To: AHC Organizations
From: American Horse Council
Re: Senate-Passed Tax Bill Reduces Capital Gains Holding Period for Horses
Date: May 13, 2004
On May 11, the U.S. Senate passed a huge international tax bill that includes a provision that the horse industry has been working on for some time, a reduction in the holding period for horses to qualify for capitol gains treatment from 24 months to 12 months. Senator Jim Bunning (R-KY) was able to include this provision in the so-called FSC/ETI bill.
All capital assets - with the exception of horses and cattle - qualify for capital gains tax treatment if held for 12 months. Horses, however, must be held for 24 months to qualify. The Bunning amendment would reduce the capital gains holding period for horses to 12 months, just like other business assets.
The principal purpose of the FSC/ETI bill is to repeal several tax provisions that benefit U.S. corporations doing business abroad that were ruled illegal by the World Trade Organization last summer. Those offending tax provisions have been opposed for some time by the European Union and led to the imposition of tariffs on many U.S. goods March 1, including horses to a limited degree. While it does not appear that these tariffs have been particularly 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 effect of the temporary tariffs.
The House of Representatives must still act on its version of the international tax bill. The House bill does not include the reduction in the capitol gains holding period for horses. Any differences in the bills would have to be worked out in a conference with Members of the Senate and House and the final package passed by Congress before it could go to the President for his signature.