Does a mid-size city's downtown hotel-and-convention-center project qualify for the Chapter 351 'qualified project' rebate program, and how do ownership, financing, leasing, and the 10-year entitlement work?

Notes from the STAR record: This ruling is also indexed as a sales-tax document under accession 201910008L. The city's hotel was owned by a local government corporation (created under Transportation Code § 431.101(a)) that issued hotel revenue bonds under Transportation Code ch. 431 — those bonds were not secured by Chapter 351 revenue; only the city's certificates of obligation for the convention center were paid from pledged Chapter 351 hotel tax.

Subject

Hotel Projects And Qualified Hotel Projects — Tax Rebates

Plain-English summary

A Texas city (2010 population between 110,000 and 135,000, spread across two counties each under 135,000) planned a destination convention-center hotel across the street from its existing convention center: a 206-room hotel and a new ~18,000 sq. ft. convention center under one roof, plus parking, restaurants, bars, a gift shop, and support facilities. The hotel would be owned by a local government corporation (LGC) on city land (financed by LGC hotel revenue bonds), and the new convention center owned by the city (financed by certificates of obligation paid from pledged Chapter 351 hotel tax). The Comptroller answered nineteen questions — all confirming the project fits the Chapter 351 "qualified project" rebate program. Highlights:

• Eligible city (Q1 — Section 351.152(12)): Yes — a city of 110,000–135,000 located in two counties, each under 135,000.
• Qualified hotel / convention center / project (Q2, Q4 — Section 351.151(2)–(4)): The 206-room hotel, built on city-owned land and connected to the new convention center, is a "qualified hotel"; the new center — wholly city-owned (no undivided common interest), 10,000+ sq. ft. of continuous configurable meeting space, connected to or within 1,000 ft of the hotel, and not inside a hotel — is a "qualified convention center facility"; building both is a "qualified project."
• One project only (Q3 — Section 351.155(c)): A city may finance only one qualified project. Enhancing the existing convention center is not part of this project and can't be a later qualified project.
• Financing & pledge (Q5–Q7 — Section 351.155(a),(b),(e)): The city's certificates of obligation for the new convention center satisfy Section 351.155(a); pledging Chapter 351 hotel-tax revenue to pay them satisfies (b) because the qualified hotel benefits; and that pledge is the precondition (Section 351.155(e)) that unlocks the Section 351.156 entitlement.
• What the city receives (Q8 — Section 351.156): the state sales tax and state hotel occupancy tax generated by the qualified hotel and each restaurant, bar, and retail establishment in or connected to the hotel or convention center; and — only if the taxing unit agrees in writing — the local sales (Ch. 322/323), local hotel (Ch. 352), and mixed beverage (Section 183.051) taxes.
• How long, and when paid (Q9–Q11 — Sections 351.158, 183.051(b)): entitlement runs until the 10th anniversary of the hotel's opening for initial occupancy (the earliest date a member of the public gets paid sleeping accommodations and the convention center is operational); state taxes are paid monthly, mixed beverage quarterly; the city claims by written request to the Audit Division (no set deadline) after the hotel opens, with a defined document package.
• Leased-out establishments still count (Q12): the entitlement follows restaurants, bars, and retail in or connected to the qualified hotel or new convention center even if leased to a private tenant — but not anything in the existing convention center (it isn't part of the qualified project).
• Few extra conditions (Q13–Q19): no minimum capital expenditure (Q13), no guest-room minimum or maximum (Q15), and the only size rule is the convention center's 10,000 sq. ft. of continuous meeting space (Q14); a ground lease or facilities lease does not disqualify the hotel or convention center as long as the city keeps land ownership / whole ownership (Q16–Q17); no restriction on the city's use of the rebated state taxes (Q18); and parking and related infrastructure within 1,000 feet of a property line may be included in the qualified project (Q19 — Section 351.151(4)(B)).

What this means for you

Cities planning a Chapter 351 qualified project

This is one of the most complete walk-throughs in the corpus of the post-2019 "qualified project" framework (Sections 351.151–351.158), distinct from the older Section 351.102 "hotel project." Note the mechanics: you pledge your Chapter 351 hotel tax to bonds/COs for the project, and that pledge is what entitles you to the Section 351.156 state (and consented-to local) tax capture. Watch the one-project-only limit and the rule that your existing convention center is off the table.

