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January 2021 Revenue Assessment Report available

Providence, R.I. -- The Rhode Island Department of Revenue today (DOR) released its FY 2021 Revenue Assessment Report for January 2021. 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 included in the enacted FY 2021 Budget signed into law by Governor Raimondo on December 18, 2020. The methodology underlying the Office of Revenue Analysis' estimates is contained in the report. The enacted FY 2021 budget revised total general revenues for FY 2021 down $18.0 million from the revenue estimates adopted at the November 2020 REC with the revision made in the lottery transfer. At the November 2020 REC, the principals adopted FY 2021 revenue estimates that were $330.6 million more than those adopted at the May 2020 REC, with nearly all revenue items experiencing an upward revision. Details on the impact of the November 2020 REC by general revenue item can be found in the November 2020 Revenue Estimating Conference Report posted on the Office of Management and Budget's website.

January Year-To-Date Performance On a fiscal year-to-date basis, the January 2021 report shows that adjusted total general revenues are ahead of expected total general revenues, based on the revenue estimates included in the FY 2021 enacted budget and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues $81.7 million more than expected total general revenues, a variance of 3.7%. The strongest driver of this outperformance are personal income tax revenues, which are up $35 million, or 4.0%, over expectations. Excise taxes adjusted revenues, including sales and use taxes, are $27 million ahead of the estimate, a variance of 3.1%. Adjusted general business taxes revenues exceed the estimate through January by $16.7 million or 8.0%. Other taxes revenues are $1.9 million less than expected, a variance of 4.8% and departmental receipts adjusted revenues are $6.4 million above expectations, or 5.2% on a fiscal year-to-date basis. Finally, the lottery transfer through January, reflecting July through December gaming activity, is $1.4 million less than expectations, a difference of 1.2%.

Regarding the January year-to-date performance, Director of Revenue James E. Thorsen made the following observations: Fiscal year-to-date adjusted total general revenues through January are $81.7 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 3.7%. Adjusted personal income tax revenues through January are $35 million above the estimate, a variance of 4.0%, led by strong personal income tax final payments, which are $32.9 million above expectations, or 52.7%. This strong growth is linked to the receipt of $43 million of personal income tax payments from pass-through entities made on behalf of their shareholders vs. expected revenues of $12.6 million from the same source. The FY 2021 estimate for personal income tax final payments revenues was increased by $170.2 million at the November 2020 REC, including $150.4 million of payments received in July that were accrued back to FY 2020. o Personal income tax withholding payment adjusted revenues trail the estimate by $1.6 million and may reflect more recent weakness in the job market as cases of COVID-19 have surged in the past two months. The FY 2021 estimate for personal income tax withholding revenues was increased by $71.5 million at the November 2020 REC. o Personal income tax adjusted estimated payments tax revenues lead expectations based on the enacted FY 2021 estimates by $5.1 million or 3.4%. The FY 2021 estimate for personal income tax estimated payments revenues was increased by $41.6 million at the November 2020 REC, including $29.0 million of payments received in July that were accrued back to FY 2020. o Personal income tax refunds and adjustments revenues were more than the enacted estimate in FY 2021 through January by $1.4 million or 1.9%. The FY 2021 estimate for personal income tax refunds and adjustments revenues was increased by $22.0 million at the November 2020 REC, including $19.3 million of disbursements made in July that were accrued back to FY 2020. FY 2021 year-to-date adjusted sales and use tax revenues through January were ahead of expectations by $25.3 million, or 3.4%. The FY 2021 estimate for sales and use tax revenues was increased by $103.7 million at the November 2020 REC. Fiscal year-to-date through January sales and use tax revenues generally reflect June through December 2020 sales activity. Adjusted business corporation tax revenues through January are $13.7 million above the enacted FY 2021 estimate through January, a variance of 19.9%. This increase may be attributable in part to the fact that the due date for business corporation tax fourth quarter estimated payments was December 15th and at that time federal tax law did not allow for the deductibility of expenses paid with Paycheck Protection Program (PPP) loans causing an unintended potential tax increase for recipients of such loans. o It is important to note that the increase in business corporation tax revenues may be temporary. Given that federal tax law now allows for the deductibility of expenses paid with PPP loans, much of this increase may be refunded as overpayments of actual business corporation tax in the future. Adjusted departmental receipts revenues through January are 5.2% above expectations, or $6.4 million, based on the FY 2021 enacted estimate. The principals of the November 2020 REC revised FY 2021 departmental receipts down by $13.0 million. FY 2021 insurance company gross premiums tax adjusted revenues are $5.3 million above enacted expectations, a variance of 8.9%. The FY 2021 estimate for insurance company gross premiums tax revenues was revised up by $13.0 million at the November 2020 REC. Cigarette and other tobacco products excise tax adjusted revenues are $1.6 million more than expected on a fiscal year-to-date basis through January. The principals of the November 2020 REC increased the FY 2021 estimate for cigarette and OTP excise taxes by $24.4 million. o It appears that state cigarette and OTP excise tax revenues continue to benefit from the ban on the sale of menthol cigarettes and flavored cigars that was put into place in Massachusetts on June 1, 2020. Fiscal year-to-date through December estate and transfer tax revenues are $2.9 million less than the enacted estimate, a variance of 9.7%. The estimate of estate and transfer tax revenues for FY 2021 was increased by $13.2 million by the principals of the November 2020 REC. Adjusted health care provider assessment revenues trail expectations by $1.8 million, or 7.4%, on a fiscal year-to-date basis through January while the adjusted lottery transfer and adjusted financial institutions tax revenues are $1.4 million and $1.2 million below their enacted estimates through January.

