Pigs are flying, or they must be somewhere in the world. President Barack Obama (while campaigning for his second term in office, I might add) has signed a bill essentially re-legalizing horse slaughter, and PETA is happy about it!  Had you told me this a couple of weeks ago, I would have thought these events as likely an Occupy Wall Street protester taking an investment banking job at Goldman Sachs.

The recent bill reinstituting federal funding for horse slaughter plant inspections has been covered ad nauseam in a number of news stories, so I won’t belabor the details.  It is important to note at the outset that there was never a federal law "banning" horse slaughter in the U.S.  In a nutshell, there was law prohibiting federal funding of USDA horse meat inspections put in place in 2006, and that law esentially ended horse slaughter for human consumption in the U.S.  The 2006 "USDA defunding" provision was lifted on November 18, 2011 as part of a Congressional bill signed by President Obama. As a result, horse slaughter plants are already being considered several states and may be operational in 30 to 90 days. But plants specifically designed for horse slaughter cannot be developed in Texas, California, Illinois and Oklahoma, where state laws specifically prohibit horse slaughter plant operations. For more information, see this article.

But the real news story, to me, is the astounding fact that PETA believes resuming horse slaughter in the U.S. will reduce overall horse suffering, and supports the move. Yes, we’re talking about PETA–the same, often controversial animal rights group known for campaigns like “fur is murder” and the lawsuit filed against Sea World for "enslaving" killer whales. 

In a Christian Science Monitor interview, PETA founder Ingrid Newkirk said PETA believes the United States never should have banned domestic horse slaughter because “the amount of suffering that it created exceeded the amount of suffering it was designed to stop.” 

According to the Christian Science Monitor article, “PETA says the optimal solution is to ban both consumption slaughter and the export of horses, but it supports reintroducing horse slaughterhouses in the U.S., especially if accompanied by a ban on exporting any horses at all to other countries.” Really? A ban on exporting any horses at all to other countries? Does anyone know if PETA really proposes that we make it illegal to export any horse to any country outside the U.S., for any purpose? If so, how would this possibly work and what would it do to our horse industry? 

These questions aside, at least proponents of horse slaughter can be glad that for once, an association like PETA agrees with them. 

Compare PETA’s position to that of Forbes contributor Vickery Eckhoff, who blasts the Thoroughbred industry in an article this week for allegedly being “silent” with respect to the fate of ex-race horses that end up being slaughtered (and tortured in the process, according to Ms. Eckhoff). 

As an aside, it should be noted that many Thoroughbred racing industry associations are members and sponsors of the Unwanted Horse Coalition (UHC), whose goal it is to reduce the numbers of unwanted horses in the U.S. so that fewer end up being slaughtered…or worse (yes, I consider many fates worse than slaughter, such as dying of starvation, dehydration, or illness in the back pasture). For a list of the current member associations of the UHC, click here.

Ms. Eckhoff, like many in the “anti-slaughter” camp, believes horse slaughter should be banned because is inherently cruel and abusive and it cannot be made humane, even if it is done in accordance with USDA regulations.  Anti-slaughter groups and individuals often place the blame on breeders, and urge the government or others to penalize people for over-breeding instead of allowing horses to be slaughtered. How would this be done, I wonder, and at what cost? And is there really no way a horse slaughter facility can be designed to make the slaughter process as humane for horses as it is for other livestock? I welcome your thoughts.

Forbes.com featured a story this week, entitled “Tax Deductions for Yearling Thoroughbreds”, that may be of interest to many horse businesses. To read the article, click here. Many Thoroughbred racing industry experts are quoted in the article, including Kentucky equine lawyer Joel B. Turner, whose guest post was featured on the Equine Law Blog this Tuesday.

The focus of the Forbes article is the applicability and effect of the 100% bonus depreciation feature of the Tax Relief Act of 2010, and its potential tax benefits to qualified horse businesses. As the Forbes article suggests, some race horse operations who buy yearlings in 2011 may be able to deduct 100% of the yearling’s purchase price in 2011. 

Before the bonus depreciation feature of the Act became effective on September 9, 2010, the percentage of depreciable basis allowed as bonus depreciation on qualified property was only 50%. This 50% depreciation percentage will apply again in 2012.

The potential tax savings offered by the Act for the 2011 tax year are significant for qualified horse businesses. Walt Robertson, Keeneland’s vice president of sales, indicated in the Forbes article that the Act may have positively affected sales activity at the Keeneland 2011 September Yearling Sale. 

It is important to note that the Act does not refer to specifically Thoroughbreds, yearlings, race horses, horses or livestock. The Act provides 100% bonus depreciation for all “qualified property”. In general, “qualified property” is tangible personal property and equipment purchased for use in a business operation, as long as certain conditions are met. For horse businesses, qualified property could arguably include horses, trailers, trucks, tractors, ATVs, and other horse/farm equipment.  Among the conditions that must be met are the following:

1) the horse / equipment’s original use must begin with the taxpayer (i.e. horses that have not begun training; new equipment); and

2) the horse / equipment must be placed in service after September 8, 2010 and before January 1, 2012.

As many of the experts quoted in the Forbes article indicate, the Act does not provide an “easy write-off”. For starters, taxpayers wishing to avail themselves of the 100% bonus depreciation must be able to prove that they are in the “horse business” and that the property was purchased for said business. This element may pose difficulties to taxpayers who have not shown a profit in their horse business for many years. Further, purchasers of fractional interests in racing syndicates are generally considered “passive investors”, and therefore may not see any tax savings through application of the Act.

There are other considerations that come into play to determine whether the 100% depreciation is available, such as whether the taxpayer borrowed money to purchase the horse/equipment through an LLC or other entity. 

Horse businesses who purchased or will purchase new horses or equipment in 2011 should consult a CPA or attorney who has expertise in the equine industry to determine the possible applicability of the Act to their newly-acquired property.

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