Developers, LGCs, and lenders

A local government corporation can own the hotel and issue hotel revenue bonds separately from the Chapter 351 pledge; a ground lease to a private developer/operator doesn't break "qualified" status so long as the city keeps ownership of the land (hotel) and whole ownership (convention center). There's no minimum spend and no room-count floor, so the structure is flexible.

Restaurants, bars, and retail at the project

If you're in or connected to the qualified hotel or new convention center — even as a private lessee — the taxes you generate can flow to the city's entitlement. You'll be asked to sign a confidentiality waiver letting the Comptroller share your sales-tax and mixed-beverage data with the city.

Common questions

Q: What taxes does the city get, and does it get the local ones automatically?
A: Automatically, the state sales tax and state hotel occupancy tax from the qualified hotel and connected establishments. Local sales, local hotel, and mixed beverage taxes only if the political subdivision entitled to them agrees in writing (Section 351.156).

Q: Can the city do a second qualified project later, or fold in its old convention center?
A: No. Section 351.155(c) allows only one qualified project, and the existing convention center (and any enhancement to it) is not part of this one and can't be a later qualified project.

Q: Does leasing a restaurant or shop to a private company cut off the rebate?
A: No — the entitlement follows establishments in or connected to the qualified hotel or new convention center even if privately leased. But nothing in the existing convention center qualifies.

Q: How long does the entitlement last, and when does the clock start?
A: Ten years from the hotel's opening for initial occupancy — the earliest date a member of the public gets paid sleeping accommodations and the convention center is operational (Section 351.158).

Q: Are there minimum size, room-count, or spending requirements?
A: No minimum capital spend and no room minimum or maximum. The only size rule is the convention center's 10,000 sq. ft. of continuous meeting space (Section 351.151(2)).

Q: Can another city rely on this ruling?
A: No. A private letter ruling binds the Comptroller only as to the requesting taxpayer and its facts; the Comptroller can't approve benefits until the project is completed and verified, and reserves the right to audit, rescind, and collect under Tax Code Chapter 111.

Citations and references

• Tex. Tax Code § 351.152(12) — the population bracket under which this city is an eligible municipality.
• Tex. Tax Code § 351.151(2)–(4) — defines "qualified convention center facility," "qualified hotel," and "qualified project" (including parking and infrastructure within 1,000 feet).
• Tex. Tax Code § 351.155 — pledge/commitment of Chapter 351 revenue, the one-project limit (subsection (c)), and the pledge precondition for entitlement (subsection (e)).
• Tex. Tax Code § 351.156 — the state (and, by written consent, local sales/hotel/mixed beverage) taxes the city may receive from the hotel and connected establishments.
• Tex. Tax Code § 351.158 — 10-year entitlement measured from the hotel's opening for initial occupancy.
• Tex. Tax Code § 183.051(b) — quarterly mixed beverage tax allocation to cities.
• Tex. Transp. Code § 431.101(a) and ch. 431 — the local government corporation and its hotel revenue bonds (not secured by Chapter 351 revenue).
• Tex. Loc. Gov't Code ch. 380 — economic development agreements referenced in the pledge authority.
• Tex. Tax Code ch. 111 — the Comptroller's collection authority if a rescinded ruling's representations prove inaccurate.
• 34 Tex. Admin. Code Rules 3.1 and 3.10 — authority for the private letter ruling and detrimental-reliance relief.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=HOT
• Opinion: https://star.comptroller.texas.gov/view/201910007L

Original ruling text

NOTE: This document is also indexed as a sales tax document under STAR 201910008L.

October 4, 2019

RE: Private Letter Ruling No. PLR20190311135245

**, Texas, Taxpayer No. **

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE: (1)] We are responding to your request dated March 18, 2019, supplemental correspondence on April 12, 2019, revised request dated July 12, 2019, and supplemental correspondence on Sept. 25, 2019. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the proposed development and construction of a municipal hotel and convention center project.

Facts Presented

CITY is located in COUNTY A and COUNTY B, which had a 2010 census population of 131,506 and 20,202, respectively. The population for both COUNTY B and COUNTY A is less than 135,000. At the time of the 2010 census, the City had a population of 117,063, which is greater than 110,000 and less than 135,000.

The City is in negotiation with a Developer to bring a destination convention center hotel to the City (Project), which will be constructed directly across the street from the City owned Existing Convention Center on three parcels of land owned by the City (Property). The Project will be a fully integrated facility contained in a single building structure.

