Bill to Bag Withholding Tax Introduced

Legislation that would eliminate the automatic 25% federal withholding on pari-mutuel winnings of $5,000 or more on wagers of at least 300-1 was introduced in the U.S. House of Representatives July 29.

The bill, called the “Pari-Mutuel Conformity and Equality Act of 2008,” has been on the wish list of the National Thoroughbred Racing Association for about a year. It was introduced by Republican U.S. Rep. Charles Boustany Jr. of Louisiana.

The NTRA and others have argued the withholding isn’t mandated for other forms of gambling. The withholding threshold has remained unchanged for 16 years, and was last increased in 1992, from $1,000 to $5,000, the NTRA said. Since then, wagers on multiple-combination bets that can produce large payoffs now account for about two-thirds of the $15 billion a year wagered on Thoroughbred racing in the U.S.

The measure is high on the list of the NTRA Horseplayers’ Coalition, a more than 1,000-member advocacy group that seeks legislative and regulatory changes to improve the pari-mutuel economy. The group has become active in lobbying, and soon will have a small committee to lead communications.

“We’ve been telling the Horseplayers’ Coalition that we would be introducing legislation to deal with the inequities of reporting withholding on pari-mutuel winnings,” NTRA chief executive officer Alex Waldrop said July 30.

Peggy Hendershot, senior vice president of legislative affairs for the NTRA, said the withholding provision “has meant a confiscatory and frequently unfair loss of available capital. That loss of reinvestment, or ‘churn,’ leads to a reduction in overall wagering that in turn means less revenue generated for state governments, racetracks, and purse money for horsemen.

“Our industry and our fans applaud Congressman Boustany for introducing this important legislation, and we look forward to working with our new Horseplayers’ Coalition to add support to this initiative.”

Hendershot said the NTRA would look for a Democrat to co-sponsor the legislation, which could take time to make its way through the legislative process. Congress will adjourn for the month of August, and return for only several weeks in September because of the upcoming November election.

"We wanted to lay down a marker and work on the committee now," Hendershot said. "We'll also be looking at doing a small economic study to show how important this is."

The bill was introduced in the House Ways and Means Committee.The withholding provision last year was "scored"--an assessment of how much revenue it would produce--at about $117 million.

The NTRA and the American Horse Council earlier this year were successful in lobbying for passage of the Equine Equity Act, which will provide about $93 million in tax breaks over a 10-year period.