January Monthly Performance. For the month of January, the report indicates that adjusted total general revenues were $23.4 million above expectations, or a variance of 6.7%. The strongest driver of this outperformance are excise taxes revenues, including sales and use tax revenues, which are up $11.2 million, or 9.0%, over expectations. General business taxes adjusted revenues are $6.2 million ahead of the estimate for the month, a variance of 72.2%. Adjusted personal income tax revenues for the month of January are $3.5 million more than expected, a variance of 2.1%. Other taxes revenues are $1.0 million above the enacted estimate for the month, a variance of 28.6% and departmental receipts adjusted revenues are $2.1 million above expectations, or 6.5% in the month. Finally, the lottery transfer for January, reflecting December gaming activity, is $0.6 million less than expectations, a difference of 5.5%.

Regarding the month of January performance, Director of Revenue James E. Thorsen made the following observations: January adjusted total general revenues are $23.4 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 6.7%. Adjusted personal income tax revenues for January are $3.5 million above the estimate, a variance of 2.1%, led by very strong personal income tax estimated payments, which are $12.2 million above expectations, or 24.8%. o Personal income tax adjusted final payments tax revenues for the month lead expectations based on the enacted FY 2021 estimates by $5.8 million or 44.0%. This robust performance includes $13.6 million of personal income tax payments from pass-through entities made on behalf of their shareholders vs. expected revenues of $9.9 million from the same source. o Personal income tax withholding payments adjusted revenues lag the estimate by $12.5 million in January, perhaps reflective of a slowdown in economic activity related to the federal COVID-19 pandemic response and the late passage of enhanced unemployment compensation at the federal level. o Personal income tax refunds and adjustments revenues were more than the enacted estimate in FY 2021 for January by $2.0 million or 23.7%. FY 2021 monthly adjusted sales and use tax revenues are ahead of expectations by $11.7 million, or 10.6%. January sales and use tax revenues generally reflect December sales activity indicating a strong holiday shopping season occurred. Adjusted business corporation tax revenues for January are $7.5 million above the enacted FY 2021 estimate for January, a variance of 185.4%, continuing a trend of strong monthly gains in this revenue source. Monthly adjusted departmental receipts revenues are 6.5% above expectations, or $2.1 million, based on the FY 2021 enacted estimate. January revenues for financial institutions taxes lagged the monthly enacted estimate by $1.4 million or 848.2%. This shortfall includes the transfer of $1.2 million to business corporation tax to adjust for an incorrect deposit that occurred in June 2020.

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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