BOSTON, MA — Massachusetts Department of Revenue (DOR) Commissioner Geoffrey Snyder today announced that preliminary revenue collections for January 2022 totaled $4.026 billion, which is $679 million or 20.3% more than actual collections in January 2021, and $856 million or 27.0% more than benchmark.¹ The increase in collections is due in part to the recently-enacted elective pass-through entity (PTE) excise, which allows members of a PTE to avoid the federal limit on the deduction for state and local taxes by electing to pay tax on the PTE’s income at the entity-level, and then claim a credit equal to 90% of the PTE excise paid. Most electing PTEs paid their 2021 excise in December and January to claim a deduction on their 2021 federal return. In the coming months, PTE members who also paid estimated taxes themselves on PTE income will receive refunds due to the credits offsetting 90% of the PTE excise payments. As a result, most of the increase in collections associated with the PTE excise is temporary. After adjusting for PTE excise payments, January 2022 collections are $315 million or 9.4% above actual collections in January 2021, and $791 million or 27.5% more than the benchmark.

FY2022 year-to-date collections totaled approximately $21.872 billion, which is $4.219 billion or 23.9% more than collections in the same period of FY2021, and $1.450 billion or 7.1% more than year-to-date benchmark. FY2022 year-to-date collections were also impacted by the PTE excise. After adjusting for PTE excise payments, FY2022 year-to-date collections are $2.982 billion or 16.9% more than collections in the same period of FY2021 and $794 billion or 4.0% more than the year-to-date benchmark.

“January 2022 revenue collections increased in most major tax types, in comparison to January 2021 collections, including withholding, non-withholding, sales and use tax, and corporate and business tax,” said Commissioner Snyder. “The increase in withholding is likely related to improvements in labor market conditions. The non-withholding income tax increase is primarily due to the recently enacted PTE excise; as mentioned above, most of this increase is temporary. The sales and use tax increase in part reflects continued strength in retail sales and meals taxes, which in turn were impacted by rising inflation. We will continue to closely monitor how the recent surge in COVID-19 cases and the revised restrictions on economic activities impact revenue collections for the remainder of the fiscal year.”

January is a significant month for revenues because many personal income taxpayers are required to make quarterly estimated payments. Historically, roughly 10.2% of annual revenue, on average, has been received during January.

Given the brief period covered in the report and the impact of PTE excise payments, January and year-to-date results should not be used as predictors for the remainder of the fiscal year.

Details:

• Income tax collections for January were $2.909 billion, $771 million or 36.1% above benchmark, and $595 million or 25.7% more than January 2021. As previously mentioned, income tax estimated payments and income tax returns and bills collections were impacted by the mostly temporary effect of PTE excise payments. After adjusting for PTE excise payments, income tax collections for January 2022 are $706 million or 38.4% above benchmark and $231 million or 10.0% more than January 2021. 
• Withholding tax collections for January totaled $1.630 billion, $138 million or 9.3% above benchmark, and $269 million or 19.8% more than January 2021.
• Income tax estimated payments totaled $1.157 billion for January, $535 million or 86.1% more than benchmark, and $254 million or 28.1% more than January 2021.
• Income tax returns and bills totaled $140 million for January, $94 million or 203.8% more than benchmark, and $75 million or 115.4% more than January 2021.
• Income tax cash refunds in January totaled $18 million in outflows, $4 million or 19.1% below benchmark, but $3 million or 21.2% more than January 2021.
• Sales and use tax collections for January totaled $791 million, $82 million or 11.5% above benchmark, and $97 million or 14.1% more than January 2021.
• Meals tax collections, a sub-set of sales and use tax, totaled $97 million, $10 million or 11.0% above benchmark, and $32 million or 50.2% more than January 2021.
• Corporate and business tax collections for the month totaled $94 million, $19 million or 16.7% below benchmark, but $32 million or 51.9% more than January 2021.
• “All other” tax collections for January totaled $233 million, $22 million or 10.2% above benchmark, but $46 million or 16.4% less than January 2021.

January 2022 Tax Collections Summary (in $ millions) Preliminary as of February 3, 2022

¹ With the enactment of the FY2022 budget, monthly revenue benchmarks were developed for the August 2021 through June 2022 period only. In December 2021, monthly benchmarks from December 2021 through June 2022 were further modified to reflect the impact of the recently enacted pass-through entity tax and the impact of taxation of non-residents. On January 14, 2022, the Secretary of Administration and Finance announced a revised tax revenue estimate of $35.9 billion for FY2022, an increase of $1.5 billion from the prior estimate of $34.4 billion. This revision is based on recent revenue performance and improved economic data. The revised FY2022 benchmark estimate of $35.9 billion represents July 2021 through December 2021 actual collections, adjusted for PTE excise collections, and forecasted collections for the months of January 2022 through June 2022.

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