09/27/2017 4:10PM

Plans to implement new withholding rules in a state of flux

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LEXINGTON, Ky. – The number of betting outlets that will be compliant with voluntary tax revisions highly beneficial to horseplayers when the rules go into effect on Thursday remained in flux Wednesday as racing companies scrambled to get their bet-processing systems up to date.

On one side of the ledger was United Tote, one of the so-called “big three” bet-processing companies in the U.S., which on Wednesday affirmed that all of its clients would be compliant with the new tax revisions on the first day the rules are applied, a list that includes the giant account-wagering operator Twinspires.com and the popular racetrack Keeneland, which opens its meet next Friday. Sportech, another of the big three companies, has remained mum on its progress so far, frustrating some of its clients.

The identity of wagering outlets that will be compliant with the tax revisions on Thursday is important to horseplayers because of the significant tax advantages conferred by the new rules. Under the revisions, winning wagers that are placed through outlets that have updated their bet-processing systems to reflect the new tax rules will be subject to far higher thresholds that trigger automatic tax-reporting or withholding requirements. Those placed through outlets that are not yet compliant will potentially face much higher tax liability, especially on a long-odds score made in the exotic pools.

So far, only United Tote, which is owned by Churchill Downs Inc., has announced that all of its outlets will be compliant with the revisions on Thursday, although there did seem to be some wiggle room in that characterization. “At this point, we plan to have all United States-based customers of United Tote ready to go on Thursday morning,” Nate Simon, the president of the company, said on Wednesday morning.

Jim Goodman, the director of mutuels and simulcasts at Keeneland, said that the track received a software update from United Tote and was testing the system on Wednesday.

“We have every expectation that we should be fully compliant for the opening of the fall meet” on Oct. 7, Goodman said.

Elsewhere, customers of Sportech have been attempting to get updates about the bet-processing company’s progress, but have not yet received answers, according to track officials who are clients of the company. Sportech’s biggest clients are in Pennsylvania, New Jersey, and Connecticut, where it runs a string of off-track betting locations. Sportech also provides bet-processing services for all of the parimutuel outlets owned and operated by Penn National Gaming Inc., a large racing and casino company with facilities across North America.

“We don’t have any response from them as of right now,” Dennis Drazin, an advisor to the New Jersey Thoroughbred Horsemen’s Association, which conducts Thoroughbred racing at Monmouth Park and the Meadowlands, said on Wednesday afternoon. “This is something we’ve alerted them to for quite a while, something that has needed to be done ASAP. But right now we don’t know where they are at.”

Sportech, which has headquarters in the U.S. and in England, did not respond to requests for comment on Wednesday.

It is unclear where the third bet-processing company, AmTote, stood on Wednesday. On Tuesday, company officials said that they were working on their updates, but the company did not respond by early Wednesday afternoon to a request for more information. AmTote is owned by The Stronach Group, and its biggest clients are in California, where Santa Anita starts its fall meet on Friday. The New York Racing Association is also a client of AmTote.

The Stronach Group also owns and operates XpressBet, one of the three largest account-wagering operations in the country, and late in the day on Wednesday, the company announced that it, too, would be compliant with the new tax rules. (XpressBet provides wagering services to DRFBets, an account-wagering platform owned by Daily Racing Form, and that site will be tax compliant as well.) The other large account-wagering company, TVG, had not yet announced when it would be compliant, but on Tuesday, the company said it “hoped” to be compliant by Friday.

After an extensive lobbying effort led by the National Thoroughbred Racing Association to get the new rules adopted, the IRS and the Treasury Department announced on Monday that the new tax rules would be published in the official register on Wednesday, with the rules going into effect on Thursday. However, under language added at the behest of some racing companies, the rules gave bet-takers 45 days from the effective date to come into compliance, opening up a window in which some would offer their customers the new tax advantages and some would not, depending on how prepared the companies were prior to the Monday announcement. The compliance deadline is Nov. 14, roughly 10 days after the two-day Breeders’ Cup event.

Under the new rules, bettors will be able to count their entire investment in a pool for the purposes of determining whether thresholds for tax-reporting or automatic withholding are triggered. The previous rule used the base denomination of the wager to determine the triggers, so the change will result in far fewer winning wagers triggering the requirements, especially in exotic pools like the trifecta, superfecta, pick four, pick five, and pick six.

Racing lobbyists had told racing companies throughout the year that the rules would be put in place in 2017, but they were uncertain about the timing, given the general disarray within federal bureaucracies since the presidential transition.

“With the new regime in Washington, it was tough to determine what would happen and when it would happen,” said Hank Zeitlin, the head of the Thoroughbred Racing Associations, a racetrack trade group that regularly meets with bet-processing companies on technology issues. “As a result, the [bet-processing] companies are in various stages of compliance.”