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February 2021 Revenue Assessment Report available

Providence, R.I. -- The Rhode Island Department of Revenue (DOR) today released its FY 2021 Revenue Assessment Report for February 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 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.

February Year-To-Date Performance. On a fiscal year-to-date basis, the February 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 $150.8 million more than expected total general revenues, a variance of 6.5%. The strongest driver of this outperformance are personal income tax revenues, which are up $96.6 million, or 10.8%, over expectations. Excise taxes adjusted revenues, including sales and use taxes, are $39.8 million ahead of the estimate, a variance of 4.2%. Adjusted general business taxes revenues exceed the estimate through February by $13.3 million or 6.1%. Other taxes revenues are $5.1 million less than expected, a variance of 11.4% and departmental receipts adjusted revenues are $3.3 million above expectations, or 2.1% on a fiscal year-to-date basis. Finally, the lottery transfer through February, reflecting July through January gaming activity, is $2.9 million above expectations, a difference of 2.1%.

Regarding the February year-to-date performance, Acting Director of Revenue Marilyn S. McConaghy made the following observations: Fiscal year-to-date adjusted total general revenues through February are a robust $150.8 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 6.3%. Adjusted personal income tax revenues through February are $96.6 million above the estimate, a variance of 10.8%, led by significantly less than expected personal income tax refunds and adjustments, which are $52.3 below the estimate, a difference of 31.1% and likely due to the delay in the onset of the TY 2020 filing season by two weeks due to the late passage of the federal Consolidated Appropriations Act (CAA) of 2021, which contained a number of tax law changes for TY 2020. 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. o Personal income tax final payments are $33.8 million above expectations, or 50.4% with this strong growth linked to the receipt of $43.5 million of personal income tax payments from pass-through entities made on behalf of their shareholders vs. expected revenues of $12.7 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 lead the estimate by $4.5 million and may reflect the recent extension of $300 bonus unemployment payments contained in the CAA. 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 $6 million or 3.9%. 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. FY 2021 year-to-date adjusted sales and use tax revenues through February were ahead of expectations by $36.3 million, or 4.3%. 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 February sales and use tax revenues generally reflect June 2020 through January 2021 sales activity. Adjusted business corporation tax revenues through February are $12 million above the enacted FY 2021 estimate through February, a variance of 16%. 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. FY 2021 insurance company gross premiums tax adjusted revenues are $4.9 million above enacted expectations, a variance of 8.2%. 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 $3.6 million more than expected on a fiscal year-to-date basis through February. 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. Adjusted departmental receipts revenues through February are 2.3% above expectations, or $3.3 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. The adjusted lottery transfer revenues through February, reflecting gaming activity from July 2020 through January 2021, are $2.9 million more than expected. The enacted FY 2021 budget reduced the lottery transfer by $18 million to account for the closure of the state's two casinos during the Pause instituted by then-Governor Raimondo during December 2020. Fiscal year-to-date through February estate and transfer tax revenues are $6 million less than the enacted estimate, a variance of 18%. 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 $2.5 million, or 8.9%, on a fiscal year-to-date basis through February while adjusted financial institutions tax revenues are $1.3 million below the enacted estimates through February.

February Monthly Performance. For the month of February, the report indicates that adjusted total general revenues were $70.6 million above expectations, or a variance of 40.4%. The strongest driver of this outperformance is adjusted personal income tax revenues, which are $61.4 million more than expected, a variance of 251.1%. Within the components of the personal income tax, the greatest impact on this difference is from refunds and adjustments, which are $53.7 million less than expected and likely a result of the delay in the opening of the TY 2020 filing season by two weeks compared to expectations. February adjusted excise taxes revenues, including sales and use tax revenues, are up $12.8 million, or 13.2%, over expectations. General business taxes adjusted revenues are $3.1 million below the estimate for the month, a variance of 27.5%. Other taxes revenues are $3.2 million behind the enacted estimate for the month, a variance of 68.5% and departmental receipts adjusted revenues are $1.7 million below expectations, or 10.1% for the month. Finally, the lottery transfer for February, reflecting January gaming activity, is $4.4 million more than expectations, a difference of 20.2%.

Regarding the month of February performance, Acting Director of Revenue Marilyn S. McConaghy, Esq. made the following observations: February adjusted total general revenues are $70.6 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 40.4%. Adjusted personal income tax revenues for February are $61.4 million above the estimate, a variance of 251.1%, led by exceptional personal income tax refunds and adjustments, which are $53.7 million below expectations, or 57.5%. The TY 2020 filing season did not commence until February 12th, which is approximately two weeks later than expected. Given that February is the month for which the highest percentage of personal income tax refunds and adjustments revenues are realized, this delay resulted in suppressed refund activity, which had a disproportionate impact on personal income tax revenues for the month of February. o Personal income tax adjusted estimated and final payments tax revenues for the month led expectations based on the enacted FY 2021 estimates by $0.6 million or 16.4%, and $0.9 million, or 19.1%, respectively. o Personal income tax withholding payments adjusted revenues lead the estimate by $6.1 million in February, perhaps reflective of the resumption of the $300 per week "bonus" unemployment compensation payments that were part of the CAA of 2021. FY 2021 monthly adjusted sales and use tax revenues are ahead of expectations by $10.9 million, or 12.9%, marking the second month in a row that adjusted sales and use tax revenues were more than $10.0 million above the estimate. This strong monthly performance may have been enhanced by the receipt of the $600 coronavirus recovery rebates that were issued after the passage of the CAA in late December 2020. February sales and use tax revenues generally reflect January sales activity. The February adjusted lottery transfer, reflecting January gaming activity, was $4.4 million more than the monthly estimate, a variance of 20.2%, and was bolstered by two $1.0 billion jackpots for MegaMillions and Powerball that materialized in January. Adjusted cigarette and other tobacco products excise tax revenues for February are $2 million above the enacted FY 2021 estimate for February, a variance of 19.6%, continuing a trend of strong monthly gains in this revenue source. Monthly adjusted estate and transfer tax revenues were $3.1 million below expectations, a difference of 88.4% while February departmental receipts revenues are 10.1% below expectations, or $1.7 million, based on the FY 2021 enacted estimate. February revenues for business corporation taxes lagged the monthly enacted estimate by $1.4 million or 24%, breaking a long string of consecutive months in which business corporation tax adjusted revenues exceeded expectations.

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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