TAX CODES: Comment deadline approaching for Treasury/IRS rule change

[Kasept]

U.S. TREASURY, IRS TO CONSIDER CLARIFICATION OF PARI-MUTUEL REPORTING/WITHHOLDING

LEXINGTON, Ky. (Wednesday, March 4, 2015) – In response to efforts spearheaded by the National Thoroughbred Racing Association (NTRA) and horse racing’s advocates within the federal government, the United States Department of the Treasury and Internal Revenue Service (IRS) yesterday issued a Notice of Proposed Rulemaking and Public Hearing (Notice) that opens the door to the possible addition of pari-mutuel gambling winnings to updated reporting and withholding requirements being developed for bingo, keno, and slot machine players. The specific references relating to pari-mutuel wagering can be found in a section of the Notice entitled, “Gambling Winnings Other Than Bingo, Keno, and Slot Machine Play.”

For several months, the NTRA has been seeking updated guidelines related to reporting and withholding of pari-mutuel winnings. A clarification by Treasury and the IRS was formally requested in June 2014 by Rep. John Yarmuth, D-Ky., and Rep. Charles Boustany, R-La., and co-signed by a bi-partisan group of 15 other members of the U.S. House of Representatives. In their letter, the 17 congressmen urged the Treasury and IRS to consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool to determine the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result. This issue typically arises in the context of increasingly popular multi-horse or multi-race wagers.

For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager would be $140, which is the total amount bet into the Pick Six pool. Currently the amount wagered is calculated using only the $1 bet on the single winning combination. By understating the amount wagered in this manner, the IRS is imposing significant additional reporting and withholding obligations on horseplayers while creating unnecessary paperwork for the IRS.

A clarification would directly benefit pari-mutuel customers by reducing burdensome tax obligations. The proposal also aims to lessen racing’s competitive disadvantage against other forms of gaming that are not subject to such aggressive tax treatment related to reporting and withholding.

A Change.org petition posted by the NTRA last year received nearly 8,000 signatures in support of the clarification in only a few months. Kentucky Gov. Steve Beshear sent a letter to the Treasury last fall seeking the clarification on behalf of his state’s signature industry. In November, the NTRA teamed with Rep. Yarmuth to request a meeting with Treasury officials in Washington, D.C., to further raise awareness of the issue. A subsequent meeting, held in January on Capitol Hill between Rep. Yarmuth and a high-ranking official at the Treasury, also included two members of the NTRA’s National Handicapping Championship (NHC) Players’ Committee and an executive from Churchill Downs, which is in Yarmuth’s home district.

“Since last summer, the NTRA has been working with the Treasury and Congress to modernize IRS form W-2G,” said NTRA President and CEO Alex Waldrop. “The clarification we are seeking will significantly decrease the incidence of reporting and withholding on winning pari-mutuel wagers.”

The request for comment was included as part of a larger IRS notice – “Information Returns; Winnings from Bingo, Keno and Slot Machines.”

“In the coming days and weeks, the NTRA will be reaching out to all segments of the horse racing industry, including horseplayers, to coordinate and solicit comments in support of this important tax clarification that could positively impact everyone associated with our sport and business,” said Waldrop. “We thank the Treasury for their consideration.”

The comment period will be open until June 1, 2015.

[herkhorse]

So if this goes down, we'd be better off playing larger caveman style tickets, correct?

[robfla]

Originally Posted by herkhorse

So if this goes down, we'd be better off playing larger caveman style tickets, correct?

not necessarily. You would still get more coverage from the ABCX approach

[Kasept]

NTRA urges horseplayers to comment on tax proposal
By Matt Hegarty

The National Thoroughbred Racing Association is coordinating with account-wagering companies and racing organizations with large mailing lists to drum up support for proposed changes to tax laws affecting withholding on pari-mutuel winnings, NTRA officials said Wednesday.

The campaign to urge organizations to contact their members is being ramped up at a time when there is a little less than two weeks remaining in a public-comment period on the proposed changes. The Internal Revenue Service and U.S. Department of the Treasury posted the proposals earlier this year, with the public-comment period remaining open until June 2.

