FAQs

+ What is HOT?

For the purposes of this toolkit, when we say HOT we’re referring to the municipal Hotel Occupancy Tax. In Texas today, municipalities are authorized to charge a tax of up to 7% on individuals staying overnight in hotels or other accommodations. The taxes collected are submitted quarterly to the municipality and must be used for one of nine allowable uses, one of which is promotion of the arts, as well as to “promote tourism and the convention and hotel industry.” Up to 15% of the money collected may be used to fund the arts. For more detail, visit the What is HOT? page.

+ Is there a difference between state, county, and municipal HOT, and how the funds are administered?

Yes, there is a difference. For the purposes of this toolkit, we’re focusing on the municipal HOT, but you can find details about both the state HOT and county HOT in the Resources section.

+ What is the definition of a "municipality"?

The term "municipality" includes any incorporated city, town, or village.

+ How much HOT revenue is collected in my municipality annually?

Municipalities that impose a local HOT must now annually report their tax rates and revenue amounts, including the percentage of revenue allocated for specific uses—including the arts—from the preceding fiscal year. You can find this data on the Texas Comptroller's website. Note, the data is self-reported by submitting municipalities or third parties on their behalf and has not been independently verified by the Texas Comptroller of Public Accounts. If you don’t see your municipality on this list or if you have specific questions about your municipality’s local HOT rate, revenue, and/or allocations, contact your municipality directly or reach out to Texans for the Arts Foundation for assistance.

+ How much HOT revenue collected in my municipality annually is spent on the arts?

With the passage of Senate Bill 1221 (SB 1221) in the 85th Texas legislative session, municipalities that impose the municipal HOT must annually report their tax rates and revenue amounts to the Texas Comptroller, including the percentage of revenue allocated for specific uses—including the arts—from the preceding year. You can find the reported data on the Texas Comptroller's website.

To cut to the (arts) chase, we’ve created a spreadsheet, linked here, that just lists the municipal HOT for the arts from the municipalities that reported over the years since the passage of SB 1221—2017 through 2021.

Note, the data is self-reported by submitting municipalities or third parties on their behalf and has not been independently verified by the Texas Comptroller of Public Accounts. If you don’t see your municipality on this list or if you have specific questions about your municipality’s local HOT rate, revenue, and/or allocations, contact your municipality directly or reach out to Texans for the Arts Foundation for assistance.

+ How does my municipality distribute HOT?

In many cases, the local elected authority appoints a “delegated authority” to distribute the funds. This delegated authority can be a municipal agency or department OR it can be an outside entity such as an IRS 501(c)(3) nonprofit corporation. You’re going to want to make sure you’re talking to the right people. Depending on the size of your community, that might be someone in the City Finance Department, City Manager’s office, Parks Department, or other municipal agency OR it might be a non-municipal organization. To find out how your city or town manages HOT, go to your municipality’s website and search for “Hotel Occupancy Tax,” or call the main municipal phone number and ask to speak with someone about the municipal Hotel Occupancy Tax. To read more about how municipalities distribute HOT, go to Tool # 3 in the HOT TOOLKIT: Arts Organizations & Artists.

+ What arts projects can and cannot be funded by HOT fund?

All municipal HOT funds are restricted to nine allowable uses—promotion of the arts being one—and those uses must also directly promote tourism and the convention and hotel industry. According to the Texas Tax Code, Chapter 351, recipients of HOT funds for the arts must present, perform, promote, encourage, or otherwise make possible artistic events, cultural performances, programs, exhibitions, or lectures involving any of the major art forms listed in the code. And because all programming must “directly promote tourism and the convention and hotel industry,” any funded event or program should be accessible to tourists—which means the ideal venue is a public setting, not private—and it must be promoted and marketed outside of the community to help attract out-of-town visitors.

The art forms specifically listed in the Texas Tax Code include “instrumental and vocal music, dance, drama, folk art, creative writing, architecture, design and allied fields, painting, sculpture, photography, graphic and craft arts, motion pictures, radio, television, tape and sound recording, and other arts related to the presentation, performance, execution, and exhibition of these major art forms.”

For more detail, visit Tool # 2 in the HOT TOOLKIT: Arts Organizations & Artists.

+ Can public art be funded by HOT funds?

