To:       AHC Members


From:   American Horse Council


Re:       Summary of Pending Legislation Affecting the Horse Industry


Date:    August 11, 2004


Congress has recessed for the August break, the Democratic and Republican conventions and the Labor Day recess.  Both Houses are scheduled to come back into session after Labor Day on September 7th.


When it returns, Congress will face a great deal of work in a short time before the elections.  Appropriations bills must still be passed to keep the federal government running, expiring legislation must be extended and huge international tax legislation and highway funding bills are still on the calendar.  Plus, the Members will have to deal with the recommendations from the 9/11 Commission.  How will it all get done?  Will it all get done?   Past experience suggests we main end up with one giant “omnibus” bill that includes all must-pass legislation.  Or a “lame-duck” session after the elections is always a possibility. 


The following is a summary of the most important bills that affect the horse industry that are still in the legislative mix.  We encourage you and the organizations that you belong to be involved with your federal officials regarding these important issues.


Please contact the AHC if you need any help. 


Taxes - Reduction of Capital Gains Holding Period for Horses


Gains from the sale of property that is used in a business, including horses, can qualify for capital gains tax treatment, which means that the tax rate is lower for individuals than the regular personal tax rate.  The current capital gains rate is 15%. 


Under the current tax code, the holding period for long-term capital gains treatment on all assets used in a trade or business - except horses and cattle - is twelve months.  Horses held for breeding, racing, showing, draft or other sporting purposes must be held for at least 24 months to qualify for the present 15% long-term capital gains tax rate.



Senate Action


On May 11, 2004, the Senate passed the American Jobs Creation Act, known as the international tax bill or FSC/ETI bill, which includes the industry-supported provision to reduce the holding period for horses from 24 to 12 months for sales after December 31, 2003.  This provision was included through the efforts of Senator Jim Bunning (R-KY). 


House Action


On June 17, 2004, the House has passed its version of the international tax bill, the American Jobs Creation Act (H.R. 4520), but it does not include the provision reducing the holding period for horses. 


Conference Required


Differences in the two tax bills, including the holding period reduction supported by the horse industry, will have to be worked out in a conference between Members of the Senate and House and the final package will have to be passed by Congress before it can go to the President for his signature. 


The Senate has named its conferees.  The Senate Republican conferees are Senator Charles Grassley(IA), Jim Bunning (KY), Judd Gregg (NH), Orrin Hatch (UT), Jon Kyl (AZ), Trent Lott (MS), Mitch McConnell (KY), Don Nickles (OK), Gordon Smith (OR), Olympia Snowe (ME), Rick Santorum (PA), and Craig Thomas (WY).  


The Senate Democratic conferees are Senators Max Baucus (MT.), Jeff Bingaman (NM), John Breaux (LA), Kent Conrad (ND), Tom Daschle (SD), Bob Graham (FL), Tom Harkin (IA), Edward Kennedy (MA), Blanche Lincoln (AR), and John Rockefeller (WV), plus Jim Jeffords (I-VT).


The House has not yet named its conferees. 


The conference on this bill will start after the August-Labor Day recess.


AHC Position


The industry supports the Senate version of the international tax bill (H.R. 4520), which includes the provision to reduce the capital gains holding period for horses to twelve months, the period enjoyed by virtually every other business.  The industry’s focus will be to ensure that the House and Senate conferees assigned to work out the differences between the two bills retain this provision in the final bill brought back to the House and Senate for a vote before it is sent to the President.




Trade - European Union Tariffs 


House and Senate Action


As described above, both the House and Senate have passed the American Jobs Creation Act (H.R. 4520), although in different forms.  The principal purpose of this legislation is to repeal the Foreign Sales Corporation/Extraterritorial Income Act, parts of which were ruled illegal by the World Trade Organization last summer.  The failure of Congress to repeal these provisions led the European Union to impose an 8% tariff on many U.S. goods on March 1, including horses.  The tariff has increased 1% per month since March.


While it does not appear that these tariffs have been onerous to U.S. horses, once the international tax bill becomes law the EU has promised to remove the tariffs.  This would alleviate any concerns over the effect of the temporary tariffs on horses going to the EU.


Health - Federal Legislation on Animal Identification


In the fall of 2003, the AHC organized a task force, which included nearly thirty equine organizations, to determine if the horse industry might develop standards for equine identification that would benefit the industry and be compatible with the various plans that have been discussed in the livestock industry should national identification become mandatory.  This group has now been designated the Equine Species Working Group by the U.S. Department of Agriculture and is responsible for this effort.


The diagnosis of a BSE-positive cow in Washington State crystallized the support for a national ID system and prompted the U.S. Department of Agriculture (USDA) to embrace the concept fully.  On April 27, 2004, Secretary of Agriculture Ann M. Veneman expressed the Department’s full support and announced the framework for implementation of a National Animal Identification System (NAIS) designed to identify any agricultural premise exposed to an animal disease so that it could be quickly contained and eradicated.


