WASHINGTON, D.C. (Dec. 4, 2014) -- A provision that retroactively extends three-year tax depreciation for all racehorses was passed by the United States House of Representatives yesterday as part of H.R. 5771, the “Tax Increase Prevention Act of 2014.” The bill, which extends retroactively through the end of 2014 numerous provisions which expired at the end of 2013, was passed by a vote of 378-46 and now goes to United States Senate for consideration.
Maintaining the three-year recovery period for racehorse purchases has been a top legislative priority for the National Thoroughbred Racing Association (NTRA) since the provision’s initial enactment as part of the 2009 Farm Bill.
The provision allows taxpayers to depreciate using a three-year schedule for racehorses 24 months of age and younger when purchased and placed into service, as opposed to a seven-year schedule. The accelerated schedule better reflects the length of a typical racehorse’s career and is more equitable for owners.
H.R 5771 also retroactively extends two other provisions that spur investment in racehorses.
“Bonus depreciation” remains set at 50 percent and may be used by business owners who purchase and place in service qualified new depreciable property. This investment incentive permits taxpayers to depreciate in the first year 50 percent of new qualified depreciable property purchased and placed into service. Yearlings that an owner purchases and puts into a training program are an example of eligible property.
The “Section 179 expense allowance” remains set at $500,000, with a $2 million threshold for qualified new or used property purchased and placed in service by small business owners in many industries. Total purchases of qualified property that exceed $2 million reduce the taxpayer’s expense allowance dollar for dollar. Broodmares may be eligible for expensing and are an example of used property because of their prior use as a racehorse or broodmare.
Information on H.R. 5771 can be found on the U.S. Congress website at www.congress.gov/bill/113th-congress/house-bill/5771. The sections of key interest to the Thoroughbred industry are Item 121 (racehorse depreciation), Item 125 (bonus depreciation) and Item 127 (expense allowance).
The NTRA will continue to update the industry as H.R. 5771 makes its way through the legislative process.