[Congressional Record Volume 145, Number 104 (Wednesday, July 21, 1999)]
[Senate]
[Page S8956]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself and Mr. Bunning):
  S. 1409. A bill to amend the Internal Revenue Code of 1986 to reduce 
from 24 months to 12 months the holding period used to determine 
whether horses are assets described in section 1231 of such Code; to 
the Committee on Finance.


    legislation reducing the capital gains holding period for horses

  Mr. McCONNELL. Mr. President, I join with my colleague, Mr. Bunning, 
to introduce legislation to reduce from 24 months to 12 months the 
capital gains holding period for horses. All capital assets--with the 
exception of horses and cattle--qualify for the lowest capital gains 
tax rate if held for 12 months. This discrepancy in the tax code is 
simply not fair to the horse industry.
  The horse industry is extremely important to our economy, and 
accounts for thousands of jobs. Whether it is owning, breeding, racing, 
or showing horses--or simply enjoying an afternoon ride along a trail--
one in thirty-five Americans is touched by the horse industry. In 
Kentucky alone, the horse industry has an economic impact of $3.4 
billion, involving 150,000 horses and more than 50,000 employees.
  What supports this industry is the investment in the horses 
themselves. Much like other businesses, outside investments are 
essential to the operation and growth of the horse industry. Without 
others willing to buy and breed horses, it is impossible for the 
industry to remain competitive. The two-year holding period ultimately 
discourages investment, putting this industry --and the 1.4 million 
jobs it supports nationwide--at risk. Clearly, this is bad economic 
policy and must be changed.
  Mr. President, the two-year holding period for horses is sorely 
outdated. It was established in 1969, primarily as an anti-tax shelter 
provision. Since then, there have been a number of changes in the tax 
code. Specifically, the passive loss limitations have been adopted, 
putting an end to these previous tax loopholes.
  Although horses are categorized as livestock, they have an entirely 
different function than other animals, like cattle. While both are 
livestock, the investment in these two animals is entirely different. 
Beef is a commodity, with a finite and generally short life span. 
However, horses--whether they are used for racing, showing, or 
working--are frequently bought and sold multiple times over their 
longer life in order to maximize the return on the owner's investment. 
Additionally, once horses retire from the track or show arena, they 
continue to enhance their value through breeding.
  Mr. President, there is no sound argument for distinguishing horses 
from other capital assets. The two-year holding period discriminates 
against the horse industry and must be reduced. I urge my colleagues to 
join Senator Bunning and me in correcting this unfair tax policy. Mr. 
President, I ask that the text of this legislation be printed in the 
Record.
  The bill follows:

                                S. 1409

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. HOLDING PERIOD REDUCED TO 12 MONTHS FOR PURPOSES 
                   OF DETERMINING WHETHER HORSES ARE SECTION 1231 
                   ASSETS.

       (a) In General.--Subparagraph (A) of section 1231(b)(3) of 
     the Internal Revenue Code of 1986 (relating to definition of 
     property used in the trade or business) is amended by 
     striking ``and horses''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
                                 ______