New withholding rules could be enacted soon

Changes to the tax code that would be highly beneficial to horseplayers have been included in a federal document listing regulatory actions expected to be adopted in the future, raising expectations that the amendments will go into effect soon.

The changes, which would allow horseplayers to use all wagers on a single ticket for the purposes of determining liability for tax reporting and withholding, were published in the “Current Unified Agenda of Regulatory and Deregulatory Actions” released by the White House on Thursday. The document states that the changes are in their “final rule stage.”

Under the new rules, requirements for tax reporting and withholding would be triggered based on the total amount a player bet in a single pool, a change that would significantly reduce the number of payouts that generate W2-Gs or mandatory withholding, especially in exotic pools. The triggers would apply to all the wagers on a single paper ticket, whereas players betting through an account-wagering company could use all the bets made in a single pool.

Currently, the requirements are triggered based on the single winning wager, disregarding whether a player used multiple combinations in an attempt to win the bet.

The National Thoroughbred Racing Association, which spearheaded lobbying efforts for the changes, said the inclusion of the changes indicates that the rules are “nearing enactment,” but an NTRA official said on Friday that the association still does not have a good estimate as to when the new rules may go into effect.

The Department of Treasury and the IRS have already recommended that the changes be adopted, following two public-comment periods. Initially, racing officials had said the changes were expected to be put into effect earlier this year, but inertia at all federal departments since the presidential transition has delayed enactment of a wide swath of initiatives.

“Regulations are beginning to trickle out, and it’s nice to know that we are on the list,” said Keith Chamblin, a senior vice president at the NTRA. “We are still moving forward.”

The document itself states that the rules will go into effect after the date of publication in the Federal Register, meaning that the new rules would not apply retroactively to any withholding or reporting requirements triggered prior to and including that date.