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Legislation Would Restore Three-Year Depreciation

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Senate Finance Committee chairman Chuck Grassley, an Iowa Republican, and ranking member Ron Wyden, an Oregon Democrat, introduced bipartisan tax and disaster relief legislation Feb. 28 that includes three-year depreciation for racehorses.

Under the proposed package, three-year racehorse depreciation would be retroactive for 2018, continue through 2019 and grant taxpayers the option to depreciate all racehorses over a three-year period.

Three-year racehorse depreciation was most recently available to the industry in 2017 but Congress did not renew it for 2018 as part of the Tax Cuts and Jobs Act (TCJA) passed in December 2017. The TCJA did include 100% bonus depreciation and a $1 million Sec. 179 expense allowance for qualified depreciable property, two important investment incentives that lessened the need for three-year depreciation in many cases.

However, three-year depreciation continues to be a beneficial option for many racehorse owners, especially racing partnerships with multiple passive owners, as it better aligns deductions with corresponding income opportunities on an annual basis.

The NTRA federal legislative team will pursue passage of three-year depreciation as part of this tax extenders legislation as we have done since its original inclusion in the 2008 Farm bill.

Bill Aims to End Export of Horses for Slaughter

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Similar legislation was filed in 2017 but stalled in committee.

 

Bipartisan legislation filed in the United States House of Representatives Jan. 30 aims to halt the shipping of horses to Canada or Mexico for slaughter.

Representatives Jan Schakowsky, an Illinois Democrat, and Vern Buchanan, a Florida Republican, reintroduced Wednesday the Safeguard American Food Exports Act, which would prohibit horse-slaughter plants from operating in the U.S. and end the export of horses across the border for this purpose.

Marty Irby, executive director of Animal Wellness Action, said the act is a permanent solution as opposed to the current de facto ban in place since 2006, which is accomplished by not funding regulatory appropriations to allow such plants to operate. Irby noted the bill includes 219 co-sponsors in the 115th Congress, more than half the House.

Similar legislation, the Safeguard American Food Exports Act of 2017, stalled in committee despite having more than 200 co-sponsors.

“Horses have a special place in our nation’s history, and these majestic creatures were not raised as food for humans,” Schakowsky said. “The SAFE Act would prohibit any horse slaughter plant from opening and also end the sale or transport of horses and horse parts in the U.S. and abroad for the purpose of human consumption. I am proud to reintroduce this bill and work with Congressman Buchanan to put an end to this practice.”

“The slaughter of horses for human consumption is a barbaric practice that has no place in America,” Buchanan said. “I will continue to lead the effort with Congresswoman Schakowsky to ban domestic horse slaughter and end the export of horses abroad for slaughter.”

National Thoroughbred Racing Association president and CEO Alex Waldrop said Wednesday he has not read through the entire bill yet, but one potential concern would be that the legislation could hinder transport of horses to Mexico or Canada for legitimate reasons, like racing or breeding.

U.S. Senators Lindsey Graham, a South Carolina Republican, and Bob Menendez, a New Jersey Democrat, intend to introduce a similar bill in the Senate soon.

Waldrop: Online Betting On Horse Racing Still Legal Despite Justice Department Reversal On Wire Act

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by  

Alex Waldrop, president and CEO of the National Thoroughbred Racing Association

Legal online wagering on horse racing will not be directly affected by a new U.S. government Department of Justice opinion on the Wire Act but could have an indirect impact on the willingness of banks and credit card companies to allow horseplayers to fund their advance deposit wagering accounts.

The opinion from the Justice Department’s Office of Legal Counsel, first reported by OnlinePokerReport.com, reversed a 2011 position taken during the Obama administration stating the Wire Act – a 1961 law prohibiting transmission of betting or betting information across state lines – only applied to sports betting. The reversal by the Trump administration may create an atmosphere of uncertainty among businesses operating online casinos, interstate lotteries and daily fantasy sports contests, along with banks and credit card companies.

The Interstate Horseracing Act of 1978, amended in 2000 to include telephone and other electronic forms of wagering in states where that type of betting is legal, provides an explicit exemption for horse racing to conduct interstate wagering.

