IRS, Treasury Department propose horseplayer-friendly tax rules

The IRS and the U.S. Department of the Treasury on Thursday issued proposed new rules that would greatly benefit horseplayers by allowing bettors to count all wagers made in a specific pool for the purposes of determining whether federal tax reporting and withholding requirements are triggered.

The proposed new rules, which were aggressively pursued by the National Thoroughbred Racing Association over the past two years, will be subject to a 90-day comment period. In a statement, the NTRA said it was “conceivable” that the new rules will be in place by late spring.

Current rules trigger tax reporting requirements if a single wager pays 300-1 or greater, while withholding is triggered if the bet pays more than $5,000 at odds of 300-1 or greater, calculated on the base unit of the wager. Under the proposed rules, the requirements would not be triggered unless the wager paid off at 300-1 or greater to the total amount bet by the player in the pool.

The proposed rules would have an enormous impact on the number of bets that trigger reporting and withholding requirements in multihorse and multirace exotic bets, where horseplayers often use boxes, keys, and wheels to structure their bets. In its statement, the NTRA said that “tens of millions of dollars in additional parimutuel churn” would result if the rules are put in place.

“This is a tremendous step forward in our ongoing efforts to modernize parimutuel regulations to accurately reflect today’s wagering environment,” said Alex Waldrop, the president of the NTRA.

The NTRA began lobbying IRS and Treasury Department officials directly two years ago after failing to get Congress to pass similar rules through legislation.

Under the rules, the new reporting and withholding requirements would apply only to a single ticket if the bet was placed at a physical wagering site, such as a racetrack or OTB. However, customers of account-wagering companies would be able to count all such wagers into a single pool, regardless of the number of tickets, because of the existence of a verifiable record of those wagers.

Last year, as the IRS and the Treasury Department began contemplating the proposed rules, the NTRA organized a letter-writing campaign that resulted in 12,000 positive comments on the rule changes. The NTRA said on Thursday that it would establish a “convenient and simple method for industry stakeholders” to comment on the proposed on its wesbite within a week.