Electricity users in the Tennessee Valley may have benefited by lower fuel costs and a mild winter, but the drop in power sales will cost state and local governments $18 million in tax-equivalent payments next year.
TVA directors approved Thursday the final in-lieu-of-tax payments to states and localities totaling $542 million in the fiscal year ended Sept. 30. Such payments are expected to total only $535 million this year and drop to $517 million next year, reflecting the decline in TVA overall revenues due to stagnant power sales and a drop in fuel expenses.
Although TVA is a federally owned corporation that does not pay regular taxes, it pays 5 percent of its annual revenues to the states and localities where it has power facilities or sells electricity.
The in-lieu-of-tax payments are based upon 5 percent of TVA’s total electricity sales and are divided equally in each political jurisdiction based equally upon the level of TVA investments and the amount of TVA power sold in each area.
TVA makes tax equivalent payments to the eight states where it sells electricity or owns generating plants, transmission lines, substations or other power-related assets. In addition, tax equivalent payments are made to 146 municipalities where TVA owns property.