The Project will consist of a 206-key hotel (Hotel Facilities), a convention center facility comprised of a new convention center and meeting facilities providing approximately 18,000 square feet of continuous configurable meeting space connected to the hotel (New Convention Center Facilities), approximately 250 surface parking spaces, food and beverage service facilities, laundry and other ancillary facilities required to support a full- service convention center headquarters hotel.

The Project will include a retail gift shop, food and beverage outlets including coffee shops, restaurants, and bars which will be located within the Hotel Facilities. Additionally, parking facilities with a property line located not more than 1,000 feet from the nearest property line of the qualified convention center facility and qualified hotel will be constructed for the Hotel Facilities and the New Convention Center Facilities. There are no additional facilities within the Project or in the immediate vicinity of the Project or located on the Property for which the City will seek to receive the available revenues under Chapter 351.

While the Hotel Facilities and the New Convention Center Facilities are under the same roof or conditioned air space, there will be a common stud wall between the two facilities in some areas. The ownership documents will clearly illustrate that the New Convention Center Facilities are owned by the City and the Hotel Facilities are owned by the local government corporation (LGC).

The Hotel Facilities will be constructed on land owned by the City. The Hotel Facilities will be owned by a LGC created by the City pursuant to Section 431.101(a) of the Transportation Code. The LGC will issue hotel revenue bonds (Hotel Revenue Bonds) in one or more series for the construction of the Hotel Facilities. The Hotel Revenue Bonds will be issued by the LGC, for and on behalf of the City, pursuant to and in accordance with authority granted under Transportation Code Chapter 431. The Hotel Revenue Bonds will not be secured by any revenues available under Chapter 351.

The New Convention Center Facilities will be owned by the City and located on land owned by the City. The New Convention Center Facilities will be financed by the City’s issuance of combination tax and revenue certificates of obligation (COs) secured by a pledge of ad valorem taxes and local hotel occupancy taxes authorized to be pledged under Chapter 351. The COs will be authorized and issued after Sept. 1, 2019.

The City will enter into a ground lease with the LGC conveying a ground leasehold interest to the LGC in the Property. The LGC and City will cause the Project to be constructed on the Property. A private entity will be engaged to manage, operate and maintain the Project pursuant to a qualified management agreement at standards set by a hotel brand pursuant to a franchise agreement. It is anticipated that the initial occupancy of the Project will be June 25, 2021.

Questions, Rulings, and Analysis

Our restatement of your questions is shown below, followed by our responses and analysis.

Question One: Does the City qualify as a city described in 351.152(12)?

Ruling One: Yes, the City qualifies as a city described in 351.152(12).

Analysis for Ruling One: At the time of the 2010 census, the City had a population of 117,063, which is greater than 110,000 and less than 135,000. A portion of the City is within COUNTY A, which had a 2010 census population of 131,506 and is also within COUNTY B which had a 2010 census population of 20,202. The 2010 census population for both COUNTY B and COUNTY A is less than 135,000.

Question Two: Do the Hotel Facilities meet the requirements of a “qualified hotel” under Section 351.151(3)?

Ruling Two: Yes, the Hotel Facilities meet the requirements of a “qualified hotel,” provided the City designates the Hotel Facilities as the hotel that is part of a qualified project. The Hotel Facilities will be constructed on the Property owned by the City and will be connected to the New Convention Center Facilities.

Analysis for Ruling Two: A qualified hotel must be designated by a municipality and located on land that is owned by the designating municipality and connected to a qualified convention center facility or be located within 1,000 feet of a qualified convention center facility, as measured by the closest exterior wall of the qualified hotel and the closest exterior wall of the qualified convention center facility. Section 351.151(3). The proposed Hotel Facilities will be located on land owned by the City and connected to the New Convention Center Facilities.

Question Three (revised per email received on Sept. 25, 2019): Will the Existing Convention Center Facility limit or preclude the Hotel Facilities and the New Convention Center Facilities from being the City's qualified project?

Ruling Three: No, the Existing Convention Center Facility will not limit or preclude the New Convention Center Facilities and the Hotel Facilities from being the City’s qualified project.

Analysis for Ruling Three: The statute provides that the City may only finance one qualified project. See Section 351.155(c). The City has indicated the qualified project it wishes to finance is the New Convention Center Facilities and the Hotel Facilities, and not the Existing Convention Center Facility.

Enhancements to the Existing Convention Center Facility are not part of the qualified project and may not be a subsequent qualified project.

Question Four: Does the construction of the New Convention Center Facilities and the construction of the Hotel Facilities qualify as a “qualified project” under Section 351.151(4)?