The term public art properly refers to works of art in any media that have been planned and executed with the specific intention of being sited or staged in the physical public domain, usually outside and accessible to all.

Yes, public art can be funded by HOT funds, as long as the placement of the work is in the public domain, that the public has physical or visual access to the work, and that there be some marketing strategy accompanying the work over time that will promote it and draw attention to it to attract out of town visitors on an ongoing basis. This promotion could be an opening or closing ceremony, guided tours of the work, social media stories to share, connectivity to other events/activities in the community, etc. - some efforts to keep the work visible and in the public eye.

+ What does the expression “heads in beds” mean and are arts organizations who receive HOT mandated to meet a certain overnight stay threshold?

“Heads in beds” is commonly used in the hotel industry when discussing occupancy statistics. This refers to the idea of measuring the impact on a hotel based on the number of overnight stays in a local hotel, B&B, etc. (literally, how many heads in how many beds).

While we know that HOT expenditures for the arts must promote and have a direct impact on tourism and the hotel and convention industry, there is a common misconception that the only way to directly impact the local hotel industry is through room night sales. In reality, there are a myriad of ways that arts entities can directly impact tourism and the hotel and convention industry as outlined in the Memorandum of Understanding between Texans for the Arts and the Texas Hotel & Lodging Association (linked below).

It is important to know that there is no provision in Chapter 351 of the Texas Tax Code that specifically refers to “heads in beds” to qualify for HOT funding. However, each municipality does have the discretion to impose their own requirements and it’s possible that local HOT funding could be tied in some way to this concept of measuring impact by counting overnight stays.

As noted above, this is a good time to review the Memorandum of Understanding between Texas Hotel & Lodging Association and Texans for the Arts to see a number of ways that hotels and arts leaders can work together to promote the arts AND the hotel industry and have a direct impact on growing tourism.

Remember that the arts not only enrich our communities, but also boost the local economy. Limiting the conversation to only “heads in beds” narrows the scope of opportunities to generate a direct impact on the hotel industry for all stakeholders.

+ What is the HOT tax rate and who pays the tax?

The HOT tax rate varies from municipality to municipality and cannot exceed 7%, without legislative action. It is paid by the hotel customer.

+ Do AirBnBs, HomeAway, Short Term Rentals (STRs), Bed & Breakfasts, and other overnight accommodations have to collect state and municipal HOT?

Yes. Chapter 351 of the Texas Tax Code was passed before the popularization of short term rentals (STRs). Subsequently, in the STATE Tax Code Sec. 156.001, the state expanded the definition of a “hotel” to include short term rentals such as Airbnb and HomeAway: “For purposes of the imposition of a hotel occupancy tax under this chapter, Chapter 351 or 352, or other law, 'hotel' includes a short-term rental. In this subsection, 'short-term rental' means the rental of all or part of a residential property to a person who is not a permanent resident under Section 156.101.” The initial definition of a “hotel” continues as follows: “Sec. 156.001. DEFINITIONS. (a) In this chapter, 'hotel' means a building in which members of the public obtain sleeping accommodations for consideration. The term includes a hotel, motel, tourist home, tourist house, tourist court, lodging house, inn, rooming house, or bed and breakfast.”

+ How much of the tax collected can be used for the arts?

In almost all Texas cities, up to 15% of the money collected from the municipal HOT can be used to fund the arts. The nine allowable uses for the local tax are: 1) convention centers, 2) materials for convention registration and delegates, 3) advertising and promotion to attract tourists and conventioneers, 4) (promotion of) the arts, 5) historical preservation and restoration, 6-8) these pertain to sports facilities and multi-use facilities, and 9) signage to attract tourists.

+ Our community currently maximizes the full allowable 15% for the arts. Can we use more than 15%?

It is possible for communities to allocate more than 15% of HOT funds to the arts, but it can only happen if your community has special state legislation that permits the community to allocate more than 15% of the local hotel occupancy tax to the arts. As an example, the City of Houston allocates 19.5% for the arts.

+ Are there other public resources, besides the HOT funds, available to support the arts?

