by T.D. Thornton
The Internal Revenue Service filed a “notice of proposed rulemaking” and opened a 90-day public comment period on Wednesday that deals with changes to the reporting of gambling winnings. But the proposed changes, as currently written, do not specifically include pari-mutuel wagering.
The IRS's “unified agenda” on this matter, as detailed on the Federal Register website, only deals with “Winnings From Bingo, Keno, and Slot Machines.”
To remedy this, National Thoroughbred Racing Association President Alex Waldrop said he will spearhead an intensely focused awareness campaign over the next three months to get rule makers to recognize the burden of federal tax reporting and withholding requirements for horseplayers.
“There are no guarantees that they will see things our way,” Waldrop said. “We've still got some work to do. But we are confident that if the IRS and Treasury Department understand the way the current reporting and withholding obligations are unfair and burdensome to horseplayers, racetracks and even the IRS, they will give us positive consideration.”
Waldrop said the caveat for the racing industry may come in the form of an invitation for public comment buried midway through the supplemental section of the rule change that reads:
“These proposed regulations apply to reporting of gambling winnings from bingo, keno, and slot machine play. The Treasury Department and the IRS are aware that taxpayers required to report winnings from pari-mutuel gambling may have concerns similar to those addressed in these proposed regulations…The Treasury Department and the IRS intend to amend the regulations under 31.3402(q)-1 in a manner consistent with these proposed regulations…In addition, comments are requested regarding whether the aggregate reporting method should be available for gambling winnings other than winnings from bingo, keno, and slot machine play.”
When queried by the TDN as to how worried the racing industry should be that the term “pari-mutuel” only appears once in the supplemental section and not at all in the actual language of the proposed changes, Waldrop said it's important to understand that just being included in the “public comment” section is the direct result of a recent NTRA strategy shift.
In previous years, the NTRA had lobbied for amendments to the tax code. But in January, Waldrop and a group of industry officials and horseplayers met directly with an undisclosed “high-ranking” Treasury official to plead the case for gambling tax changes, because that department has the power to interpret the code without altering the underlying statutes.
“What happened here is these [proposed] changes had already been in the works for years by the time we went to the Treasury,” Waldrop explained. “So once we began raising the issues with Treasury and the IRS, they decided to include us in this notice and commentary period. We are, perhaps [being considered] after the fact. But we feel good that we made our case at the right time, in front of a group of regulators who look ready to make changes in this area. So we think it's well positioned.
“If you try to do make wholesale changes to the tax code, that really requires legislative changes,” Waldrop continued. “What we're trying to do is work within the confines of existing legislation to get modernization and clarification of existing regulations. If we start taking on things like eliminating withholding or increasing the reporting requirements, what we'll run afoul of is statutory enactments, and we don't want to get in that situation.”
An NTRA press release gave the following example of how tax rules might be changed to “lessen racing's competitive disadvantage against other forms of gaming”:
“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.”
Waldrop said he will be asking supporters within the industry to remain focused instead of venting general frustrations with the tax code.
“These don't need to be random comments, and they don't need to be comments in general about all [of racing's] problems with taxation, because there are a myriad of issues we could raise,” Waldrop said. “We're very targeted. What we're trying to get the IRS to do in the context of this regulation is very narrow, with a focus on the very specific issues that are in play here.”
Citizens may comment online here until June 1. A public hearing has been scheduled for June 17.
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