Providence, RI – The Rhode Island Department of Treasury (DOR) today released its Fiscal Year 2021 Revenue Assessment Report for December 2020. The monthly Revenue Assessment Report compares adjusted general income by source of income for a year since the start of the year and monthly based on expected general income by source of income.
The expected general revenue is estimated by the Office of Revenue Analysis of the DOR based on the revenue estimates included in Governor Raimondo's budget for fiscal year 2021, which came into effect on December 18, 2020. The methodology underlying the Office of Revenue Analysis estimates is included in the report.
The approved budget for fiscal 2021 revised total general revenue for fiscal 2021 by $ 18.0 million from the revenue estimates adopted at REC in November 2020 with the revision of the lottery broadcast. At REC in November 2020, clients passed fiscal 2021 revenue estimates that were $ 330.6 million higher than those at REC in May 2020, with almost all revenue items being revised upwards. For details on the November 2020 REC impact on general revenues, see the November 2020 Conference Report on Estimating Revenue, posted on the Office of Management and Budget website.
Performance since the beginning of the year in December. Based on the fiscal year to date, the December 2020 report shows that adjusted total general revenues are ahead of expected total general revenues based on the estimates of fiscal 2021 revenues included in the approved budget for fiscal 2021 and the estimate Office of Revenue Analysis methodology with adjusted total general revenues of $ 58.0 million more than expected total general revenues, a 3.1% variance. The main driver of this outperformance is personal income tax revenue, which is $ 31.2 million, or 4.4%, above expectations. Adjusted excise tax revenue, including sales and use taxes, is $ 15.8 million above estimate, a deviation of 2.1%. Adjusted general business tax revenue exceeds estimate by December by $ 10.5 million, or 5.3%. Other tax income is $ 3.0 million below expectations, up 8.0%, and adjusted departmental income is $ 4.3 million above expectations, or 4.7% on an annualized basis. Finally, the lottery transfer through December, reflecting gaming activity from July through November, is $ 0.8 million below expectations, a difference of 0.8%.
Commenting on year-to-date performance in December, Revenue Director James E. Thorsen made the following comments:
• Adjusted total general revenue for the fiscal year through December is $ 58.0 million above expectations based on estimates included in the budget for fiscal 2021, which is a deviation of 3.1%.
Adjusted income tax revenues through December are $ 31.2 million above estimate, a deviation of 4.4%. This is due to strong final income tax payments which are $ 27.1 million above expectations, or 55.1%. That strong growth is linked to receiving $ 29.4 million in income tax payments from pass-through companies made on behalf of their shareholders, versus expected revenue of $ 2.7 million from the same source. The personal income tax estimate for FY 2021 was increased by $ 170.2 million to the REC in November 2020, including payments received in July of $ 150.4 million that decreased through FY 2020 .
Adjusted income tax withholding revenue tops the estimate by $ 10.9 million and may have benefited from the $ 600 per week received in July 2020 and the $ 300 per week paid in September. The 2021 estimate for withholding tax revenue on personal income was increased by $ 71.5 million in November 2020.
o Income tax-adjusted estimated tax receipts for payments are in line with expectations based on estimates for fiscal 2021 of $ 7.4 million, or 7.4%. Fiscal year 2021 estimate of estimated income tax revenue was increased by $ 41.6 million in the REC in November 2020, including payments received in July of $ 29.0 million that decreased through fiscal 2020 .
o Personal tax refunds and adjustment proceeds were $ 595,923, or 0.8%, lower than the estimate that was in effect in fiscal 2021. The 2021 estimate of income from personal income tax refunds and adjustments was increased by $ 22.0 million in the REC in November 2020, including $ 19.3 million in July disbursements that decreased through fiscal 2020.
• Adjusted sales and use tax revenue for fiscal 2021 was $ 13.6 million, or 2.1%, above expectations since December. Fiscal 2021 estimate for sales and use tax revenue increased by $ 103.7 million from the November 2020 REC. Sales and usage tax revenues for the current fiscal year through December generally reflect sales activities from June through November 2020.
Adjusted corporate tax revenue through December is $ 6.2 million above the fiscal year 2021 estimate approved through December, a deviation of 9.5%. This increase may be due in part to the fact that the fourth quarter corporate income tax due date was estimated to be December 15, and federal tax law at that time allowed the deductibility of expenses incurred with Paycheck Protection Program (PPP) loans, did not allow an unintended potential tax hike for recipients of such loans.
o It is important to note that the increase in corporate tax revenue can be short-lived. Given that federal tax law now allows for the deductibility of expenses paid in PPP loans, much of that increase may be refunded in the future as an overpayment of actual corporate tax.
