No. 38946 (New Rule): Rule R357-13. Hotel Convention Center Tax Credit

(New Rule)

DAR File No.: 38946
Filed: 11/09/2014 01:04:13 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is created for the purpose of outlining the parameters by which this tax credit will be administered.

Summary of the rule or change:

This rule identifies: 1) procedures by which the Governor's Office of Economic Development may enter into an agreement with a qualified hotel owner for the development of a qualified hotel and authorize a tax credit under the New Convention Facility Development Incentive Act; 2) minimum criteria for an agreement with a qualified hotel owner; 3) roles and responsibilities of the independent review committee; 4) sales and use taxes available to measure and calculate the income tax credit; 5) procedures for calculating the income tax credit; 6) funding for the local portion of the income tax credit from local sales and use tax revenue; and 7) administrative procedures of the Hotel Impact Mitigation Fund.

State statutory or constitutional authorization for this rule:

• Section 63M-1-3409

Anticipated cost or savings to:

the state budget:

This rule outlines the parameters of this tax credit program. It does not require any additional funds from the state nor does it cut any costs to the state for the program. Thus, there are no anticipated costs or savings to the state budget.

local governments:

Local governments may be impacted by the local portion of their taxes becoming part of this tax credit's formula via statute. Thus, this rule may affect local governments because it outlines how the local portion of income tax local government's collect will be utilized in this program.

small businesses:

Small businesses may be impacted by this rule because it outlines the administrative procedures of the Hotel Impact Mitigation Fund. This fund will be used to provide "bounce back" incentives for visitors to use in other areas' hotels etc. in the state. Thus, some small businesses may be impacted by how this fund is used to create such an incentive for visitors.

persons other than small businesses, businesses, or local governmental entities:

There may be other persons affected by this rule. However, the office does not believe there are any other direct groups that will by impacted by this rule because the rule and tax credit generally only impacts small businesses and local governments.

Compliance costs for affected persons:

There are no compliance costs needed for this rule. Small businesses and local governments do not to change any practice or protocol as a result of this rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

As mentioned above small businesses may be impacted by this rule because it outlines the administrative procedures of the Hotel Impact Mitigation Fund. This fund will be used to provide "bounce back" incentives for visitors to use in other areas' hotels etc. in the state.

Val Hale, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Governor
Economic Development
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Jeffrey Van Hulten at the above address, by phone at 801-538-8694, by FAX at 801-538-8888, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/31/2014

This rule may become effective on:

01/08/2015

Authorized by:

Val Hale, Executive Director

RULE TEXT

R357. Governor, Economic Development.

R357-13. Hotel Convention Center Tax Credit.

R357-13-1. Purpose.

(1) This rule identifies:

(a) procedures by which the Governor's Office of Economic Development may enter into an agreement with a qualified hotel owner for the development of a qualified hotel and authorize a tax credit under the New Convention Facility Development Incentive Act;

(b) minimum criteria for an agreement with a qualified hotel owner

(c) roles and responsibilities of the independent review committee;

(d) sales and use taxes available to measure and calculate the income tax credit;

(e) procedures for calculating the income tax credit;

(f) funding for the local portion of the income tax credit from local sales and use tax revenue; and

(g) administrative procedures of the Hotel Impact Mitigation Fund.

 

R357-13-2. Authority.

(1) Utah Code Section 63M-1-3409 authorizes the Governor's Office of Economic Development to enact rules to carry out its responsibilities under the Act.

 

R357-13-3. Definitions.

(1) Unless otherwise specifically defined in this rule, Utah Code Section 63M-1-3402 defines the terms used in this rule.

(2) "Appointing entity" means any of the entities responsible for appointing members to the Independent Review Committee pursuant to Utah Code Section 63M-1-3404.

 

R357-13-4. Application for Approval of a Qualified Hotel and For Authorization of Tax Credits.

(1) A qualified hotel owner or host local government may apply to the Office for approval to develop a qualified hotel, and to authorize a tax credit as set forth below.

