Members of the U.S. Senate and the U.S. House of Representatives voted May 22 to override a presidential veto of the 2007 Farm Bill exercised by George W. Bush May 21. As a result, the 2007 Farm Bill is now law and it includes the Equine Equity Act, a provision that amends the depreciation schedule for racehorses to a uniform three years.
Under previous tax law, racehorses were depreciated over either three or seven years, depending on their age when "placed in service." A horse is generally deemed to be placed in service when it begins training. Racehorses over the age of 24 months (from date of foaling) when placed into service are depreciated over three years; otherwise, they are depreciated over seven years. In a given crop of horses that make it to the track, about half will start as 2-year-olds and the rest will start as 3-year-olds. Most racehorses (except geldings) are off the track by 5, making a seven-year depreciation schedule anachronistic. Legislation contained in the 2007 Farm Bill allows an owner to recover his/her costs over the period of time that the horse is likely to race.
"This crucial piece of legislation finally provides fair and equitable tax treatment to the Thoroughbred industry," said Alex Waldrop, president and CEO of the National Thoroughbred Racing Association in a release from the organization. "This day is the culmination of many years of effort on Capitol Hill by the NTRA legislative team, and we thank Sen. Mitch McConnell, who secured inclusion of the racehorse depreciation measure in the Farm Bill, for his strong support of Kentucky's signature industry."
The 2007 Farm Bill also contains two other provisions, promoted by the NTRA, to aid horse owners. These provisions would make horse breeders eligible for the first time for emergency federal loans following a disaster. Further, the bill includes a new permanent disaster assistance program that will provide relief funds to farmers and ranchers who suffer losses in areas that are declared disaster areas by USDA. This additional disaster program will be available to horse owners.
The NTRA will be holding tax seminars this year around major Thoroughbred sales, explaining the new law, as well as legislation changing the terms for the Section 179 expensing allowance and for bonus depreciation that was passed earlier this year as part of President Bush's Economic Stimulus Act.
According to "The Economic Impact of the Horse Industry on the United States," produced in July 2005 by Deloitte Consulting, the horseracing industry carries a total economic impact of $26 billion, $20.7 billion of which is from Thoroughbred racing. There are nearly 845,000 racehorses in the U. S., and the racing industry supplies more than 380,000 jobs.