Members of the U.S. Senate and the U.S. House of Representatives voted
Thursday to override a Presidential veto of the 2007 Farm Bill exercised by
George W. Bush Wednesday. As a result the 2007 Farm Bill is now law, and it
includes the Equine Equity Act, a provision that amends the depreciation
schedule for racehorses to a uniform three years.
Under previous tax law, racehorses were depreciated over either three or
seven years, depending on their age when “placed in service.” A horse is
generally deemed to be placed in service when it begins training. Racehorses
over the age of 24 months (from date of foaling) when placed into service are
depreciated over three years; otherwise, they are depreciated over seven years.
In a given crop of horses that make it to the track, about half will start as
two-year-olds and the rest will start as three-year-olds. Most racehorses
(except geldings) are off the track by age five, making a seven-year
depreciation schedule anachronistic. Legislation contained in the 2007 Farm Bill
allows an owner to recover his or her costs over the period of time that the
horse is likely to race.
“This crucial piece of legislation finally provides fair and equitable tax
treatment to the Thoroughbred industry,” said Alex Waldrop, President and CEO of
the National Thoroughbred Racing Association (NTRA). “This day is the
culmination of many years of effort on Capitol Hill by the NTRA legislative
team, and we thank Sen. Mitch McConnell, who secured inclusion of the racehorse
depreciation measure in the Farm Bill, for his strong support of Kentucky’s
signature industry.”
The 2007 Farm Bill also contains two other provisions, promoted by the NTRA,
to aid horse owners. These provisions would make horse breeders eligible for the
first time for emergency federal loans following a disaster. Further, the bill
includes a new permanent disaster assistance program that will provide relief
funds to farmers and ranchers who suffer losses in areas that are declared
disaster areas by USDA. This additional disaster program will be available to
horse owners.
The NTRA will be holding tax seminars this year around major Thoroughbred
sales, explaining the new law as well as legislation changing the terms for the
Section 179 expensing allowance and for bonus depreciation that was passed
earlier this year as part of President Bush’s Economic Stimulus Act.
According to “The Economic Impact of the Horse Industry on the United
States,” produced in July 2005 by Deloitte Consulting LLP, the horse racing
industry carries a total economic impact of $26 billion, $20.7 billion of which
is from Thoroughbred racing. There are nearly 845,000 racehorses in the United
States and the racing industry supplies more than 380,000 jobs.