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Key Topic

Tax Equivalent Payments

TVA provides tax equivalent payments annually to state and local governments in the eight states in which the federal agency sells electricity or owns power production assets and properties (generating plants, transmission lines, substations, etc.). TVA paid a record $579 million in tax equivalent payments to state and local governments in fiscal year 2012 – $49 million more than 2011.

Background

As a federal entity, TVA is exempt from taxes, including sales, property or income taxes. To compensate state and local governments, the TVA Act requires that TVA make annual tax equivalent payments to states and counties where it does business. The payments are based on TVA power operations in those states. TVA also makes payments to counties where TVA acquired properties that were once owned and operated by another utility company and had been subject to local property taxes.

Key points

  • TVA makes payments to the seven states in the TVA service area (Tennessee, Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia) and one state (Illinois) where TVA has coal reserves, which are agreements to buy coal yet to be mined.
  • The majority of TVA's tax equivalent payments are paid to state governments, which then distribute the money to local governments based on formulas set by the state legislatures. The remainder is paid directly to counties.
  • TVA pays 5 percent of its gross power proceeds to states and counties where its conducts power operations. The payments are based on financial data from the prior year.
  • The funds are distributed in monthly payments, with final payments approved at the end of each fiscal year.
  • The TVA board has approved estimated tax equivalent payments of $536 million for fiscal year 2013. This is less than 2012 payments because of the slow economy and lower power revenues due to milder, warmer weather in the winter of 2011-2012.
  • TVA estimates it has paid states and counties more than $10.3 billion in tax equivalent payments since payments began in 1941. Payments in the past 10 years have totaled $4.4 billion.

Fiscal 2012 payments

Total payments by TVA to each state for fiscal year 2012 were:

Alabama $122,665,588
Georgia 9,409,090
Illinois 550,070
Kentucky 46,755,942
Mississippi 40,878,879
North Carolina 2,837,202
Tennessee 354,389,772
Virginia 1,534,406
Total $579,020,949

 

November 2012

 

 

           
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