Members of the House Appropriations Committee met virtually Monday and heard from Commonwealth Secretary of Fiance, Aubrey L. Layne, Jr., regarding the May revenue report for Fiscal Year 2020. Layne told committee members that May is generally a month where Virginia sees an increase in tax collections because individual income tax is due May 1. However, with Governor Northam extending the income tax payment deadline to June 1, it will be necessary to asses the June collections to get a better picture to the close of FY 2020.
Layne added that the COVID-19 pandemic, and the economic shutdown to mitigate the spread of the virus, did negatively impact the final months of the fiscal year. He added that revenue collections will be less than $billion below the official forecast made to lawmakers earlier in the fiscal year.
Highlights from Secretary Layne's report include:
Net Individual Income Tax (70% of general fund revenues): Through May, collections of net individual income tax fell 3.6 percent from the same period last year, trailing the annual estimate of 1.3 percent growth. Performance in each component of individual income tax is as follows:
Individual Income Tax Withholding (62% of general fund revenues): Collections of payroll withholding taxes fell 13.0 percent in May. Two fewer deposit days accounted for a large part of the decline; however, there was a broad-based decrease in the number of firms paying. Tax withholding collections decreased 4.4 percent during April and May combined. Year-to-date, collections have grown 3.1 percent, trailing the annual estimate of 4.7 percent growth.
Individual Income Tax Nonwithholding (17% of general fund revenues): May is typically a significant month for collections in this source, with final payments for tax year 2019 and the first estimated payment for tax year 2020 both due at the beginning of May. This year, the payment date has been extended to June 1, so it is unclear how many payments have been delayed.
Collections in nonwithholding were $500.1 million compared with $764.9 million in May of last year, a decline of 34.6 percent. This decline was anticipated and consistent with our projections. Year-to-date, collections fell by 22.6 percent, trailing the annual estimate of a 4.3 percent decline.
Individual Income Tax Refunds: The Department of Taxation issued $182.0 million in refunds in May, compared with $144.6 million in May of last year, an increase of 25.9 percent. For the filing season, TAX has issued 2.3 million refunds, about the same number as last year. On a fiscal year basis, TAX has issued $1,695.9 million in refunds through May compared with $1,643.4 million through the same period last year.
Sales Tax (18% of general fund revenues): Collections of sales and use taxes, reflecting April sales, fell 12.5 percent in May. The month represents a full month of reduction in sales due to numerous store closings during the COVID-19 pandemic. On a year-to-date basis, collections of sales and use taxes have risen 5.4 percent, trailing the annual estimate of 7.4 percent growth.
Corporate Income Tax (5% of general fund revenues): May is not typically a significant month for collections in this source, as final or extension payments are mainly due only from retailers who usually have a January 31 close to their fiscal year. Such payments vary significantly from year to year. Collections of corporate income taxes were $47.2 million in May, compared with receipts of $2.5 million in May of last year. The main reason for the increase is that last year contained about $25 million in prior tax year refunds.
To view the full report from Secretary Layne, please click here.
