|NTRA Legislative Update: Foreign Sales
Corporation Bill Signed Into Law - 30% Withholding Tax on Foreign Wagers
The Foreign Sales Corporation (FSC) bill, which includes a measure that
would repeal the 30 percent alien withholding requirements and allow the
domestic horseracing industry to further export its product to foreign
markets, was signed into law by the President this morning, October 22,
aboard Air Force One.
The primary focus of the FSC legislation is to repeal subsidies for U.S.
exports that the World Trade Organization (WTO) has deemed illegal. Key
supporters of the Thoroughbred industry in Congress included language
in the bill that eliminates the 30 percent withholding tax that foreigners
would pay on winnings for pari-mutuel wagers into U.S. pools. The 30 percent
withholding effectively precluded common pooling by foreign countries
into U.S. wagering pools.
NTRA officials expect that the elimination of the 30 percent withholding
will help open the $85 billion international market for horseracing to
U.S. common pooling. If five percent of that were to enter U.S. pools,
another $4.25 billion in handle and some $135 million in commissions would
be realized by domestic racing interests.
The Oct. 30 Breeders’ Cup at Lone Star Park will feature international
common pools with Ireland, United Kingdom, France, South Africa, Switzerland,
Panama, Germany, Austria, Peru and Australia.
In addition to eliminating the 30 percent withholding, the FSC bill contains
provisions to eliminate a series of tariffs on a variety of exports to
the European Union, including horses. The tariffs began in March at 5%
and have increased 1% each month since.
The FSC bill also contains legislation that will allow citizens of states
without income tax to deduct their state sales tax from federal income
taxes. This provision will lessen the tax burden on residents of Florida,
Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.