2 million more than expected total general revenues, a variance of 2.3%. The strongest driver of this outperformance are excise taxes revenues, which exceeded the monthly estimate by $17.6 million or 16.4%. Personal income tax adjusted revenues trailed the monthly estimate by $4.6 million or 4.8%. General business taxes adjusted revenues are $4.7 million below the estimate, or 31.3% while adjusted other taxes revenues for October are $1.9 million less than expected, a variance of 41.1%. October departmental receipts adjusted revenues are $966,651 below expectations, or 4.3% while the lottery transfer for October, reflecting month of September gaming activity, is $801,802 more than the monthly estimate or 3.7%.

2. Month of October Summary of Findings:

Regarding October monthly performance, Acting Director of Revenue James E. Thorsen made the following observations: October adjusted total general revenues are $6.2 million ahead of expectations based on the monthly FY 2021 revised estimates adopted at the May 2020 REC, a variance of 2.3%. Adjusted monthly personal income tax revenues are $4.6 million below the estimate, a variance of 4.8%, primarily due to personal income tax refunds and adjustments revenues, which are $13.3 million more than the estimate for October, a variance of 110.1%. o Personal income tax combined estimated and final payments revenues are ahead of the monthly estimate by $5.7 million, or 32.0%. o October personal income tax withholding revenues are $2.9 million more than expected for the month, a variance of 3.2%. Sales and use tax revenues for October exceed expectations by $15.6 million, or 16.3% (October sales and use tax revenues generally reflect September sales activity), while cigarette and OTP excise tax revenues are $1.4 million more than estimated, a variance of 13.9%. Adjusted financial institutions tax revenues for October were above expectations by $2.4 million, a difference of 966.7%. Based on ORA's estimation methodology, financial institutions tax revenues were expected to show a net refund in October. October public utilities gross earnings tax revenues are $1.6 million below the estimate, a 314.0% variance, as a net refund was posted in October 2020 rather than a net receipt as was estimated. The monthly performance of both business corporation tax and estate and transfer tax revenues were below expectations, trailing the respective estimates by $(4.9 million) and $(2.1 million).

The entire report can be found on the Department of Revenue's web site at http://www.dor.ri.gov/revenue-analysis/2021.php.

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) 378-1080.

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