KNOXVILLE – The Tennessee Valley Authority may be exempt from federal income taxes, but it is paying state and local governments a record of $547.7 million in in-lieu-of-tax payments this year.
Higher revenues for TVA from both its base rate increase and hot weather during the past couple of years led to a $24 million increase in such tax equivalent payments compared to the previous year. TVA directors approved the payments today, which are based upon 5% of power sales revenues from the previous year.
The payments are divided among the seven states served by TVA, plus Illinois where TVA owns coal fields it owns and leases to other companies.
The payments compensate state and local governments that cannot levy property or sales taxes on TVA as a federal entity, and make TVA one of the largest contributors to state budgets in Tennessee and Alabama. TVA is paying Tennessee $367.3 million in tax equivalent payments this year, up from $347.4 million last year. Tennessee accounts for about two thirds of the TVA payments, which are based upon the TVA facilities in each area and the amount of power purchased in each area.
Alabama is receiving $85.8 million in tax equivalent payments this year, but that is down from the $87.5 million in the previous year because TVA has canceled plans to build its Bellefonte Nuclear Power Plant and wrote off most of its remaining value from its books last year.