The 2021 Consolidated Finance Law (the “LCA”), enacted on December 27, 2020, includes legislation with significant impacts on the horse racing industry, including provisions applicable to owners, racetracks and stables. Significantly, the CAA understands the Horse Racing Integrity and Safety Act (the “HISA”), which aims to improve the integrity and safety of horse racing by requiring a uniform doping control program. and drugs and setting national standards to promote fairness and increase safety in horse racing.
In addition to adopting the HISA, the CAA also includes an extension of the tax benefits granted to owners of racehorses through the accelerated cost recovery system. Under Section 168 (e) (3) (A) of the Internal Revenue Code, a racehorse is treated as a “3-year-old property” for the purposes of tax depreciation. The accelerated three-year cost recovery period provides a tax benefit to racehorse owners by more accurately reflecting the length of a typical racehorse career and allowing cost recovery tax deductions for the owner over the course of of this shortened period.
Due to the CAA, the 3 year amortization provision under Section 168 (e) (3) (A) (i) is extended until January 1, 2022, and is applicable to any racehorse. put into service which is less than 2 years. In addition, under Section 168 (e) (3) (A) (ii), the application of the 3-year payback period is also extended for racehorses over 2 years of age where they are put into service before December 31, 2021. Without the extension provided for in the CAA, the depreciation period for a racehorse would have returned to the 7-year calendar.
Finally, the CAA also includes the possibility for eligible racetracks and farms to participate in the second round of the Paycheck Protection Program (the “PPP”). The expanded terms of the PPP loan include new eligibility for owners of horses and farms without employees operating as sole owners or as sole member limited liability companies.