Texas Legislative Update, 88th Legislature, Regular Session | Qualified Projects Under Texas Tax Code Chapter 351, Subchapter C

Summary: The Texas Legislature enacted four bills that 1) expand the list of cities that can build qualified projects (i.e., hotel and convention center projects subject to certain specifications) under Texas Tax Code Chapter 351, Subchapter C; 2) establish a claw back mechanism if state tax revenue generated by a qualified project does not meet certain metrics, 3) require a biennial report from the Texas Comptroller of Public Accounts regarding qualified projects, and 4) clarify that the provisions in Subchapter C do not provide any additional mechanism for taking property for public purposes or economic development.

Bills Enacted:

Background: Texas Tax Code Chapter 351, Subchapter C entitles certain cities to receive rebates of state taxes if the cities use their municipal hotel occupancy tax revenue in connection with a "qualified project."1 (Note that Texas Tax Code Chapter 351 also envisions qualified projects that are not governed by Subchapter C. For the sake of clarity, I'll refer to the projects in this post as Subchapter C qualified projects.)

A Subchapter C qualified project is a project to acquire, construct, repair, remodel, expand, or equip a qualified convention center facility, a qualified hotel, and/or certain restaurants bars, retail establishments, spas, and parking areas or structures within a certain proximity to the qualified convention center facility or qualified hotel.2

A "qualified convention center facility" means a facility that:

  • is primarily used to host conventions or meetings;
  • is wholly owned by a municipality;
  • is connected to or has an exterior wall that is located not more than 1,000 feet from the nearest exterior wall of a qualified hotel;
  • is not located in a hotel, sports stadium, or other structure;
  • has at least 10,000 square feet of continuous meeting space; and
  • is configurable to simultaneously accommodate multiple events of different sizes and types.3

A "qualified hotel" means a hotel that is designated by a qualifying city as the hotel that is part of a Subchapter C qualified project.4 A qualified hotel generally:

  • must be located on land owned by the designating municipality (there are exceptions discussed below); and
  • must be connected to a qualified convention center facility or have an exterior wall that is located not more than 1,000 feet from the nearest exterior wall of the qualified convention center facility.5

If a city pledges or commits a portion of its municipal hotel occupancy tax revenue collected by the qualified hotel for the payment of bonds and certain other obligations issued or incurred for the Subchapter C qualified project, the city generally will be entitled to receive certain state tax revenue derived from the project for a period of 10 years after the qualified hotel opens for initial occupancy.6 These state taxes include sales and use tax and hotel occupancy tax generated by the qualified hotel, and each restaurant, bar, and retail establishment located in or connected to the qualified hotel or qualified convention center facility.7 If a political subdivision that is entitled to receive tax revenue from the project agrees in writing, the city also is entitled to receive the sales and use tax imposed by political subdivision, the hotel occupancy tax imposed by the subdivision, and the mixed beverage tax to which the political subdivision is entitled.8

A certain subset of cities also may be entitled to additional rebates from qualified establishments located within 1,000 feet from the nearest exterior wall of a qualified hotel or qualified convention center facility.9


1. See Tex. Tax Code §§ 351.152 (Applicability), 351.155 (Pledge of Commitment of Certain Tax Revenue for Qualified Project), 351.156 (Entitlement to Certain Tax Revenue), 351.157 (Additional Entitlement for Certain Municipalities).

2. Id. § 351.151(4) (Definitions).

3. Id. § 351.151(2).

4. Id. § 351.151(3).

5. Id.

6. Id. §§ 351.155(e), 351.158 (Period of Entitlement).

7. Tex. Tax Code §§ 351.156.

8. See Id. §§ 183.051 (Mixed Beverage Tax Clearance Fund), 351.156(3).

9. Id. § 351.157.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.