Language that would authorize two breed development funds and eliminate a tax on the sale of yearlings and 2-year-olds in Kentucky has been delivered to Republican Gov. Ernie Fletcher for possible inclusion in a tax modernization plan that could be unveiled in early February.Republican Sen. Damon Thayer, an executive with the National Thoroughbred Racing Association and Breeders' Cup, proposed the measures. Thayer said he was approached by Kentucky Commerce Secretary Jim Host and asked to provide language for consideration in the Fletcher plan.The measure would create two funds: the Kentucky Thoroughbred Breeders Incentive Fund and the Kentucky Horse Breeders Incentive Fund. Money currently collected through a tax on stud fees--about $15 million a year--would be deposited into the breeding funds instead of the state's general fund."Hopefully, it will be included in the governor's tax plan," Thayer told The Blood-Horse Jan. 21.Thayer, who co-chairs the state Interim Joint Committee on Agriculture and Natural Resources Subcommittee on Horse Farming, said the Thoroughbred breed incentive fund would be for Thoroughbreds only, and the other fund for all other breeds. According to the Legislative Research Commission, the stud-fee tax on Thoroughbreds generates about $14 million a year, while other breeds produce about $1 million a year.If the language were included in the Fletcher document, the money would begin to accrue July 1. The actual programs would commence Jan. 1, 2006. Thayer said he is working on legislation that would create two boards that would make recommendations to the Kentucky Horse Racing Authority on how the funds should be structured."The funds would be administered by the KHRA," Thayer said. "I believe that matches up with the mandate the governor gave the authority to help with the economic development of the horse industry. The two boards would make recommendations to the authority on how to determine eligibility, implementation, and awards for the programs."Thayer said he'd like to see a provision that would require mares bred in Kentucky to remain in the state until they foal in order for the foal to be eligible for fund benefits. He said that would generate revenue for farms because they'd have more boarders.Development of a breed development scheme is one of the legislative objectives of the Kentucky Equine Education Project, a multi-breed organization that seeks to educate the public and legislators on the importance of the horse industry to the state's economy. Thayer said he planned to meet with KEEP officials in early February to discuss a suggestion that some money from the Thoroughbred fund go to the general horse fund to encourage growth of other breeds.Currently, Kentucky's incentive program consists of the Kentucky Thoroughbred Development Fund, which provides about $9 million a year in purse supplements for owners. The money goes toward purses for maiden special weight events, allowance events, and stakes.The sales tax on yearlings and 2-year-olds generates $300,000 to $500,000 a year, Thayer said. The tax in effect provides an incentive for people to take horses out of Kentucky, something that flies in the face of the purpose of a breed development program."It's a detriment to the economic development of the industry in Kentucky," Thayer said. "We have plenty of good training centers that are being denied the opportunity to train and break these 2-year-olds."Not in the mix, at least right now, is elimination of a tax on feed, fencing, and farm equipment that generates about $9 million a year."We'll look at that tax at some point. The total package isn't politically feasible at this time, but it remains a priority," Thayer said.