New bill on Tax Investment for race horse industry

A new bill, H.R. 5833 for the 117th Congress, has just been introduced by U.S. Representative Andy Barr (R-KY), Co-Chair of the Congressional Horse Caucus, to incentivize investment in the equine industry The Equine Tax Fairness Act would provide owners and breeders a three year depreciation tax schedule for race horses on a permanent basis rather than the current temporary, yearly enactment of the provision by congress.

The bill also provides a deduction in the holding period to 12 months from the current 24 months for equine assets to be considered long-term capital gains. As in the successful enactment of the Horseracing Integrity and Safety Act in December 2020 which will improve racing ethics and safety, these tax law changes are intended to further enhance investment outcomes in horse racing.  Both amended provisions have an effective date of after December 31, 2021. Excerpt from H.R. 5833 is as follows:

 SEC. 2.  REDUCTION OF HOLDING PERIOD TO 12 MONTHS FOR PURPOSES OF DETERMINING WHETHER HORSES ARE SECTION 1231 ASSETS.

(a) In General.—Section 1231(b)(3)(A) of the Internal Revenue Code of 1986 is amended by striking “and horses”.(b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

        SEC. 3. THREE-YEAR DEPRECIATION FOR RACE HORSES.

(a) In General.—Section 168(e)(3)(A)(i) of the Internal Revenue Code of 1986 is amended to read as follows:“(i) any race horse,”.(b) Effective Date.—The amendments made by this section shall apply to property placed in service after December 31, 2021.

From the U.S. Harness Racing Alumni Association