09/28/2017 3:20PM

Sportech clients left in the gate as new tax rules take hold

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Sportech, one of the three dominant bet-processing companies in the United States, has told its clients that it may be another month before the company can update their systems to comply with tax revisions that are highly beneficial to horseplayers.

Sportech sent a brief email to its clients Thursday morning describing a vague timeline for the updates “with our goal being to have all customers updated by the end of October.” The email, which was addressed to “Sportech Customer,” said that the company had “been preparing for this adjustment for some time,” and said that company representatives would be in touch with each client “with detailed information about their specific roll-out timing.”

The tax revisions went into effect Thursday for any bet-taker that had updated its bet-processing network to comply with the new rules, which allow bettors to count all of their wagers in a single pool for the purposes of determining tax liability. Another bet-processing company, United Tote, which is owned by Churchill Downs, had updated all of its clients as of Wednesday morning, while the other, AmTote, owned by The Stronach Group, had updated several of its most important clients by that night, raising questions about Sportech’s preparation in advance of the revisions being formalized.

“This is something we have been telling them they need to do for months,” said Dennis Drazin, adviser to the New Jersey Thoroughbred Horsemen’s Association, which runs Thoroughbred racing at Monmouth Park and the Meadowlands, two clients of Sportech, on Thursday after receiving the email. “Months.”

Sportech spokeswoman Jennifer Conning responded to a request for comment by reiterating the content of the e-mail. When asked additional questions by email seeking more detail about the company’s preparation and planning and whether the company would establish priorities among its clients, Conning repeated the earlier statement.

In addition to the New Jersey tracks, Sportech’s clients include all of the properties of Penn National Gaming Inc., Parx Racing outside Philadelphia, OTBs in Connecticut, and a number of smaller account-wagering sites.

Several officials representing clients of Sportech declined to comment because of their concern that criticizing the company would exacerbate the situation.

The Sportech sites are now facing a potential loss of customers as bettors seek out sites that are compliant with the tax revisions. Any winning wager made through a site that has not updated its system for the revisions will be treated under the old tax rules, which require tax-reporting for any bet that pays off at greater than 300-1 and requires automatic withholding for any payoff at those odds that also is more than $5,000.

While the tax rules went into effect Thursday, the rules also gave bet-takers a 45-day grace period to come into compliance. The compliance deadline is Nov. 14.

By Wednesday night, all of the major national account-wagering companies had declared that their systems had been updated to be compliant with the revisions, including Twinspires, TVG, XpressBet, DRF Bets (and other XpressBet partner sites), NYRA Bets, and 4NJBets, a TVG-run site that is the only licensed account-wagering company in New Jersey.

While XpressBet and NYRA Bets are clients of AmTote, the bet-processing company owned by The Stronach Group, it was unclear mid-day on Thursday how much progress AmTote had made in updating the systems at myriad other sites in its network, but there were strong signals the company had prioritized its clients. Just prior to the Gulfstream Park card on Thursday morning, the track’s system was updated by the company to be tax compliant, suggesting that the next in line would be fellow Stronach Group track Santa Anita, which is scheduled to start its fall meet Friday.

AmTote officials have not responded to requests for comment for several days.

The tax revisions were largely the result of work over the past three years by the National Thoroughbred Racing Association, which told racetracks and bet-processing customers throughout the year that they believed that the revisions would be approved in 2017. The NTRA also had urged the tracks and bet-processing companies to prepare their systems in advance of formal approval, but the Monday announcement by the IRS and Treasury Department caught many in the industry slightly off guard.