Congress Approves Tax Reform, COVID Relief Legislation

The National Thoroughbred Racing Association noted that federal legislation approved Dec. 21 by the U.S. House of Representatives and Senate contains key tax reform and COVID-19 relief provisions beneficial to the horse breeding and racing industry. 

The $1.4 trillion omnibus package that includes funding for the federal government's current fiscal year included the Horseracing Integrity and Safety Act, historic legislation that will establish national standards to promote fairness and increase safety in Thoroughbred racing, but also saw other key provisions that could benefit the industry or racing participants.

A key provision that extends three-year tax depreciation for all racehorses through 2021 was part of the omnibus bill. Uniform three-year racehorse depreciation was among numerous tax provisions across many industries that were set to expire at the end of 2020. 

According to the NTRA, the provision allows taxpayers to depreciate, on a three-year schedule, racehorses less than 24 months of age when purchased and placed into service. In the past, racehorses of this age were depreciated on a seven-year schedule. The accelerated schedule better reflects the length of a typical racehorse's career and is more equitable for owners. 

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Maintaining the three-year recovery period for racehorse purchases has been a top legislative priority for the NTRA federal legislative team since the provision's initial enactment as part of the 2008 Farm Bill.

A $900 billion COVID-19 relief package included several positive provisions relative to horse breeding and racing, according to the NTRA. Eligible racetracks and farms would again be allowed to participate in this second round of the Paycheck Protection Program as they were in the first round after the NTRA helped secure favorable guidance from the Small Business Administration.

The new provisions include:

• Expanded PPP loan terms that include new eligibility for horse and farm owners without employees operating as sole proprietors or via single member LLCs;
• New PPP eligibility for qualifying 501(c)(6) organizations with less than 300 employees;
• Additional eligible expenses that now also include software, human resources, accounting, and personal protective equipment for those who have not yet had PPP loans forgiven; 
• A second draw PPP loan of up to $2 million that now is available for qualifying businesses with at least a 25% reduction in gross receipts;
• Extension of employer tax credits for paid sick and family leave and employee retention into 2021; and,
• Full deductibility of meals from restaurants during 2021 and 2022.

"The relief package has some helpful provisions for industry participants, especially with regards to the enhanced PPP loan program, and the three-year tax depreciation for yearlings," said Jen Shah, tax director at Lexington-based Dean Dorton. "This new relief plus the current 100% bonus depreciation available on qualifying purchases continue to provide meaningful tax deductions for horse and farm owners."