Relating to the eligibility of the INDYCAR Grand Prix of Arlington for funding under the major events reimbursement program.
LowStandard timeline
Low Cost
Effective:2025-09-01
Enforcing Agencies
Office of the Governor, Economic Development & Tourism Office (Trusteed Programs)
01
Compliance Analysis
Key implementation requirements and action items for compliance with this legislation
Implementation Timeline
Effective Date: September 1, 2025
Compliance Deadline:Immediate upon contract formation. While the law takes effect in September, any vendor contracts or sponsorship agreements drafted now for the inaugural event must align with MERP documentation standards to ensure reimbursability.
Agency Rulemaking: The Texas Comptroller will issue a determination defining the specific "Market Area" (geographic tax capture zone) prior to the event. This is a regulatory gray zone; businesses on the periphery of Arlington must monitor this ruling to determine if their tax receipts contribute to the fund.
Immediate Action Plan
Immediate: Update standard vendor agreements to include the specific statutory event name and indemnification clauses favoring the State of Texas.
Q3 2025: Monitor the Comptroller’s office for the official "Market Area" designation to determine which business units fall within the tax capture zone.
Pre-Event: Ensure the Local Organizing Committee commissions the mandatory Economic Impact Study to establish the baseline for the "incremental tax increase."
Ongoing: Segregate all event-specific invoices from general operating expenses to facilitate a clean audit trail for reimbursement.
Operational Changes Required
Contracts
Statutory Naming: All vendor and sponsorship agreements must utilize the precise statutory nomenclature: "INDYCAR Grand Prix of Arlington." Invoices or contracts using generic terms (e.g., "Arlington Race" or "IndyCar Weekend") risk audit disqualification.
Penske Entertainment Validation: Contracts involving rights fees or site selection must explicitly reference Penske Entertainment. The statute names this specific entity; the paper trail must flow to or through them.
Contingency Clauses: Prime contractors with the LOC should negotiate payment schedules that account for the state reimbursement timeline (post-event true-up), which can take 10+ months.
Hiring/Training
POS Configuration: Finance and IT teams for hospitality businesses within the Market Area must ensure Point-of-Sale systems accurately segregate and report State Sales Tax, Hotel Occupancy Tax, and Mixed Beverage Tax. The reimbursement is calculated on *incremental* gain; commingled tax data will result in lost revenue.
Reporting & Record-Keeping
Causality Documentation: Vendors must maintain records proving expenditures are directly related to the event. General operational costs are ineligible; costs must be tied to the specific event window (typically 30 days pre- and post-event).
Affidavits of Attendance: If required by the Comptroller for the post-event economic impact study, the LOC and major venues must retain data verifying out-of-state attendance.
Fees & Costs
No New Fees: There are no new compliance fees.
Cost Absorption: The state assumes the administrative cost; however, the LOC must fund the required Economic Impact Study prior to application submission.
Strategic Ambiguities & Considerations
"Related Activity" Scope: The bill allows funding for "any activity related to or associated with" the Grand Prix. The Comptroller has significant discretion to determine if off-site concerts, festivals, or activations qualify. If these activities are not explicitly linked to the event in the application, they may be excluded from the tax capture calculation.
The 2030 Sunset: The waiver allowing the event to qualify without a competitive bid expires September 1, 2030. Stakeholders must anticipate that after the 2030 race, the LOC will be required to prove the event is being actively courted by a non-Texas site to retain funding eligibility.
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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
The Major Events Reimbursement Program (MERP) permits local governments and local organizing committees to apply to the state for the establishment of a Major Events Reimbursement Fund to help pay for certain eligible costs associated with conducting specifically named major events if all statutory and administrative requirements are met.
A fund is established for each event that consists of amounts deposited by the state and local government of the estimated incremental increase in tax receipts (state sales tax, hotel occupancy tax, mixed beverage tax, motor vehicle tax), as determined by the state, that are directly attributable to the preparation for and presentation of the event for a one-year period. The period begins two months before the date of the event and continues for ten months thereafter. In accordance with statute, the estimated increase in tax receipts is limited to amounts collected within a designated market area, and only to amounts collected from five specific tax types.
S.B. 2004 proposes adding the Arlington Grand Prix to the Major Events Reimbursement Program statute and would help offset costs incurred for hosting and conducting a major event.
This bill not only has support from the local community, it promises to bolster tourism to the benefit of the state economy as a whole.
As proposed, S.B. 2004 amends current law relating to the eligibility of the INDYCAR Grand Prix of Arlington for funding under the major events reimbursement program.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Sections 478.0001(3) and (7), Government Code, as follows:
(3) Adds the INDYCAR Grant Prix of Arlington to the list of activities which mean "event."
(7) Adds Penske Entertainment to the list of organizations which mean "site selection organization."
Honorable Phil King, Chair, Senate Committee on Economic Development
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB2004 by King (Relating to the eligibility of the INDYCAR Grand Prix of Arlington for funding under the major events reimbursement program.), As Introduced
No significant fiscal implication to the State is anticipated.
The bill would amend the Government Code to include certain events as eligible for funding under the Major Events Reimbursement Program.
It is assumed that any costs associated with the bill could be absorbed using existing resources.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
300 Trusteed Programs Within the Office of the Governor
LBB Staff:
JMc, RStu, KCu
Related Legislation
Explore more bills from this author and on related topics
SB2004 explicitly designates the INDYCAR Grand Prix of Arlington as an eligible event under the Major Events Reimbursement Program (MERP), unlocking access to state tax trust funds to offset event costs. The legislation creates a temporary statutory waiver until 2030, exempting this specific event from the standard requirement to prove a competitive bid against an out-of-state venue, thereby streamlining the funding application process for the Local Organizing Committee (LOC) and its vendors. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: Immediate upon contract formation.
Q
Who authored SB2004?
SB2004 was authored by Texas Senator Phil King during the Regular Session.
Q
When was SB2004 signed into law?
SB2004 was signed into law by Governor Greg Abbott on May 27, 2025.
Q
Which agencies enforce SB2004?
SB2004 is enforced by Office of the Governor, Economic Development & Tourism Office (Trusteed Programs).
Q
How urgent is compliance with SB2004?
The compliance urgency for SB2004 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of SB2004?
The cost impact of SB2004 is estimated as "low". This may vary based on industry and implementation requirements.
Q
What topics does SB2004 address?
SB2004 addresses topics including amusements, games, sports, state finances and state finances--management & control.
Legislative data provided by LegiScanLast updated: November 25, 2025
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