(2) The initial application shall include at least the following information:

(a) Identify the hotel property and the hotel owner;

(b) A proposal for the convention center hotel, including construction time lines and proposed spending over the life of the project;

(c) Include the required endorsement letter from the County in which the hotel is located;

(i) The endorsement letter shall include by reference to or attachment of all of the requirements placed on the hotel by the County in relation to the endorsement letter; and

(ii) The endorsement letter shall include by reference to or by attachment the County's expectations regarding compliance with its requirement by the developer or owner, including how compliance with the requirements will be measured and tracked.

(d) Details regarding the capital investment expected

(e) The period of time for which the qualified hotel owner or host local government expects to request and claim tax credits related to the project, subject to the limitations set forth in Utah Code Section 63M-1-3403.

(f) The maximum amount of tax credits that the applicant is requesting, subject to the limitations set forth in Utah Code Section 63M-1-3403.

(3) The Office, with advice of the Board shall review the application and materials and determine whether to approve the Hotel, and what conditions to place on the award of tax credits.

(a) The Office shall review and application and respond within 60 days.

(b) If more information is requested by the Office or the Board, the applicant will have 15 days to provide the additional information, and the Office's decision will be extended by 15 days.

(c) If the Office declines to approve the project, it shall state specifically the reasons for declining, and what, if anything the applicant can do to cure the defects.

(d) If the Office approves the project, a notice of agency action will be sent to the applicant and to the county and municipality where the proposed project is located.

(4) The notice of agency action shall include the terms and requirements related to the applicant's application for tax credits.

 

R357-13-5. Independent Review Committee.

(1) Creation of Independent Review Committee

(a) The Board shall establish the independent review committee within thirty days of the RFP award.

(i) All entities with appointing authority shall submit the name(s) of the person(s) that they are appointing to the Board no later than 10 days after the RFP award.

(ii) The appointing authority shall ensure that the person being appointed has accepted the position on the independent review committee and is willing and able to serve, prior to submitting the name to the Board.

(iii) The Board shall appoint its member to independent review committee no later than 10 days after the RFP award.

(iv) If the appointing entity is removing its appointee from the Independent Review Committee, or if the appointee resigns, the appointing entity shall notify GOED within 3 business days, and appoint a replacement person as soon as practically possible.

(2) Conducting Business:

(a) Four members of the Independent Review Committee shall constitute a quorum.

(b) Voting may take place if a quorum is present at meeting

(c) A majority vote of members present during a meeting (either in person or via electronic meeting) constitutes the vote of the Independent Review Committee for the purposes or proceeding with the Committee's duties.

(3) Electronic Meetings:

(a) The independent review committee may conduct its business through electronic meetings pursuant to Utah Code Section 52-4-207.

(b) A quorum of the public body is not required to be present at the anchor location, but at least one member of the independent review committee shall be present at an anchor location for a electronic meeting.

(c) All meetings will provide for the capacity for Board members to participate electronically.

(d) All members participating electronically shall notify the office at least 24 hours in advance of the meeting of their intent to participate electronically.

(4) Role of the Independent Review Committee: The Independent Review Committee shall:

(a) Review applications for tax credits from either a qualified hotel owner or a host local government.

(b) Review documentation from applicants regarding:

(i) Compliance with the terms of the County endorsement letter;

(ii) Compliance with the requirements set forth in the Office's Notice of Agency Action;

(iii) Proof of new tax revenue as set forth in Utah Code Section 63M-1-3402;

(iv) Proof of reduction of the tax credit by $1,900,000 for the first two years of the project;

(c) Specify the maximum dollar amount that the tax credit recipient may receive for each application;

(d) Review documentation to ensure that tax credits are being used for the purposes set forth in Utah Code Section 63M-1-3413.

 

R357-13-6. Procedures for Calculating the Income Tax Credit.

(1) The applicant for a tax credit shall comply with Utah Code Section 63M-1-3405.

(2) For each tax credit application, the certified public accountant's certification required by Utah Code Subsection 63M-1-3405(1)(d) shall identify by location, using the nine digit postal code, where the sales and use taxes constituting new tax revenue were paid. For each location identified, the certification shall itemize the amount constituting new tax revenue for each category of sales and use tax identified in Subsection R375-6-6(3).

