Reporting, Withholding Revisions Would be Game-Changing

  • Comments

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, 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.

Recent Posts

More Blogs