In a recent letter to the United States Treasury, Kentucky Governor Steve Beshear urged the federal government to clarify guidelines relating to the calculation of pari-mutuel winnings for tax purposes.

The letter was shared with the National Thoroughbred Racing Association and a copy with the full text is available online here.

Beshear is the first governor to voice support for the clarification. Earlier this year, a bipartisan group of 17 congressmen led by Rep. Charles Boustany (R-LA) and Rep. John Yarmuth (D-KY) sent a letter to the Treasury with the same recommendation. That request was formally acknowledged by the Treasury, which said in August that it would take the lawmakers’ wishes into consideration.

Governor Beshear’s letter states in part:

[T]he current wagering tax system simply does not reflect today’s wagering climate, especially in the U.S. horse racing industry where wagering has grown in recent decades to encompass a host of new bet types. Further, redefining the cost of a bet or wager to reflect today’s pari-mutuel wagering is urgently needed to aid an industry of great importance to the economic well-being of Kentucky.

Kentucky has long been the epicenter of the equine world. A comprehensive study by Deloitte entitled “The Economic Impact of the Horse Industry on the United States” found the total effect of the entire equine industry on the State of Kentucky’s gross domestic product to be over $3.5 billion annually. This includes racing, breeding, training and other equine activities. Further, the study found that the industry provides nearly 100,000 jobs per year to our state.

Without pari-mutuel wagering, the jobs and economic activity so important to my state’s economy simply would not exist.

The request for clarification urges 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 exotic wagers.

For example, under the proposed clarification, 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 Internal Revenue Service is erroneously imposing significant additional reporting and withholding obligations on horseplayers. The 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 have never been subject to such an aggressive tax ruling.

The clarification effort has been spearheaded by the NTRA. More than 7,800 citizens have signed a change.org petition in support of the clarification. The petition is available online here.

More on the initial Boustany-Yarmuth letter can be found here.

(NTRA)