Shawn Smeallie, Founder, ACG Advocacy
Thank you, Everett, and congratulations. By the way, eight years ago I had the honor to address the round table about the Horseracing Integrity and Safety Act, which at the time was still three years away from becoming law. It was clear then as it remains today, the industry did the right thing and the smart thing for pushing the passage of that bill. The recent Supreme Court decision to not review HISA anytime soon is great news. I hope that HISA’s opponents will now move on to other more pressing matters. Indeed, continuing in relentless litigation only contributes to the one of the few legitimate concerns of HISA – its cost. My understanding that the cost of litigation is now well into the millions. Let HISA be the law of the land and of our industry, and let’s work to make it the best it can be.
From a Washington perspective, racing has entered a new political phase. As with most industries, the federal government looms large for better or worse inarguably. When Congress passed the interstate Horse Racing Act in the ‘70s, it threw the industry a lifeline. It was not without its downsides, but interstate wagering, something racing exclusively enjoyed for decades, helped keep racing afloat and helps it to this day. On the other hand, the tax bill of 1986 sent the breeding and racing industry into recession that took many years from which to emerge. For the last several years, the industry has had the luxury of one of its own: Kentucky Senator Mitch McConnell as the Senate Republican leader, one of the top four leadership positions in Congress. Indeed, without Senator McConnell’s urging HISA would’ve never been signed into law. And over the years, he almost single-handedly protected our industry. We owe a huge debt of gratitude to Senator McConnell and his staff for the countless hours they put on our behalf.
But times have changed, and we discovered just how much. So when consideration of the recently passed “One Big Beautiful Bill,” while the industry was focused on restoring 100% depreciation of a horse purchase, another change threatened to undo all the good that bonus depreciation would’ve done in the House version of the bill. A technical change was included, which would have no longer allowed offsetting horse racing expenses with investment income. This would’ve significantly impacted the vast majority of horsemen. This provision went unnoticed during the House consideration of the bill, and it was only brought to our attention two weeks before the Senate began consideration. And here I want to give a special thanks to Jen Shaw of Dean Dorton, who made Jim Gagliano and the NTRA aware of this provision. Quickly, the industry marshaled resources, it had to educate lawmakers of the potentially devastating impact of this tax change.
I want to commend Tom Rooney, the head of the NTRA and his team. He called upon his former colleagues and did what was necessary to educate and cajole Congress. I also want to thank Hunter Bates and Phil Maxson. Together we made up the D.C.-based war room for this effort. Removing this provision was not going to be a walkover. Wealthy horsemen, as you can imagine, are not high in the sympathy scale, but our message was simple. Fewer owners meant fewer horses meant fewer races, meant fewer fans, and fewer jobs.
As many of you now know, the offending House provision was taken out, 100% bonus depreciation was included and as importantly made permanent. So now if you buy a horse, any losses can be offset by investment income and you can fully depreciate the cost at the time of the purchase. This is a great outcome for racing and hopefully will lead to more owners, more horses, more races, more fans, and more jobs.
I would say that the most important lesson taken from this effort was how the industry was able to rally without relying on a Senate Majority Leader McConnell. It was an industry team effort and should be a roadmap on how the industry needs to operate in Washington in the future. We actually began to file this roadmap before we had a problem. We knew we had a problem with the tax bill. The first order of business was to educate new Majority Leader John Thune of South Dakota. Luckily for us, Senator Thune was familiar with our industry as he is a strong supporter of HISA from his days as chairman of the Senate Commerce Committee. Kudos to The Jockey Club stewards in recognizing that the industry needed to reach out to him again. In May, the stewards put together a luncheon for the new majority leader in the New York City headquarters. Special appreciation to NTRA PAC, Barbara Banke, Marc Holliday, David O’Rourke, and many others in this room today who supported this event.
As it did with HISA, The Jockey Club showed real leadership in spearheading this event. It proved not only to be a great success, but wonderful timing as well. This lunch in early May really helped the industry immeasurably in June.
Once we discovered the house tax provision, we immediately called upon Senator Thune and our other current Republican champions in Congress, Senator McConnell and especially Congressman Andy Barr of Kentucky. Andy was instrumental in getting the House leadership to agree to drop their own provision in the final bill. We also called upon Senator Tommy Turbeville of Alabama, a racing enthusiast and, little known fact, teenage employee at Oaklawn. He pressed the Senate leadership relentlessly on our behalf. Members of The Jockey Club, the NTRA, the Breeders’ Cup, and Barbara Banke all made calls and all made their voices heard. We also joined forces with other organizations who oppose this change together. We created enough noise that the chairman of the Senate Finance Committee finally relented and removed the provision.
My dad used to say, there’s no education in the second kick of a mule. We dodged a bullet this time, and my hope is that we can stay vigilant and united on the issues that benefit or hurt the industry. I also believe that the industry needs to better support their friends in Washington and work to develop new friends. Those members and senators from states with racing need to be active champions for our causes. We are fortunate that three of the top four leadership positions in Congress come from racing states – are racing state members. For example, many folks in this room have a great relationship with Senate Majority Leader Chuck Schumer of New York, who has been helpful to us in the past. We are also very fortunate to have champions like Paul Tonko of New York, who not only spearheaded the HISA legislation but co-chairs the Congressional Horse Caucus
For states without racing, their representatives need to understand how important racing is to the country as a whole. And it’s a great story we have to tell. The horse industry as a whole contributes an estimated $177 billion to the U.S. economy in ‘23 and over 2.2 million jobs. Horse racing and breeding alone accounted for $36 billion of that and has nearly a half a million jobs.
My other takeaway from this effort is that the industry is fortunate to have what is called in the lobbying world strong grass tops support. Many of you in this room, I would say a vast majority of you in this room, have personal relationships with policymakers in Washington. And if you don’t, you probably have the ability to easily develop them. Your voices make a different with key decision makers. We need your help on issues important to the industry, and I can assure you there will always be issues.
We are a nationwide industry, not without controversy. Whether it’s visas for backstretch employees or efforts to weaken HISA, or if this tax change should rear its ugly head again, we need our champions ready, able, and willing. In fact, we may need you sooner rather than later. One tax increase that did sneak into the bill, unbeknownst to the very powerful American Gaming Association, was a provision allowing only 90% deduction for gambling losses. This would actually create a scenario for gamblers where they would have to pay taxes on their losses. Legislation has already been introduced in both the House and Senate to restore 100% deductibility, and I’m told that there’s going to be a tax bill later this fall and this fix will be included. I hope you’ll let the NTRA or me know if you have any particular relationship and, more importantly, are willing to weigh in with policymakers on our behalf.
Whether it’s direct outreach or supporting The Jockey Club PAC or the NTRA PAC, your participation can really move the needle. This industry has many challenges on many fronts, but those issues are much more manageable if we can draw upon the many resources the industry has to address them.
Finally, I just want to say to Stuart: I began working with The Jockey Club just as you became chairman, and I have to say that it was an honor to be in the foxhole with you on many of the issues that we fought down in Washington, and I really appreciate you taking a chance on me. So, thank you everybody.
VOG:
Thank you, Shawn. Our next speakers are John Stewart and Dr. Ryan Kelley of Fastbreak AI.
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