[Congressional Record Volume 153, Number 69 (Monday, April 30, 2007)]
[Senate]
[Page S5309]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself, Mrs. Lincoln, and Mr. Bunning):
  S. 1251. A bill to amend the Internal Revenue Code of 1986 to provide 
for the tax treatment of horses, and for other purposes; to the 
Committee on Finance.
  Mr. McCONNELL. Mr. President, I rise today to introduce the Equine 
Equity Act of 2007 with my colleague from Arkansas, Mrs. Lincoln, and 
my colleague from Kentucky, Mr. Bunning.
  On this upcoming Saturday, the sporting world turns its attention to 
my hometown of Louisville for the annual running of the Kentucky Derby. 
It has been appropriately called ``the most exciting 2 minutes in 
sports,'' and has given us such great champions as Secretariat, Seattle 
Slew, and the courageous Barbaro.
  The activities surrounding the derby also allow Kentucky to show off 
one of its signature industries, the horse industry. Long after the 
pageantry and festivities of derby day, the horse industry remains a 
vital part of Kentucky's economy and cultural heritage. Horses are 
Kentucky's largest agricultural product. The horse industry contributes 
$3.5 billion to Kentucky's economy, and directly employs more than 
50,000 Kentuckians.
  While many Americans appropriately identify the horse industry as one 
of Kentucky's signature industries, the industry's economic impact 
extends well beyond the borders of the Commonwealth. A recent economic 
impact study by the firm of Deloitte Touche Tohmatsu found that the 
horse industry contributes approximately $39 billion in direct economic 
impacts to the U.S. economy each year. The industry sustains 1.4 
million full-time equivalent jobs each year, with over 460,000 of those 
jobs created from direct spending within the industry.
  Nearly 2 million Americans own horses, either for racing, showing or 
recreational purposes. While the popular image of horse owners might 
focus on Millionaire's Row at Churchill Downs on derby day, the facts 
tell a different story. Only about one-quarter, 28 percent, of U.S. 
horse owners have incomes greater than $100,000. More than one in every 
three, 34 percent, horse owners has an income of less than $50,000.
  Like many businesses, outside investments are essential to the 
operation and growth of the horse industry. Without investors willing 
to buy and breed horses, it is impossible for the industry to thrive. 
Unfortunately, there are several unfair, unwise provisions in the tax 
code that discourage investment in the horse industry.
  In an effort to address these concerns, today I introduce the Equine 
Equity Act with my colleague from Arkansas, Mrs. Lincoln, and my good 
friend from Kentucky Mr. Bunning. The Equine Equity Act includes two 
key provisions.
  First, it will provide capital gains treatment for horses that is 
equal to other investments. Nearly all capital assets are eligible to 
receive more favorable capital gains tax treatment once they are held 
for 12 months. However, horses and cattle must be held for two years to 
receive capital gains treatment. This legislation would reduce the 
capital gains holding period for horses from 24 months to 12 months.
  Second, it will apply equal depreciation standards for all 
racehorses. Current law states that racehorses that begin training when 
older than 24 months of age are depreciated over 3 years, while those 
horses that begin training before reaching 24 months of age are 
depreciated over 7 years.
  Most horses begin training before they reach 24 months, but their 
racing careers do not last 7 years. This legislation would reduce the 
depreciation period for racehorses to 3 years more accurately reflect 
the racing life of horses.
  I appreciate the willingness of my colleagues from Arkansas and 
Kentucky to join me in introducing this legislation of tremendous 
importance to our states. I look forward to working with them and our 
colleagues in the Senate to enact this bipartisan bill into law.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1251

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Equine Equity Act of 2007''.

     SEC. 2. 3-YEAR DEPRECIATION FOR ALL RACE HORSES.

       (a) In General.--Clause (i) of section 168(e)(3)(A) of the 
     Internal Revenue Code of 1986 (relating to 3-year property) 
     is amended to read as follows:
       ``(i) any race horse,''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.

     SEC. 3. REDUCTION OF HOLDING PERIOD 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 
     livestock) is amended by striking ``and horses''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.
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