Despite that exemption, many banks and credit card companies were slow to permit the use of credit cards to fund advance deposit wagering accounts. Breakthroughs were made in recent years, however, and Alex Waldrop, president and CEO of the National Thoroughbred Racing Association, wants to make sure this new Justice Department opinion does not reverse the trend.

“Still reviewing this long and complicated opinion but it appears to return us to 2011 when casinos and lotteries were fearful of operating online but the horse industry online presence through ADWs was already well established,” Waldrop told the Paulick Report via email. “So online wagering on horse racing that is conducted in compliance with the IHA is still legal.  We will be working with allies on the (Capitol) Hill to assure banks and credit card processors that it is still legal to allow their credit cards to be used to fund ADW wagering accounts. We also expect the next version of the Schumer/Hatch sports betting bill to have extensive language sorting out the application of the Wire Act to all sorts of online betting transactions.”

The order by the Justice Department is dated Nov. 2, days before the resignation of Attorney General Jeff Sessions. The move was applauded by the Coalition to Stop Internet Gambling, a group widely believed to be funded by Sands casino operator and GOP mega-donor Sheldon Adelson, an opponent of online gaming.

Read more at OnlinePokerReport.com

Modernized IRS Rules Keep Millions in Bettors’ Hands

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NTRA looks back at first year since update on tax rules on withholding and reporting.

 

In the first year of operations under newly modernized U.S. Treasury and Intenal Revenue Service (IRS) regulations, there was a $307 million reduction in the amount  of winning pari-mutuel wagers reported to the IRS using form W-2G, according to  statistics released today by the National Thoroughbred Racing Association (NTRA).

This reduction in the amount of winning wagers reported was the result of a dramatic 89% decline in the number of winning tickets flagged for IRS reporting. The declines also led to a $35 million reduction in the amount withheld from bettors’ winnings. The new regulations, which took effect Sept. 28, 2017, recast the Treasury’s definition of the “amount of the wager” to include the entire amount wagered into a specific pari-mutuel pool by an individual rather than the prior IRS standard of using only the base amount of the winning wager.

Based on data provided by CHRIMS, which conducts settlements and other services for many of the nation’s pari-mutuel operators, individual racetracks, and the two largest U.S. totalizator companies–AmTote and United Tote–the NTRA estimates the following nationwide impacts over the first 12 months of operation under the new regulations (10/1/2017 – 9/30/2018 vs. 10/1/2016 – 9/30/2017):

•         The gross amount of winning wagers reported to the IRS on Form W-2G declined $307,700,000 (82%), from approximately $374,500,000 to about $66,800,000;
•         Federal taxes withheld from winning wagers and sent to the IRS declined $35,400,000 (82%), from $43,200,000 to $7,800,000; and
•         The actual number of IRS tickets flagged for W-2G reporting by the IRS declined nearly 89%, from approximately 235,100 tickets to only about 26,350 winning tickets.
From a percentage standpoint, the impacts were equally positive for horseplayers, pari-mutuel operators and horsemen across the country–regardless of the size of the racetrack market. The new regulations also provided positive impacts to advance deposit wagering (ADW) operators and their customers.

“The drastic reduction in the number of winning tickets requiring reporting and withholding is consequential in several ways,” said NTRA President and Chief Executive Officer, Alex Waldrop. “Under the old regulations, it was not uncommon for horseplayers to feel the thrill of ‘winning’ only to have their proceeds reported and/or withheld by the IRS. The old regulations were both unfair and a burden to all involved. A significant overreach by the IRS has been corrected thanks to fair-minded officials at the U.S. Treasury.”

There are numerous specific examples of events where the industry benefited from the new regulations.
On-track at the host venues of the Triple Crown races–Derby Day, Preakness Day and Belmont Stakes Day–the combined number of winning tickets required by the IRS to be reported on Form W-2G fell 96%, with the gross amount of winning wagers required to be reported falling by 87% and the amount of money withheld from pari-mutuel winnings falling 71%. It is likely that similar results were realized nationwide.

