09/26/2017 3:54PM

Bet-takers scramble to implement tax relief for horseplayers


LEXINGTON, Ky. – Tax revisions that will be highly beneficial to horseplayers are expected to go into effect Thursday, but it is unclear how many bet-takers in the United States will be ready to immediately comply with the changes on that date.

The somewhat sudden announcement of the rollout of the new rules on Monday, to go into effect after its publication in the official tax code Wednesday, has set off a scramble among bet-takers such as racetracks and account-wagering companies to bring their bet-processing systems into compliance. At the front line of that scramble are the three major bet-processing companies in U.S. racing, two of which are owned by racetrack operators. Those companies form the backbone of the U.S. parimutuel system.

Under the rule’s enabling language, bet-takers have 45 days from the publication of the rules to come into compliance with the new revisions. However, any company that is in compliance as of Thursday or sooner than the Nov. 14 deadline will be able to treat winning payoffs under the new rules, and bettors playing with those companies will receive nearly outlandish tax advantages compared to bettors who have placed their wagers with companies that are not already in compliance.

“The best way to put this is that between Thursday, which is the effective date of the regulation, and Nov. 14, it will be optional,” said Alex Waldrop, president of the NTRA, which lobbied for the revisions. “From Nov. 14 forward, it will be mandatory. Those who choose to opt in and provide this benefit to horseplayers before that date, I think the market will decide how beneficial that is, because I think you will see players flocking to those sites and those facilities.”

As of late afternoon Tuesday, only one large betting company, Twinspires.com, had confirmed that it would be in compliance Thursday. Twinspires.com is owned by Churchill Downs Inc., which also owns United Tote, one of the so-called Big Three bet-processing companies.

“This is a very big win for horseplayers and for parimutuel wagering on horse racing,” Ted Gay, the president of Twinspires, said in a release.

Under the revisions, bettors will be able to count all of their bets in a single wagering pool for the purposes of triggering tax-reporting or automatic-withholding requirements. The current threshold for reporting is any bet that pays off at greater than 300-1, calculated on the base wager, no matter how many combinations a player may have bet to cash a winning ticket. Now, under the revisions, if a player bet, for example, a $48 tri-wheel at a $1 base bet and cashed on one of the combinations, the bet would have to pay off at greater than $14,400 to trigger any reporting or withholding requirements (48 multiplied by 300). 

Account-wagering operations and racetracks that provide mobile-betting platforms for customers are in the best position to capitalize on the revisions, because under the rules, all bets in a pool, even on separate tickets, will be allowed to be counted to determine liability, as long as there is a clear accounting trail to a single user. For paper tickets, the kinds issued by mutuel machines at tracks and offtrack betting parlors, only the single winning ticket will be allowed to be used to determine liability, since there aren’t good ways to determine whether losing tickets in the same pool were bet by the same customer.

A spokesperson for TVG, the television network and account-wagering operator which is nearly the same size as Twinspires, said Tuesday that the company was hopeful that it would be compliant with the revisions by Friday, when the fall Santa Anita meet opens. TVG is based in California, and has a large presence in the state.  

XpressBet, the third of the three largest account-wagering companies in the United States, does not yet have a firm timetable for when it will be in compliance with the revisions, according to Scott Daruty, the head of the company. XpressBet is owned by The Stronach Group, which owns a handful of racetracks and the bet-processing company AmTote. (XpressBet also is the bet-processing partner for a number of smaller account-wagering operations, including DRF Bets, owned by Daily Racing Form.)

Daruty said Tuesday that he expected an update on the company’s progress “in the next day or so.”

“All I can say for certain now is that we will certainly meet the 45-day time period, but I expect it will be much sooner than that,” Daruty said.

The New York Racing Association, which operates the national NYRA Bets account-wagering system, is working with Amtote, the bet-processing company owned by The Stronach Group, “to expedite compliance for the benefit of horseplayers wagering at NYRA tracks or through NYRA Bets,” according to David O’Rourke, chief revenue officer for the association. O’Rourke did not provide a firm date.

For all intents and purposes, the industry is actually facing an earlier deadline: Nov. 3-4, when the two-day Breeders’ Cup event will be held at Del Mar in Southern California. The Breeders’ Cup races attract some of the largest fields and betting action in racing, and the event can trigger enormous payouts.

The NTRA began meeting with bet-takers and the major bet-processing companies in January to hash out the changes that would be necessary to comply with the revisions. Most of that work was conducted through the 2020 Committee of the Thoroughbred Racing Associations, a racetrack trade group. The 2020 Committee works on technology-related issues in the racing industry, in an attempt to find solutions to problems among competitors that cannot be resolved without cooperation, considering that wagering pools must be merged between thousands of locations in the United States that are owned and operated by myriad companies.

Hank Zeitlin, executive vice president of the TRA, did not return a phone call Tuesday.

Waldrop said that the NTRA had done its “level best” to convince betting companies that the change was coming and that the companies needed to be prepared for when the revisions went into effect. He said that companies that are not in compliance with the revisions by Nov. 14 will “have to answer to the IRS and Treasury Department.”

“More importantly, they are going to have to answer to the customers, because they are going to be demanding these changes much earlier than that,” Waldrop said. “My advice to horseplayers is to look to those operators where they can take advantage of this. I am sure those operators will be advertising that fact.”