Tool #4: HOT revenue do’s and don’ts

You’ll want to be aware of the allowable uses for HOT funds—as well as the ways the funds cannot be used. 

According to the Texas Tax Code, Chapter 351.101.(4), 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. In addition, any funded event or program should be accessible to tourists—which means the ideal venue is a public setting, not private—and it should be promoted and marketed outside of the community to help attract out of town visitors.

The art forms specifically listed in the code are fairly all encompassing and 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.”

The Texas Tax Code allows for the presentation of art to take many forms, including events taking place in physical facilities such as museums, theaters, concert halls, etc., as well as those taking place in parks, streetscapes, and less traditional arts venues. All events and programs must be advertised and open to the general public.

In addition, we know that HOT funds for the arts must directly enhance and promote tourism and the convention and hotel industry. Review the Texas Hotel & Lodging Association (THLA) and Texans for the Arts’ Memorandum of Understanding (see resources below) to find many useful strategies and examples of how arts events and arts organizations can show a direct impact on tourism and the convention and hotel industry.

While the state does not state that only nonprofit entities may receive funding from HOT, municipalities are able to impose their own eligibility requirements and most do require proof of nonprofit status for an entity to qualify for local HOT funding. In some cases, municipalities require that individual artists apply for funding as a sponsored project (meaning, sponsored by a qualifying nonprofit organization).

State law specifically provides that HOT revenue may not be used for the general revenue purposes or the general governmental operations of a municipality. In other words, the municipality may not use HOT funds to cover their general budget expenses such as transportation, construction, public works, police/fire/EMS, housing, parks and recreation, etc.