Tax Changes That Would Benefit Racing Near Adoption

The Department of Treasury and Internal Revenue Service took a big step toward changing rules on withholding and reporting in respect to pari-mutuel winnings Dec. 29, a move that if it becomes reality, experts believe will result in tens of millions of wagering dollars added to pari-mutuel pools.

In the most significant move on the rule since the National Thoroughbred Racing Association spear-headed efforts two years ago to update how withholding and reporting thresholds are determined, the Treasury issued a 31-page document that clarifies "the amount of the wager" used to determine the thresholds will be based on the entire cost of the ticket.

Currently in pari-mutuel wagering, thresholds for reporting and withholding on lucrative wins is based on the base unit of the wager. For instance, currently if a player puts together a $1 trifecta play with 24 different combinations, the thresholds are still based on a $1 play. The new rules would base the thresholds relative to a $24 play.

NTRA chief operating officer Keith Chamblin said the proposed regulations will undergo a 90-day comment period and if everything goes smoothly, could be in place before the 2017 Triple Crown races.

"This is a tremendous step forward in our ongoing efforts to modernize pari-mutuel regulations to accurately reflect today's wagering environment," said NTRA president Alex Waldrop. "The NTRA remains thankful to everyone who has engaged in this process, including numerous industry stakeholders, horseplayers, members of Congress, governors, and other elected officials, especially Congressmen John Yarmuth (D-Ky.) and Charles Boustany (R-La.), who led the congressional effort. 

"A unified message has gotten us to this point and we encourage everyone to continue to work through the channels we will be establishing as we seek to push these proposed regulations across the goal line."

The new 31-page Treasury document, entitled "Withholding on Payments of Certain Gambling Winnings," accomplishes the goals started by the NTRA more than two years ago. The effort to this point has included meetings between the NTRA and Treasury and IRS officials, visits to Washington by horseplayers, grass roots campaigns and direct contact involving thousands of industry stake holders, including bettors, as well as involvement by numerous members of Congress, governors, and other elected officials. 

The proposed regulations 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 totalizator ticket. The proposed regulations would have the same positive results for advance-deposit wagering customers and would not impact how those wagers are currently made.

 

As was the case during a similar comment period in 2015 that attracted nearly 12,000 comments, the NTRA next week will establish a convenient and simple method for industry stakeholders to encourage enactment of the proposed regulations. 

 

In its 31-page rulemaking document, the Treasury and IRS cited numerous specific examples provided by the NTRA as reasons for the need to modernize and also referred to the many comments it received from individuals in support of the proposed changes.

The complete Treasury and IRS rulemaking document is posted on NTRA.com.