An NTRA official said on Wednesday that approximately 3,000 people have submitted comments through a form on the NTRA website, but Treasury officials have recently told the organization that more comments are needed if the changes are to be seriously considered.

Submit your comments to the U.S. Treasury

The NTRA has an internal goal of 10,000 submissions, according to the organization’s chief operating officer, Keith Chamblin, and it has lately secured pledges from all the major account-wagering companies and several large racing organizations like the National Horsemen’s Benevolent and Protective Association to distribute alerts to their mailing lists about the importance of submitting comments, Chamblin said.

The proposed changes would reduce the number of bets that trigger IRS notifications and automatic withholding by using the total amount bet into a pool by an individual, rather than the base denomination of the bet.

[Kasept]

DEADLINE APPROACHING; GET FRIENDS TO SUBMIT

[Kasept]

Horseplayers have chance to make tax relief a sure thing
By Andrew Beyer

Horseplayers are accustomed to dealing with tough losses and cruel tricks of fate, knowing that they’re an inescapable part of the game. But most bettors cannot abide a rule that was issued by the Treasury Department in 1978 and has tormented them ever since.

Treasury mandated that bettors fill out a tax form before collecting “certain gambling winnings,” and that the Internal Revenue Service withhold tax from large winnings. Some results of the policy were unfair: The IRS confiscated money from many bettors who, at year’s end, didn’t owe any taxes. The rules that govern reporting and withholding have become absurdly outdated but have undergone little change in 37 years.

What hurts the customers hurts a business, and for many years, racing’s leaders have bemoaned the effects of tax withholding on their industry. Finally, the National Thoroughbred Racing Association has found a smart way to confront the issue. It is urging Treasury to change the calculation that determines what money is subject to withholding. The modification would be an infinitesimal item in the gigantic mass of U.S. tax regulations, but it would be a significant benefit to the sport.

In 1978, Treasury was trying to make sure that windfall gambling profits didn’t escape detection by the IRS. It chose to define a big win as one that returned more than $300 for each $1 wagered. Under today’s rules, a winner must complete IRS Form W-2G if he hits a 300-1 payoff and collects $600 or more. If the payoff is $5,000 or greater, the IRS withholds 25 percent. Thus, a player hitting a pick six worth $10,000 will collect only $7,500.

Treasury was principally targeting games like keno and bingo, not horse racing. Payoffs at huge odds were rare in an era when most wagers were placed on horses to win, place, or show. But by the 1990s, of course, racetrack betting was being transformed by the proliferation of popular exotic bets – trifectas, superfectas, pick threes, pick fours, etc. – that regularly yielded big returns. Instead of conservatively betting horses to win, most players adjusted their approach and tried to hit occasional large payoffs in the exotics. In the process, they got caught in the maw of the IRS.

The typical horseplayer doesn’t make a net profit over the course of a year; if he had money withheld during the course of a losing year, he would be entitled to get the money back. But to satisfy the IRS, he would need records documenting all of his gambling transactions to establish his loss. He would have to file a return itemizing deductions to show losses that offset his reported winnings. Many players either surrendered their money to the IRS or else turned over a winning ticket at the track to a so-called “10 percenter” who would cash it for a fee.

The whole system produced many negative effects. Maury Wolff, gambler and economist, said, “It used to be a standard belief that a dollar at the track would be bet three or four times a day.” A player cashes a bet, feels a little more confident, bets a little more on the next race, and the process continues – what racetracks call the “churn.” But every dollar taken out of circulation by withholding may never get churned again.

The cumulative cost to the racing industry is significant.

One aspect of Treasury’s rules governing withholding was blatantly unfair: the way it chose to define what constitutes a 300-1 return. Bettors almost always play a multiplicity of combinations in pursuit of a big payoff in the exotics. If a player boxes six horses in a superfecta with a $1 base unit, the cost is $360. If he catches a $7,200 payoff, he’s getting a return of 20-1 on his money, well below the 300-1 threshold that triggers withholding. Yet the IRS ignores $359 of the investment and maintains the fiction that this was a $1 bet returning $7,200.

