06/03/2015 1:56PM

Tax law change faces additional hurdles


A proposal to alter U.S. federal tax laws in favor of horseplayers still has several more hurdles to overcome before the rules could go into effect, an official with the racing organization that has organized support for the changes said Wednesday.

Keith Chamblin, the chief operating officer of the National Thoroughbred Racing Association, said the organization does not have a firm handle on when the changes could go into effect, but he said the proposal will need to be evaluated by officials for the IRS and U.S. Treasury. If the agencies approve the change, they would need to write a formal rule, and that rule itself likely will be subject to a public-comment period before facing a final evaluation.

On Tuesday, the first public-comment period for the proposal closed, with the NTRA saying 11,665 people had used its online portal to submit a letter to the agencies in support of the change. The NTRA had set a goal of 10,000 comments, and its efforts to reach out to large racing organizations with two weeks remaining in the public-comment period bore substantial fruit, resulting in more than 7,000 comments.

“We’ve gotten it to the doorstep,” Chamblin said. “We have their ear.”

The change would allow horseplayers to count the total amount wagered in a pool in order to calculate tax reporting or withholding requirements. Currently, any wager that pays off at greater than 300-1 odds generates a W2-G form reported to the IRS as gambling income, and any wager that pays off at greater than those odds and more than $5,000 is subject to automatic withholding, regardless of how much a bettor wagered. The change would greatly reduce tax liabilities for many horseplayers who invest substantial money in exotic pools that typically produce high payouts.

The IRS and Treasury Department have scheduled a hearing for June 17 in Washington to discuss the proposal and others under consideration. Chamblin said the NTRA is hoping to be invited to the hearing, but if the organization is not invited, it will submit lengthy comments as written testimony in support of the change, along with a printout of the names of all those who submitted comments through its website.

Over the last year, the NTRA has developed a coalition of lawmakers who have asked the Treasury Department and IRS to approve the change. Those lawmakers are likely to be enlisted down the road to provide additional support, Chamblin said.

As to when the rule could go into effect if it clears all the remaining hurdles, Chamblin said the NTRA is in the dark, citing its inexperience in efforts to modify tax laws and uncertainty over whether the changes would take effect at the start of a tax year or be allowed to be applied retroactively.

“I can say this: If we get the change, we will take the change, regardless of when it would be enacted,” Chamblin said.