Modernized IRS Pari-Mutuel Regulations Now Official With Publication In Federal Register

by | 09.27.2017 | 12:55pm

Updated regulations regarding the withholding and reporting of pari-mutuel proceeds adopted by the U.S. Treasury Department and the Internal Revenue Service (IRS) became official, as expected, with their publication in today's Federal Register. The modernized regulations, secured by the National Thoroughbred Racing Association (NTRA) with a prolonged lobbying effort in Washington, D.C., will drastically reduce the number of winning tickets that require withholding and reporting, returning more money to horseplayers.

While the benefits to horseplayers are obvious, all segments of the industry stand to gain. Racetracks will generate incremental pari-mutuel handle, owners, trainers and jockeys will compete for more purse money, breeders will enjoy increased demand for their bloodstock, and even government will benefit from additional tax revenue and less burdensome paperwork.

“The overwhelmingly positive response to our success securing these updated regulations has been tremendous,” said NTRA President & CEO Alex Waldrop. “We cannot stress enough how the guidance and support from our friends in Washington, especially Reps. Andy Barr and John Yarmuth of Kentucky, Rep. Pat Meehan of Pennsylvania, and Senate Majority Leader Mitch McConnell, helped us make our case for modernization before Treasury and the IRS.”

The finalized rules as published in today's Federal Register can be accessed online at: https://www.federalregister.gov/d/2017-20720. A PDF file of the pages as they appear in print can be accessed here: https://www.gpo.gov/fdsys/pkg/FR-2017-09-27/pdf/2017-20720.pdf.

Racing associations, totalisator companies, and advance deposit wagering (ADW) operators have up to 45 days to implement the changes; however, at least one major company has announced that they are set to start Thursday.

Monday's announcement that the rules were scheduled to be published elicited widespread praise throughout the industry, including overjoyed reactions from horseplayers and fans of the sport.

  • gus stewart

    Fantastic job to those who fought for a change, will wait to see the adjustments before i celebrate, but at least it seems like something was done..

    • Beverly

      Great News for our horse players, XPRESSBET will be ready Thursday as well!!

      • gus stewart

        Thats a good thing..

  • affirmed

    I tried to read this IRS stuff.. can someone explain this to me, what it means to a bettor? are they taking out less money from winnings etc.. I need to know what it is all about, as already some are saying it’s a great deal, and happy for it, I want someone who understands what it entails to explain it to me,thanks.

    • Canarse

      How I understand it is that the amounts for reporting and withholding do not change. The pay out first has to be greater than $600 and better than a 300% profit for it to be reported to the IRS. Withholding begins if the bet meets the reporting requirements and the payout is greater than $5000.

      The change is the value of the bet. In the past if you bet a $0.50 Pick-4 and hit for $5000 or more the IRS would use the $0,50 base bet amount to calculate the 300% profit margin. Now the IRS will use the total amount you bet on the ticket for that Pick-4 wager. So, if you bet $100 in fifty cent combinations that would not be a 300% profit so there would be no reporting or withholding.

      I hope this helps.

      • affirmed

        Thanks Canarse, yes hoping this will help! and thanks to you for replying , take care.

  • jack blades

    This is Awesome news!! long time coming ! helps everyone going to boost revenue and handle and get rid of track bums and closest gamblers who wont have to worrie anymore this is fantastic so Happy !!

  • doug frannick

    so for people who don’t understand this its simple: whatever you bet say 24 dollars on a tri multiply times 300 and that’s what the irs will take out . For example 24 times 300 is 7200 so if you hit a dollar tri now they wont take taxes out unless its over 7200 instead of 5001

  • Tom Davis

    Under the old rules, if you boxed 4 horses in a trifecta for $1 it cost $24 and if the trifecta paid $2400 for the $1 you invested you had to sign a tax form because it paid over $600. But under the new rules, the $24 you invested is considered instead of $1 and now it becomes 100-1. Not even close to the 600-1, so no tax form has to be signed.

  • kyle

    Since the NTRA obviously isn’t going to explain this to players…while the new rules will eliminate 90% of withholding and reporting they do not change in any way tax rules on winnings. Now, we all live in America and I assume we all know how things work with the IRS. What they don’t know…however, even if there is no initial reporting notification or a trail that traces to the winning ticket, except of course online, winning bettors, especially those who hit for very large sums, are going to have to do something with the cash or the balance in their adw accounts. It will be then that the trail starts. So, be wary.

  • Ellis Starr

    The thing that changed is the threshold for the track or ADW reporting (by issuing the bettor a W2-G and sending one to the IRS) and the threshold for withholding.

    The threshold remains 300 to 1 but the difference from before the new regulations is all bets on the same ticket in the same pool can be counted against that 300 to 1 threshold.

    There are examples in the documentation but the simplest is if you bet a 3 horse exacta box at the $1 minimum level (for a cost of $6) the bet is now considered $6 instead of 6 bets at $1 for measuring the 300/1 basis for issuing at W2-G, so now you would have to win $1800 before the track or ADW gives you a W2-G and sends 1 to the IRS.

    It is no longer necessary bet $0.50 trifecta tickets over and over, or $0.10 superfecta tickets over and over, if you wanted to keep the total under $600 (which would have generated a W-2G). Now the best thing to do is to put as many combinations in the same pool (doubles, pick 3’s, trifectas, etc..) on one ticket which makes the dollar amount higher for issuing a W2-G based on the 300/1 threshold. For example if you bet a $2 trifecta box with four horses the cost is $48 so there’s no W2-G issued unless you cash for 14,400 (300 x 48).

    I hope that helps.

    • kyle

      There is no reporting or withholding on that last example.

      • Ellis Starr

        You are correct. The proceeds from the wager must exceed $5,000 and be
        at least 300 times the wager. In the case of a $50 bet the net proceeds
        must be at least $15,050 to meet the threshold.

  • Barry

    Thank you to the current administration for making this happen. Hopefully we will see the implementation of even more growth oriented policies.

Twitter Twitter
Paulick Report on Instagram