DONE! Treasury/IRS Issues Updated Tax Rules

[Kasept]

Horseracing Wins As Treasury/IRS Issue Updated Tax Rules

The U.S. Treasury Department and the Internal Revenue Service (IRS) today announced that they will formally adopt modernized regulations regarding the withholding and reporting of pari-mutuel proceeds. The National Thoroughbred Racing Association (NTRA) has long pressed for these updated regulations that will allow horseplayers to keep more of their winnings, thereby increasing the amount wagered on U.S. pari-mutuel racing by as much as 10 percent annually, or upwards of $1 billion, according to independent estimates. The new rules were posted late Monday afternoon as a Public Inspection Document. They are scheduled to be officially published in Wednesday’s edition of the Federal Register and will go into full effect by no later than Nov. 14, giving racing associations, totalisator companies, and advance deposit wagering (ADW) operators up to 45 days to implement these important changes; however, some may elect to start as soon as Thursday.

“These landmark U.S. Treasury regulations will have an enormously positive impact on horseplayers, the racing industry, and the federal government,” said NTRA President & CEO Alex Waldrop. “I am extremely proud of the NTRA’s legislative team for spearheading this effort, which will prove to be among the most meaningful regulatory advances made by our industry in decades. The results of this much-needed measure will be horseplayers keeping more of their winnings, racetracks generating more pari-mutuel handle, and government collecting additional tax revenue. This is a sure bet where everyone wins!”

Added Waldrop: “This day would never have come without the persistence of Thoroughbred racing’s friends in Congress, especially Rep. John Yarmuth of Kentucky, Rep. Pat Meehan of Pennsylvania, Senate Majority Leader Mitch McConnell and our many bipartisan supporters on Capitol Hill. We also are indebted to the industry stakeholders and thousands of customers of Thoroughbred racing who signed our petition or submitted public comments in favor of these changes.”

Under the new regulations, the IRS will consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool when determining the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result.

For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager now will be $140, which is the total amount bet into the Pick Six pool. This more accurate calculation will remove the significant reporting and withholding obligations on horseplayers and the unnecessary paperwork for the IRS that was a result of the prior rule that used only the $1 bet on the single winning combination as the amount wagered.

“This is a major victory for all pari-mutuel wagering customers,” said Judy Wagner, the Horseplayers’ Representative on the NTRA Board of Directors and winner of the 2001 National Horseplayers Championship (NHC). “It would not have occurred without the leadership of the NTRA and the support of thousands of horseplayers who actively participated in the process to modernize these regulations.”

The amended regulations, advocated by the NTRA and its legislative team, define the “amount of the wager” to include the entire amount wagered into a specific pari-mutuel pool by an individual – not just the winning base unit as is the case today – so long as all wagers made into a specific pool by an individual are made on a single totalisator ticket if the wager is placed onsite. The modernized regulations will have the same positive results for ADW customers and will not impact how those wagers are currently made.

View the full text of the new rule under section 3402(q) of the Internal Revenue Code here: https://s3.amazonaws.com/public-insp...2017-20720.pdf.

The NTRA has pushed for the modernization of pari-mutuel withholding and reporting rules for several years. As more and more pari-mutuel wagering was directed toward exotic wagering pools it become clear that the tax rules were becoming an increasing and unfair burden on horseplayers as those outdated rules significantly increased the incidence of winning tickets subject to withholding and reporting. These new rules are the product of all the work the NTRA, and other industry stakeholders, undertook with Congressional representatives and Treasury and IRS officials.

“This represents a great triumph by the entire NTRA legislative team, including the bipartisan Horse PAC, which played an instrumental role in the passage of these regulations that will benefit all segments of the industry,” said Horse PAC chairman William S. (Bill) Farish. “We thank the hundreds of individual stakeholders who contribute to Horse PAC; they played a major role in today’s victory.”

Waldrop noted that the NTRA has been working behind the scenes since January with industry groups – including totalisator companies, ADWs, and racing organizations – to ensure a smooth implementation for customers.

“For the industry to fully realize the benefits of modernized regulations for pari-mutuel withholding and reporting it is essential that we deliver a seamless transition to our customers,” he said. “We are optimistic that the industry will be fully prepared to institute these landmark changes by no later than November 14.”

