Providence, R.I. -- The Rhode Island Department of Revenue (DOR) today released its FY 2021 Revenue Assessment Report for April 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. The underlying information contained in this report was available to the principals of the May 2021 REC as they adopted the revised estimates for FY 2021 on May 10, 2021.

April Year-To-Date Performance On a fiscal year-to-date basis, the April 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 $350 million more than expected total general revenues, a variance of 11.8%. The strongest driver of this outperformance are personal income tax revenues which are up $215.6 million, or 21.3%, over expectations. The flow of adjusted personal income tax revenues has been impacted by the delay in the TY 2020 return filing and final payment due date from April 15, 2021 to May 17, 2021. Excise taxes adjusted revenues, including sales and use taxes, are $85.1 million ahead of the estimate, a variance of 7.3%. Adjusted general business taxes revenues exceed the estimate through April by $35.6 million or 10%. Other taxes revenues are $9.9 million less than expected, a variance of 18% and departmental receipts adjusted revenues are $8.2 million above expectations, or 4.6% on a fiscal year-to-date basis. Finally, the lottery transfer through April, reflecting July through March gaming activity, is $15.3 million above expectations, a difference of 8.2%.

Regarding the April 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 April are a very strong $350 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 11.8%. • Adjusted personal income tax revenues through April are $215.6 million above the estimate, a variance of 21.3%. Every personal income tax component is ahead of their respective estimates by more than $20 million each. The realized revenue flows for personal income tax have been impacted in unpredictable ways by the delay in the start of the TY 2020 filing season to February 12, 2021 (personal income tax refunds and adjustments) and by the postponement of the TY 2020 filing and final payment due date from April 15, 2021 to May 17, 2021 (personal income tax estimated and final payments). It may turn out, as ORA expects, that personal income tax refunds and adjustments will be larger than expected in the month of May while personal income tax final payments will be less than expected in the month of May thus narrowing the difference between adjusted and expected revenues on a fiscal year to date basis. o Personal income tax final payments are $98.5 million above expectations, or 92.6% with this strong growth linked to the receipt of $57.7 million of personal income tax payments from pass-through entities made on behalf of their shareholders vs. expected revenues of $17.2 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 Adjusted personal income tax refunds and adjustments are $63.4 million below the estimate, a difference of 18.1%. 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 withholding payments adjusted revenues lead the estimate by $30.5 million and may reflect the recent extension of $300 bonus unemployment payments contained in both the Consolidated Appropriations Act (CAA) of 2020 and the American Rescue Plan Act (ARPA) of 2021. 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 $23.2 million or 12.5%. 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 April were ahead of expectations by $79.6 million, or 7.8%. The surge in adjusted sales and use tax revenues has likely been impacted by the distribution of $1,400 per person third round stimulus checks that were authorized under ARPA. 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 March 2021 sales activity. • Adjusted business corporation tax revenues through April are $36.5 million above the enacted FY 2021 estimate through April, a variance of 27.5%. 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. • The adjusted lottery transfer revenues through April, reflecting gaming activity from July 2020 through March 2021, are $15.3 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. • FY 2021 financial institutions tax adjusted revenues through April are $9.7 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 april of the fiscal year. Financial institution tax revenues were revised down by $2.7 million at the November 2020 Revenue Estimating Conference. • Adjusted departmental receipts revenues through April are 4.6% above expectations, or $8.2 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. • Fiscal year-to-date insurance company gross premiums tax adjusted revenues are $6.7 million above enacted expectations for year-to-date FY 2021, a variance of 6.9%. 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 $5.5 million more than expected on a fiscal year-to-date basis through April. 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 realty transfer tax revenues lead expectations by $1.5 million or 11.2% on a fiscal year-to-date basis through April. The increase in realty transfer tax revenues above the estimate is likely reflective of the red hot real estate market in Rhode Island. • Fiscal year-to-date through April estate and transfer tax revenues are $11.4 million less than the enacted estimate, a variance of 27.5%, while year-to-date FY 2021 public utilities gross earnings tax adjusted revenues are also $11.4 million below the expected amount based on the estimate enacted into law in December 2020. The estimate of estate and transfer tax revenues for FY 2021 was increased by $13.2 million and the FY 2021 estimate of public utilities gross earnings tax revenues was increased by $10.7 million at the November 2020 REC • Adjusted health care provider assessment revenues trail expectations by $4.3 million, or 12.2%, on a fiscal year-to-date basis through April.

April Monthly Performance. For the month of April, the report indicates that adjusted total general revenues were $129.6 million above expectations, or a variance of 41%. The strongest driver of this outperformance is adjusted personal income tax revenues which are $82.3 million more than expected, a variance of 157.2%. Excise taxes adjusted revenues, including sales and use tax revenues, are up $33.7 million, or 31.5%, over expectations. Adjusted general business taxes revenues are $2 million more than the estimate for the month, a variance of 1.9%. April other taxes revenues are $1.7 million behind the enacted estimate for the month, a variance of 42% and departmental receipts adjusted revenues for April are $2.6 million above expectations, or 11.6%. Finally, the lottery transfer for April, reflecting March gaming activity, is $10.7 million more than expectations, a difference of 44.1%.

Regarding the month of April performance, Acting Director of Revenue Marilyn S. McConaghy, Esq. made the following observations: • April adjusted total general revenues are $129.6 million ahead of expectations based on the FY 2021 enacted estimates included in the budget, a variance of 41%. • Adjusted personal income tax revenues for April are $82.3 million above the estimate, a variance of 157.2%, led by personal income tax final payments which are $47 million above expectations, or 359.5%. o Personal income tax adjusted estimated payments tax revenues for the month led expectations based on the enacted FY 2021 estimates by $11.1 million or 40.5%. o Personal income tax withholding payments adjusted revenues lead the estimate by $13.1 million in April reflective in part of the extension of the $300 per week "bonus" unemployment compensation payments that were part of ARPA 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 less than expected for the month by $11.1 million or 12.4%. The delayed start to the TY 2020 tax return filing season has likely delayed the filing of some refund returns into May, a month when the volume of this type of return is usually low. • FY 2021 monthly adjusted sales and use tax revenues are ahead of expectations by $31.4 million, or 33.5%, marking the fourth 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 $1,400 coronavirus recovery rebates that were issued after the passage of ARPA in March 2021. April sales and use tax revenues generally reflect March sales activity. • April revenues for business corporation taxes led the monthly enacted estimate by $12 million or 36.6%, continuing a trend that resumed last month in which business corporation tax adjusted revenues exceeded expectations. • The April adjusted lottery transfer, reflecting March gaming activity, was $10.7 million more than the monthly estimate, a variance of 44.1%, and was led by across the board increases in all lottery products including casino gaming. • Departmental receipts adjusted revenues, cigarette and other tobacco products tax adjusted revenues and insurance company gross premiums tax adjusted revenues led expectations by a combined $5.9 million in April. • Financial institutions tax adjusted revenues for April are 72.2% less than expected for April, a difference of $5.6 million, while adjusted public utilities gross earnings tax revenues in April were $4.7 million less than expected, a variance of 17.6%. • Finally, monthly adjusted estate and transfer tax revenues were $2.4 million below expectations in April a difference of 76.6%. This marks the fourth month in a row that adjusted revenues have trailed expected revenues.

The entire report can be found on the Department of Revenue's website 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.