January 12, 2024, Number 1
Comptroller Adopts Local Sales Tax Sourcing Rule Governing Order Receipt and Fulfillment
Updating a previous Legislative Update article, the comptroller has adopted changes to the office’s administrative rules governing local sales tax sourcing, effective January 9. The rule change adds the following language to the existing sales tax sourcing rule governing when an order is received by a fulfillment warehouse:
“The location where the order is received by or on behalf of the seller means the physical location of a seller or third party such as an established outlet, office location, or automated order receipt system operated by or on behalf of the seller where an order is initially received by or on behalf of the seller and not where the order may be subsequently accepted, completed or fulfilled. An order is received when all of the information from the purchaser necessary to the determination whether the order can be accepted has been received by or on behalf of the seller. The location from which a product is shipped shall not be used in determining the location where the order is received by the seller.”
The comptroller acknowledges the ongoing litigation involving six Texas cities and the comptroller in which the cities claim that the location where an order is received should be the location where the vendor forwards the order for fulfilment, rather than the location where the order is received from the customer. According to the comptroller, “the legislative history indicates that the legislature did not intend a fulfillment warehouse to be the location where the order was received unless the fulfillment warehouse received the order directly from the customer.”
The full discussion of the rule change in the Texas Register can be read here.
Bills Effective January 1
Although most bills passed during the 88th Regular Session of the Texas Legislature went into effect on September 1, 2023 or earlier, some bills went into effect on January 1, 2024. Below are the city-related bills that went into effect on January 1, 2024 (or that have important January 1 deadlines within the bill), with the bill text or additional information about each bill linked.
- H.B. 9: Broadband Infrastructure Fund
- H.B. 1228: Electronic Communications with Tax Officials
- H.B. 1922: Building Permit Fees
- H.B. 3186: Municipal Court Youth Diversion Program (Note: While H.B. 3186 goes into effect on January 1, 2024, a municipal court is not required to implement a youth diversion plan under the bill until January 1, 2025. The plan would apply to offenses committed on or after January 1, 2025.)
- H.B. 3273: Notice of Property Tax Amount
- H.B. 3699: Changes to Platting Shot Clock Regulations (Note: H.B. 3699 went into effect on September 1, 2023, but contains an important January 1, 2024 deadline. By January 1, a city must make available to the public a complete, written list of all documentation and other information the city requires to be submitted with a plat application and post the list on the city’s website. A city that does not operate a website must publish the list in a newspaper of general circulation in the city and a public place in the location where the city council meets.)
- S.B. 28: Texas Water Fund
- S.B. 1145: Local Option Property Tax Exemption for Certain Child-Care Facilities
- S.B. 1340 :Reporting Requirements for Chapter 312 Property Tax Abatements in Comptroller’s Local Development Agreement Database
- S.B. 1999: Calculation of Unused Increment Tax Rate
Comptroller Reporting Requirements: Eminent Domain and Local Hotel Occupancy Reports
Eminent Domain Reporting
Legislation passed in 2015 requires cities to annually fill out a web-based form with the comptroller relating to each city’s statutory eminent domain authority. Instructions for reporting can be found here.
The three-month reporting period began on November 1, 2023 and closes on February 1, 2024. However, reports may be updated at any time throughout the year. The failure to fill out the form could result in a maximum $2,000 penalty against a city.
The entry should be, for almost every city, an update of previously filed information, including whether the city exercised its eminent domain authority in the preceding calendar year by filing a condemnation petition under Section 21.012, Property Code. This was clarified to some degree for certain cities by legislation that passed in 2021. S.B. 157 provides that—for cities under 25,000 population—an annual report must be filed only if the city’s eminent domain authority information has changed from the previous year. If the city’s information has not changed from the previous report, the city must use the comptroller’s reporting tool to confirm the accuracy of the previous information by electronically updating the filed report with the comptroller. Of course, any city that never filled out the form as required should do so now.
Local Hotel Occupancy Tax Reporting
The three-month window for reporting local hotel occupancy tax information opened January 1, 2024. The reporting deadline is March 1, 2024.
