Lago Vista paid chamber $30,000 in public money amid legal doubts

The chamber's own filings with the Internal Revenue Service (IRS) raise a second question for taxpayers.³ Its last full returns, for 2017, 2019, and 2020, showed gross receipts of $114,090 to $163,988 a year.^4,5,6 For 2021 through 2025, while it sought public money from the city, it filed only the IRS e-Postcard.^3,7 The e-Postcard is meant for groups that normally take in $50,000 or less, and it shows no income or spending.⁸ Based on the chamber's own returns, its 2021 postcard would not meet the IRS test as written.^4,5,8 Asked about the filings, the chamber's executive director, Allison Sargent, wrote that "the Chamber filed incorrectly under previous leadership."⁹

Totals and gross receipts in this story are our calculations from the cited records.

What hotel tax and the e-Postcard are

Lago Vista charges a 6% hotel occupancy tax (HOT) on stays at hotels, motels, and short-term rentals.¹⁰ State law lets a city give that money to a private group only "by contract," and only to promote tourism.¹¹ Our Sept. 24 story, Lago Vista paid its chamber $228,000 with no signed contract, found $228,000 in hotel tax paid to the chamber from October 2020 through September 2025.^7,12,13 It found no signed agreement in the minutes and packets it reviewed.^14,15 It also reported a city staff member's April 2 statement that legal counsel found too little documentation for a partial payment.¹

The chamber is a nonprofit business group, registered with the IRS as a 501(c)(6), the tax category for chambers of commerce and trade groups.¹⁶ The IRS lists it as the Lago Vista Area Chamber of Commerce, and city papers call it the North Lake Travis Chamber of Commerce & Visitors Center.^3,17

A full annual return reports a group's revenue, expenses, and net assets.⁶ A small group may file the e-Postcard (Form 990-N) instead if its gross receipts, meaning all the money it takes in, are "normally $50,000 or less." For a group at least three years old, that means an average of $50,000 or less over the filing year and the two years before it. So the three years together can total no more than $150,000.⁸

The chamber's tax filings, year by year

In every year it filed a full return, from 2004 through 2020, it reported gross receipts above $50,000.^4,18,19 The lowest total was $63,337, in 2007.¹⁹

For 2004, the chamber filed a full Form 990 showing gross receipts of $70,096.¹⁸ We found no return for 2005 or 2006.^3,16 Its short-form returns show gross receipts of $63,337 for 2007, $97,876 for 2008, and $92,425 for 2009.^19,20,21

The 2010 return shows $126,536. On that same page, the chamber checked box K, which says its gross receipts are "normally not more than $50,000."²² For 2011 it filed both a full return, showing at least $109,372, and an e-Postcard.^3,23 Its returns show $141,669 for 2012 and $127,330 for 2013.^24,25

Gross receipts were at least $107,113 in 2014 and $139,781 in 2015.^26,27 For 2016, the IRS lists only an e-Postcard, which says receipts were "not greater than" $50,000.³ The 2017 return's figures add up to gross receipts of $145,916. Line L, where the form asks for that total, shows $50,370 instead, the cost of the chamber's fundraising events.⁶

For 2018, the IRS again lists only a postcard.³ The chamber's net assets, what it owned minus what it owed, were $83,868 at the end of 2017 and $105,847 at the start of 2019.^5,6 The 2019 and 2020 returns show gross receipts of $163,988 and $114,090. Both list $56,000 to $61,000 in contributions, gifts, and grants.^4,5

From 2021 through 2025, the IRS lists only e-Postcards, each saying gross receipts were "not greater than" $50,000.³ In those years the city paid the chamber $48,000 in 2022-23, $36,000 in 2023-24, and $48,000 in 2024-25 from its hotel fund.⁷

Errors on the returns

The full returns the chamber did file also contain errors and blank sections.^4,6 The 2017 balance sheet lists year-end net assets of $78,955, while page 1 lists $83,868, and the form says the two "must agree." That return reports $55,413 from fundraising events but includes no Schedule G, the page the form says to attach when that income tops $15,000.⁶