Adjusted department revenue through December is 4.7% above expectations, or $ 4.3 million, based on fiscal 2021 estimate. The November 2020 commissioners of the REC revised the department's revenue for the 2021 fiscal year by $ 13.0 million.
• The tax-adjusted gross premium income of the insurance company for the 2021 financial year is also USD 4.3 million above the effective expectations, which corresponds to a deviation of 7.3%. The 2021 fiscal year 2021 gross premium tax revenue estimate for insurance companies was revised by $ 13.0 million in November 2020.
• Excise-adjusted revenues from cigarettes and other tobacco products are $ 2.0 million more than expected through December. The November 2020 commissioner for the REC increased the 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 sales of menthol cigarettes and flavored cigars introduced in Massachusetts on June 1, 2020.
• Estate and transfer tax revenues from December through December are $ 3.0 million below the current estimate, a 10.9% variance. The estimate of estate and transfer tax revenues for the 2021 financial year was increased by USD 13.2 million by the clients of REC in November 2020.
Monthly performance in December. For the month of December, the report states that adjusted total general revenues were $ 33.5 million above expectations, or a variation of 9.0%. The biggest driver of this outperformance is general corporate tax revenue, which is $ 11.9 million, or 16.0%, above expectations. Adjusted excise tax revenue, including sales and use taxes, is $ 9.2 million above estimate for the month, down 8.5%. Adjusted income tax revenue for the month of December is $ 8.8 million above expectations, a variation of 6.0%. Other tax income is $ 1.3 million above estimate for the month, up 18.8%, and adjusted departmental income is $ 3.1 million above expectations, or 21.4% for the month. Finally, the December lottery transfer, reflecting gaming activity in November, is $ 0.8 million below expectations, a 4.0% difference.
In relation to December performance, Finance Director James E. Thorsen made the following comments:
• Adjusted total general revenue for December is $ 33.5 million above expectations based on budget estimates for fiscal year 2021, which is a deviation of 9.0%.
Adjusted December income tax revenue is $ 8.8 million above estimate, a variation of 6.0%. This is due to very strong final income tax payments, which are $ 25.0 million above expectations, or 417.9%. That strong growth is linked to receiving $ 24.3 million in income tax payments from pass-through companies made on behalf of their shareholders, versus expected revenue of $ 2.4 million from the same source.
Adjusted withholding tax revenue for income taxes is $ 3.9 million below estimate for December. This may be due to a slowdown in economic activity related to the federal-level response to the COVID-19 pandemic and the pause in the reopening of the state economy declared by Governor Raimondo on November 30th until December 20, 2020.
Personal income tax-adjusted estimated tax receipts for payments for the month are $ 9.4 million, or 37.6%, below expected fiscal 2021 estimates. This decrease could be due to increased final income tax payments made on behalf of shareholders by pass-through companies.
Personal tax refunds and adjustment proceeds were $ 2.9 million, or 50.7%, higher than the estimate set for December in fiscal 2021.
• Monthly adjusted sales and use tax revenues for fiscal 2021 are $ 7.4 million, or 7.9%, above expectations. December sales and use tax receipts generally reflect November sales.
• Adjusted corporate corporate income tax revenue in December is $ 6.3 million above the fiscal 2021 estimate for December, a deviation of 23.9%, while monthly gross premium tax adjustments for insurance companies are $ 4.8 million above The expectations that came into force lie, which corresponds to a deviation of 22.5%.
• Monthly Adjusted Departmental Revenue is 21.4% above expectations, or $ 3.1 million, based on fiscal year 2021 estimate, while Cigarette and Other Tobacco Products (OTP) revenues in December and Estate and transfer taxes top the monthly estimates at a combined estimate of $ 3.0 million, or 16.0%. Excise tax revenues on cigarettes and OTP appear to continue to be impacted by the June 1, 2020 ban on the sale of menthol cigarettes and flavored cigars in Massachusetts.
The full report is available on the Treasury Department's website at http://www.dor.ri.gov/revenue-analysis/2021.php.
If you have any questions or comments about the report, please email [email protected] or call Paul Grimaldi, Head of Information and Public Relations, at (401) 378-1080.