ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
November 13, 2008
The·HonofabIe ·BeveilYWoolley OpiriI()iiN(). GA-0682
Chair, Committee on Calendars
Texas House of Representatives Re: Meaning of "administrative costs" for purposes
Post Office Box 2910 of section 352.1015(c), Tax Code, relating to the
Austin, Texas 78768-2910 expenditures ofrevenue from the hotel occupancy tax
(RQ-0714-GA)
Dear Representative Woolley:
Tax Code chapter 352 authorizes the commissioners courts of certain counties, by order or
resolution, to impose a county hotel occupancy tax. TEX. TAX CODE ANN. § 352.002 (Vernon 2008)
(listing categories of counties that may impose the tax). The tax is primarily for "enhancing and
promoting tourism and the convention and hotel industry," although a county's authority to expend
revenue from the tax depends on the statutes specifically applicable to the county. Id § 352.1015(e);
see generally ide §§ 352.101-.1 09 (subchapter B, designating uses ofrevenue for different categories
of counties). Applicable to all counties imposing the tax, section 352.1015(c) allows a county to
spend its hotel occupancy tax revenue for "administrative costs ... incurred directly in the promotion
and servicing expenditures authorized by the applicable provisions of [subchapter B] governing the
use of revenue by that particular county." Id. § 352.1015(c).
You ask if expenditures for administrative costs authorized in section 352.1015(c) may
include the payment of premiums for an insurance policy known as "key man" or "key person"
insurance. 1 You explain "that a key-man life insurance policy is a life insurance arrangement under
which an entity purchases a life insurance contract to insure the life of a 'key' person. The entity
retains all the rights and benefits of the life insurance contract, including the rights to all death
benefits and cash value." Request Letter, supra note 1, at 1 (citing Split-Dollar Life Insurance
Arrangements, T.D. 9092, 2003-2 C.B. 1055). Your request does not specify a particular kind of
entity that may be funded in part by the tax, or the particular positions that might be insured.
Id at 2.
lSee Letter from Honorable Beverly Woolley, Chair, Committee on Calendars, Texas House ofRepresentatives,
to Honorable Greg Abbott, Attorney General of Texas (May 12, 2008) (on file with the Opinion Committee, also
available at www.texasattorneygeneral.gov) [hereinafter Request Letter].
The Honorable Beverly Woolley - Page 2 (GA-0682)
To determine legislative intent, we "consider a statute as a whole and give meaning to the
language that is consistent with its other provisions." Sultan v. Mathew, 178 S.W.3d 747, 749 (Tex.
2005). Section 352.1015 requires a county to expend hotel occupancy tax revenue as authorized by
the statutes specifically applicable to the particular county and, with certain exceptions, prohibits
using revenue from the tax "for the general revenue purposes or general governmental operations
ofacounty." TEX. TAX CODE ANN. § 352.1015(e) (Vernon 2008).2 Section 352.1015(a) authorizes
a county commissioners court to contractually delegate "the management or supervision ofprograms
and activities funded with revenue" from an authorized tax "to a person, including another .
~gev-emm@ntal~-enti-ty-e£a-private--ergani-z.ati-en-." ········ld§~-$2.1Ql$~Ea).· ·Theeemmissiel1e-rs~-eellrt·-is
responsible for approving such a delegatee's annual budget derived from the hotel occupancy tax
revenue, and by contract, the delegatee is a fiduciary for the funds budgeted. Id The provision you
mention, subsection 352.1015(c), states that:
Hotel occupancy tax revenue spent for a purpose authorized by this
section may be spent for day-to-day operations, supplies, salaries,
office rental, travel expenses, and other administrative costs only if
those administrative costs are incurred directly in the promotion and
servicing expenditures authorized by the applicableprovisions ofthis
subchapter governing the use ofrevenue by that particular county.
If a county or other public or priv~te entity that condlJcts an activity
authorized by the applicable provisions ofthis subchapter governing
the use of revenue by that particular county conducts other activities
that are not authorized, the portion ofthe total administrative costs of
the entity for which hotel occupancy tax revenue may be used may
not exceed the portion ofthose administrative costs actuallyincurred
in conducting the authorized activities.
Id. § 352.1015(c) (emphasis added).
The statute does not define the term "administrative costs." Id. But even assuming for
purposes of this opinion that key person insurance is an administrative cost, the question here is
whether this cost would be "incurred directly in the promotion and servicing expenditures authorized
by the applicable provisions of [chapter 352, subchapter B]." Id. Whether a particular expenditure
is "incurred directly in the promotion and servicing expenditures" as authorized generally will be a
question offact, and will depend on the specific facts and circumstances concerning the expenditure.
See Tex. Att'y Gen. Ope No. JC-0348 (2001) at 2 (advising that whether, and to what extent, a
particular expenditure is a legitimate administrative cost is a question offact). Thus, we cannot say
as a matter of law whether the use of tax revenues for key person insurance could be authorized as
an administrative cost "incurred directly in the promotion and servicing expenditures" under section
352.1015(c). Rather, that issue is for the commissioners court, which approves the budget of the
2But see TEX. TAX CODE ANN. § 352.108(2) (Vernon 2008) (authorizing certain counties that border Mexico
and contain a national recreation area to utilize "25 percent ofthe revenue for the general revenue purposes or general
governmental operations of the county").
The Honorable Beverly Woolley - Page 3 (GA-0682)
authorized program or activity, to determine in the first instance, subject to judicial review. TEX.
TAX CODE ANN. § 352.1015(a), (c) (Vemon2008). And in determining whether tax revenue may
be expended on a key person insurance policy, the commissioners court must consider whether
such an expenditure would be consistent with all provisions of chapter 352 that are applicable to
the partic~lar county. See, e.g., id. § 352.1015(c) (expenditure of tax revenue for administrative
costs of an entity must not exceed the actual administrative costs of the authorized activity); id
§ 352.1015(e) (tax revenue must directly enhance and promote tourism and the convention and
hotel industry and may not be used for general governmental operations). See generally id
§§352.1 ()l-.l-()~J(subchapt€rB,-llses-()fre¥enue--f(}rdifferentcateggriesgfcQunties).
The Hon9rable Beverly Woolley - Page 4 (GA-0682)
SUMMARY
Tax Code section 352.1015(c) allows hotel occupancy tax
revenue to be expended for administrative costs only if they are
incurred directly for the promotion and servicing expenditures
authorized by the provision applicable to the particular county, and
the expenditure is otherwise consistent with chapter 352 of the
Code. Whether expenditures for "key person insurance" premiums
c()l1stitute anauth()ri~edadmil1i-strativec()stisf()r thecemmissiol1ers
court to determine in the first instance, subject to judicial review.
KENT C. SULLIVAN
First Assistant Attorney General
ANDREW WEBER
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
William A. Hill
Assistant Attorney General, Opinion Committee