Influx...not In Flux - By Evan Hammonds

How good are things in the Thoroughbred world these days? Well, there’s always the doomsday brigade, but in actuality, the breeding and racing business was on a pretty good roll in September.

Why the upbeat mood? Spirited action in the auction arena through the summer and early fall and the National Thoroughbred Racing Association’s good work on new tax guidelines give the business an influx of working capital as opposed to being an industry in a state of flux due to sour sales and high takeout.

The pinhookers did well during this year’s 2-year-old sale season, so some of their largess rolled over into a yearling market that has seen its temperature rise, but not to the boiling point yet.

The major yearling sales so far have all reported positive figures over 2016 numbers, with each auction seemingly outdoing the last. Keeneland’s September yearling sale was “buzzing” as opposed to a “buzz kill,” with buyers and sellers moving at a quickened pace in the back ring all the way through the 12 sessions. The buying list seemed deeper than usual; and there was ample participation from Europeans, Central and South Americans, and several Asian countries. While there wasn’t “crazy money” like the industry has seen in the past, there certainly was plenty of bidding on the best lots.

The mood in the U.S. might have something to do with this. Despite what has—or has not happened in our nation’s capital—the economy has gotten a lot stronger. Since the presidential election last November, the Dow 30 on the New York Stock Exchange has moved from 18,840 to 22,400, a rise of some 18%. The rise in the average price of a yearling at Keeneland from last September to this year is 23.2%.

The influx of capital into the breeding segment is welcome, and as we all know, will be put to good use reloading and upgrading mares come the mixed sales and refurbishing and upgrading farms and equipment.

Another influx of capital—this time for the oft-neglected wagering segment of the sport—is an even bigger deal.

After much behind-the-scenes work the NTRA finally got the payoff Sept. 25 when the United States Treasury Department and the Internal Revenue Service announced they will formally adopt modernized regulations regarding the withholding and reporting of pari-mutuel proceeds.

The impact figures to be tremendous with as much as a 10% gain in handle—up to $1 billion a year—possible. Under the guidelines the IRS will consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool (say a $12 trifecta wheel or $50 Pick Four part-wheel) when determining the amount reported or withheld for tax purposes, as opposed to only the amount wagered on a winning ticket (the single $1 winning combination). The new regulation should reduce the tax liability immensely for the game’s biggest “whales”…meaning more figures to be plowed back in, or churned through the pari-mutuel system on other wagers.

In a sport that is full of few wins and way too many losses, it’s a net positive for everyone.

For the NTRA, which was formed back in 1998 to “increase the popularity of horse racing and improve economic conditions for industry participants,” this is the biggest achievement it can claim.

And don’t just ask us. In these days of Twitter, it was said best—in 140 characters or less—by Glen Hill Farm’s Craig Bernick on his Twitter account: “To me, @NTRA should present Eclipse Award of Merit to themselves in 2018 for passing the new tax code.”

We can’t disagree.

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