[declansharbor]

[joeydb]

This is awesome news. Thanks Steve for giving the issue and all those who worked to make it happen the publicity that helped it get done.

[jms62]

Reading the rule and going through the examples I still need clarification. So if I play a $20 1x3x3 Pick 3 Automatic withholding will be triggered at $53,800
((180*300) - 180)

[ateamstupid]

Kudos to all the people at NTRA who fought for this, Steve for megaphoning and to everyone who submitted comments to the IRS. This is the most significant victory for horseplayers in my lifetime.

[ADJMK]

Example 10. (i) B places a $15 bet at the cashier window at the racetrack for
horse A to win the fifth race at the racetrack that day. After placing the first bet, B gains
confidence in horse A’s prospects to win and places an additional $40 bet at the cashier
window at the racetrack for horse A to win the fifth race, receiving a second ticket for
this second bet. Horse A wins the fifth race, and B wins a total of $5,500 (100 to 1
odds) on those bets. The $15 bet and the $40 bet are identical wagers under
paragraph (c)(1)(iii)(A) of this section because winning on both bets depended on the
occurrence of the same event and the bets are placed in the same parimutuel pool with
the same payer. This is true regardless of the fact that the amount of the wager differs
in each case.
(ii) B cashes the tickets at different cashier windows. Pursuant to paragraph (d)
of this section and §1.6011-3, B completes a Form W-2G indicating that the amount of
winnings is from identical wagers and provides the form to each cashier. The payments
by each cashier of $1,500 and $4,000 are less than the $5,000 threshold for
withholding, but under paragraph (c)(1)(iii)(A) of this section, identical wagers are
treated as paid with respect to a single wager for purposes of determining the proceeds
from a wager. The payment is not subject to withholding or reporting because although
the proceeds from the wager are $5,445 ($1,500 + $4,000 - $55), the proceeds from the
16
wager are not at least 300 times as great as the amount wagered ($55 x 300 =
$16,500).
Example 11. B makes two $1,000 bets in a single “show” pool for the same jai
alai game, one bet on Player X to show and one bet on Player Y to show. A show bet is
a winning bet if the player comes in first, second, or third in a single game. The bets are
placed at the same time at the same cashier window, and B receives a single ticket
showing both bets. Player X places second in the game, and Player Y does not place
first, second, or third in the game. B wins $8,000 from his bet on Player X. Because
winning on both bets does not depend on the occurrence of the same event, the bets
are not identical bets under paragraph (c)(1)(iii)(A) of this section. However, pursuant to
the rule in paragraph (c)(1)(ii) of this section, the amount of the wager is the aggregate
amount of both wagers ($2,000) because the bets were placed in a single parimutuel
pool and reflected on a single ticket. The payment is not subject to withholding or
reporting because although the proceeds from the wager are $6,000 ($8,000 - $2,000),
the proceeds from the wager are not at least 300 times as great as the amount wagered
($2,000 x 300 = $600,000).

Example 12. B bets a total of $120 on a three-dog exacta box bet ($20 for each
one of the six combinations played) at the dog racetrack and receives a single ticket
reflecting the bet from the cashier. B wins $5,040 from one of the selected
combinations. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the amount of
the wager is $120, not $20 for the single winning combination of the six combinations
played. The payment is not subject to withholding under section 3402(q) because the
proceeds from the wager are $4,920 ($5,040-$120), which is below the section 3402(q)
withholding threshold.

Example 13. B makes two $12 Pick 6 bets at the horse racetrack at two different
cashier windows and receives two different tickets each representing a single $12 Pick
6 bet. In his two Pick 6 bets, B selects the same horses to win races 1-5 but selects
different horses to win race 6. All Pick 6 bets on those races at that racetrack are part
of a single parimutuel pool from which Pick 6 winning bets are paid. B wins $5,020 from
one of his Pick 6 bets. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the
bets are not aggregated for purposes of determining the amount of the wager because
the bets are reflected on separate tickets. Assuming that the applicable rate is 25%, the
racetrack must deduct and withhold $1,252 (($5,020-$12) x 25%) because the amount
of the proceeds of $5,008 ($5,020 - $12) is greater than $5,000 and is at least 300 times
as great as the amount wagered ($12 x 300 = $3,600). The racetrack also must report
B’s winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy
of the Form W-2G to B.

