08/07/2014 11:31PM

Legislation to give federal government oversight of racing unlikely to pass soon


SARATOGA SPRINGS, N.Y. – Legislation that does not have the full support of an entire industry, such as the controversial bill that would give the federal government oversight of racing, is extremely unlikely to pass before the current congressional session ends, federal lobbyists said Thursday night during a briefing near Saratoga Race Course.

Greg Means, a principal in the Alpine Group who represents the racing industry in Washington, said the current climate in Congress and its natural bent to avoid issues that are “divisive” within industries generally doom bills like the federal-oversight legislation, which is supported by some owners and breeders because of dissatisfaction with the current state-by-state regulatory structure of racing.

“The first thing Congress does on a tough issue is punt,” said Means.

The Thursday night legislative briefing, held at the Fasig-Tipton sales grounds adjacent to Saratoga, was put together by the National Thoroughbred Racing Association, which conducts political fundraising on behalf of the racing industry and directs its lobbying campaigns. The briefing was intended to give industry officials and contributors an overview of current lobbying campaigns and updates on current racing issues in front of Congress.

Means also said that obtaining an extension of a tax provision allowing horse owners to accelerate depreciation over three years rather than seven years may be hard to win in this year’s lame-duck session following November’s midterm elections. The tax provision was passed in 2013 on a one-year basis, expiring at the end of that year, and lobbyists are hoping to get the extension for two years, retroactive to the beginning of this year.

So far, the Senate has passed a bill containing the extension, but the House has yet to vote, and it may not do so prior to the election break. After that, it’s anyone’s guess as to what will happen in the lame-duck session depending on how the elections break.

However, said Means, “I don’t think this is going to be a particularly productive lame-duck session.”

As part of the briefing, Means also described the “novel approach” racing’s lobbyists have taken to change current tax law to the benefit of horseplayers. After failing to get legislation passed over the last four years that would change the law, the NTRA earlier this year enlisted 17 congressmen to ask the U.S. Treasury to reinterpret the law, with the intention of significantly reducing the instances in which horseplayers must report winnings to the IRS or have taxes automatically withheld from payouts.

Earlier this week, the U.S. Treasury said it would “take the recommendations under consideration.” While the acknowledgment does not guarantee that the Treasury will interpret the language in racing’s favor, racing lobbyists said it represents a “good first step” toward a change.

The congressmen specifically asked the Treasury to reconsider a rule that requires horseplayers to declare winnings to the IRS anytime they cash a bet of $600 or more when the bet paid off at odds of 300-1 or greater (the same rule requires taxes to be withheld if the payoff is $5,000 or more). Under that rule, the IRS determines whether the bet paid off at 300-1 based on the denomination of the base wager. The NTRA – and many horseplayers – have argued that the odds should be based on the total cost of the wager, i.e., if a player hits a pick six after submitting a ticket costing $72, the player should only have to declare the winnings if the bet paid off at 300-1 of the total cost of the ticket.

Lobbyists have argued that the current interpretation does not make sense considering the growth in the last two decades in exotic wagers and multileg bets in which payoffs frequently exceed the 300-1 threshold. It’s extremely rare for a player to cash those bets with a straight $1 or $2 ticket.

“The rule is outdated, it’s archaic, it’s anachronistic, and it doesn’t reflect today’s environment,” Means said.
Legislators have been reluctant to pass a bill changing the law because of the perception that the bill would grant a tax break to gamblers. The latest strategy sidesteps the political process nearly altogether.

“We’ve got a path to try to get this changed without Congress having to pass a bill,” Means said.