Title: New York’s Budget Revamps Horse Racing: Tax Breaks, Advanced Imaging, and Penny Breakage Reform

New York lawmakers and the governor have agreed on a package of measures to give racetracks millions of dollars in tax breaks, steer funding to a new advanced equine imaging research program adjacent to Belmont Park, and end a nearly century-old system that kept horse racing bettors from putting in their wallets the exact amounts they should have been getting from their winnings.

The New York State budget, limping to closure at the state Capitol possibly as early as sometime May 8 or May 9, includes a tax measure quietly fought over by industry stakeholders for just a matter of weeks. For some horse bettors, who have grumbled over the state’s betting breakage laws, it’s been decades of wanting relief from Albany.

The racing industry provisions were revealed in the final round of a bill making up the components of a more than $250 billion New York State budget, which was supposed to have been in place for the fiscal year start April 1. The racing provisions contained in the so-called "revenue bill" were negotiated in secret, as is the case each year in Albany’s budget process. The bill containing the racing industry provisions was easily approved Thursday night in Albany. Gov. Kathy Hochul, who signed off on all the deals, already supports them.

Pari-Mutuel Tax Rates

The racing-related measures under consideration at the state Capitol grew to three topics in recent weeks.

The most recent to emerge was a push by the New York Racing Association to decrease the state’s pari-mutuel tax rate on racetracks to a level that will benefit tracks across New York by about $5 million annually. Picking up the tab to make up for the lost tax revenues: out-of-state advance-deposit wagering companies.

When Hochul proposed her state budget in January, it contained a modest, revenue-neutral set of tax simplification changes to how New York collects pari-mutuel revenues on horse racing wagers. By April, though, the contours of that plan changed to also include a push by NYRA to get a tax relief package for itself and the other in-state tracks. It is still uncertain how much of the $5 million overall tax break for tracks will directly benefit NYRA, but it is likely at least half would go to the track corporation that runs racing at Belmont, Saratoga Race Course, and Aqueduct Racetrack.

Industry officials say the tax changes better equalize the state tax on wagers between in-state tracks and out-of-state ADWs. When all taxes and fees are factored in, ADWs still have a slightly lower overall tax rate compared to in-state tracks on wagers placed at tracks and through their mobile platforms.

New York industry sources say out-of-state ADWs, which handle nearly 40% of pari-mutuel wagering in the state, enjoyed an average tax rate of 0.25% compared to a 1.1% rate on all the forms of wagering handled by NYRA.

NYRA and other tracks will pay 0.7% in taxes on wagers they process in New York, down by 0.45% from current law.

New Advanced Imaging Technology

The final budget deal, as expected, includes creation of a new advanced imaging program at the Cornell Ruffian Equine Specialists hospital near Belmont Park. The idea first surfaced a year ago in the Democrat-led state Assembly but died during budget talks in 2024. Hochul, a Democrat, and her fellow Democrats in the state Senate embraced the idea earlier this year before final fiscal negotiations commenced.

The proposal requires NYRA, which embraced the effort, to invest $2 million for advanced imaging equipment at the equine hospital. The state will provide operating funds for the initiative courtesy of a tax hike on out-of-state ADWs that will raise about $18 million over the next three years.

The Hochul administration in January said it was backing the effort as a means to "combat breakdowns in Thoroughbred racing." NYRA has previously expressed support for the program, stating that it will expand access "to the most advanced imaging technology" that will "enhance equine safety and improve scientific research" of Thoroughbred racing. Advocates say the efforts, which have been embraced in other racing jurisdictions, will help veterinarians better identify equine health problems at early stages before they become debilitating or life-threatening for racehorses.

The final budget deal calls for research at the Cornell facility to include identification of the incidents of fetlock fractures and pre-facture pathology in Thoroughbred horses with and without lameness, and research to determine "the sensitivity and specificity of standing computer tomography, positron emission tomography, and magnetic resonance imaging of Thoroughbred racehorses compared to that of digital radiographs."