Federal Legislation


Several bills have been introduced in this Congress calling for implementation of a national ID system as soon as possible.


The National Farm Animal Identification Records Act, or FAIR Act, has been introduced in both the Senate and House.


The Senate bill (S. 2008), introduced by Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT), and the House bill (H.R. 3787), introduced by Representative Colin Peterson (D-MN), both direct the Secretary of Agriculture to establish a nationwide electronic livestock identification system that will enable the USDA to enhance the speed and accuracy of the response to outbreaks of disease in livestock.  Under the legislation, the system must be capable of tracing an individual animal within 48 hours of a disease outbreak.  The states would be involved in the system and have access to it.


Both bills would require the USDA to begin implementation within 90 days after enactment.


The Senate bill authorizes $50 million and the House bill authorizes $175 million to set up the identification system.  The House bill includes specific language protecting the animal identification numbering information, exempting it from disclosure under the Freedom of Information Act and allowing the information to be used by the Secretary only in the case of an animal disease outbreak.  Access to this information by a broad audience has been a concern expressed by equine organizations.


Senator Chuck Hagel (R-NE) has also introduced the United States Animal Identification Implementation Act (S. 2070) specifically directing the Secretary of Agriculture “to implement the United States Animal Identification Plan.”  The Hagel legislation also provides for a phase-in of the Plan for different animals, such as horses.  An identification system for other livestock, including horses, would have to be established within one year of enactment.


All these bills amend the Animal Health Protection Act, which was passed to clarify and strengthen the USDA’s authority to prevent, control and eradicate animal diseases.  Under that Act, “animal” is defined to include all animals, except humans.  “Livestock” is defined to include “all farm-raised animals.”  Horse fit within both definitions.


Current Status


These and other similar bills have been referred to the respective Agriculture Committees in the Senate and House of Representatives and several hearings have been held .  No action has been taken on any of these bills, although the Senate has passed a resolution supporting a national animal identification system.  This resolution does not have the force of law.


AHC Position


Although the AHC has not adopted a formal position on this legislation yet, the requirements in the bills that any system be adopted within ninety days of enactment appears ambitions and may be very difficult for the various livestock industries, including the horse industry, to accomplish.


Recreation - Funding and Maintaining Access to Trails


Senate and House Action


Both the House and the Senate have passed federal highway funding legislation, called the Safe, Accountable, Flexible and Efficient Transportation Equity Act or SAFETEA, although there are major differences in the two versions of the bill.


This legislation contains all funding for transportation projects, and is therefore widely known as the highway-funding bill.  Though the bill primarily addresses highway and infrastructure funding, SAFETEA also contains the authorization for funds for the Recreational Trail Program (RTP).  The RTP is important to the recreational rider – the program creates and improves trails for riders and allows the states to decide where the new trails should be or what trails need maintenance work.


In addition to the funding for the Recreational Trails Program, the Senate bill includes a provision specifically important to the equestrian community. Under current federal transportation law, equestrians are not included in the definition of allowable activities on "shared use paths".  Some land managers have used this exclusion to deny access to equestrians, though that was never the intent of the federal government.  The Senate legislation solves this problem specifically recognizing that horseback riding is an allowable activity on shared-use paths.


Conference Required


There are many differences in the House and Senate bills, two of which are important to the recreational riding community.  The funding levels for the RTP is higher in the House bill and the language specifically protecting horseback riding is in the Senate bill.  A conference committee, made up of Members of the House and Senate, has been formed to reconcile the differences and bring one bill back to the House and Senate for passage.   While members of the conference committee have met a few times, disagreements between the House and the Senate still exists in regard to appropriate funding levels.  The conference committee will meet again after the recess.


AHC Position


The AHC support the $503 million funding for the Recreation Trails Program over six years in the House-passed bill and the provision in the Senate-passed bill that specifically recognizes that horseback riding is an allowable activity on shared-use paths.


Immigration Reform – H-2A Agricultural Workers Program


Agricultural immigration reform is badly needed and has been broadly debated for several Congresses.  Several bills have been introduced in this Congress and while there is still a possibility that some reform may pass, the chances are slipping away because of politics and security concerns.


Senate and House Bills


Several comprehensive immigration reform bills have been introduced.  Perhaps the legislation with the most support is that introduced by Senator Larry Craig (R-ID) in the Senate (S. 1645) and Congressman Chris Cannon (R-UT) in the House (H.R. 3142).  Each bill is known as the Agricultural Job Opportunity, Benefits, and Security Act of 2003, or AgJobs bill. The legislation would:




This legislation is supported by most sectors of agriculture, including the AHC, as a workable solution to a difficult and emotional problem of reforming our immigration laws.


House Action


There have been several hearings in the House on this legislation and other bills introduced by Congressmen Virgil Goode (R-VA) and Bob Goodelatte (R-VA).  But no further action has occurred.


