Over the last few years, the horse racing industry has pushed legislation in Congress to change the current federal laws that require Internal Revenue Service (IRS) reporting on pari-mutuel winnings of $600 or more and 25% withholding on winnings of $5,000 or more. Both require the odds to be 300-to-1.
The National Thoroughbred Racing Association and American Horse Council have also pursued an administrative solution by asking the Department of Treasury (Treasury) and the IRS to review the current federal regulations regarding how “wagering proceeds” are calculated to ensure that the reporting and withholding requirements on winnings from pari-mutuel betting are accurate and reflect the current state of wagering in the industry. The industry has suggested that winnings from combinations of bets into the same pool be calculated as total proceeds minus total wagers into that pool. The industry has argued that to be fair, the regulations should be updated to define a bet or wager to include the amount won less the amount wagered into each specific pool.
On March 4, 2015, Treasury proposed to update the regulations for reporting winnings form bingo, keno, and slot machine play. While the primary proposed changes dealt with circumstances surrounding those forms of gaming, the proposal also noted that Treasury and the IRS were aware that taxpayers required to report winnings from pari-mutuel gambling may have concerns similar to those addressed in the proposed regulation with respect to bingo, keno, and slots relating to when wagers with respect to horse races may be treated as identical. Identical wagers are combined and offset against winnings to determine proceeds from the wager for purposes of determining whether the reporting thresholds are satisfied.
Accordingly, the proposed rule announced that Treasury and the IRS “intend” to amend the regulations regarding pari-mutuel wagering under Section 31.3402(q)-1 in a manner consistent with these proposed regulations relating to bingo, keno and slot machine play. Treasury and IRS requested comments from the public on this topic with respect to other forms of wagering. This would include pari-mutuel racing.
The request by IRS for comments on this issue provides the horse racing industry with an opportunity to make the broader case to the government that the reporting and withholding rules that currently apply to pari-mutuel wagering on horse racing are not only outdated, but are unfair to racing’s patrons, horse owners, breeders, trainers, race tracks and states. All of these entities share in the amount wagered and withholding reduces this betting amount dramatically.
Comments on these proposals may be submitted by June 2, 2015. The full rule proposal may be viewed at http://www.gpo.gov/fdsys/pkg/FR-2015-03-04/pdf/2015-04437.pdf.
You can view the full article on the AHC Website.