Individual racetracks have tried to reduce the frequency of withholding by offering wagers with lower base units – 10-cent superfectas, 50-cent pick fours, for example – so that they pay less than $5,000 and are exempt from withholding. The industry has for years sought legislative remedies for the policies that govern withholding. But Alex Waldrop, the NTRA’s president, acknowledged, “With the gridlock in Washington, it was a waste of time.”

So, the NTRA altered its strategy and asked Treasury to change its “definition of the amount wagered” and recognize the entire size of the investment that produced a payoff. Congressmen wrote to Treasury seeking to modernize the treatment of racetrack winnings, as did Kentucky Gov. Steve Beshear. The NTRA wants racing fans to do the same.

In a perfect world, Treasury would instantly recognize that a $360 bet on a superfecta is a $360 bet, not a $1 bet. But in case the regulators do not understand this fact, racing fans ought to remind them. From now until June 2, they can submit comments that will reach Treasury at www.ntra.com/legislative/tax-reg-modernization/.

[jms62]

Originally Posted by Kasept

Horseplayers have chance to make tax relief a sure thing
By Andrew Beyer

Horseplayers are accustomed to dealing with tough losses and cruel tricks of fate, knowing that they’re an inescapable part of the game. But most bettors cannot abide a rule that was issued by the Treasury Department in 1978 and has tormented them ever since.

Treasury mandated that bettors fill out a tax form before collecting “certain gambling winnings,” and that the Internal Revenue Service withhold tax from large winnings. Some results of the policy were unfair: The IRS confiscated money from many bettors who, at year’s end, didn’t owe any taxes. The rules that govern reporting and withholding have become absurdly outdated but have undergone little change in 37 years.

What hurts the customers hurts a business, and for many years, racing’s leaders have bemoaned the effects of tax withholding on their industry. Finally, the National Thoroughbred Racing Association has found a smart way to confront the issue. It is urging Treasury to change the calculation that determines what money is subject to withholding. The modification would be an infinitesimal item in the gigantic mass of U.S. tax regulations, but it would be a significant benefit to the sport.

In 1978, Treasury was trying to make sure that windfall gambling profits didn’t escape detection by the IRS. It chose to define a big win as one that returned more than $300 for each $1 wagered. Under today’s rules, a winner must complete IRS Form W-2G if he hits a 300-1 payoff and collects $600 or more. If the payoff is $5,000 or greater, the IRS withholds 25 percent. Thus, a player hitting a pick six worth $10,000 will collect only $7,500.

Treasury was principally targeting games like keno and bingo, not horse racing. Payoffs at huge odds were rare in an era when most wagers were placed on horses to win, place, or show. But by the 1990s, of course, racetrack betting was being transformed by the proliferation of popular exotic bets – trifectas, superfectas, pick threes, pick fours, etc. – that regularly yielded big returns. Instead of conservatively betting horses to win, most players adjusted their approach and tried to hit occasional large payoffs in the exotics. In the process, they got caught in the maw of the IRS.

The typical horseplayer doesn’t make a net profit over the course of a year; if he had money withheld during the course of a losing year, he would be entitled to get the money back. But to satisfy the IRS, he would need records documenting all of his gambling transactions to establish his loss. He would have to file a return itemizing deductions to show losses that offset his reported winnings. Many players either surrendered their money to the IRS or else turned over a winning ticket at the track to a so-called “10 percenter” who would cash it for a fee.

The whole system produced many negative effects. Maury Wolff, gambler and economist, said, “It used to be a standard belief that a dollar at the track would be bet three or four times a day.” A player cashes a bet, feels a little more confident, bets a little more on the next race, and the process continues – what racetracks call the “churn.” But every dollar taken out of circulation by withholding may never get churned again.

The cumulative cost to the racing industry is significant.

