The U.S. Treasury Department and the Internal Revenue Service (IRS) announced Monday they will formally adopt modernized regulations for the withholding and reporting of pari-mutuel proceeds.
The National Thoroughbred Racing Association (NTRA) has been pressing hard and long for these updated regulations. According to independent estimates, they will allow horseplayers to keep more of their winnings and increase the amount wagered on U.S. pari-mutuel racing by as much as 10 percent annually, or upwards of $1 billion.
The new rules were posted late Monday afternoon as a Public Inspection Document. They are scheduled to be officially published in Wednesday's edition of the Federal Register and will go into full effect by no later than Nov. 14, according to a story in Monday's Paulick Report. It will give racing associations, totalizator companies, and advance deposit wagering (ADW) operators up to 45 days to implement these important changes; nevertheless, some may elect to start as soon as Thursday.
“These landmark U.S. Treasury regulations will have an enormously positive impact on horseplayers, the racing industry, and the federal government,” said NTRA President & CEO Alex Waldrop. “I am extremely proud of the NTRA's legislative team for spearheading this effort, which will prove to be among the most meaningful regulatory advances made by our industry in decades. The results of this much-needed measure will be horseplayers keeping more of their winnings, racetracks generating more pari-mutuel handle, and government collecting additional tax revenue. This is a sure bet where everyone wins.”
Waldrop said the heroes of the day were "Thoroughbred racing's friends in Congress," who persisted to make it all happen -- especially Rep. John Yarmuth of Kentucky, Rep. Pat Meehan of Pennsylvania, Senate Majority Leader Mitch McConnell "and our many bipartisan supporters on Capitol Hill."
Waldrop also thanked industry stakeholders and the thousands of customers of Thoroughbred racing who signed NTRA's petition or submitted public comments in favor of the changes.
Under the new regulations, the IRS will consider the inclusion of a bettor's entire investment in a single pari-mutuel pool when determining the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result, Paulick Report says.
For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager now will be $140, which is the total amount bet into the Pick Six pool. This more accurate calculation will remove the significant reporting and withholding obligations on horseplayers and the unnecessary paperwork for the IRS that was a result of the prior rule that used only the $1 bet on the single winning combination as the amount wagered.
“This is a major victory for all pari-mutuel wagering customers,” said Judy Wagner, the horseplayers' representative on the NTRA Board of Directors and winner of the 2001 National Horseplayers Championship (NHC). “It would not have occurred without the leadership of the NTRA and the support of thousands of horseplayers who actively participated in the process to modernize these regulations.”
The amended regulations, advocated by the NTRA and its legislative team, define the “amount of the wager” to include the entire amount wagered into a specific pari-mutuel pool by an individual -- not just the winning base unit as is the case today -- so long as all wagers made into a specific pool by an individual are made on a single totalizator ticket if the wager is placed onsite. The modernized regulations will have the same positive results for ADW customers and will not impact how those wagers are currently made.
Waldrop noted that the NTRA has been working behind the scenes since January with industry groups -- including totalizator companies, ADWs, and racing organizations -- to ensure a smooth implementation for customers.
View the full text of the new rule under section 3402(q) of the Internal Revenue Code by clicking here.
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