LEXINGTON, Ky. (Wednesday, June 3, 2015) – The National Thoroughbred Racing Association (NTRA) today announced upon conclusion of a 90-day comment period that nearly 12,000 comments have been submitted directly to the U.S. Treasury in support of a measure seeking to modernize tax regulations related to pari-mutuel wagering.
The proposed changes would clarify withholding and reporting rules by redefining the “amount wagered” to include all of a bettor’s investment into a single pari-mutuel pool, and not simply the base amount of the winning combination. Because of the wide scope of the economic benefits, support for the proposed modification came from all segments of the horse racing and breeding industry.
In addition to a nine-page submission by the NTRA, dozens of organizations, representing every sector of the Thoroughbred, Quarter Horse and Standardbred industries, submitted letters to Treasury in support of the proposed change. A total of 11,665 comments were submitted by individual horseplayers, fans and stakeholders through a submission process established on NTRA.com.
The effort also received strong backing from dozens of state and federal legislators who realize the economic benefits derived from a healthy and vibrant horse industry in their home states.
Editorials and columns supporting the measure appeared in numerous publications, including The Washington Post.
“We thank the thousands of individuals and dozens of organizations that took the time to submit a comment to the Treasury in support of this important effort,” said NTRA President and Chief Executive Officer Alex Waldrop. “The diversity, scope and sheer volume of the responses is reflective of the fact that the change we are proposing is widely supported by a multi-billion dollar industry and will positively impact tens of thousands of individuals as well as state and federal government. The time to modernize tax regulations is now.”
In response to efforts spearheaded by the NTRA and horse racing’s advocates within the federal government, the Treasury and Internal Revenue Service (IRS) on March 3 issued a Notice of Proposed Rulemaking and Public Hearing (Notice) that opened the door to the possible addition of pari-mutuel gambling winnings to updated reporting and withholding requirements being developed for bingo, keno, and slot machine players. The specific references relating to pari-mutuel wagering can be found in a section of the Notice entitled, “Gambling Winnings Other Than Bingo, Keno, and Slot Machine Play.”
For more than a year, the NTRA has sought updated guidelines related to reporting and withholding of pari-mutuel winnings. A clarification by Treasury and the IRS was formally requested in June 2014 by Rep. John Yarmuth, D-Ky., and Rep. Charles Boustany, R-La., and co-signed by a bi-partisan group of 15 other members of the U.S. House of Representatives. In their letter, the 17 congressmen urged the Treasury and IRS to consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool to determine the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result. This issue typically arises in the context of increasingly popular multi-horse or multi-race wagers.
For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager would be $140, which is the total amount bet into the Pick Six pool. Currently the amount wagered is calculated using only the $1 bet on the single winning combination. By understating the amount wagered in this manner, the IRS is imposing significant additional reporting and withholding obligations on horseplayers while creating unnecessary paperwork for the IRS.
A clarification would directly benefit pari-mutuel customers by reducing burdensome tax obligations. The proposal also aims to lessen racing’s competitive disadvantage against other forms of gaming that are not subject to such aggressive tax treatment related to reporting and withholding.
A Change.org petition posted by the NTRA last year received nearly 8,000 signatures in support of the clarification in only a few months. Kentucky Gov. Steve Beshear sent a letter to the Treasury last fall seeking the clarification on behalf of his state’s signature industry. In November, the NTRA teamed with Rep. Yarmuth to request a meeting with Treasury officials in Washington, D.C., to further raise awareness of the issue. A subsequent meeting, held in January on Capitol Hill between Rep. Yarmuth and a high-ranking official at the Treasury, also included two horseplayers (NTRA Board Member Judy Wagner and National Handicapping Championship Players’ Committee Chairman Chris Larmey) and an executive from Churchill Downs, which is in Yarmuth’s home district.
Even though the June 2 deadline has passed, the NTRA will continue to push for modernization of tax regulations in a variety of ways, including a request to appear before a June 17 hearing scheduled by Treasury and the IRS to speak in support of the tax modernization effort.