06/03/2014 9:39AM

NTRA pushing for change to IRS tax rules


Horse racing’s lobbying arm is once again pushing for federal tax relief for horseplayers, this time in an effort to get the Department of the Treasury to issue a ruling on whether bettors can use the total cost of a wager to determine tax liability.

The National Thoroughbred Racing Association, which conducts racing’s federal lobbying efforts, has recruited more than a dozen congressional representatives to sign off on a letter to Treasury asking for a “clarification” of the current tax rule, which uses the denomination of a wager to determine tax liability. The NTRA is seeking an opinion that would allow players to use the total cost of the wager instead, which could provide substantial tax relief to many exotic-wager bettors and players who focus on multirace bets.

“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 Alex Waldrop said in a release. “If granted, this clarification will allow horseplayers to keep more of their winnings, reduce the administrative burden on tracks and [account-wagering companies], and ultimately generate more revenue for tracks, horsemen, and government.”

Federal tax policy on gambling winnings has been a source of frustration for many horseplayers for decades, and it’s becoming more widely irritating because of the rise of exotic wagering and multirace bets like the pick four and pick five, which can often have payouts that exceed the 300-1 federal tax limit even though the payoff is only four or five times the cost of the player’s total bet.

The letter sent by the NTRA to Treasury was co-authored by U.S. Reps. Charles Boustany (R.-La.) and John Yarmuth (D.-Ky.). Both are members of the House Ways and Means Committee, which has oversight over IRS rules.

The NTRA also said it has posted a petition on change.org calling for the clarification and will begin soliciting signatures from its contact lists and on horse-racing forums.

The NTRA and other horse-racing lobbyists have pressed in the past for tax policy to be changed through legislation, but those efforts have perennially failed, in part because of resistance by many lawmakers to be associated with a measure that, in the fewest words possible, is referred to as a “tax break for horse gamblers.”

The letter sent to Treasury states that the current tax policy was set in 1978, at a time that “pre-dates the expansion of simulcasting and exotic wagering.” Under that ruling, the IRS said that even though a $1 exacta box of three horses costs $6, the cost of the bet should be treated as $1. The NTRA called that ruling “in conflict with Treasury regulations stating that wagers in the same pool shall be treated as one bet.”

In regards to the 1978 ruling, the letter states that it “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.”