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What… This Old Thing? Texas Hotel Occupancy Tax and Historic Preservation

What… This Old Thing? Texas Hotel Occupancy Tax and Historic Preservation

As most Texans already know, the population in our great state has grown by leaps and bounds in the last decade. In 2017, it was estimated that Texas was growing by more than 1,000 people per day, which was the largest number of any state in the country. This unprecedented growth in population is happening primarily in the larger metropolitan areas like Houston, Dallas/Fort Worth, and Austin.

The result is that a lot of smaller municipalities located around these major metropolitan areas are seeing the big city lights get closer and closer to their once somewhat rural areas and, in turn, causing their own populations to grow. One of the many benefits in this boost in population is an increase in revenue for these smaller cities, which provides them with the financial resources needed to keep up with that growth.

A main source of this increase in revenue comes from property, sales, and hotel occupancy taxes that increase as a city’s population continues to grow. The cities can then use the revenue from these taxes to help maintain and grow their infrastructure, as well as make needed repairs on old roads and restore old historical buildings to their former glory.

Some older cities in Texas have a downtown area that is comprised of many old buildings in disrepair, some of which are considered historical buildings. Instead of demolishing a piece of their towns history some Texas municipalities are deciding to assist the owners in the restoration of these structures. There are a couple ways this can be done, but one that city officials may not be aware of is using funds from the city’s Hotel Occupancy Tax.

To do this we turn to the Texas Tax Code Chapter 351 “Municipal Hotel Occupancy Taxes” Section 351.101 “Use of Tax Revenue.” This statute states:

Revenue from the municipal hotel occupancy tax may be used only to promote tourism and the convention and hotel industry, and that use is limited to the following:

(5)  historical restoration and preservation projects or activities or advertising and conducting solicitations and promotional programs to encourage tourists and convention delegates to visit preserved historic sites or museums:

(A)  at or in the immediate vicinity of convention center facilities or visitor information centers; or

(B)  located elsewhere in the municipality or its vicinity that would be frequented by tourists and convention delegates;

So, if there is an old building within the city limits of a Texas municipality that the city wants to help restore, the first step that the city must take is to research the history of the building in order to determine whether it has historical significance. The next step is to determine whether the building is located in an area of the city that is close to a visitor information center or that is frequented by tourists. This can be somewhat of an interesting project for city staff because they might uncover something of true historical significance about the building that was not well known, which in turn could then cause it to be frequented by tourists.

For any city trying to decide whether they can use their Hotel Occupancy Tax funds for certain projects, the following summary from Attorney General Opinion No. GA-0124 would be the most helpful:

“Under section 351.101 of the Tax Code, a municipality may expend its municipal hotel occupancy tax revenue “only to promote tourism and the convention and hotel industry” and only for the specific uses listed in the statute. TEX. TAX CODE ANN. fj 3 5 1.10 1 (a) (Vernon Supp. 2004). Whether a particular proposed expenditure of municipal hotel occupancy tax revenue is a permissible use and will “directly enhanc[e] and promot[e] tourism and the convention and hotel industry” is for a municipality’s governing body to determine in the first instance.”

The growth that many of our Texas cities have been experiencing for the last decade can have a positive or negative impact on the city and its residents. If a municipality is not prepared to meet this unprecedented growth, then it can create a lot of difficulties for the Council Members and city staff that are responsible for navigating their citizens through the treacherous waters that are created by such rapid urbanization. Knowing about laws such as Texas Tax Code 351.101 is a great way to stay on course and ensure that your city utilizes their available resources to the best of their ability.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our municipal law practice can be found here.

Carl attended the University of North Texas from 2008 to 2011, where he earned his Bachelor’s degree in History (both majoring and minoring in History). Upon graduating, he worked for TRCA, Inc. in Denton, Texas as a Sr. Account Executive, where he was personally mentored by the company’s CEO. It was in this capacity that...

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