TVA Board Meeting - FY24 Financial plan and budget- Reso-Memo
Attachment 6
Report on Fiscal Year 2023Final Payments Under Section 13 of the TVA Act
Attached for the consideration of the Board are the recommended final tax equivalent payment schedules for fiscal year 2023, along with other recommendations relating to the payment schedule that would be implemented by the Proposed Board Resolution. On July 28, 2022, the Board authorized monthly payments to states during fiscal year 2023 at 98 percent of one-twelfth of the estimated allocation to each state. The states have received equal monthly payments at this rate beginning in October 2022. The Proposed Board Resolution would ensure that the total amount of the payments that the states receive in fiscal year 2023 conform to the total amount payable, as calculated based upon audited financial data. TVA is directed by Section 13 of the TVA Act to pay five percent of its gross proceeds from the sale of power (less off-system sales, sales to federal agencies, and power used by TVA) to states and counties where its power operations are carried on or in which it has acquired properties previously subject to state and local taxation. TVA’s payments to the states are determined by the following formula: (1) 50 percent is derived from the ratio of the book value of TVA power properties and reservoir properties allocated to power located within each state compared to the book value of all such TVA properties; and (2) 50 percent is derived from the ratio of gross proceeds from power sales in each state compared to TVA’s total gross proceeds from power sales. Within the allocation formula, certain criteria are used in the determination of TVA power properties and reservoir properties allocated to power. Coal rights held by TVA are treated as purchased power property. For single-use hydro projects, 100 percent of the land acquired for reservoir purposes has been assigned to power. For multipurpose hydro projects preceding Melton Hill, 42 percent of the cost of reservoir land has been allocated to power. In the cases of Melton Hill, Tellico, Nickajack, and Tims Ford, the power proportion is 35 percent, 21 percent, 12 percent, and 6 percent, respectively, with the exception of the downstream flowage rights accompanying Tims Ford Reservoir, which have been assigned 100 percent to power. Section 13 of the TVA Act also notes that TVA is required to make direct payments to counties in an amount equal to the two-year average of county ad valorem property taxes (including taxes levied by taxing districts within the respective counties) upon power property and reservoir lands allocable to power. The two-year average payment amount is typically calculated based upon the last two years during which the property was privately owned and operated. All direct payments made to counties within a state will be deducted from the payment otherwise due to the state under the provisions of the TVA Act. Section 15d(g) of the TVA Act provides that the payment under Section 13 dueto a state where a power generating or related facility operated by TVA under a lease or lease-purchase agreement (“Leased Facility”) is located shall be reduced by the amount which is determined or estimated by the Board to result from holding the Leased Facility or from selling electric energy generated from the Leased Facility to the extent that taxes or tax equivalents are paid by the owners (or others) on account of the Leased Facility. All direct payments made to counties
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