(3) For each tax credit certificate issued, the Governor's Office of Economic Development shall verify and identify by location, using the nine digit postal code, where the sales and use taxes that fund the tax credit were paid. For each location, the certification shall itemize by category the sales and use tax identified in Subsection R357-6-3(3) that fund the tax credit.

(4) For each tax credit certificate issued, the Governor's Office of Economic Development shall identify the effective date for the distribution formula used to allocate local sales and use tax authorized in Utah Code Section 59-12-201. The effective date for the distribution formula is December 31st of the tax year pertaining to the new tax revenue used to establish the amount of the tax credit.

(5) The Governor's Office of Economic Development shall transmit the itemization in paragraph (3) and the effective date of the distribution formula to the Chief Financial Officer of the Utah State Tax Commission within thirty (30) days from issuing the tax certificate.

(6) The tax credit recipient shall follow Utah Code Sections 59-7-616 and 59-10-1110 and the rules and instructions of the Utah State Tax Commission in claiming the tax credit.

 

R357-13-7. Minimum Criteria and Available Local Sales and Use Taxes.

(1) Subject to other limiting conditions imposed in the agreement, the following sales and use taxes generated from the construction and operation of a qualified hotel may be used to establish the amount of the tax credit:

(a) state sales tax identified in Utah Code Subsection 59-12-103(2);

(b) local sales and use tax identified in Utah Code Section 59-12-201:

(c) county option sales and use tax identified in Utah Code Section 59-12-1101;

(d) county transient room tax identified in Utah Code Section 59-12-301;

(e) municipality transient room tax identified in Utah Code Section 59-12-351;

(f) tourism and restaurant tax identified in Utah Code Subsection 59-12-603(1)(a)(ii); and

(h) tourism accommodations tax identified in Utah Code Subsection 59-12-603(1)(a)(iii).

 

R357-13-8. Funding the Local Portion of the Income Tax Credit.

(1) The state sales and use tax constituting new tax revenue as itemized in Subsection R357-6-7(3) shall fund the tax credit.

(2) The Utah State Tax Commission may enact rules to administer the funding of the income tax credit provided in Subsection R357-6-8(1).

 

R357-13-9. Procedures for the Administration of the Hotel Impact Mitigation Fund.

(1) There is created an expendable special revenue fund known as the Hotel Impact Mitigation Fund.

(2) The mitigation fund shall:

(a) be administered by the board;

(b) earn interest; and

(c) be funded by:

(i) payments required to be deposited into the mitigation fund by the Division of Finance under Subsection 59-12-103(14);

(ii) money required to be deposited into the mitigation fund under Subsection 17-31-9(2) by the county in which a qualified hotel is located; and

(iii) any money deposited into the mitigation fund under Subsection (6).

(3) Interest earned by the mitigation fund shall be deposited into the mitigation fund.

(4) In accordance with office rules, the board shall annually pay up to $2,100,000 of money in the mitigation fund:

(a) to affected hotels;

(b) for four consecutive years, beginning 12 months after the date of initial occupancy of the qualified hotel occurs; and

(c) to mitigate direct losses.

(5) If the amount the board pays under Subsection (4) in any year is less than $2,100,000, the board shall pay to the Stay Another Day and Bounce Back Fund, created in Section 63M-1-3411, the difference between $2,100,000 and the amount paid under Subsection (4).

(a) The board shall make any required payment under Subsection (5) within 90 days after the end of the year for which a determination is made of how much the board is required to pay to affected hotels under Subsection (4).

(6) A host local government or qualified hotel owner may make payments to the Division of Finance for deposit into the mitigation fund.

(7) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the office shall, in consultation with the Utah Hotel and Lodging Association and the county in which the qualified hotel is located, make rules establishing procedures and criteria governing payments under Subsection (5)(a) to affected hotels.

 

KEY: hotel convention center, tax credit

Date of Enactment or Last Substantive Amendment: 2015

Authorizing, and Implemente or Interpreted Law: 63M-1-3409

 

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