NTRA, Treasury Discuss Tax Withholding Requirements

By T.D. Thornton 

The National Thoroughbred Racing Association has embarked upon a strategy shift in an effort to ease the burden of federal tax reporting and withholding requirements for horseplayers. 

For roughly the past decade, the NTRA has been lobbying for legislative changes to Internal Revenue Code Section 3402(q)(3)(c), which requires tax withholding if winnings of more than $5,000 are derived from base bets at least 300 times as large as the amount wagered. 

This rule is unfair, the NTRA has argued, because it was conceived decades ago in an era when the daily double was the industry’s most exotic bet. 

That 300-1 standard is outdated, the NTRA claims, because withholding-triggering scores are often comprised of an increasingly complex array of wheels, boxes and strings of horizontal and vertical bets that by their very nature end up producing numerous losing wagers on the same ticket. 

To remedy the situation, NTRA president Alex Waldrop, several horseplayers, and an official from Churchill Downs met on Tuesday with an unnamed “high-ranking” United States Department of the Treasury official to try and change the rule so that the entire amount wagered—not just the amount bet on the winning combo—will determine whether 300-1 withholding is triggered. 

“We had a very timely and productive meeting,” said Waldrop. “Timely because the Treasury is in the process of reviewing the W2-G form itself, and productive because the individual with whom we spoke was knowledgeable about parimutuel wagering and struck an immediate rapport with our horseplayers.” 

Jeff Platt, president of the Horseplayers Association of North America, said he was not at the meeting, but supports the rule change. 

“It’s a no-brainer,” Platt said. “The tax code is more favorable to the slots player than the horseplayer. The NTRA has had a team of lobbyists going after this for at least 8 years and they haven’t gotten anywhere. It’s not the NTRA’s fault. It’s just that the Treasury Department has more important things, in their mind, to look at.” 

Waldrop said the NTRA strategy shift involves going straight to the Treasury, which has the power to interpret the tax code without changing it. 

“We had been going at it by asking for a legislative change to withholding and reporting,” Waldrop said. “But because of the unlikelihood of any meaningful tax reform in the near term, we decided to pursue at alternative course. We’re asking for a modernization of the instructions to the form W2-G that must be filed by gamblers to report winnings.” 

Waldrop said that although he has numerous racing industry-related items he would like help with from the federal government, the NTRA has to be selective about picking its spots. 

“We were there for one purpose,” Waldrop said of Tuesday’s meeting in Washington, D.C. “We were very specific about our intentions and our interests. We did not go in with a laundry list of concerns. This is the top of the list because of its unique ability to be dealt with outside of legislation or regulation.” 

Platt said his wish list has a different item at the top: The nationwide reduction of takeout. 

“If there was one thing I could change with the sweep of a pen, I would make racing’s takeout more favorable, competition-wise, with other forms of gambling,” Platt said. 

Platt gave the example that if you bet $2 across the board on every single starter in America last year, you would have lost roughly 25% for each dollar wagered, largely because of high takeout and breakage. 

Platt gave an example comparing horse race wagering to roulette, which is considered a “bad bet” because the American version of the game (with two table-busting zeroes) gives a 5.26% edge to the house. 

“To make roulette the equivalent of losing 25 cents for each dollar wagered like in horse racing, you’d have to add 10 more zeroes to the wheel,” Platt said. “Who in their right mind would walk through a casino and say, ‘Oh, here’s a roulette table with 12 zeroes on it. I think I’ll stop and play here.’” 

Waldrop said takeout is “beyond the NTRA’s area of influence” because it is set by individual tracks and states. 
“Our focus has been and will continue to be at the federal level,” Waldrop said. “Capitol Hill is where we have the most political influence and have built a strong political presence.” 

Waldrop said he could not outline a timetable for the reporting/withholding reform. 

“We don’t have a specific agenda going forward, but we’re encouraged because we now have an open dialogue with Treasury on a topic that is important to many in the industry,” Waldrop said.