The 2017 return was signed June 13, 2018, and stamped received by the IRS on June 18.⁶ The IRS says a calendar-year group's return is due May 15 of the following year unless it gets an extension.²⁸ The return does not show whether the chamber had one.⁶

The 2019 and 2020 returns each check the box for an "initial return," though the chamber had filed returns since at least 2004.^4,5,18 On the 2020 return, cash of $117,369.94 and other assets of $3,551.66 add up to $120,921.60, but the return lists total assets of $121,754.94. It lists $1,500 in grants paid on page 1, while its Schedule O lists one $1,000 scholarship.⁴

The 2020 Schedule G lists Casino Night as a fundraising event with $13,280 in receipts, while page 1 reports the same $13,280 as gaming income. The schedule lists $8,874.58 in event costs, while page 1 deducts $12,140.01. It also lists $2,867.25 in costs for a Cajun Fest marked as canceled.⁴ The 2017 and 2020 returns leave Part III blank, the section where a group states its mission and what it did.^4,6

March 21, 2026, two council posts

On March 21, 2026, Benefield wrote on the council's public message board that the chamber had gone "without funding since last October." He wrote that "funds should not be released without a contract." He also wrote that "the City has failed the Chamber," and that payments "should be processed promptly and retroactively for any expenses that are properly supported." He asked the council to have the city attorney finish a compliant contract within 7 to 10 days.²⁹

Mayor Pro Tem Norma Owen replied the same day. She wrote that "historically this relationship was not structured in a way that fully aligned with those requirements." She wrote that the city could fund "eligible projects that can be supported once a compliant agreement is in place."²⁹

April 1 and 2, 2026, the $30,000 check

The council held its regular meeting on April 2, 2026, in the City Council chambers. One item asked it to set a hotel tax policy. The minutes list Charles West as city manager and Brad Bullock as city attorney.² Early in the item, a city staff member said staff had made "a partial reimbursement" to the chamber that week.¹

Allison Sargent, the chamber's executive director, said the chamber received "less than half" of what it requested the day before. She said it took "a significant amount of escalation to get it there." She said the chamber kept running the visitor center and large events "without reimbursement of approved funds."¹

Later, Benefield read aloud from emails he said West sent on April 1. We have not seen the emails, so their words here come from his reading. In one, which he said went out at 9:24, he read, "If directed by city council as a whole, staff will issue a check." It went on, "However, without supporting documentation and based on the advice of our attorney, I will not direct a check at this time."¹

Another email that morning said, "For today's check run, please process a $30,000 check." Benefield later put its time at 9:41. Benefield said he would not read Bullock's reply from the next morning, but summarized it as saying the reimbursements were "likely not compliant with state law." "I'm reading this getting whiplash," Benefield said.¹

A council member then described that day. Benefield later said this account came from Owen. She said she found a provision that the chamber must understand "if it doesn't pass an audit, we've got to ask for that money back." She called it "the one item that was a workaround that happened between the time that Charles said, I can't do that."¹

"We may have been out on a limb on this one without that," she said. She said she hoped the provision "gives us enough cover in order to not get in trouble." She said there was "a willingness to go ahead and take a leap of faith and move forward."¹

Benefield said it sounded to him like "a conversation between her and the city manager occurred that talked about the clawback provisions," the terms for taking money back. He asked whether any vote "authorized the city manager to issue a $30,000 check," and said, "I know I wasn't solicited."¹

Another council member called that "a diversionary comment." That member said the council's budget plan already gave West "the authority for him to write that check."¹ The council took no vote on the item and directed staff to bring back a policy.² On April 16, it approved that policy 7 to 0.³⁰

September 3, 2026, "the check went out anyway"

On Sept. 3, 2026, the council took up the chamber's latest reimbursement request.³¹ Benefield said the city had "paid $38,000 to date."³² The city's budget book shows $38,237 paid to the chamber from the hotel fund in 2025-26. For that year, one budget column lists $100,000 for the chamber and another lists $0.⁷ About the money already paid, Benefield said, "I don't know what it was used for."³²

He said he raised concerns "back when that money was released." He said the council was told "there was not sufficient justification for that check to go out." "But yet the check went out anyway," he said.³²

