Waldrop Speaks at Hearing on Pari-Mutuel Winnings

In an address to United States Treasury and Internal Revenue Service (IRS) officials at a hearing Wednesday, National Thoroughbred Racing Association (NTRA) President and Chief Executive Officer Alex Waldrop emphasized the “outdated, unfair and overly burdensome” nature of current regulations related to withholding and reporting of pari-mutuel winnings. Changes 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. 

“It is the position of the entire horse breeding and racing industry that these Treasury regulations need to be modernized to ensure that both the withholding and reporting of winning pari-mutuel wagers accurately and fairly reflect the realities of wagering in the 21st century,” Waldrop said. “Specifically, we respectfully request that The Treasury Department and the Internal Revenue Service amend the Treasury Regulations and related forms to include a definition of the ‘amount of the wager’ that encompasses the total amount wagered by a bettor into a specific pari-mutuel pool for purposes of determining whether any wagering proceeds paid to the bettor from that pari-mutuel pool are subject to withholding and reporting.” 

The 10 a.m. hearing in the Internal Revenue Service Building’s IRS Auditorium in Washington, D.C., addressed a range of topics related to wagering, including separate issues of importance to keno, bingo and slot-machine players. Waldrop was one of five speakers granted 10 minutes for remarks and the only one to represent the racing industry. 

Waldrop used the example of this year’s GI Kentucky Derby superfecta to illustrate how bettors are often forced to pay taxes even when they may not have shown a profit on their wagers. “It is very likely that many of the individuals holding winning Derby superfecta tickets won little or no money when considering the full cost of their superfecta wager, only to find themselves standing in line at an IRS window due to the fact that the wager paid $634.10 on a single winning combination of one dollar,” he said. 

Officials scheduled to attend the hearing included the Deputy Associate Chief Counsel, Senior Technician Reviewer and Attorney from the IRS’s Procedure and Administration department, as well as an attorney and advisor from Treasury’s Office of Tax Policy. 

Should the IRS and Treasury agree to move forward with the proposed changes, a new formal rule will be written and will likely be subject to a public comment period. 

The full text of Waldrop’s prepared remarks for today’s hearing can be accessed on the NTRA website here.