Does a large Texas city have to spend half its hotel tax on tourism advertising?

Texas AG Opinion JC-0105: When a City's Hotel Tax Escapes the 50% Advertising Rule

Plain-English summary

State Representative Pat Haggerty asked the Attorney General to interpret two phrases in section 351.103 of the Tax Code, the provision that governs how a municipality must split its hotel occupancy tax revenue. The dispute behind the question was between the El Paso Hotel/Motel Association, which argued the City of El Paso had to put 50% of its occupancy tax toward tourism advertising, and the City, which said it was exempt.

The statute works in layers. Subsection (a) requires a municipality with a population of 200,000 or more to allocate at least half its hotel occupancy tax revenue to the purposes in section 351.101(a)(3), advertising and promotion to attract tourists and convention delegates. Subsection (b), though, says subsection (a) "does not apply" to a municipality whose total hotel occupancy tax for the most recent calendar year exceeds $2 million; such a city instead allocates the revenue by ordinance, "consistent with the other limitations of this section." Representative Haggerty asked what "the other limitations of this section" (in subsection (b)) and "the applicable provisions of this section" (in subsection (e)) mean.

The Attorney General concluded the statutory language answered both questions. "Other limitations" means the limitations other than subsection (a), because subsection (a) by its own terms does not apply to a high-revenue city; reading subsection (a) back into the "other limitations" would contradict subsection (b) and make it a nullity, which the rules of statutory construction (Government Code sections 311.011 and 311.021) forbid. The same logic answered the subsection (e) question: for a city to which subsection (a) "does not apply," subsection (a) is simply not an "applicable provision." So if the City of El Paso collected more than $2 million in hotel occupancy tax in the most recent calendar year, as everyone seemed to agree it did (around $4 million a year), it was not bound by the 50% allocation formula of section 351.103(a).

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Does every big Texas city have to spend 50% of its hotel tax on tourism advertising?
At the time of this opinion, no. The opinion read section 351.103(b) to exempt a city whose hotel occupancy tax collections exceeded $2 million in the most recent calendar year from the 50% rule in subsection (a).

What does the exempt city have to do with the money instead?
The opinion explained that subsection (b) lets such a city allocate the revenue by ordinance, consistent with the section's other limitations, meaning the limitations other than the 50% rule.

What did "the other limitations of this section" mean?
The opinion read it to mean the limitations other than subsection (a). Folding subsection (a) back in would contradict the exemption and render subsection (b) meaningless.

Was El Paso bound by the 50% rule?
No. Because the City appeared to collect well over $2 million a year (about $4 million), the opinion concluded it was not bound by the section 351.103(a) allocation formula.

Background and statutory framework

Section 351.103 of the Tax Code sets allocation rules for municipal hotel occupancy tax revenue. Subsection (a) directs a municipality of 200,000 or more to allocate at least 50% to section 351.101(a)(3) purposes (tourist and convention advertising and promotion), as distinct from section 351.101(a)(1) purposes (convention center facilities). Subsection (b) removes that 50% requirement for a municipality whose total hotel occupancy tax in the most recent qualifying calendar year exceeds $2 million, directing it to allocate by ordinance "consistent with the other limitations of this section." Subsection (e) allows hotel tax revenue to be spent on section 351.101(a)(1) purposes only if the municipality "complies with the applicable provisions of this section." The opinion resolved both phrases by plain meaning and the anti-surplusage canon, reading "other limitations" and "applicable provisions" to exclude subsection (a) for a city that subsection (b) exempts, because the Code Construction Act requires words to be read in context per common usage (Gov't Code section 311.011(a)) and the entire statute to be effective (section 311.021(2)). The request arose from competing letters by the El Paso Hotel/Motel Association and the City of El Paso, and the opinion sided with the City's reading.

Citations

Statutes and authorities:

• Tex. Tax Code Ann. §§ 351.101(a)(1), (a)(3), 351.103, 351.103(a), (b), (e) (Vernon 1992 & Supp. 1999)
• Tex. Gov't Code Ann. §§ 311.011(a) (Vernon 1998), 311.021(2)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0105
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1999/jc0105.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL STATE OF TEXAS

JOHN CORNYN

September 1, 1999

The Honorable Patrick B. Haggerty
Chair, Committee on Corrections
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78768-2910

Opinion No. JC-0105

Re: Allocation of revenue by a municipality from hotel occupancy tax (RQ-0064)

Dear Representative Haggerty:

You ask this office to interpret two phrases in section 351.103 of the Tax Code, namely "consistent with the other limitations of this section" in section 351.103(b) and "the applicable provisions of this section" in section 351.103(e).

