A fiscal note dated April 20, 2015 anticipates a negative two-year net impact to General Revenue Related Funds from CSHB 3692 of $170,000 through the biennium ending August 31, 2017.

House Bill 3692 would amend Chapter 351 of the Tax Code related to Municipal Hotel Occupancy Taxes to change the definition of "convention center facilities" or "convention center complex" to add a hotel to be owned by a person, including a private entity, to be constructed within 1,000 feet of a convention center facility owned by a municipality with a population of at least 99,900 but not more than 112,000 and that is located in a county with a population of at least 135,000 but not more than 200,000.

House Bill 3692 would amend Subchapter B, Chapter 351 of the Tax Code on the use and allocation of revenue from municipal hotel occupancy taxes to add that a municipality with a population of at least 99,900 but not more than 112,000 that is located in a county with a population of at least 135,000 but not more than 200,000 could agree to rebate, refund, or pay all or part of the revenue from the municipal hotel occupancy tax that is derived from a qualified hotel project for up to 20 years after the qualified hotel project opens for initial occupancy. In such a case, the municipality should not, on or after the qualified hotel project from which the revenue is derived opens for initial occupancy, reduce the percentage of revenue from the municipal hotel occupancy tax allocated for advertising and conducting solicitations and promotional programs to attract tourists and convention delegates or registrants to the municipality or its vicinity to a percentage that is less than the average percentage of that revenue allocated by the municipality for that purpose during the 36-month period the municipality begins using tax revenue from the qualified hotel project.

The bill would also entitle such a municipality to receive hotel occupancy tax revenue from a qualified hotel project that an owner of the project may receive under Section 151.429(h) of the Tax Code (related to tax refunds for enterprise projects) and Section 2303.5055 of the Government Code (related to refund, rebate, or payment of tax proceeds to qualified hotel projects), during the first 20 years after the qualified hotel project is open for initial occupancy.

House Bill 3692 seeks to extend certain sales and state hotel occupancy tax refunds, rebates or payments to certain municipalities -- the fiscal note indicates that the City of Midland and the City of Odessa would benefit from the bill -- for a qualified hotel project defined as a hotel proposed to be constructed that is within 1,000 feet of a convention center facility owned by a municipality with a population of at least 99,900 but not more than 112,000 that is located in a county with a population of at least 135,000 but not more than 200,000.

House Bill 3692 would also allow such hotel projects to benefit from such rebates for up to 20 years (Section 2303.5055 of the Government Code regarding a refund, rebate, or payment of tax proceeds to qualified hotel projects currently extend such favors for up to 10 years).

House Bill 3692 tries to extend certain tax privileges to a very narrow category of municipalities and hotel projects, hence favoring these municipalities and these particular hotels above other municipalities or hotels.

While such rebates already exist, this is not the proper way to apply taxation. A tax should be low and broad-based enough that only necessary revenues are levied - and no more - and it doesn't impede private enterprise from starting new projects. If tax rebates are deemed necessary for some private projects to be started, maybe the tax is too high, or the project is not sustainable. In any case, the burden of paying the tax should not be placed on some to support others.

Additionally, tax privileges, because they favor some above others, distort the free market system and have the potential to create unintended consequences.

House Bill 3692 would not only increase the scope of government but it would also be bad for the free market. We oppose House Bill 3692.