Example 14. C makes two $50 bets in two different parimutuel pools for the
same jai alai game. One bet is an “exacta” in which C bets on player M to win and
player N to “place.” The other bet is a “trifecta” in which C bets on player M to win,
player N to “place,” and player O to “show.” C wins both bets and is paid $2,000 with
respect to the bet in the “exacta” pool and $3,100 with respect to the bet in the “trifecta”
17
pool. Under paragraph (c)(1)(iii)(A) of this section, the bets are not identical bets.
Under paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of
determining the amount of the wager for either payment because they are not wagers in
the same parimutuel pool. No section 3402(q) withholding is required on either
payment because neither payment separately exceeds the $5,000 withholding
threshold.
Example 15. C makes two $100 bets for the same dog to win a particular race. C
places one bet at the racetrack and one bet at an off-track betting establishment, but the
two pools constitute a single pool. C receives separate tickets for each bet. C wins
both bets and is paid $4,000 from the racetrack and $4,000 from the off-track betting
establishment. Under paragraph (c)(1)(ii) of this section, the bets are not aggregated
for purposes of determining the amount of the wager because the wager placed at the
racetrack and the wager placed at the off-track betting establishment are reflected on
separate tickets, despite being placed in the same parimutuel pool. No section 3402(q)
withholding is required because neither payment separately exceeds the $5,000
withholding threshold.
Example 16. C places a $200 Pick 6 bet for a series of races at the racetrack on
a particular day and receives a single ticket for the bet. No wager correctly picks all six
races that day, so that portion of the pool carries over to the following day. On the
following day, C places an additional $200 Pick 6 bet for that day’s series of races and
receives a new ticket for that bet. C wins $100,000 on the second day. Pursuant to the
rule in paragraph (c)(1)(ii) of this section, the bets are on two separate tickets, so C’s
two Pick 6 bets are not aggregated for purposes of determining the amount of the
wager. Assuming that the applicable rate is 25%, the racetrack must deduct and
withhold $24,950 (($100,000 - $200) x 25%) because the amount of the proceeds of
$99,800 ($100,000 - $200) is greater than $5,000, and is at least 300 times as great as
the amount wagered ($200 x 300 = $60,000). The racetrack also must report C’s
winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy of
the Form W-2G to C.

[jms62]

Originally Posted by ADJMK

Example 10. (i) B places a $15 bet at the cashier window at the racetrack for
horse A to win the fifth race at the racetrack that day. After placing the first bet, B gains
confidence in horse A’s prospects to win and places an additional $40 bet at the cashier
window at the racetrack for horse A to win the fifth race, receiving a second ticket for
this second bet. Horse A wins the fifth race, and B wins a total of $5,500 (100 to 1
odds) on those bets. The $15 bet and the $40 bet are identical wagers under
paragraph (c)(1)(iii)(A) of this section because winning on both bets depended on the
occurrence of the same event and the bets are placed in the same parimutuel pool with
the same payer. This is true regardless of the fact that the amount of the wager differs
in each case.
(ii) B cashes the tickets at different cashier windows. Pursuant to paragraph (d)
of this section and §1.6011-3, B completes a Form W-2G indicating that the amount of
winnings is from identical wagers and provides the form to each cashier. The payments
by each cashier of $1,500 and $4,000 are less than the $5,000 threshold for
withholding, but under paragraph (c)(1)(iii)(A) of this section, identical wagers are
treated as paid with respect to a single wager for purposes of determining the proceeds
from a wager. The payment is not subject to withholding or reporting because although
the proceeds from the wager are $5,445 ($1,500 + $4,000 - $55), the proceeds from the
16
wager are not at least 300 times as great as the amount wagered ($55 x 300 =
$16,500).
Example 11. B makes two $1,000 bets in a single “show” pool for the same jai
alai game, one bet on Player X to show and one bet on Player Y to show. A show bet is
a winning bet if the player comes in first, second, or third in a single game. The bets are
placed at the same time at the same cashier window, and B receives a single ticket
showing both bets. Player X places second in the game, and Player Y does not place
first, second, or third in the game. B wins $8,000 from his bet on Player X. Because
winning on both bets does not depend on the occurrence of the same event, the bets
are not identical bets under paragraph (c)(1)(iii)(A) of this section. However, pursuant to
the rule in paragraph (c)(1)(ii) of this section, the amount of the wager is the aggregate
amount of both wagers ($2,000) because the bets were placed in a single parimutuel
pool and reflected on a single ticket. The payment is not subject to withholding or
reporting because although the proceeds from the wager are $6,000 ($8,000 - $2,000),
the proceeds from the wager are not at least 300 times as great as the amount wagered
($2,000 x 300 = $600,000).

