When did recurring motel repainting qualify as scheduled maintenance instead of taxable restoration or remodeling?

Plain-English summary

Rule 3.357 presumed repainting to be restoration or remodeling. Repainting faded, declined, or deteriorated paint was restoration; repainting that replaced or upgraded existing paint, such as a color change, was remodeling.

Scheduled and periodic timing alone did not make repainting maintenance. The work also had to prevent decline or deterioration and preserve the paint's current condition. The motel needed schedules or work orders showing fixed, regularly recurring intervals planned before the existing paint deteriorated. A history of repainting every four years, or budgeting for estimated painting costs, was not enough by itself.

If four-year repainting occurred because walls had become scuffed or soiled or exterior paint had faded, blistered, or peeled, the work was restoration rather than maintenance. The rule set no universal time interval; ordinary meanings of "scheduled" and "periodic" applied. Using different contractors did not prevent otherwise qualifying work from being maintenance.

What this means for you

Property owners claiming maintenance treatment should document the preventive schedule before deterioration occurs. Records showing only that repainting happens repeatedly do not establish the required purpose or timing.

Common questions

Was every four-year repainting cycle maintenance? No. What documentation helped? Fixed schedules or work orders showing repainting before decline. Was repainting damaged paint maintenance? No, it was restoration. Did changing contractors matter? No if the work otherwise qualified.

Citations and references

• 34 Tex. Admin. Code Rule 3.357(a)(6), (a)(9), and (b)(8)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9112L1141G12

Original ruling text

December 5, 1991

Dear ***:

I am sorry to have taken so long in clarifying what constitutes "scheduled
maintenance" under Rule 3.357, Real Property Repair and Remodeling. Your
situation involves a motel chain that can document a history of the expenses
it incurred in painting the hotel units every four years. The taxpayer
may use different contractors for this work.

Repainting of realty is presumed to be a restoration or remodeling activity.
Rule 3.357(b)(8). "Restoration" means to bring back as near as can be to
its original condition real property which is still functional but which has
faded, declined, or deteriorated. Rule 3.357(a)(9). "Remodeling" includes
replacing or upgrading any part of an existing structure. Rule 3.357(a)(6).

Thus, repainting work performed on real property where the original paint
has faded, declined, or deteriorated is restoration. Repainting to replace
or upgrade the existing paint (e.g. to change the color) is remodeling.

The fact that the repainting is scheduled and periodic does not in itself
qualify it as maintenance. In addition to being scheduled and periodic,
maintenance is performed to prevent the decline or deterioration of the
improvement (in this case, the paint), that is, to maintain it in its current
condition.

To support its claim that the repainting of its hotel units is maintenance,
your client must be able to show by maintenance schedules or work orders that
the repainting is planned for fixed and regularly occurring time intervals
(not simply that it occurs at four-year intervals or that money is set aside
for estimated painting expenses) and that these intervals occur prior to the
deterioration or decline of the existing paint.

For example, when the repainting is scheduled for every four years because
historically within that time period the paint on interior walls has begun
to look bad because it is scuffed, soiled, or otherwise damaged and the
exterior paint has begun to fade significantly, blister, or peel, then the
repainting involves restoration rather than maintenance.

For obvious reasons, the rule sets no mandatory time limits (e.g. at least
once a year) on "scheduled periodic work." Neither does the rule define
"scheduled" or "periodic;" therefore, these words are given their normally
understood meanings. According to Webster's New Collegiate Dictionary,
scheduled means "assigned or designated for a fixed time" and periodic
means "occurring or recurring at regular intervals."

The fact that your client uses different contractors for the work will
not prevent the repainting from being considered maintenance if it otherwise
qualifies as maintenance.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need additional information, please call me
at 1-800-252-5555, ext. 3-4004.

Sincerely,

Wade Anderson
Assistant Director
Tax Administration Division