On-track impacts were most pronounced at Pimlico on Preakness Day, where the number of tickets requiring reporting fell 99% and the number of tickets requiring Federal withholding fell 100% because there were no winning tickets at Pimlico on Preakness Day that triggered Federal withholding.

On-track at the 40-day 2018 Saratoga Meeting, the number of winning tickets flagged for processing by the IRS fell 96%, the gross amount of winnings required to be reported fell 94% and the amount of money withheld from winning bettors fell 91%.

“The new regulations have been enormously beneficial to every sector of our business,” Waldrop continued. “They would never have transpired without the bipartisan support we received on Capitol Hill and the unwavering support of every segment of the horse racing industry, including thousands of customers who answered our call to action.  Best of all, we will continue to realize the positive impacts from these regulations for many years to come.”

For more than a decade, the NTRA and others promoted legislation to modernize pari-mutuel withholding and reporting. The industry argued that as pari-mutuel wagering increasingly shifts toward exotic bet types like Exactas, Trifectas and Pick 4s, more winning wagers are being reported and more winnings withheld, creating an unfair burden on bettors, pari-mutuel operators and state and federal governments.

Then in 2014, the NTRA developed a new strategy that relied on regulatory, not statutory relief from outdated regulations. Following the new strategy, the NTRA was able to convince the Treasury Department and the IRS to expand the definition of the phrase “amount of the wager” to include the total amount bet on a single ticket (or through an ADW) by an individual into a specific pari-mutuel pool. This one simple change in the Treasury regulations that took effect on September 28, 2017 has led to the significant benefits reported today.

Through September of this year, U.S. wagering has increased 3.95% ($336,724,709) overall while average wagering per race day has increased 7.67% ($180,231), according to statistics provided by Equibase.

 

NTRA Provides Updates on Industry Issues

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An NTRA legislative briefing held Thursday, Aug. 10 at Fasig-Tipton Sales Paddocks provided updates on a diverse range of topics impacting Thoroughbred breeding, racing, and handicapping.

NTRA President and CEO Alex Waldrop and Greg Means, principal and CFO at The Alpine Group, which represents the NTRA and the industry’s lobbying interests in Washington, D.C., provided updates on a range of topics, including:

Federal Withholding & Reporting – Long-sought Treasury and IRS regulations that modernize federal withholding and reporting of pari-mutuel winnings have resulted in a 90-95% reduction in the filing of IRS Form W-2Gs. The changes have led to a drastic reduction in the reporting and withholding of winning wagers, which in turn has helped fuel handle increases. During the first six months of 2018, overall handle increased 5.5%. Average handle per race day in 2018 has increased 8.7% through June (vs. a 3.7% gain in all of 2017). Overall, U.S. pari-mutuel handle in 2018 is on course to exceed $11 billion for the first time since 2010.

Tax Reform – The Tax Cuts and Jobs Act that became law in December 2017 contains a number of incentives that promote investment in Thoroughbred breeding and racing. Among the many positive changes included in the bill were:

•    An increase in immediate expensing to 100% and expansion of the definition of “new property.” Buyers would be able to write off 100% of all horses purchased, including breeding stock, as long as the asset purchased has not been previously owned by the purchaser.

•    An increase in the Section 179 limit to $1 million from $500,000, and an increase in the cost of property subject to the phase-out to $2.5 million from $2 million, which would be beneficial to industry participants that generate net taxable income.

•    Inclusion of a new 20% deduction for certain pass-through business income. Owners of businesses such as sole proprietorships, partnerships, trusts and S corporations now may be able to deduct 20% of their qualified business income when filing their tax returns. Qualified business income includes domestic income from a trade or business but does not include employee income, capital gains, interest and dividend income. Additionally, business owners can combine their businesses into a single unit to claim the benefit, thereby making the process of filing more efficient and less costly.

Waldrop stressed the importance of each taxpayer consulting with his or her tax advisors to assess how the bill will specifically affect their operations.

