US racing industry expects 10% betting bump from new tax rules

TAGs: horseracing, Internal Revenue Service, National Thoroughbred Racing Association

irs-pari-mutuel-race-betting-rulesUS race betting operators expect a surge in betting handle thanks to new rules for how punters’ winnings are taxed.

On Monday, the US Treasury Department and the Internal Revenue Service (IRS) announced new rules for pari-mutuel wagering proceeds. The IRS will now consider a bettor’s entire investment in a single pari-mutuel pool, rather than only the amount wagered on the correct result, when determining the amount to be reported or withheld for tax purposes.

Basically, punters who place multiple wagers on a single pool will now have the full value of their stake applied to their winning wagers for tax purposes. For on-site betting, all wagers placed in a single pool must be made on the same tote ticket. Pool bets placed via advance deposit wagering (ADW) sites will enjoy the same tax benefits without any changes to their current wagering methods.

The reporting thresholds remain the same as before: 300:1 and a $600 payout. But the IRS will now calculate that 300:1 ratio differently. Churchill Downs Inc’s ADW site offered the following example of how the system will benefit bettors:

Let’s say you box five horses in a $1 superfecta—a bet that costs $120. If you win and the bet returns $5,005 you will not receive a W2G or be subject to automatic withholding because 5,005 is not 300x more than 120. Under the old regulations, you’d have received a W2G and had taxes withheld from your account automatically because $5,005 is more than 300x the $1 superfecta that hit.

TwinSpires cautioned that just because the site won’t be reporting punters’ winnings to the IRS in the same way doesn’t absolve punters of their tax obligations on certain winnings. As always, check with your friendly neighborhood tax adviser.

The new rules – which also apply to greyhound and jai alai betting pools – were officially published on Wednesday, and racing operators will have up to 45 days in which to adjust their systems, meaning all operators will have made the adjustments by November 14. However, many operators are expected to get the job done well in advance of that date, including TwinSpires, which plans to incorporate the changes by Thursday.

The National Thoroughbred Racing Association (NTRA), which has been lobbying for this rule change, was positively giddy at the news, saying it could boost annual pari-mutuel handle by as much as 10%, or an extra $1b per year. NTRA CEO Alex Waldrop called the change “among the most meaningful regulatory advances made by our industry in decades.”

Similarly, TwinSpires president Ted Gay called the news “a very big win” for pari-mutuel racing. “The reduction of wagering dollars withheld from circulation means more money for our players, which means more handle for the industry, our partner tracks, and horsemen. These changes will improve the economics of the sport at every level.”


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