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 will pay an estimated $567 million in tax equivalent payments to state and local governments in 2012, an increase of about 7 percent over 2011 payments.

Background

As a federal entity, TVA is typically exempt from taxes, including sales, property or income taxes. However, TVA is required under the TVA Act to make annual tax equivalent payments to help states and counties where it does business. TVA makes payments to states based on its 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 (about $3.6 million in fiscal 2011) 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.
TVA estimates it has paid states and counties more than $9.8 billion in tax equivalent payments since payments began in 1941. Payments in the past 10 years have totaled $4.2 billion.

Fiscal 2011 payments

Total payments by TVA to each state for fiscal year 2011 were:

Alabama	$115,539,825
Georgia	8,553,601
Illinois	450,190
Kentucky	46,554,896
Mississippi	33,155,137
North Carolina	2,674,655
Tennessee	321,488,305
Virginia	1,218,160
Total	$529,634,769

November 2011