Sports Betting – The Monmouth Park/New Jersey Thoroughbred Horsemen’s Association Supreme Court victory put horseracing at the epicenter of sports betting. It also extends the industry’s reach from online wagering under the Interstate Horseracing Act–space it has occupied since 2000–into a vast new area of the American gaming market, where sports betting is estimated to be a $400 billion business. While the primary activity since the Supreme Court decision has been at the state level, Means noted that the major sports leagues, in particular, are already advocating on Capitol Hill for a uniform federal bill aimed at consumer protections, among other issues. Means projected that it is unlikely that Congress will consider any legislation on this topic this year. However, the issue will likely arise in more force in 2019. Both Means and Waldrop noted that Thoroughbred racing must be aggressive in defending its interests relating to Sports Betting and be ready to take advantage of new opportunities on Capitol Hill should they arise.

Credit Card Transactions Involving Advance Deposit Wagering (And, Potentially, Sports Betting) – While many banks permit Visa and MasterCard credit cards to be used in funding an Advance Deposit Wagering (ADW) account, up until this year four of the largest banks that are significant card issuers have refused to allow this legal use. In January, JP Morgan Chase, the nation’s largest issuer of credit cards, began allowing this activity and the NTRA continues to work with the three other large banks to secure a reversal of their exclusions.

The same challenges to ADW wagering may affect those who seek to fund sports betting accounts via credit card, meaning that those in our industry who offer ADW and sports betting will have multiple banking issues.
On the same front, ADW wagering is being blocked by search engines such as Google that do not readily turn up direct links to horseracing betting sites, but simply link to informational stories about wagering or horse races. The advent of sports betting will change this landscape rapidly, again posing potential threats–and opportunities–for the Thoroughbred industry.

Immigration – There is strong disagreement on Capitol Hill over Immigration policy. Efforts earlier this summer to pass immigration bills failed and it is unlikely that Congress will take any major action on Immigration prior to the November elections. Thoroughbred trainers continue to face major labor shortages due to a lack of H-2B visas available to backstretch employees. While comprehensive immigration reform will be necessary if Thoroughbred racing is to receive the relief it needs from the current guest worker program, Waldrop and Means acknowledged that such reform is not likely to occur in the near term due to the current political environment in Washington.

Appropriations Bill Could Provide H-2B Visa Relief

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Bill could double number of visas available.

 

Congress on the morning of March 23 passed a Fiscal 2018 omnibus appropriations bill, which includes language that could almost double the number of H-2B visas available, potentially improving a dire situation for Thoroughbred trainers who depend on these visas for the industry’s sizable foreign temporary workforce.

The bill provides the Secretary of Homeland Security the authority to raise the cap on H-2B visas if the Secretary, in consultation with the Department of Labor, determines there is an economic need.

If the omnibus spending bill is signed into law by President Trump, the total number of H-2B workers that may enter the U.S. during fiscal 2018, which ends on Sept. 30, 2018, will then be capped at 129,547. If fully implemented, this new cap would be equal to the number of new and returning H-2B workers admitted to the U.S. in fiscal 2007, which is the fiscal year when the highest number of H-2B foreign temporary workers participated in the H-2B program.

“Congress provided the Secretary of Homeland Security with the same discretionary power to increase H-2B limits as part of the 2017 omnibus spending bill passed in May of last year,” said National Thoroughbred Racing Association President and CEO Alex Waldrop. “Unfortunately, the Secretary did not make the necessary finding of economic need until July of last summer when it was too late for most employers to take advantage of the increased number of H-2B visas before the end of the fiscal year.”

The NTRA, through its membership in the H-2B Workforce Coalition, will urge the Administration to swiftly implement this H-2B cap relief and will continue to encourage Congress to pass permanent H-2B cap relief.

THREE-YEAR RACEHORSE DEPRECIATION RETURNS RETROACTIVELY FOR FISCAL YEAR 2017

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Friday, February 9, 2018 President Trump  signed into law the Bipartisan Budget Act, a bill that among other measures extends retroactively for fiscal year 2017 uniform three-year racehorse depreciation, an important tax provision supported by the National Thoroughbred Racing Association (NTRA) that expired in 2016 alongside certain other expired tax provisions.  The bill also funds the federal government until March 23.

Three-year depreciation is an investment incentive for racehorse owners that had been in place for several years before expiring at the end of 2016.

