NTRA, lawmakers seek changes to withholding taxes

The National Thoroughbred Racing Association (NTRA) on Tuesday released a

copy of a bipartisan letter from key members of Congress asking the Department

of Treasury to clarify regulations regarding the way pari-mutuel winnings are

calculated for tax purposes.

The NTRA is also calling on horse racing industry participants and customers

to express their support of the effort by signing a Change.org petition

available here:

http://chn.ge/RXZ6DW.

The letter to the Secretary of the Department of Treasury was co-authored by

Rep. Charles Boustany (R-LA) and Rep. John Yarmuth (D-KY) and co-signed by more

than a dozen other congressmen.

The request for clarification urges 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

exotic wagers.

For example, under the proposed clarification, the amount wagered by a Pick 6

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 6 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 Internal Revenue Service

is erroneously imposing significant additional reporting and withholding

obligations on horseplayers. The clarification would directly benefit

pari-mutuel customers by reducing burdensome tax obligations and allowing them

to retain more of their winnings, some of which will likely be reinvested

through increased handle.

The proposal also aims to lessen racing's competitive disadvantage against

other forms of gaming that have never been subject to such an aggressive tax

ruling.

"Under an archaic IRS ruling currently in place, players' winnings are being

erroneously reported or withheld without regard for how much they actually

wagered," NTRA President and CEO Alex Waldrop said. "If granted, the

clarification will allow horseplayers to keep more of their winnings, reduce the

administrative burden on tracks and ADWs and ultimately generate more revenue

for tracks, horsemen and government.

"We applaud congressmen Boustany, Yarmuth and others for their leadership and

their awareness of the significant economic contributions that horse racing and

breeding make in their states. We look forward to working with them on this

important issue."

Current guidelines regarding the calculation of pari-mutuel winnings for tax

purposes are based largely on a 1978 ruling by the IRS that pre-dates the

expansion of simulcasting and exotic wagering. However, that ruling, which was

issued in response to an inquiry over a "box" wager totaling $6, is in conflict

with Treasury regulations stating that wagers in the same pool shall be treated

as one bet.

"This ruling appears to ignore the fact that even though the $6 box ticket

represented the placing of a $1 bet on each of six different combinations, all

of those wagered amounts were part of a single pari-mutuel pool," the letter

states.

Boustany and Yarmuth go on to explain the impact current regulations have on

the racing industry:

Statistics show that each pari-mutuel dollar returned to the bettor in the

form of winnings is re-bet seven times throughout the course of the day. Tax

withholding reduces the amount of re-betting, which not only has an effect on

the bettor and the track but also serves to reduce the collection of additional

tax revenues that are paid by each racetrack operator on its net revenues. The

ultimate adverse impact is a downward economic spiral for the industry with

reduced purses, less wagering, less tax and economic benefit to localities and

states and job losses at tracks, farms, breeding operations and related

entities.

A copy of the full Boustany-Yarmuth letter, which is expected to attract

additional signatures from Democrats and Republicans alike, can be accessed

here:

http://ntra.com/media/8717067/Treasury Pari-Mutuel Ltr.pdf.

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