The American Horse Council reports that Congressmen Jerry Weller (R-IL), Joel Hefley (R-CO), Ron Lewis (R-KY) and Congresswoman Karen Thurman (D-FL) have introduced legislation to reduce from two years to one the period for which horses must be held to realize capital gains treatment upon sale. The bill number is H.R. 1174.

Gains from the sale of capital assets, including horses used for commercial purposes, qualify for the lower tax rate on capital gains, if held for the required period. Under the current tax code the holding period for capital gains tax treatment on the sale of horses is 24 months, while it is 12 months for all other assets. “Passage of this legislation would redress what many in the industry have long believed is the unfair treatment of horses under the Internal Revenue Code with respect to capital gains tax treatment by reducing the holding period from two years to one,” said Jay Hickey, President of the AHC.

In introducing the bill, Congressman Weller stated, “There is no reason to treat horses differently than other capital assets. The horse industry provides sport, recreation and entertainment for millions. This industry has a national economic impact of $112 billion, supports 1.4 million jobs and pays $1.9 billion in taxes to all levels of government. Making the capital gains holding period for horses the same as other capitol assets will finally treat horse owners and breeders the same as other businessmen and women.”

Originally, the two-year holding period for horses was established as an anti-tax shelter provision. Since its implementation, however, there have been many changes in the tax code, particularly the initiation of the passive loss limitations, that have virtually done away with the tax shelter benefits of the horse industry. “Whatever the rationale was for making the holding period for horses different, it has outlived its usefulness,” said Congressman Weller