Congress has passed the Farm Bill, which includes favorable tax changes for horse owners under the Equine Equity Act, after months of negotiations between the United States House of Representatives and the Senate.

The House passed the bill on Wednesday by 318-106 vote, and the Senate passed it the following day by an 81-15 vote.

President George W. Bush has said he plans to veto the bill because of its approximately $300-billion cost, but Congress can override the veto by a two-thirds vote in both chambers.

The tax portion of the bill amends the current depreciation schedule for racehorses to make it uniform at three years. According the bill language, beginning January 1, 2009, all racehorses will be depreciated over three years, regardless of their age when placed in service. Prior to then, racehorses will continue to be depreciated over seven years if they are placed in service before they turn two. The change to the tax code for racehorses will expire at the end of 2013. 

Last year, Senators Mitch McConnell (R-Kentucky), Jim Bunning (R-Kentucky), and Blanche Lincoln (D-Arkansas) introduced the Equine Equity Act, which proposed to put all racehorses in the three-year category for depreciation purposes and make horses eligible for capital gains tax treatment after being held for 12 months. 

“The [Equine Equity Act] was included in the Senate version of the Farm Bill by an amendment offered by Senator McConnell,” said Jay Hickey president of the American Horse Council.  “Although the Equity Act was not in the House-passed Farm Bill, the depreciation provision was included in the final bill through the efforts of Senator McConnell who understood the inequity and worked overtime to ensure it was changed.” 

A tax provision in the Equine Equity Act that would shorten the capitol gains holding period for horses from two years to one year, was not included in the final version passed by Congress.