Fourth‑quarter spike and falling excise: lawmakers press revenue office on construction tax and military buildup collections

Lawmakers in a joint session of the House Ways and Means Committee and the Senate Fiscal Affairs Committee pressed the Department of Finance and the Division of Revenue and Taxation on Oct. 13 about mixed tax results that showed a strong fourth‑quarter income tax pick‑up alongside steep declines in excise and hotel receipts.

Secretary of Finance told the committee the cumulative fourth‑quarter report (attachment A to the governor’s letter) showed a significant income tax increase of about 24 percent in the income tax category. The secretary said the gains were concentrated in gross receipts and withholding from wages and salaries, and that a notable portion of the penalties and interest uptick reflected a bankruptcy settlement payment recorded in the fourth quarter.

At the same time, officials reported declines in several other tax lines: excise (import) taxes down about 46 percent in the condensed excise category, hotel occupancy taxes down 16 percent, and a beautification (likely occupancy/visitor) tax down about 16 percent. The Division of Revenue and Taxation explained that the excise category is a consolidated “other commodities” line that bundles many import types beyond cigarettes and beer, making it difficult to pinpoint which industries drove the decline without customs breakdowns.

Lawmakers raised the role of construction activity — notably the military buildup on Tinian — in the income and BGRT increases. The director of revenue and taxation told the committee the military‑linked collections for the quarter were larger than other construction activity combined and estimated (with caution) that collection associated with military buildup was in the “$6–7 million” range, though the director said he did not have the exact figure on hand and agreed to provide aggregate data.

Members also questioned a newly enacted construction tax. The administration significantly reduced its projection for the construction tax in the FY2026 submission from an earlier $5 million estimate down to a conservative $500,000 after reporting zero collections on the construction tax for FY2025. Treasury and revenue officials said outreach and audits are under way and amendments to the law may improve compliance, but they emphasized collecting the tax is different from assessing it.

The committee recorded formal requests for: (1) a detailed excise‑tax breakdown from the director of customs or revenue/customs so the committee can distinguish commodity categories; and (2) aggregate collections tied to the military buildup separated from local construction collections. Lawmakers said the information is necessary for forecasting and for assessing whether policy or enforcement changes are warranted.

Ending

The revenue office agreed to provide an aggregate report on military‑buildup collections and to work with customs to deliver a more detailed excise‑category breakdown. Committee staff signaled they will review those details and consider follow‑up oversight, audits, or legislation to tighten collection and enforcement.