Ruling Four: Yes, a “qualified project” is satisfied with the construction of a qualified convention center and the construction of a qualified hotel.

Analysis for Ruling Four: A “qualified project” means a project to construct a qualified convention center facility and a qualified hotel. See Section 351.151(4).

A qualified convention center facility is a facility that has been or will be constructed, and is primarily used to host conventions or meetings with at least 10,000 square feet of continuous meeting space and be configurable to simultaneously accommodate multiple events. A qualified convention center must be wholly owned by a municipality and none of which is or may be owned through an undivided common interest, and must be connected to a qualified hotel or contain an exterior wall that is located not more than 1,000 feet from the nearest exterior wall of a qualified hotel, but cannot be located within a hotel. See Section 351.151(2).

A qualified hotel must be designated by the municipality and located on land owned by the designating municipality and be connected to a qualified convention center facility. See Section 351.151(3). The Hotel Facilities are being constructed on land owned by the City and will be connected to the New Convention Center Facilities, therefore the Hotel Facilities are a qualified hotel.

Question Five (revised per email received on Sept. 25, 2019): Does the City's issuance of COs meet the requirements of Section 351.155(a)?

Ruling Five: Yes, the City’s issuance of COs satisfies the requirements of Section 351.155(a).

Analysis for Ruling Five: A municipality may pledge or commit the revenue derived from the tax imposed under Chapter 351 from a qualified hotel and the revenue to which the municipality is entitled under Section 351.156 for the payment of contractual obligations related to the project, including obligations under a contract authorized by Chapter 380, Local Government Code, for the project and an interlocal agreement directly related to the project. See Section 351.155(a).

Question Six (revised per email received on Sept. 25, 2019): Will the City's pledge of local hotel occupancy taxes to pay for the City's COs for the project satisfy the requirements of Section 351.155(b)?

Ruling Six: Yes, Section 351.155(b) is satisfied with the pledging or committing of revenue derived from the tax imposed under Chapter 351 from a qualified hotel for the payment of the City COs to construct and equip the New Convention Center Facilities.

Analysis: A municipality may pledge or commit revenue for the payment of bonds, other obligations, or contractual obligations only if the qualified hotel that is a component of the qualified project for which that revenue is pledged or committed benefits from the pledging or committing of that revenue. See Section 351.155(b).

Question Seven: Is the City entitled to receive revenue derived from the Hotel Facilities and each restaurant, bar, and retail establishment located in or connected to the Hotel Facilities under Section 351.156 if the City pledges the revenue derived from the tax imposed under Chapter 351 from the Hotel Facilities for the payment of the City COs issued for the New Convention Center Facilities?

Ruling Seven: Yes, by pledging the revenue derived from the qualified hotel the City is entitled to the revenue described by Section 351.156 derived from the qualified hotel, and each restaurant, bar, and retail establishment located in or connected to the qualified hotel.

Analysis for Ruling Seven: A municipality is not entitled to receive revenue under Section 351.156 or 351.157 unless the municipality has pledged or committed a portion of the revenue derived from the tax imposed under Chapter 351 and collected by the qualified hotel for the payment of bonds, other obligations, or contractual obligations … and issued or incurred for the qualified project. Section 351.155(e). This requirement is satisfied by the City pledging the revenue derived from the tax imposed under Chapter 351 collected at the qualified hotel for the payment of the City’s COs.

Question Eight: What revenue is the City entitled to receive under Section 351.156?

Ruling Eight: The City is entitled to receive revenue under Section 351.156 as long as the requirements for Section 351.155(e) are satisfied.

Analysis for Ruling Eight: A municipality is entitled to receive the revenue derived from state sales tax and state hotel occupancy tax generated, paid, and collected by a qualified hotel, and each restaurant, bar, and retail establishment located in or connected to the hotel or the related qualified convention center facility. See Section 351.156. Additionally, a municipality may also receive the local sales tax imposed by a political subdivision under Chapter 322 or 323, the hotel occupancy tax imposed by a political subdivision under Chapter 352, and the mixed beverage tax issued under Section 183.051 if the political subdivision that is entitled to receive the revenue from the tax agrees in writing to the municipality receiving that revenue. Section 351.156(3).

Question Nine: Is the City entitled to receive all funds described in Section 351.156 generated by the Project for a period of 10 years after the date the Hotel Facilities are open for initial occupancy?