The program is outlined as a three-year research project and is pursuant to an agreement between Cornell University’s College of Veterinary Medicine and the head of the New York State Gaming Commission. The research includes attempting to refine risk factor assessments for fatal musculoskeletal injuries in Thoroughbreds. Updates on the work are to be provided by each Dec. 1 to the governor and leaders of the Assembly and Senate, along with a comprehensive final report at the end of the three-year period. What happens to the program after three years is not addressed in the budget bill.

Screenings under the program, "to the extent practicable," may be done at both Belmont and Saratoga racetracks, and horsemen who enroll their horses in the research program will have screenings and advanced imaging done free of charge. Those not enrolled in the program can still use the facility, with owners charged for actual costs of the screenings and imaging. The soon-to-be law states that Cornell Ruffian does not have to analyze the results of screenings done on horses not enrolled in its new research program.

The measure states that NYRA, to further "ensure the health and safety of its equine participants," by Sept. 25 must make its $2 million payment that must be earmarked only for equipment purchases for the new program at the Ruffian hospital.

In all, out-of-state ADWs will see their tax obligations to New York State rise 1.45% to pay for both the Cornell Ruffian program and the tax break for New York tracks.

Senator Joseph Addabbo, chairman of the Senate Racing, Wagering, and Gaming Committee, who negotiated the final terms of the various racing industry components, supports the hike on ADW taxes as a way to help both New York racetracks and the screening and advanced imaging program to be housed next to Belmont.

"A budget lives and breathes. It all starts with good intentions, and if it works, great, and if it doesn’t we’ll have to amend it," he said of the tax changes.

As for helping tracks with a tax break, Addabbo noted the importance of the facilities for jobs and spin-off on the economy. "Let’s be honest. Every governor, Democrat or Republican, seems to have helped this industry in bad and good fiscal times because they feel the investment in this industry is better than not investing," the Queens Democrat said Thursday morning before the Senate headed into session to try to wrap up the final budget bills sometime Thursday night or Friday morning.

Addabbo said the advanced equine screening program is a step forward. "We can use technology today to figure out the horses’ fates going forward," he said.

The office of Assemblywoman Carrie Woerner, a Saratoga Democrat who chairs the Assembly Committee on Racing and Wagering, did not immediately return a request for comment on the tax matter.

Penny Breakage

In addition, the final budget deal this week in Albany ends the remnants of what Hochul earlier this year described as the "outdated concept" of breakage in horse racing wagers. Under the decades-old system, bettors would see their winnings rounded down to the nearest 5 to 50 cents, depending on the type of wager and amount of the payout—providing millions of dollars in revenues to tracks each year.

The new state budget plan in New York requires rounding winnings to the nearest penny for most bets.

Bettors at Saratoga Race Course and all New York tracks are in line to receive higher payouts under penny breakage.

The final budget bill made an important distinction for breakage purposes between on-track and off-track wagers. While off-track wagers will be required to round to the nearest penny, Thoroughbred and Standardbred tracks can round winning payouts to the nearest nickel—provided, however, that the revenue from those "breaks" must be directed to state-created retired and rescued horse aftercare funds.

As many states round down to the nearest dime, New York already was offering a better deal to horseplayers than many jurisdictions. It now will join Kentucky as major racing states that have amended their breakage rules to round to the nearest penny.

NYRA officials praised the overall budget deal for its impact on racing.

"NYRA thanks Governor Hochul and the New York State Legislature for advancing a budget that reflects the importance of horse racing to New York State’s economy and culture. By funding transformational equine safety research, modernizing the economics of the wagering marketplace, and achieving long-sought rewards for the betting public, the FY 2026 budget positions the sport for continued success," NYRA president and CEO David O’Rourke said.

"Along with the initiatives guaranteed through this budget, NYRA is constructing a new, world-class Belmont Park to fulfill the vision set forth by Governor Hochul and legislative leaders in Albany. The future of horse racing in New York has never been brighter," O’Rourke added.