Example 12. B bets a total of $120 on a three-dog exacta box bet ($20 for each
one of the six combinations played) at the dog racetrack and receives a single ticket
reflecting the bet from the cashier. B wins $5,040 from one of the selected
combinations. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the amount of
the wager is $120, not $20 for the single winning combination of the six combinations
played. The payment is not subject to withholding under section 3402(q) because the
proceeds from the wager are $4,920 ($5,040-$120), which is below the section 3402(q)
withholding threshold.

Example 13. B makes two $12 Pick 6 bets at the horse racetrack at two different
cashier windows and receives two different tickets each representing a single $12 Pick
6 bet. In his two Pick 6 bets, B selects the same horses to win races 1-5 but selects
different horses to win race 6. All Pick 6 bets on those races at that racetrack are part
of a single parimutuel pool from which Pick 6 winning bets are paid. B wins $5,020 from
one of his Pick 6 bets. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the
bets are not aggregated for purposes of determining the amount of the wager because
the bets are reflected on separate tickets. Assuming that the applicable rate is 25%, the
racetrack must deduct and withhold $1,252 (($5,020-$12) x 25%) because the amount
of the proceeds of $5,008 ($5,020 - $12) is greater than $5,000 and is at least 300 times
as great as the amount wagered ($12 x 300 = $3,600). The racetrack also must report
B’s winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy
of the Form W-2G to B.

Example 14. C makes two $50 bets in two different parimutuel pools for the
same jai alai game. One bet is an “exacta” in which C bets on player M to win and
player N to “place.” The other bet is a “trifecta” in which C bets on player M to win,
player N to “place,” and player O to “show.” C wins both bets and is paid $2,000 with
respect to the bet in the “exacta” pool and $3,100 with respect to the bet in the “trifecta”
17
pool. Under paragraph (c)(1)(iii)(A) of this section, the bets are not identical bets.
Under paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of
determining the amount of the wager for either payment because they are not wagers in
the same parimutuel pool. No section 3402(q) withholding is required on either
payment because neither payment separately exceeds the $5,000 withholding
threshold.
Example 15. C makes two $100 bets for the same dog to win a particular race. C
places one bet at the racetrack and one bet at an off-track betting establishment, but the
two pools constitute a single pool. C receives separate tickets for each bet. C wins
both bets and is paid $4,000 from the racetrack and $4,000 from the off-track betting
establishment. Under paragraph (c)(1)(ii) of this section, the bets are not aggregated
for purposes of determining the amount of the wager because the wager placed at the
racetrack and the wager placed at the off-track betting establishment are reflected on
separate tickets, despite being placed in the same parimutuel pool. No section 3402(q)
withholding is required because neither payment separately exceeds the $5,000
withholding threshold.
Example 16. C places a $200 Pick 6 bet for a series of races at the racetrack on
a particular day and receives a single ticket for the bet. No wager correctly picks all six
races that day, so that portion of the pool carries over to the following day. On the
following day, C places an additional $200 Pick 6 bet for that day’s series of races and
receives a new ticket for that bet. C wins $100,000 on the second day. Pursuant to the
rule in paragraph (c)(1)(ii) of this section, the bets are on two separate tickets, so C’s
two Pick 6 bets are not aggregated for purposes of determining the amount of the
wager. Assuming that the applicable rate is 25%, the racetrack must deduct and
withhold $24,950 (($100,000 - $200) x 25%) because the amount of the proceeds of
$99,800 ($100,000 - $200) is greater than $5,000, and is at least 300 times as great as
the amount wagered ($200 x 300 = $60,000). The racetrack also must report C’s
winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy of
the Form W-2G to C.

So I think I am right that W2G and Automatic withholding will take place at 53,800..

[Port Conway Lane]

Originally Posted by jms62

So I think I am right that W2G and Automatic withholding will take place at 53,800..

that appears to close but wouldn't it be 53,820?

[jms62]

Originally Posted by Port Conway Lane

that appears to close but wouldn't it be 53,820?

Yes. My bad