Yes. On the local level, these will vary from municipality to municipality so we’d suggest reaching out to your local leaders to learn more. On the state level, the Texas Commission on the Arts (TCA) is the state of Texas’ arts agency. To learn more about TCA in general, and funding opportunities specifically, visit www.arts.texas.gov. At the national level, the National Endowment for the Arts has funding opportunities and you can read more about them at www.arts.gov.

+ I want to learn more about how HOT is used in our municipality, but our municipal staff says I must submit a Public Information Request (PIR) for more information. How do I submit a PIR?

Every municipal website should have an online tool to request public information. Your municipality will have two weeks to provide the information or indicate when the information can be provided. In a public information request, you’ll want to ask for:

1. The municipal Hotel Occupancy Tax rate.
2. Gross amounts collected annually through the municipal HOT.
3. Amount spent in each of the nine allowable uses.

(Note: the nine allowable uses are 1) convention centers, 2) materials for convention registration and delegates, 3) advertising and promotion to attract tourists and conventioneers, 4) (promotion of) the arts, 5) historical preservation and restoration, 6-8) these pertain to sports facilities and multi-use facilities, and 9) signage to attract tourists.)

To find out more about researching how your municipality distributes HOT, visit Tool # 1 in the HOT TOOLKIT: Arts Organizations & Artists.

+ Our community currently dedicates most of its municipal HOT to fund a convention center or municipal/civic building used for conventions and large meetings. Do we have any hope of securing HOT resources before the debt is paid?

The funding, building and maintenance of convention centers/convention hotels is costly and often, the primary recipient of HOT in a given community, especially in larger communities. Frequently, those funds can be tied up for 20-30 years depending upon the size of the debt incurred and legal commitments made in the development of the convention facilities. However, there have been communities that have paid off some debt early, freeing up some HOT funds for other uses including the arts. It is worth exploring with your municipal finance department what the status of HOT funds tied up in convention center construction/maintenance is and if there is the possibility of negotiating or servicing debt to make funds available for other community uses that promote the very things that conventioneers would like to partake in—such as the arts.

+ My municipal leadership says that to receive HOT funds any contracts we (an arts organization) make with other entities to realize our funded project must meet municipal hiring criteria. Is that true?

There is nothing in Chapter 351 of the Texas Tax Code that sets forth hiring criteria for artists and/or arts organizations in any community. In fact, it’s to be expected that individuals and organizations contracted to provide artistic events/cultural performances with the use of HOT dollars will have a skill base unique to their art form that is unlikely to comply with and/or relate to municipal hiring criteria. You should make the point that a municipality mandating an arts project/cultural event funded by HOT comply with municipal hiring criteria would very likely devastate the proposed arts/cultural event.

+ Our community requires that applicants must provide an audited financial report with their application to secure HOT funds for the arts. Is that a requirement according to the state statute?

While communities can set up their own granting/contracting programs to distribute HOT for the arts, we have not heard of other communities mandating an audited financial statement as part of an application (or a final report), nor is it a requirement articulated in Chapter 351 of the Texas Tax Code. We recommend that applications include both program or project budgets, and organizational budgets approved by the applicants' respective Board of Directors, in the case of funding organizations, but would consider it a costly and onerous burden to require a formally audited financial statement.

+ Can HOT funds be used to fund a performing arts center or arts related facility?

The short answer is “no,” at least not with funds designated as part of Chapter 351.101(a)(4) or the promotion “of the arts.” In 2017 in Opinion KP-0131, the Texas Attorney General took a strict position on using local hotel tax revenue for an arts facility. The opinion states that the phrase "promotion of the arts," in the state statute does not expressly authorize the use of municipal hotel tax revenues for the construction of arts facilities. The opinion concluded, "construction costs of theater facilities, considered alone, are not within the scope" of the arts category of hotel occupancy tax expenditures. Based on this reasoning, it seems that the Texas Attorney General holds that funding of a physical structure with local hotel tax revenue must be specifically authorized under some other statutory category of hotel tax expenditures, aside from the general “promotion of the arts” category*—such as Chapter 351.101(a)(1) or the construction of convention centers.

+ How can arts organizations receiving HOT funds and hotels hoping to increase overnight stays work together?

Partnerships between arts organizations and hotels are beneficial to both parties. The Memorandum of Understanding between Texans for the Arts and the Texas Hotel & Lodging Association is a great resource for ways the arts and the hotel industry can support each other.