The 88th Legislature passed H.B. 3727 and S.B. 1420 which, among other things, update the previous reporting statute to require cities to report all uses of hotel occupancy tax revenue, the amount and percentage of the revenue, and the total unspent revenue.
Cities are required to use the comptroller’s online reporting form to submit all required information. Under the new legislation, a city may use a portion of its local hotel occupancy tax revenue for the costs incurred by the city in making and submitting the report to the comptroller. The total amount a city may use for reporting purposes may not exceed: (1) $1,000 if the city has a population of less than 10,000; or (2) $2,500 if the city has a population of 10,000 or more. For more information see the comptroller’s hotel occupancy tax reporting webpage.
The comptroller’s website now consolidates all local government reporting information on one webpage, making it easier to comply with reporting requirements passed in recent sessions. City officials can also access information about special district reporting requirements that generally apply to city-related entities like crime control and prevention districts, municipal development districts, municipal management districts, public improvement districts, and sports and community venue districts.
City officials with questions about the requirements can contact the comptroller’s transparency team by email at firstname.lastname@example.org or (844) 519-5676.
FHWA Releases New Traffic Control Device Manual
The Federal Highway Administration (FHWA) recently released the new 11th edition of the Manual on Uniform Traffic Control Devices for Streets and Highways (MUTCD). The MUTCD provides national standards for traffic signs, signals, and pavement markings. The 11th edition update incorporates input from state and local traffic engineers, traffic control device technicians, and other stakeholders.
The last MUTCD was released in 2009. Under the Infrastructure Investment and Jobs Act, the FHWA must update the MUTCD every four years.
City officials can find the 11th edition of the MUTCD here.
TCEQ Seeking Applicants for Solid Waste and Recovery Advisory Council
The Texas Commission on Environmental Quality (TCEQ) is seeking elected officials to join the Municipal Solid Waste and Resource Recovery Advisory Council. TCEQ is looking to fill three vacant positions:
- An elected official from a municipality with a population fewer than 25,000. The selected council member’s term will expire August 31, 2029.
- An elected official from a municipality with a population of 100,000 or more but less than 750,000. The selected council member’s term will expire August 31, 2025.
- An elected official from a municipality with a population of 750,000 or more. The selected council member’s term will expire August 31, 2029.
- Review and evaluate the effect of state policies and programs on municipal solid waste management;
- Make recommendations to the TCEQ Commissioners on matters relating to municipal solid waste management;
- Recommend legislation to encourage the efficient management of municipal solid waste;
- Recommend policies for the use, allocation, or distribution of the planning fund that includes:
- Identification of statewide priorities for use of funds;
- The manner and form of application for financial assurance; and
- Criteria in addition to those to be evaluated in establishing priorities for providing financial assistance to applicants; and
- Recommend special studies and projects to further the effectiveness of municipal solid waste management and resource recovery.
Interested city officials can find more information including the application form here.
Reminder: U.S. Treasury to Host Workshop on SLFRF Reporting
The U.S. Department of the Treasury (Treasury) will host a workshop on the 2024 State and Local Fiscal Recovery Funds (SLFRF) annual report due April 30, 2024. The workshop is to help recipients with key resources and a live “how-to” training demonstration to complete the annual report.
The following areas will be covered in the workshop:
- Reporting responsibilities;
- Updating user roles;
- A Treasury Reporting Portal demonstration; and
- Compliance responsibilities.
The workshop will be on January 16, 2024 at 2:00 CST. Interested city officials can register here. Treasury recommends that staff who administer their city’s SLFRF funds attend. Specifically, staff directly administering budget, finance, policy, grants, housing programs, Capital Improvement Plan programs, emergency management programs, or other functions of the SLFRF program.