“We wish to thank Senate Majority Leader Mitch McConnell for his continued support for our industry,” said NTRA President and CEO Alex Waldrop. “We’ve worked with the Leader for over a decade on our industry’s unique issues, and we appreciate his continued efforts.”

Prior to the 2008 Farm Bill, which became effective January 1, 2009, racehorses 24 months of age and younger when purchased and placed in service, were depreciated on a seven-year schedule that did not accurately reflect the length of a typical racehorse’s career; only racehorses over 24 months old were depreciated using a three-year schedule.

The NTRA will continue to advocate for tax policies that accurately reflect our unique industry.

About the NTRA

The NTRA, based in Lexington, Ky., is a broad-based coalition of more than 100 horse racing interests and thousands of individual stakeholders consisting of horseplayers, racetrack operators, owners, breeders, trainers and affiliated horse racing associations, charged with increasing the popularity, welfare and integrity of Thoroughbred racing through consensus-based leadership, legislative advocacy, safety and integrity initiatives, fan engagement and corporate partner development. The NTRA owns and manages the NTRA Safety and Integrity Alliance, NTRA.com, the Eclipse Awards, the National Handicapping Championship, NTRA Advantage, a corporate partner sales and sponsorship program, and Horse PAC, a federal political action committee. NTRA press releases appear on NTRA.com, Twitter (@ntra) and Facebook (facebook.com/1NTRA).

TAX BILL BENEFITS THOROUGHBRED BREEDERS AND OWNERS, DOUBLES CERTAIN DEPRECIATION BENEFITS, RETAINS MISCELLANEOUS LOSS DEDUCTION FOR HORSEPLAYERS

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LEXINGTON, Ky. (Wednesday, December 20, 2017) – The Tax Bill cleared by Congress for President Trump’s signature contains a number of provisions beneficial to horse breeders and owners, according to an initial assessment by the National Thoroughbred Racing Association (NTRA).

The tax bill benefits the horse racing industry by slashing corporate tax rates, reducing most individual tax rates, doubling the estate tax exemption from $5 million to $10 million (indexed for inflation occurring after 2011), and generally providing special tax treatment for certain pass-through entities (sole proprietorships, partnerships, limited liability companies, and S corporations).

The package also includes significant and positive changes to depreciation and expensing of yearlings, breeding stock, farm equipment and other qualifying depreciable property. These include:

  • Bonus Depreciation. An increase in bonus depreciation from 50 percent to 100 percent for both new and used property acquired and put into service after Sept. 27, 2017, and before Jan. 1, 2023. Bonus depreciation permits first-year, full expensing for purchases such as yearlings, breeding stock, and farm equipment. Current law provides for 50 percent depreciation on new property only. The new benefits will be effective at the 100 percent rate through 2022. Beginning with 2023, bonus depreciation will be phased out at a rate of 20% each year until fully phased out after 2027.
  • 179 Deduction. The maximum amount that may be expensed under this provision has been increased from $500,000 to $1 million for new and used property. Additionally, the phase-out threshold for the deduction has been increased from $2 million to $2.5 million. Both the maximum deduction and phase-out amount are permanently extended and will be indexed for inflation.
  • Farm Property. Machinery and equipment used in farming operations will be granted accelerated depreciation with a useful life of only five years and depreciation using the 200 percent declining balance method. The current law provides for a useful life of seven years and depreciation using the 150 percent declining balance method.

“At more than 700 pages, the tax bill and accompanying joint explanatory statement are enormous in both size and complexity,” said NTRA President & CEO Alex Waldrop. “While the overall impacts on each individual will vary, in general many of the provisions should have a positive impact on the economics of horse racing and breeding.”

For horseplayers – many of whom may benefit from the reduced corporate, individual, and pass-through entity tax rates – the NTRA successfully worked to defeat a proposed amendment that would have eliminated the itemized miscellaneous deduction for gambling losses entirely. Consequently, horseplayers will continue to be allowed to deduct their losses from wagering transactions (i.e., losing tickets) up to the amount of winnings. However, beginning January 1, 2018, through December 31, 2025, the limitation on losses from wagering transactions (up to the amount of winnings) will apply not only to the actual costs of wagers incurred by an individual, but also to other deductible expenses such as travel and lodging incurred by the individual in connection with the conduct of that individual’s gambling activity.