A brief description of the relevant provisions, and of the controversy which leads to your question, is necessary to place the question in context. Section 351.103 of the Tax Code reads in relevant part:

(a) At least 50 percent of the hotel occupancy tax revenue collected by a municipality with a population of 200,000 or greater must be allocated for the purposes provided by Section 351.101(a)(3) . . . .

(b) Subsection (a) does not apply to a municipality in a fiscal year of the municipality if the total amount of hotel occupancy tax collected by the municipality in the most recent calendar year that ends at least 90 days before the date the fiscal year begins exceeds $2 million. A municipality excepted from the application of Subsection (a) by this subsection shall allocate hotel occupancy tax revenue by ordinance, consistent with the other limitations of this section . . . .

(e) A municipality may use hotel occupancy tax revenue collected by the municipality for a purpose provided by Section 351.101(a)(1) only if the municipality complies with the applicable provisions of this section.

TEX. TAX CODE ANN. § 351.103 (Vernon 1992 & Supp. 1999) (emphasis added).

Section 351.101(a)(1) and section 351.101(a)(3), as referenced in section 351.103, provide that permissible uses for hotel occupancy tax revenue are "the acquisition of sites for and the construction, improvement, enlarging, equipping, repairing, operation, and maintenance of convention center facilities . . .," id. § 351.101(a)(1) (Vernon Supp. 1999), and "advertising and conducting solicitations and promotional programs to attract tourists and convention delegates or registrants to the municipality or its vicinity." Id. § 351.101(a)(3). Pursuant to section 351.103(a), then, a municipality subject to it would have to spend at least 50 percent of hotel occupancy tax revenue on advertising and promotion of tourism and conventions.

The El Paso Hotel/Motel Association argues that the City of El Paso is required by section 351.103 to allocate 50 percent of its occupancy tax revenue to section 351.101(a)(3) purposes. See Letter from Henry P. King, Executive Director, El Paso Hotel/Motel Association, Inc., to Honorable Pat Haggerty, State Representative, District 78 (Apr. 15, 1999) (on file with Opinion Committee) [hereinafter King Letter of 4/15/99]. The City of El Paso, on the contrary, avers that it is exempted from the requirements of subsection (a) of section 351.103, and is not required to allocate the funds in that manner. See Letter from Myles S. Hall, Assistant City Attorney, City of El Paso, to Honorable John Cornyn, Attorney General (June 11, 1999) (on file with Opinion Committee) [hereinafter Hall Letter of 6/11/99]. In our view, the City's argument is correct.

We note as a preliminary matter that there appears to be general agreement that the City of El Paso meets the requirement of section 351.103(b) that its total hotel occupancy tax proceeds for the most recent calendar year exceed $2 million. See King Letter of 4/15/99 ("The City of El Paso collects about $4 million in Occupancy taxes annually."); Hall Letter of 6/11/99, at 3 ("The City of El Paso, Texas meets the criteria described in the first sentence of Subsection (b) of Texas Tax Code Section 351.103."). Our analysis, therefore, proceeds on this assumption.

You ask us first to interpret the phrase "consistent with the other limitations of this section." In the context of the sentence in section 351.103(b), the meaning of that phrase is clear and unambiguous: the "other limitations" are the limitations other than that of subsection (a), which limitation by the plain language of subsection (b) does not apply in the relevant case. Any other construction intended to include the subsection (a) restriction among the "other limitations" both violates the plain sense of subsection (b), and renders that subsection a nullity. We are charged, both by the maxims of construction generally and by sections 311.011 and 311.021 of the Code Construction Act, not to construe statutes in such a manner. See TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 1998) (words to be read in context and construed according to grammar and common usage); id. § 311.021(2) (entire statute intended to be effective).

You ask further about the meaning of the phrase "the applicable provisions of this section" in section 351.103(e), which requires a municipality that wishes to expend occupancy tax revenues on convention center facilities to comply with the applicable provisions of section 351.103. TEX. TAX CODE ANN. § 351.103(e) (Vernon Supp. 1999). Again the statutory language answers the question. By the statute's own terms, if a municipality takes in sufficient occupancy tax revenues in a calendar year, subsection (a) "does not apply" to it. Id. § 351.103(b) (Vernon 1992). For such a city, then, subsection (a) is not an applicable provision.

In short, if, as appears to be the case, the City of El Paso, Texas collected more than $2 million in hotel occupancy tax revenue in the most recent calendar year, it is not bound by the allocation formula of section 351.103(a) of the Texas Tax Code.

SUMMARY

Pursuant to section 351.103(b) of the Texas Tax Code, the allocation restriction of section 351.103(a) of the Tax Code does not apply to a municipality which has collected in excess of $2 million in hotel occupancy tax revenue in the most recent calendar year.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

James E. Tourtelott
Assistant Attorney General - Opinion Committee