In addition, Treasury has provided the following resources for cities:
- Link to subscribe to the SLFRF Newsletter
- NEU Quick Reference Guide
- SLFRF Explainer Video Series:
Governor Announces Grants to Military Communities
On Tuesday, Governor Abbott announced a round of $15.4 million in grant funding from the Texas Military Preparedness Commission (TMPC) Defense Economic Adjustment Assistant Grant (DEAAG) program. The DEAAG program is a grant program that invests in infrastructure projects and other initiatives to increase the military value in Texas military installations to help prevent any potential future Base Realignment and Closure (BRAC) round from occurring in Texas.
The following cities will receive FY 2024-2025 DEAAG reimbursements:
- City of Harker Heights: $5 million; Fort Cavazos – Railhead Energy Resiliency Project
- City of Fort Worth: $300,000; Naval Air Station Fort Worth – Anti-Terrorism Protection Security System
- City of El Paso: $4.5 million; McGregor Range – Booster Station Replacement Project
Federal Infrastructure Bill Update
In November 2021, the federal Infrastructure Investment and Jobs Act (IIJA) was signed into law. The IIJA is altogether a $1.2 trillion bill that will invest in the nation’s core infrastructure priorities including roads, bridges, rail, transit, airports, ports, energy transmission, water systems, and broadband.
The League will monitor state and federal agencies and work with the National League of Cities (NLC) to access the latest information relating to the IIJA. We will provide periodic updates in the Legislative Update on resources for Texas cities on how to access IIJA funding for local infrastructure projects.
U.S. Department of Energy (USDOE)
The USDOE is accepting applications for its Inflation Reduction Act (IRA) Assistance for the Adoption of the Latest and Zero Building Energy Code (AZBEC) grant program. The AZBEC program seeks to promote innovative approaches to improve energy efficiency and reduce emissions in new and existing buildings by providing grant funding to state and local governments to adopt, implement, and measure building energy codes that meet or exceed IRA energy savings targets.
Eligible applicants include state and local governments with the authority to adopt qualified building codes.
Eligible projects must address one or more of the following topics:
- Topic Area 1: Adopting and implementing qualified model energy and zero energy building energy codes;
- Topic Area 2: Adopting and implementing the latest model energy or zero energy codes, custom zero energy codes, stretch codes, or amendments to strengthen or weaken existing codes; or
- Topic Area 3: Adopting and implementing innovative building energy codes with energy savings equivalent to the latest model energy or zero energy codes.
Proposed building energy code changes or approaches must be measurable, verifiable, and enforceable by the applicant vested with the authority to enforce such measures.
Interested applicants must submit mandatory concept papers at infrastructure-exchange.energy.gov by 3:59 PM CST on Friday, February 9, 2024.
USDOE must receive complete applications by 3:59 PM CST on Tuesday, April 30, 2024.
United States Department of Housing and Urban Development (HUD)
HUD is accepting applications for its Section 108 Loan Guarantee program. The Section 108 program seeks to support state and local government projects designed to increase their resilience against natural disasters. The program allows Community Development Block Grant (CDBG) recipients to leverage their annual CDBG awards to obtain low-cost, flexible financing. CDBG recipients may use Section 108 funds to undertake projects directly, engage subrecipients to undertake projects, or provide third-party loans to businesses or developers.
Eligible projects and activities include:
- Acquiring real property;
- Rehabilitating publicly-owned property;
- Rehabilitating CDBG-eligible housing;
- Constructing affordable housing units (only in limited circumstances);
- Constructing, improving, or installing public facilities;
- Relocating, clearing, or making site improvements for eligible properties;
- Third-party economic development loans;
- Public works and site improvements in colonias;
- Payment of interest on eligible public offerings; and
- Debt service reserves and finance fees.
All eligible projects and activities must benefit low and moderate-income people, help eliminate or prevent slums and blight, or meet urgent community needs.
City officials can find more information about the Section 108 loan program here.
Interested applicants must conduct pre-submission and citizen participation activities before submitting their application. Because of these requirements, HUD recommends contacting Section 108 program staff before applying. Texas is in HUD Region 6. Contact information for Region 6 field offices can be found here.
HUD is accepting Section 108 program applications on a rolling basis.
TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.