Congress Passes H-2B Provisions, Three-Year Tax Depreciation for Racehorses

Passed on Friday, the bill includes a provision to extend the three-year tax depreciation for racehorses through the end of next year.

NTRA press release

The U.S. Congress on Friday passed a bill that offers relief for H-2B visa employers.

Provisions backed by the National Thoroughbred Racing Association that offer relief for H-2B visa employers, including racehorse trainers, were approved by Congress as part of the omnibus appropriations bill passed on Friday.

The bill includes a provision that extends three-year tax depreciation for all racehorses through 2016.

Of particular interest to trainers and others in the racing industry who rely on H-2B workers are these provisions:

H-2B returning workers are exempt from the annual 66,000 H-2B cap;
Those paying H-2B wages are allowed the use of private wage surveys, which are not allowed under current H-2B rules;
Seasonal employment is clearly defined as 10 months of employment, compared to nine months in the current H-2B rules;
The Department of Labor is prevented from implementing the provisions of current H-2B rules related to corresponding employment and the 3/4 guarantee requiring a set number of work hours; and
The Department of Labor is prohibited from implementing a burdensome new enforcement scheme related to auditing of employers and certifying officer assisted recruitment.

“We applaud Congress for recognizing the need for more H-2B visas, which will allow trainers and other major employers in the (racing) industry to properly hire the workers they need,” said NTRA president and chief executive officer Alex Waldrop. “Racing and breeding still need comprehensive immigration reform, but these changes to the H-2B visa program are a step in the right direction.”

The Protecting Americans from Tax Hikes (PATH) Act of 2015 maintains the three-year recovery period for racehorsepurchases that has been a top legislative priority for the National Thoroughbred Racing Association (NTRA) since the provision's initial enactment as part of the 2008 Farm Bill. Most recently, the NTRA successfully secured inclusion of three-year depreciation in the 2014 tax extenders package that expired at the end of 2014.

“Owners and breeders can now invest with confidence knowing that this important tax incentive will be available for at least the next two years,” Waldrop said.

The provision allows taxpayers to depreciate, on a three-year schedule, 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.

The PATH Act also retroactively extends two other provisions that spur investment in racehorses and depreciable farm equipment.

“Bonus depreciation” will remain set at 50 percent and may be used by business owners who purchase and place in service qualified new depreciable property. Yearlings that an owner purchases and puts into a training program are one example of eligible property. Bonus depreciation is set at 50% for 2015, 2016 and 2017, at 40% for 2018 and at 30% for 2019.

The “Section 179 expense allowance” will be 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. The comprehensive budget and tax legislation will make the Section 179 expense allowance incentive permanent at this level.

President Obama is expected to sign both bills into law.

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