The council voted 6 to 1 to have the city attorney negotiate a formal agreement, with 2025-26 reimbursement limited to "qualified Hot Fund Monies." Benefield, Owen, and Council Members Paul Prince, Amanda Chavarria, Karen Van Ness, and Jess Hall voted yes. Mayor Shane Saum voted no.³¹

September 17, 2026, the receipts are declined

On Sept. 17, 2026, the council met with Bullock in a closed session, which the public cannot attend, then spoke about the chamber in open session. Bullock said an expense must "directly impact hotel stays." He said visitor centers "provide budgets to councils in writing before the year starts."³³

Benefield said the receipts had not met that test, "according to our attorney," and "that's why those have been declined." He said they "could be resubmitted with new data," and Bullock agreed.³³

Benefield raised another option, a service agreement paid from the General Fund, the city's main operating fund, for chamber work that hotel tax cannot cover. The council agreed to stop contract talks until it finished strategic planning.³³ Benefield has since put the chamber back on the Oct. 15 agenda, with the up-front request for up to $42,422.20 we reported on Oct. 11.¹⁷

Was the $30,000 payment legal?

The city's budget book lists all $38,237 paid to the chamber in 2025-26 in its hotel fund.⁷ By the law's text and the city's own legal advice, the April 1 payment likely fell short of what state law requires for hotel tax money.^1,11

State law says hotel tax money "may be used only to promote tourism and the convention and hotel industry." Each expense must be spent in a way "directly enhancing and promoting tourism and the convention and hotel industry." A city "may not delegate" the management of its hotel-tax-funded convention and visitors programs to anyone "other than by contract." The council "in writing shall approve in advance the annual budget" of that group, which must report its spending at least every quarter.¹¹

The records show three gaps when the check went out.^1,29,33 First, there was no contract.²⁹ The law requires one when a city hands a group the management of its convention and visitors programs.¹¹ The chamber runs the visitor center.¹ The law does not say whether repaying a group's expenses counts as handing over that management.¹¹ In March, Benefield wrote that the chamber operated "without a formal agreement," and in September he said, "A year later, we still don't have an operating agreement."^29,33

Second, we found no written council approval of the chamber's budget, which state law requires in advance.¹¹ Third, the city's lawyers found the paperwork fell short. A staff member said legal counsel advised there was not "enough documentation there to suffice to meet the intent of the law." Benefield summarized Bullock's April 2 email as saying the reimbursements were "likely not compliant with state law."¹

There is another side.¹ Sargent wrote that the April 1 reimbursement "was reviewed and approved by the City Manager and City Attorney."⁹ A council member said the budget plan gave West "the authority for him to write that check." Board President Justin Loucks said the chamber had "not requested reimbursement for any ineligible expenses." And on April 2, Bullock said a contract is "clearly the best practice," but also that "Chapter 351 doesn't specify that."¹ The statute's text does require a contract when a city hands a private group the management of its hotel-tax-funded convention and visitors programs.¹¹

What the filings could mean for the chamber

By the IRS's own test, the 2021 postcard does not hold up.⁸ The chamber's 2019 and 2020 gross receipts alone total $278,079, which is $128,079 over the $150,000 three-year limit before any 2021 money is counted.^4,5,8 The 2016 postcard fails the same way, because 2014 and 2015 total at least $246,894.^26,27 The 2011 postcard fails too, because 2009 and 2010 total $218,961.^21,22

For the 2018 postcard to pass, 2016 and 2018 together would have to total $4,084 or less.^6,8 For 2022, 2021 and 2022 together would have to total $35,910 or less.^4,8 The postcards for 2023 through 2025 give no totals, so those years cannot be tested.³

If the IRS treats those postcards as returns that were never properly filed, the chamber faces three kinds of risk.^34,35 The first is penalties. The IRS charges $20 a day for a late return, up to the lesser of $12,000 or 5% of that year's gross receipts.³⁶ At the 2020 level of $114,090, 5% is $5,705 for a single year.^4,36 Federal law applies the same penalty to a return that leaves out required information or does not "show the correct information." The penalty does not apply to the e-Postcard itself, so it would apply only if the IRS found the chamber should have filed a full return.³⁴