Ruling Nine: Yes, the City is entitled to receive all funds described in Section 351.156 generated by the Project for a period of 10 years after the date the Hotel Facilities are open for initial occupancy provided the requirements in Section 351.155(e) are satisfied.

Analysis for Ruling Nine: Section 351.158 states that a municipality is entitled to receive revenue as provided by Sections 351.156 and 351.157 until the 10th anniversary of the date the qualified hotel to which the entitlement relates is open for initial occupancy. Open for initial occupancy means the earliest date on which a member of the public obtains sleeping accommodations for consideration and the qualified convention center facility is operational, as supported by records of the hotel and convention center.

Question Ten: When will the entitled tax revenues be paid to the City by the Comptroller?

Ruling Ten: The rebates will be for the first 10 years after the qualified project is open for initial occupancy. The Comptroller’s office will make monthly payments of state sales and use taxes and state hotel occupancy taxes. The Comptroller allocates mixed beverage taxes quarterly under Section 183.051(b) to cities.

Question Eleven: Assuming the Comptroller’s office agrees that the City is entitled to receive the revenues under Section 351.156, what is the process for obtaining such revenues?

Ruling Eleven: The City may submit a written request to receive the revenues under Section 351.156 to the Comptroller’s Audit division. There is no specific timeframe for when a City may formally submit a request. The Comptroller’s office will not issue revenue to the City until the qualified hotel is open for initial occupancy. A written request to the Comptroller’s Audit Division should include the following:

A copy of the municipality’s ordinance or resolution approving the rebate agreement between the municipality and the qualified project;

A copy of the architect’s plan for the qualified project;

A map showing required distances between the qualified hotel, including restaurants, bars, retail establishments, and the qualified convention center facility;

Documentation showing ownership for the qualified convention center facility and property ownership for the qualified hotel;

Designation of the hotel;

Records from the qualified hotel, qualified convention center, and municipality, such as guest folios and press releases, which show the date when the project was open for initial occupancy;

Name and address of the qualified hotel and the Comptroller-issued taxpayer identification and location numbers that the hotel is using, or will use, to report sales and use tax, hotel occupancy tax, mixed beverage gross receipts tax, and mixed beverage sales tax;

Name and Comptroller-issued taxpayer identification, and location numbers of each restaurant, bar, and retail establishment that is part of the qualified project;

Waiver of confidentiality releases signed by the authorized officer or director of the hotel and from each restaurant, bar, and retail establishment allowing the Comptroller to release the facility’s sales and use tax and mixed beverage sales tax information to the municipality. Releases must be renewed annually, unless the release specifically states a longer period not to exceed three years;

Name and telephone numbers of contact person for the municipality; and

Completed direct deposit authorization form from the municipality.

After review, the Comptroller’s office will give the City written notice as to the results of that review and will initiate the rebate process as appropriate.

The Comptroller’s office does not have statutory authority to approve a qualified project for any benefits until the project is completed and an application for benefits is submitted and verified. At this time the Comptroller does not find facts that would preclude the City from being eligible to request a refund related to the qualified project under the applicable statutory provisions.

The Comptroller reserves the right to audit and investigate the City’s project to confirm the accuracy of the representations made in this private letter ruling. If City’s representations are inaccurate, the Comptroller shall have the right to rescind this private letter ruling and may collect the amounts due from the project by any method allowed by Tax Code, Chapter 111, or any other applicable law.

The Comptroller will have to verify all relevant facts after receiving a request for refund of the taxes described in Section 351.156. We base this response on the facts presented, which are subject to verification by the Comptroller’s Audit Division. Different facts may yield different conclusions.

Question Twelve: In the event any of the restaurants, bars, and retail establishments located in or connected to the Hotel Facilities or the New Convention Center Facilities or the Existing City Convention Center are leased out to a private entity other than the operator of the Project, would the City still be able to receive revenues for such facilities?

Ruling Twelve: Yes, the City would be able to receive revenues for restaurants, bars, and retail establishments that are located in or connected to the related qualified convention center facility or the qualified hotel. Leasing these facilities to a private entity would not prevent the City from receiving revenues from the facilities.

The City can only receive rebates from the New Convention Center Facility and Hotel Facilities. The Existing Convention Center Facility is not part of the qualified project and therefore, the City is not entitled to receive revenues from restaurants, bars, and retail establishments that are located in the Existing Convention Center Facility.

