April 2023 tax collections affected by IRS delay
May Revision anticipates $42 billion shift of receipts to October due to IRS action
April 2023 California state income tax revenues were, as expected, heavily affected by the IRS’ eight-month deadline extension for most residents and businesses.
Many—apparently most—very high-income Californians and some big businesses have ceased making income tax payments to the state’s Franchise Tax Board until the end of the deadline extension in October. The lack of information on prior year income tax liabilities adds complexity to the already complex state budget revenue forecasting process this month. The May Revision anticipates that $29 billion of personal income tax (PIT) and $13 billion of corporation tax (CT) payments typically due earlier in the year will be delayed until October. The May Revision attempts, as always, to reflect April collections in its forward-looking revenue estimates.
April income tax collections results are summarized below. Receipts are compared to the administration estimates released in January 2023, which attempted to account for the IRS extension. (In future months, receipts generally will be compared to updated monthly estimates released in conjunction with the recent May Revision.)
Personal Income Tax. The General Fund’s net PIT collections for the month of April 2023 totaled $7.8 billion, down $17.5 billion (69.2%) from the total in April 2022. Withholding, which is generally not affected by the IRS deadline extension, was down $319 million (4.1%) from April 2022. April’s quarterly payments and final and extension payments for the most recent tax year were down $17.5 billion (74.7%) from April 2022.
PIT refunds in April 2023 ($5.9 billion) were basically equal (down just $33 million) to levels recorded in April 2022. (Interestingly, despite the IRS delay, May 2023 refunds continue to be disbursed at or above prior year levels.)
April 2023 net PIT collections were $3.4 billion (30.3%) below the administration’s January projections for the month, which attempted to account for the IRS delay but are subject to significant uncertainty in that regard. Of the $3.4 billion shortfall for the month, $705 million was attributable to PIT withholding.
For the 2022-23 fiscal year to date, net PIT receipts are $79.6 billion, down $44.5 billion (35.8%) from the same period in 2021-22. This $79.6 billion is $7.8 billion (9.0%) below the level anticipated in the administration’s January revenue estimates.
Corporation Tax. Net CT collections for the month of April 2023 totaled $3.8 billion, down $1.8 billion (32.1%) from the total in April 2022.
April 2023 net CT collections were $378 million (8.9%) below the administration’s January projections for the month, which attempted to account for the IRS delay.
For the 2022-23 fiscal year to date, net CT receipts are $22.9 billion, down $11.2 billion (32.8%) from the same period in 2021-22. This $22.9 billion is $1.25 billion (5.2%) below the level anticipated in the administration’s January revenue estimates.
October Receipts Will Be Key. With a mammoth amount of receipts anticipated in October, that month’s results will be key to whether—and to what extent—midyear budget corrections are required in early 2024. In New York, an income tax state where the majority of taxpayers were still required to make payments in mid-April, the State Comptroller recently reported that state tax collections were a dismal 39.9% below last April’s level, with even larger declines in PIT collections. As the California Legislative Analyst’s Office recently reported, the present economic picture is particularly muddy, including some signs of recession like recent tax receipts.