U.S. Sen. Mitch McConnell of Kentucky introduced legislation April 30 designed to promote investment in the horse industry by removing unfair provisions of federal law that favor other investments. The Equine Equity Act of 2007 would reduce the capital gains holding period for horses and allow horse owners to depreciate all racehorses over the same period.
The proposed Equine Equity Act has been supported by the American Horse Council and National Thoroughbred Racing Association.
“While I know that Kentucky's horse industry is most closely associated with the Derby, it is important to remember that horses remain Kentucky's largest agricultural product,” McConnell, a Republican, said in a statement. “The horse industry contributes $3.5 billion to the commonwealth’s economy and employs 50,000 Kentuckians year round.”
The McConnell bill reduces the capital gains holding period for horses from 24 months to 12 months, which is the case with most capital assets. Currently, horses must be held for two years to receive capital gains treatment.
The legislation also applies equal depreciation standards for all racehorses. Current law states that racehorses that begin training when older than 24 months of age are depreciated over three years, while horses that begin training before reaching 24 months of age are depreciated over seven years.
Most horses begin training before they reach 24 months, but their racing careers do not last seven years. The bill reduces the depreciation period to three years to more accurately reflect the racing life of horses.
The Equine Equity Act is co-sponsored by Senators Jim Bunning, a Kentucky Republican, and Blanche Lincoln, an Arkansas Democrat.