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March 2021 Revenue Assessment Report available

Providence, R.I. -- The Rhode Island Department of Revenue today (DOR) released its FY 2021 Revenue Assessment Report for March 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 (ORA) from the revenue estimates included in the enacted FY 2021 Budget signed into law by Governor Raimondo on December 21, 2020. The methodology underlying the ORA's 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.

March Year-To-Date Performance. On a fiscal year-to-date basis, the March 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 ORA's estimation methodology, with adjusted total general revenues $220.4 million more than expected total general revenues, a variance of 8.3%. The strongest driver of this outperformance are personal income tax revenues which are up $133.3 million, or 13.9%, over expectations. Excise taxes adjusted revenues, including sales and use taxes, are $51.4 million ahead of the estimate, a variance of 4.9%. Adjusted general business taxes revenues exceed the estimate through March by $33.6 million or 13.2%. Other taxes revenues are $8.2 million less than expected, a variance of 16.1% and departmental receipts adjusted revenues are $5.6 million above expectations, or 3.6% on a fiscal year-to-date basis. Finally, the lottery transfer through March, reflecting July through February gaming activity, is $4.7 million above expectations, a difference of 2.9%.

Regarding the March year-to-date performance, Acting Director of Revenue Marilyn S. McConaghy, Esq., made the following observations: Fiscal year-to-date adjusted total general revenues through March are a strong $220.4 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 8.3%. Adjusted personal income tax revenues through March are $133.3 million above the estimate, a variance of 13.9%, led by significantly less than expected personal income tax refunds and adjustments which remain $52.3 below the estimate, a difference of 20.1% 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 $51.4 million above expectations, or 55.1% with this strong growth linked to the receipt of $53 million of personal income tax payments from pass-through entities made on behalf of their shareholders vs. expected revenues of $16.3 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 $17.4 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 $12.2 million or 7.7%. 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 March were ahead of expectations by $48.3 million, or 5.2%. 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 March sales and use tax revenues generally reflect June 2020 through February 2021 sales activity. Adjusted business corporation tax revenues through March are $22.5 million above the enacted FY 2021 estimate through March, a variance of 24.2%. 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 financial institutions tax adjusted revenues through March are $15.3 million more than expected due in large part to the receipt of large tax payment(s) totaling $15.0 million. This marks the second year in a row that such large payment(s) have been received through March of the fiscal year. Financial institution tax revenues were revised down by $2.7 million at the November 2020 Revenue Estimating Conference. Fiscal year-to-date insurance company gross premiums tax adjusted revenues are $5.4 million above enacted expectations for FY 2021, a variance of 8.4%. The FY 2021 estimate for insurance company gross premiums tax revenues was revised up by $13.0 million at the November 2020 REC. Adjusted departmental receipts revenues through March are 3.6% above expectations, or $5.6 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. Cigarette and other tobacco products excise tax adjusted revenues are $3.5 million more than expected on a fiscal year-to-date basis through March. 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. The adjusted lottery transfer revenues through March, reflecting gaming activity from July 2020 through February 2021, are $4.7 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 March estate and transfer tax revenues are $8.9 million less than the enacted estimate, a variance of 23.4%. 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. Public utilities gross earnings tax adjusted revenues for FY 2021 through March are $6.7 million below the expected amount based on the estimate enacted into law in December 2020. At the November 2020 REC, the public utilities gross earnings tax revenue estimate was increased by $10.7 million. Adjusted health care provider assessment revenues trail expectations by $3.3 million, or 10.6%, on a fiscal year-to-date basis through March.

March Monthly Performance. For the month of March, the report indicates that adjusted total general revenues were $67.9 million above expectations, or a variance of 27.4%. The strongest driver of this outperformance is adjusted personal income tax revenues which are $37.1 million more than expected, a variance of 56.9%. General business taxes adjusted revenues are $19.6 million more than the estimate for the month, a variance of 55.2%. March adjusted excise taxes revenues, including sales and use tax revenues, are up $11.6 million, or 12%, over expectations. Other taxes revenues are $3.1 million behind the enacted estimate for the month, a variance of 50.9% and departmental receipts adjusted revenues are $0.8 million above expectations, or 5.1% for the month. Finally, the lottery transfer for March, reflecting February gaming activity, is $1.8 million more than expectations, a difference of 8.3%.

Regarding the month of March performance, Acting Director of Revenue Marilyn S. McConaghy, Esq. made the following observations: March adjusted total general revenues are $67.9 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 27.4%. Adjusted personal income tax revenues for March are $37.1 million above the estimate, a variance of 56.9%, led by personal income tax final payments which are $17.7 million above expectations, or 67.4%. o Personal income tax adjusted estimated payments tax revenues for the month led expectations based on the enacted FY 2021 estimates by $6.6 million or 130.6%. o Personal income tax withholding payments adjusted revenues lead the estimate by $13 million in March, reflective in part of the resumption of the $300 per week "bonus" unemployment compensation payments that were part of the CAA of 2021 as well as the beginning of the reopening of the state's economy as COVID-19 vaccinations become more widespread. o March personal income tax refunds and adjustments adjusted revenues were in line with expectations for the month, but still leave approximately $50 million of refunds and adjustments yet to be processed to meet expectations on a fiscal year-to-date basis as a result of the delayed start to filing season for TY 2020. FY 2021 monthly adjusted sales and use tax revenues are ahead of expectations by $12 million, or 14.3%, marking the third 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. March sales and use tax revenues generally reflect February sales activity. Financial institutions tax adjusted revenues for March are 3,975% more than expected for March, a difference of $16.6 million, due overwhelmingly to the receipt of large, infrequently occurring payment(s) totaling $15 million in the month. March revenues for business corporation taxes led the monthly enacted estimate by $9.9 million or 53.3%, resuming a trend in which business corporation tax adjusted revenues exceeded expectations. The March adjusted lottery transfer, reflecting February gaming activity, was $1.8 million more than the monthly estimate, a variance of 8.3%, and was led by increases in casino gaming revenues from video lottery terminals and table games. Monthly adjusted estate and transfer tax revenues were $3.0 million below expectations in March, a difference of 59.8%.

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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