Senate Action


Senator Craig’s bill now has 62 cosponsors and bi-partisan support.  Senator Craig has attempted to add his legislation to bills considered by the Senate, but his attempts have not been successful to date.  It is likely he will attempt to add it to legislation after Congress returns.  Despite the broad support, the AgJobs legislation has encountered stiff opposition. 


Several factors account for this opposition.  Many Members of Congress are still opposed to immigration reform of any kind because of the attacks on the U.S.  Many federal officials want to make admission to the U.S. more difficult – not easier. 


The AHC believes that the President’s “temporary worker program,” allowing foreign workers, including those undocumented workers already in the country, to enter the U.S. and work for three years, would benefit the horse industry.  But many Members of Congress consider this approach an “amnesty” since it allows aliens who violated the immigration laws to legalize their status and be “rewarded” for flaunting U.S. law.  For this reason, they oppose the President’s proposal.





Recreation – “Right-to-Ride” Legislation


Representative George P. Radanovich (R-CA) has introduced legislation to protect and preserve the use of pack and saddle stock horses on public lands.  The legislation, H.R. 2966, known as the "Right-to-Ride Bill," applies to all federal lands managed by the National Park Service, the Bureau of Land Management, the United States Fish and Wildlife Service and the U.S. Forest Service.


Specifically, the legislation mandates that public lands should be managed by the federal agencies "to preserve and facilitate the continued use and access of pack and saddle stock animals on such lands, including wilderness areas, national monuments, and other specifically designated areas, where there is a historical tradition of such use." 


House Action


This bill was passed by voice vote in the House Resources Committee.  It was sequentially referred to the House Agriculture Committee and has now been discharged from that Committee.  It is now on the House Calendar and ready for floor consideration as soon as the House leadership schedules it.


There is no similar bill in the Senate.


AHC Position


The AHC supports this legislation. 


Recreation - Health Insurance and the Recreational Rider


Senate and House Bills


On February 14, 2003, Senators Susan Collins (R-ME) and Russell Feingold (D-WI) introduced legislation (S. 423) that would prohibit health insurers from denying benefits under a group health insurance plan to participants injured while engaging in legal recreational activities like horseback riding. Representative Scott McInnis (R-CO) introduced an identical bill in the House (H.R.1749) on April 10, 2003.  



House Action


The House bill has been referred to the Committee on Energy and Commerce in addition to the Committees on Education and the Workforce, and Committee on Ways and Means.  Although no action has been taken, the bill has strong support with over 170 cosponsors.



Senate Action


The Senate Health, Education, Labor and Pension Committee held a hearing on the bill and changes were made to the original bill in order to include more recreational activities.  The present Senate bill provides that:


A group health plan, or a health insurance offering group health insurance in connection with a group health plan, may not deny benefits otherwise provided under the plan or coverage for the treatment of an injury solely because such injury resulted from the participation or beneficiary in a legal transportation or legal recreational activity.


AHC Position


The AHC supports both the Senate and House bills.


Recreation - Bush Roadless Proposal


Access to public lands for horseback riders is an important issue to the recreational segment of the horse industry.  The industry must be constantly aware of any efforts, federal, state or local, to close public lands to horses.


One of the programs adopted in the final weeks of President Clinton’s Administration was the so-called “Roadless Initiative,” which could have prevented recreational activities on 58.5 million acres of federal forests and changed the way land is managed in over 120 national forests.  The Clinton Roadless Initiative would have prevented any road building or logging on 58.5 million acres, essentially creating wilderness areas within national forests.  The rule was scheduled to go into effect in May 2001, but the Bush Administration postponed the effective date of the rule.  It was also delayed through several lawsuits. 


The Bush Administration announced on July 12th that the Forest Service would reinstate the interim directive to conserve roadless areas that were protected under the 2001 rule.  The interim directive will remain in effect for 18 months until the finalization of a new roadless rule which was proposed by the Bush Administration on July 16th.


The new rule emphasizes conserving roadless areas by working with the states on state-specific regulations.  In essence, the authority to keep segments of the national forests “roadless” would be with the states and particularly the state governors.  The proposed rule would allow governors to petition the federal government if they wished to keep certain areas roadless.  Under the proposed rule, a governor could also petition for less protection. If the Forest Service accepts the petition, it would negotiate a detailed plan with the state.


Once a state finished its petition process, the Forest Service would publish a subsequent rulemaking for inventoried roadless areas within a petitioning state. Each state-specific rulemaking would go through the required National Environmental Policy Act (NEPA) analysis as well as input from the public during the notice and comment period. Petitions would have to be submitted within 18 months of the effective date of the final rule.


Public Comment Period


Comments on the proposed rule must be submitted by September 14, 2004.  The Forest Service will then review the comments submitted and issue a final rule.  The AHC plans to submit comments.