Kentucky Breakage And Parimutuel Tax Bill Approved By Senate, Approaching Finish Line

HB 607, which cleared the Kentucky House by a 66-29 vote March 22, passed with a 33-1 vote in the Senate
Kentucky Downs

A bill that would essentially eliminate breakage in parimutuel horse racing payouts and balance parimutuel taxes in Kentucky passed through the state Senate on Tuesday and is now a couple of steps away from becoming law.

HB 607, which cleared the Kentucky House by a 66-29 vote March 22, passed with a 33-1 vote in the Senate, with bipartisan comments of support on the floor.

Senate Floor Majority Leader Damon Thayer, a Republican who co-chaired the Pari-Mutuel Wagering Taxation Task Force that spawned the bill along with bill author Rep. Adam Koenig, called it “a really good bill [and] a result of months of hard work [from] … the task force, which will modernize the way we tax horse racing in Kentucky. It will allow the racing industry to continue to grow and take an industry-leading position, but it will also ensure more dollars wagered on Kentucky racing will flow to the general fund.”

Currently, the tax on parimutuel wagering activity in Kentucky is 0.5% for online advance-deposit wagering (ADW) bets, 1.5% for on-track wagers, 3% for off-track simulcast locations, and 1.5% for historical horse racing (HHR) machines. The bill would move all tax rates to 1.5%.

Three of the 30 Republican senators didn’t vote, one passed, and Republican Whitney Westerfield was the only no vote. All eight of the Democrats in the Senate approved the bill, including Denise Harper Angel, who voiced her support.

“As a daughter of a lifelong thoroughbred trainer, I was really pleased to be able to serve on this … task force with our leader,” Harper Angel said. “This is good legislation, I’m proud to vote aye for it, and I encourage all members to do the same.”

Breakage is on the way out in Kentucky

Breakage, which is the practice of rounding down to the dime (per dollar) for parimutuel payouts in most U.S. jurisdictions, would be essentially eliminated for Kentucky races if the bill is signed into law, and payouts would be delivered to winning bettors down to the penny. Breakage revenues, which critics have said for decades should go to bettors, amount to an estimated $40-$60 million a year for bet takers.

Thayer on Tuesday called breakage “an antiquated method of payout that actually costs winning bettors. … This will now pay to the penny, which will make Kentucky an industry leader and allow those that bet on Kentucky races to keep more of their winnings — to keep all of their winnings, as a matter of fact.”

The bill would also allow for money from the Kentucky Thoroughbred Development Fund to be used for claiming races, which would be a departure from the current practice of deploying those funds only for maiden races, allowances, and stakes.

The next step for the bill is to go through “concurrence” in the House, where representatives can concur with the minor changes made to the bill in the Senate and send it to Gov. Andy Beshear, who can sign it into law.

Koenig, the bill’s author, said Tuesday he was happy to see the bill approach the legislative finish line.

“It’s pretty exciting,” Koenig said. “You try not to get too excited until it gets through, because weird things happen, but to make these changes that really do a lot to modernize parimutuel wagering is exciting, and I’m most excited about breakage [as a horseplayer].

HHR was a big step forward to move us up as the best [horse racing] circuit in North America, and this bill will be another step in that direction.”

Photo: Pat McDonogh/Courier-Journal/USA TODAY


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