Analysis for Ruling Twelve: A municipality is entitled to receive the revenue derived from the taxes generated, paid, and collected by a qualified hotel, and each restaurant, bar, and retail establishment located in or connected to the hotel or the related qualified convention center facility. See 351.156. A qualified convention center facility must be wholly owned by a municipality and none of which is or may be owned through an undivided common interest. See 351.151(2)(B). Even if the restaurant, bar, or retail establishment located in the related qualified convention center facility is leased out to a private entity, then the ownership requirement for the qualified convention center facility is still satisfied.

Section 351.151(3) contains the requirement that a qualified hotel must be located on land owned by the City. Therefore, the City will continue to receive revenues in the event that the restaurants, bars, or retail establishments located in the qualified hotel are leased out to a private entity, so as long as the qualified hotel is located on the property owned by the City.

Question Thirteen: Are there any minimum capital expenditure requirements required to be made in connection with the Project?

Ruling Thirteen: No, there are no minimum capital expenditure requirements required to be made in connection with the Project.

Question Fourteen: Are there any minimum or maximum size requirements for the buildings or sites or delegated space for certain purposes within such buildings or component spaces associated with the Project?

Ruling Fourteen: The only size requirement is found in Section 351.151(2)(E) and states that the qualified convention center facility has at least 10,000 square feet of continuous meeting space.

Question Fifteen: Are there any minimum or maximum number of guest room requirements to be a “qualified hotel” under Section 351.151(3)?

Ruling Fifteen: No, there are no minimum or maximum number of guest room requirements express or implied in Section 351.151(3).

Question Sixteen (Question 16 from the initial request has been restated as Question 16 and Question 17): As long as the Project and its separate components (i.e. the Hotel Facilities), meet the definitional requirements of a “qualified hotel” under Section 351.151(3), will the City’s entrance into a ground lease or facilities lease with a tenant affect the Hotel Facilities qualification as a “qualified hotel” under Section 351.151?

Ruling Sixteen: No, as long as the definitional requirements are met for a qualified hotel, the City’s entrance into a ground lease or facilities lease with a tenant will not affect the Hotel Facilities status as a qualified hotel under Section 351.151.

Analysis for Ruling Sixteen: A qualified hotel must be located on land owned by the designating municipality. See Section 351.151(3)(A). The Hotel Facilities will be built on land owned by the City. A ground lease will not disqualify the Hotel Facilities as long as the City retains ownership of the land on which the hotel is located.

Question Seventeen: As long as the Project and its separate components (i.e. the New Convention Center Facilities), meet the definitional requirements of a “qualified convention center facility” under Section 351.151(2), will the City’s entrance into a ground lease or facilities lease with a tenant affect the New Convention Center Facilities qualification as a “qualified convention center facility” under Section 351.151?

Ruling Seventeen: No, the City’s entrance into a ground lease or facilities lease with a tenant will not affect the New Convention Facilities status as a qualified convention center facility under Section 351.151.

Analysis for Ruling Seventeen: A qualified convention center facility must be wholly owned by a municipality and none of which may be owned through an undivided common interest. See Section 351.151(2)(B). The New Convention Center Facilities will be wholly owned by the City and will be built on land owned by the City. A ground lease will not disqualify the New Convention Center Facilities as long as the City wholly owns the New Convention Center Facilities through an undivided common interest.

Question Eighteen: Are there any restrictions on the use of funds received by the City under Section 351.156?

Ruling Eighteen: There is no statutory restriction on the use of rebated state sales and use taxes and state hotel occupancy taxes.

Question Nineteen (added based on email received on Sept. 25, 2019): Will the construction of parking facilities to serve the qualified project, and the construction of related infrastructure to serve the qualified project be eligible to be included as part of the qualified project?

Ruling Nineteen: Yes, the construction of parking facilities and the construction of related infrastructure to serve the qualified project are both eligible to be included as part of the qualified project.

Analysis for Ruling Nineteen: A qualified project may include a parking area or structure, the nearest property line of which is located not more than 1,000 feet from the nearest property line of a qualified convention center facility or qualified hotel. See Section 351.151(4)(B)(i)(b). Additionally, a qualified project may include constructing infrastructure that is directly related to and necessary for the qualified convention center facility or qualified hotel and is located within the property lines of the qualified convention center facility or qualified hotel, or not more than 1,000 feet from the nearest property line of the facility or hotel. See 351.151(4)(B)(ii).

The Texas Tax Code and Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20190311135245.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

1. Unless otherwise indicated, all references to “Section” and “Chapter” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.