One aspect of Treasury’s rules governing withholding was blatantly unfair: the way it chose to define what constitutes a 300-1 return. Bettors almost always play a multiplicity of combinations in pursuit of a big payoff in the exotics. If a player boxes six horses in a superfecta with a $1 base unit, the cost is $360. If he catches a $7,200 payoff, he’s getting a return of 20-1 on his money, well below the 300-1 threshold that triggers withholding. Yet the IRS ignores $359 of the investment and maintains the fiction that this was a $1 bet returning $7,200.

Individual racetracks have tried to reduce the frequency of withholding by offering wagers with lower base units – 10-cent superfectas, 50-cent pick fours, for example – so that they pay less than $5,000 and are exempt from withholding. The industry has for years sought legislative remedies for the policies that govern withholding. But Alex Waldrop, the NTRA’s president, acknowledged, “With the gridlock in Washington, it was a waste of time.”

So, the NTRA altered its strategy and asked Treasury to change its “definition of the amount wagered” and recognize the entire size of the investment that produced a payoff. Congressmen wrote to Treasury seeking to modernize the treatment of racetrack winnings, as did Kentucky Gov. Steve Beshear. The NTRA wants racing fans to do the same.

In a perfect world, Treasury would instantly recognize that a $360 bet on a superfecta is a $360 bet, not a $1 bet. But in case the regulators do not understand this fact, racing fans ought to remind them. From now until June 2, they can submit comments that will reach Treasury at www.ntra.com/legislative/tax-reg-modernization/.

After we slay this dragon then we go after letting me write off Racing Betting Investment losses vs Stock Market Gambling gains and vice versa.

[OTM Al]

I did this yesterday as I didn't have much time before and figured it would take a while. Couldn't have been easier.

[Benny]

Why doesn't the NTRA have all tracks PR departments printout forms for punters to fillout this big Memorial weekend of racing ?

Even give them a free passs for future entry for a filled out form

[Kasept]

MODERNIZATION OF PARI-MUTUEL TAX RULES INCHING FORWARD

LEXINGTON, Ky. (Friday, July 8, 2016) – The U.S. House of Representatives approved the fiscal year 2017 Financial Services and General Government Appropriations bill Thursday evening that includes report language detailing Committee on Appropriations instructions for the U.S. Treasury to “expedite final consideration of the guidance which would modernize the rules governing pari-mutuel wagering.”

The bill (HR 5485) provides $21.7 billion in annual funding for the Treasury Department, the Judiciary, the Small Business Administration, the Securities and Exchange Commission, and other related agencies. A companion bill in the Senate containing identical “Guidelines for Pari-mutuel Winnings” has been passed out of committee and now awaits passage by the full Senate.

Language in the House Appropriations Committee Report reads:

Guidelines for Pari-mutuel Winnings.—The Committee appreciates the Department of the Treasury’s proposed rule (REG– 132253–11) published on March 4, 2015, along with the associated public hearing held on June 17, 2015. The Committee encourages the Treasury to expedite final consideration of the guidance which would modernize the rules governing pari-mutuel wagering.

“The House [has] passed a bill that prioritizes funding where it will be best used, and makes policy reforms that improve efficiency and accountability and rein in executive overreach,” House Appropriations Chairman and U.S. Representative Hal Rogers (KY) said.

Recent actions by the House and Senate are the latest in a concerted, industry-wide effort to modernize regulations relating to pari-mutuel winnings. Updates proposed by the NTRA would clarify regulations by redefining the “amount of the wager” to include all of a bettor’s investment into a single pari-mutuel pool, and not simply the base amount of the winning combination. The effort has received support from Members of Congress as well as all segments of the horse racing industry, including customers, who last year submitted nearly 12,000 comments to the Treasury and IRS in support of the proposed change.

“Modernization of tax regulations relating to pari-mutuel winnings is a top priority of the NTRA in Washington,” NTRA President and CEO Alex Waldrop said. “We appreciate the fact that the House recognizes the need to modernize pari-mutuel tax regulations that are outdated and burdensome. It is time for the Treasury to act.”