Washington Horse Racing Commission and Parimutuel Tax.
The Washington Horse Racing Commission (Commission) is responsible for licensing, regulating, and supervising all horse race meets held in Washington where the parimutuel system of betting is used. The Commission is also responsible for inspecting each race course in the state at least once a year.
Betting or wagering on a horse race is lawful only when done via the parimutuel method. The parimutuel method is a wagering system in which the bets are pooled, taxes and commissions are removed, and payoffs are calculated by sharing the pool among all of the winning bets.
Licensees that operate race meets must withhold and pay a parimutuel tax that is a percentage of all the daily gross receipts from the in-state parimutuel machines. The tax is paid to the Commission daily, for each authorized day of parimutuel wagering. The parimutuel tax rate is:
The receipts from the parimutuel tax are deposited in the Washington Horse Racing Commission Operating (WHRCO) Account. The WHRCO account also holds any gifts, grants, or endowments the Commission receives. The Commission may authorize expenditures from the WHRCO Account. Money in the WHRCO Account must be used for the Commission's operating expenses, except as otherwise required in the terms of a gift, grant, or endowment. If sufficient funds are available for operating expenses, the Commission may spend up to $300,000 per fiscal year in support of the equine industry. If a licensee is a nonprofit, and meets less than 10 days a year, they are not subject to the parimutuel tax.
Sums paid to the Commission, including license fees, but excluding licensee withholdings paid to the Commission related to nonprofit race meets and Washington-bred-only horse race payments, are retained by the Commission for the payment of salaries to its members, secretary, clerical and office expenses, and all other expenses incurred.
Race Fee.
Every person wanting to hold a horse race with betting and wagering must apply to the Commission for a license and must pay a fee. The licensee shall provide certain information on the race meet. The number of horse race meet days as well as the gross receipts from parimutuel betting from the previous calendar year shall determine the daily fee. Licensees that had gross receipts from parimutuel machines in excess of $50 million in the previous year must pay a $500 daily fee, while those at or below $50 million in the previous year must pay a $200 daily fee. There must be at least six, but no more than 11, races per day for each licensee subject to the daily fee.
Business and Occupation Tax.
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business. Businesses must pay the B&O tax even though they may not have any profits or may be operating at a loss.
A taxpayer may have more than one B&O tax rate, depending on the types of activities conducted. Major B&O tax rates are 0.471 percent for retailing, 0.484 percent for manufacturing and wholesaling, and 1.5 percent (businesses with taxable income of less than $1 million) or 1.75 percent (businesses with taxable income of $1 million or more) for services and for activities not classified elsewhere. There are many specialized B&O tax rates and preferential rates that apply to specific business activities.
The Commission is authorized to impose fees to pay federal fees and be in compliance with the Horseracing Integrity and Safety Act of 2020. Revenues from the fees must be deposited into the newly created Washington Equine Industry Federal Regulatory (WEIFR) Account. Money in the WEIFR Account can only be used to pay fees charged by the federal Horseracing Integrity Safety Authority (HISA).
A B&O tax credit is created for persons that conduct horse racing meets in the state. The credit is the amount paid to either the federal HISA or to the Commission. The person must have made the payment before claiming the credit. In order to claim the credit, the person must file all returns, forms, and any other necessary information with the Department of Revenue (DOR) and file an application. The Commission must be able to provide information to verify eligibility for the tax credit.
Beginning January 1, 2026, and January 1 of each year thereafter, the Office of the State Treasurer must transfer an amount not to exceed $1.5 million per fiscal year from the General Fund into the WEIFR Account. The amount deposited into the WEIFR Account will be funded by the imposition of state sales and use taxes collected by class 1 racing associations.
Each biennium the $1.5 million limit may be reviewed and increased for inflation based on changes in the Consumer Price Index.
The substitute bill adds an application requirement to the B&O tax credit and a change to the fund source for the General Fund transfer to be sales and use taxes collected by a class 1 racing association. The substitute bill also defines inflation and makes other technical and date-related changes.
(In support) This bill is about protecting and saving an industry. The industry is fairly broad in the state and involves many people who care for the horses as well as the actual track infrastructure. The United States (US) Congress recently created a new federal agency, the HISA, and gave the ability to charge race tracks fees for protecting the welfare of horses. Fees are very large and pretty new, and they are growing over time. Some funding has been received recently to help local tracks pay fees, but those funds have run out. Fees are expected to continue to jump, and it will be a blow to the industry. This bill will help the industry in the state. Without tracks, the breeding industry would no longer exist. Horse racing is very popular at Emerald Downs and is important to the state's economy. We want to maintain horse racing in the state, and the costs from HISA fees are very difficult. There are 89 small businesses on the property of Emerald Downs. Many jobs are supported by Emerald Downs, so supporting it is important to help families grow professionally and financially. Gambling has changed immensely in the state and contributes directly to the state; it is an industry well worth keeping. Veterinarians and many other jobs are supported by the horseracing industry. We need emergency funding. Horseracing regulation is vital, and a new funding mechanism is critical to that end.
(Opposed) None.
(Other) This bill needs administrative work. The sales and use taxes are not identifiable by type; it requires an application for the B&O tax credit. The DOR needs a January 1 effective date for Section 2, and you may want to consider fees paid in prior calendar year rather than prior fiscal year. The HISA is not an agency, it is just authorized by the US Congress in 2020 without a hearing. The industry as a whole across the country did not support it. The fees have been able to be assisted by the Commission, but that will not be possible for very long. We have seen the loss of many tracks over time, and hope that we don’t see that loss to Emerald Downs. The methodology to give fees was originally based on purse money and size of track; that got the amendment made so the purse size doesn’t matter, and we’re paying the exact same fee. It is inequitable and the HISA has little oversight or accountability.
(In support) Representative Chris Stearns, prime sponsor; Philip Ziegler, Emerald Downs; Rocio Reyes, Emerald Downs; Ron Crockett, Emerald Downs; and Nicole Gomez, Washington Federation of State Employees, Lobbyist.