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Payments in Lieu of Taxes: Natural Gas Utilities

Reference Number: MTAS-1851
Tennessee Code Annotated
Reviewed Date: October 21, 2020
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Revenue Class: Local Taxes


Account No.: 31514

Description: Revenue received as payment in lieu of tax on the gas system property and operations that represents the public utility’s fair share of the cost of local government. Payments are based on the value of the gas system and gas operations. It applies only to municipalities that own and operate a gas system. A worksheet can be found under MTAS Municipal Resources: In-lieu-of tax calculator on the

Authorization: T.C.A. § 7-39-401 et seq. (Municipal Gas System Tax Equivalent Law).

Requirements or Restrictions: Payments cannot be made to the municipality unless the following expenses are paid or provided for: operating expenses, debt payments, reasonable reserves, and cash working capital adequate to cover operating expenses for a reasonable number of weeks. A resolution is required that sets forth the tax equivalent provisions.

Current Rate: In lieu of tax payments are computed under T.C.A. § 7-39-404 (1).

Frequency of Late Pay Interest: None.

Exemptions: Retail sales or use taxes on gas energy at the same rates applicable generally to sales or use of personal property or services are not included in the calculations. T.C.A. § 7-39-404(6).

Collection: Payments are transferred from the gas fund in accordance with resolution passed by the governing body. T.C.A. § 7-39-405.

Use Restrictions: None.


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