Appropriately enough, the Dec. 29 release from the National
Thoroughbred Racing Association started with the greeting, "Happy New
Year!"
What followed in the release certainly is good news. The Department
of Treasury and Internal Revenue Service have all but enacted new rules on
withholding and reporting of pari-mutuel winnings that experts believe will
pump tens of millions of dollars back into pari-mutuel pools.
While a 90-day
period for public comment will follow before the new rules become reality, the
Treasury has issued a 31-page document that clarifies "the amount of the
wager" used to determine reporting and withholding thresholds will be
based on the entire cost of the pari-mutuel ticket, which effectively will
increase the reporting and whithholding thresholds for many big payoffs on
exotic wagers where players typically box or wheel several combinations.
How
close is this to becoming reality? The rule isn't yet in place but the Treasury
wouldn't put together a 31-page document clarifying its position if it wasn't
ready to move forward. Still, the NTRA is taking the right approach of assuming
nothing until the new regulation is fully in place and will call for letters of
support from the industry and fans next week. A previous campaign saw more than
12,000 letters supporting the changes.
Under the current method, a $1
trifecta wheel of 10 horses is viewed as 10 bets of $1 each. If a payout of $600 or more
at odds of 300-1 or higher follows, the payout must be reported to the IRS. If
that same wager pays $5,000 or more on odds of 300-1 or higher, money from the
winnings must be withheld for taxes.
The rules changes would affect the 300-1
threshold. Now the $10 ticket in the scenario above is considered a $10 wager.
To reach 300-1 odds, the payout must now be more than $3,010, which means far
fewer big payouts will need to be reported.
More significantly, because it
immediately takes money out of people's pockets, players who spend $100 on 100
combinations in a Pick 4 that pays $7,500 will not face withholding. While the
payout exceeds $5,000, it no longer is a 300-1 proposition because the wager
amount will now be considered to be $100 instead of $1. To reach 300-1 odds,
the payout would have to reach $30,000.
Ed DeRosa, director of communications
for advance-deposit wagering site TwinSpires.com, said the changes in
withholding should positively impact wagering. He said under the current system
where $2,000 may immediately be withheld from a big score, that money will now
be in play. He said typically winnings are churned through 2 1/2 times, so that
$2,000 would figure to result in $5,000 more in additional handle for horse
racing.
"This is a tremendous step forward in our ongoing efforts to
modernize pari-mutuel regulations to accurately reflect today's wagering
environment," said NTRA president Alex Waldrop. "A unified message
has gotten us to this point and we encourage everyone to continue to work
through the channels we will be establishing as we seek to push these proposed
regulations across the goal line."
If all stays on schedule, the new rules
could be in place before the Triple Crown races; which indeed could make for a
very happy new year.