Waldrop added: “The information presented in this release is not a comprehensive explanation of the tax bill. The NTRA urges every industry participant with tax concerns to consult with your tax advisor for information and planning advice applicable to your specific situation.”

About the NTRA

The NTRA, based in Lexington, Ky., is a broad-based coalition of more than 100 horse racing interests and thousands of individual stakeholders consisting of horseplayers, racetrack operators, owners, breeders, trainers and affiliated horse racing associations, charged with increasing the popularity, welfare and integrity of Thoroughbred racing through consensus-based leadership, legislative advocacy, safety and integrity initiatives, fan engagement and corporate partner development. The NTRA owns and manages the NTRA Safety and Integrity Alliance; NTRA.com; the Eclipse Awards; the National Handicapping Championship; NTRA Advantage, a corporate partner sales and sponsorship program; and Horse PAC®, a federal political action committee. NTRA press releases appear on NTRA.com, Twitter (@ntra) and Facebook (facebook.com/1NTRA).

Horseracing Wins As Treasury/IRS Issue Updated Tax Rules

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The U.S. Treasury Department and the Internal Revenue Service (IRS) today announced that they will formally adopt modernized regulations regarding the withholding and reporting of pari-mutuel proceeds. The National Thoroughbred Racing Association (NTRA) has long pressed for these updated regulations that will allow horseplayers to keep more of their winnings, thereby increasing the amount wagered on U.S. pari-mutuel racing by as much as 10 percent annually, or upwards of $1 billion, according to independent estimates. The new rules were posted late Monday afternoon as a Public Inspection Document. They are scheduled to be officially published in Wednesday’s edition of the Federal Register and will go into full effect by no later than Nov. 14, giving racing associations, totalisator companies, and advance deposit wagering (ADW) operators up to 45 days to implement these important changes; however, some may elect to start as soon as Thursday.

“These landmark U.S. Treasury regulations will have an enormously positive impact on horseplayers, the racing industry, and the federal government,” said NTRA President & CEO Alex Waldrop. “I am extremely proud of the NTRA’s legislative team for spearheading this effort, which will prove to be among the most meaningful regulatory advances made by our industry in decades. The results of this much-needed measure will be horseplayers keeping more of their winnings, racetracks generating more pari-mutuel handle, and government collecting additional tax revenue. This is a sure bet where everyone wins!”

Added Waldrop: “This day would never have come without the persistence of Thoroughbred racing’s friends in Congress, especially Rep. John Yarmuth of Kentucky, Rep. Pat Meehan of Pennsylvania, Senate Majority Leader Mitch McConnell and our many bipartisan supporters on Capitol Hill. We also are indebted to the industry stakeholders and thousands of customers of Thoroughbred racing who signed our petition or submitted public comments in favor of these changes.”

Under the new regulations, the IRS will consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool when determining the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result.

For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager now will be $140, which is the total amount bet into the Pick Six pool. This more accurate calculation will remove the significant reporting and withholding obligations on horseplayers and the unnecessary paperwork for the IRS that was a result of the prior rule that used only the $1 bet on the single winning combination as the amount wagered.

“This is a major victory for all pari-mutuel wagering customers,” said Judy Wagner, the Horseplayers’ Representative on the NTRA Board of Directors and winner of the 2001 National Horseplayers Championship (NHC). “It would not have occurred without the leadership of the NTRA and the support of thousands of horseplayers who actively participated in the process to modernize these regulations.”

The amended regulations, advocated by the NTRA and its legislative team, define the “amount of the wager” to include the entire amount wagered into a specific pari-mutuel pool by an individual – not just the winning base unit as is the case today – so long as all wagers made into a specific pool by an individual are made on a single totalisator ticket if the wager is placed onsite. The modernized regulations will have the same positive results for ADW customers and will not impact how those wagers are currently made.

View the full text of the new rule under section 3402(q) of the Internal Revenue Code here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-20720.pdf.