The second risk falls on the people who run it. If the IRS sends a written demand and a person does not comply, that person owes $10 a day, up to $5,000 per return.³⁴

The third is the chamber's tax exemption. The IRS says groups "that do not file for three consecutive years automatically lose their tax-exempt status."³⁵ The chamber filed postcards for five straight years, 2021 through 2025.³ If they did not count, a revoked group "is no longer exempt from federal income tax" and may have to pay income taxes. The IRS says the law "prohibits the IRS from undoing a proper automatic revocation," so the group would have to apply to get its status back.³⁵

The IRS lists the chamber's postcards as filed, and none says the group has ended.³ The IRS rules we reviewed do not say how it treats a postcard filed by a group over the limit.⁸

What it could mean for taxpayers

An IRS penalty would be paid by the chamber, not the city.³⁴ But state law limits hotel tax money to tourism uses, and paying a tax penalty is not one of them.¹¹ Since 2021, the chamber has sought public money while filing forms that give no figures for its income or spending.^3,7 State law lets a city ask a group that spends hotel tax for its "complete and accurate financial records."¹¹

Owen said money that fails an audit would have to be asked back.¹ On Oct. 15, the council weighs paying the chamber up to $42,422.20 in advance. The packet says the chamber does "not currently have the financial capacity to advance approximately" $42,000.¹⁷ If money paid in advance later fails an audit, a group short of cash may not be able to pay it back.^1,17

Hotels collect the tax from their guests, not from homeowners.¹⁰ But it is public money, and state law makes the council approve a group's budget for it in advance.¹¹ And a service agreement paid from the General Fund would draw on the same money that property and sales taxes support.^33,37

Responses

We emailed the chamber and Mayor Pro Tem Owen on Oct. 13, 2026, with questions about the filings and the April 1 check.³⁸ Sargent replied that evening, and her reply is posted with this story.⁹

On the filings, she wrote, "Regarding the IRS filings, you are correct." She wrote that "the Chamber filed incorrectly under previous leadership" and called them "inherited issues that I have been actively working to address." She wrote that the concern "specifically relates to which IRS form was used based on gross receipts."⁹

She wrote that in those years the chamber's "own reserves" fell "by more than $140,000 to support HOT qualifying operations and events." She wrote that she found the decline in her first 90 days and told the council and the chamber board in September 2025.⁹ We could not check that figure, and the chamber's last full return listed net assets of $119,802 at the end of 2020.⁴

On the April 1 check, she wrote that the $30,000 "was one quarterly reimbursement and represented less than half of what we submitted." She wrote that the chamber was not told which line items were approved. She wrote that West "issued an additional check approximately one week later following further review of qualifying expenses."⁹ We have not seen a record of that check, and the city's budget book shows $38,237 paid to the chamber in 2025-26.⁷

She wrote that the council "unanimously approved up to $100,000 in support of the Chamber." She offered to meet with us and review records together.⁹ We will update this story with any reply from Owen.³⁸

What we could not find

• The April 1 emails and Bullock's April 2 email. We have only Benefield's reading of them.
• Any vote or written council approval for the $30,000 check, and the account it came from.
• What the $38,237 paid in 2025-26, including the $30,000 check, reimbursed, and a record of the second check Sargent describes.
• The chamber's income and spending for 2018 and 2021 through 2025.
• Whether the IRS has ever reviewed the chamber's postcards.

What you can do

• Ask the city for the April 1 and 2 emails about the chamber, the $30,000 payment record, and the receipts it paid, through the city's records request page.³⁹
• Ask the chamber for copies of its annual returns. The IRS says an exempt group must make them available for public inspection.⁴⁰
• Look up the chamber's filings yourself on the IRS Tax Exempt Organization Search by its tax ID number, 74-2470396.³
• Speak at the Oct. 15 council meeting, or write to council members before it.¹⁷
• If you have records on this, share them at /share-records. We protect your identity and publish the evidence when we can do so safely.