The NTRA has pushed for the modernization of pari-mutuel withholding and reporting rules for several years. As more and more pari-mutuel wagering was directed toward exotic wagering pools it become clear that the tax rules were becoming an increasing and unfair burden on horseplayers as those outdated rules significantly increased the incidence of winning tickets subject to withholding and reporting. These new rules are the product of all the work the NTRA, and other industry stakeholders, undertook with Congressional representatives and Treasury and IRS officials.

“This represents a great triumph by the entire NTRA legislative team, including the bipartisan Horse PAC, which played an instrumental role in the passage of these regulations that will benefit all segments of the industry,” said Horse PAC chairman William S. (Bill) Farish. “We thank the hundreds of individual stakeholders who contribute to Horse PAC; they played a major role in today’s victory.”

Waldrop noted that the NTRA has been working behind the scenes since January with industry groups – including totalisator companies, ADWs, and racing organizations – to ensure a smooth implementation for customers.

“For the industry to fully realize the benefits of modernized regulations for pari-mutuel withholding and reporting it is essential that we deliver a seamless transition to our customers,” he said. “We are optimistic that the industry will be fully prepared to institute these landmark changes by no later than November 14.”

About the NTRA
The NTRA, based in Lexington, Ky., is a broad-based coalition of more than 100 horse racing interests and thousands of individual stakeholders consisting of horseplayers, racetrack operators, owners, breeders, trainers and affiliated horse racing associations, charged with increasing the popularity, welfare and integrity of Thoroughbred racing through consensus-based leadership, legislative advocacy, safety and integrity initiatives, fan engagement and corporate partner development. The NTRA owns and manages the NTRA Safety and Integrity Alliance; NTRA.com; the Eclipse Awards; the National Handicapping Championship; NTRA Advantage, a corporate partner sales and sponsorship program; and Horse PAC®, a federal political action committee. NTRA press releases appear on NTRA.com, Twitter (@ntra) and Facebook (facebook.com/1NTRA).

New Withholding, Reporting Rules Near Enactment

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A document outlining upcoming federal regulatory actions released July 20 by The White House indicates that modernized tax guidance relating to withholding and reporting of pari-mutuel winnings is nearing enactment, the National Thoroughbred Racing Association said.

The “Current Unified Agenda of Regulatory and Deregulatory Actions” describes the Amendment of 3402(q) Regulations providing new rules for pari-mutuel wagering as in the final rule stage.

The regulation, detailed by the Internal Revenue Service and U.S. Treasury in the Dec. 30, 2016 Federal Register in a section titled “Withholding on Payments of Certain Gambling Winnings,” accomplishes goals started and spearheaded by the NTRA three years ago.

“We are pleased to see this latest indication that the regulation continues to make its way toward final approval,” said NTRA president and CEO Alex Waldrop in a release. “We take nothing for granted, though, and will continue to work closely with our allies in Washington, D.C., to get this important change completed. We urge Treasury and the IRS to act quickly so horseplayers, the racing industry, and the federal government can all start benefitting from these landmark rules.”

The proposed regulations, developed with the NTRA’s guidance, clarify “the amount of the wager” to include the entire amount wagered into a specific pari-mutuel pool by an individual—not just the winning base unit as is the case today—so long as all wagers made into a specific pool by an individual are made on a single tote ticket if the wager is placed onsite. The proposed regulations would have the same positive results for advance deposit wagering customers and would not impact how those wagers are currently made.

Currently a $1 trifecta wheel of 10 combinations is viewed as 10 bets of $1 each. If a payout of $600 or more at odds of 300-1 or higher is awarded, that payout must be reported to the IRS. If that same wager pays $5,000 or more on odds of 300-1 or higher, some of the winnings must immediately be withheld for taxes.

The change would affect how the 300-1 threshold is determined. Under the change, the $10 ticket in the scenario above would be considered a $10 wager. To reach 300-1 odds, the payout must be more than $3,010, which means far fewer big payouts will need to be reported.

The NTRA said the regulations will positively impact a significant percentage of winning wagers, particularly those involving multi-horse or multi-race exotic wagers, and result in tens of millions of dollars in additional pari-mutuel churn.

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