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Curious about tax deductions with American Horse Trials Foundation.

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  • Curious about tax deductions with American Horse Trials Foundation.

    A recent post on Eventing Nation got me curious about tax deductions for horses. They mentioned that syndicate shares and maintenance costs for a horse are are 100% tax deductible through the American Horse Trials Foundation. So if you own a horse that a trainer on the AHTF list rides can you deduct all those costs?

    Here's an example:
    Owner owns three horses.
    Owner takes lessons once a week with trainer.
    Trainer rides all horses at least 3x a week.
    Horses go south for the winter and are in full training with trainer.
    Throughout the year horses are competed both by trainer, and by owner with the trainer coaching.

    So can owner "donate" all costs for this to the trainer through AHTF and deduct the costs for her hobby? If so could everyone "donate" the cost of their lessons with a trainer on the AHTF list and deduct that cost?

  • #2
    I'm really unsure how anything is deductable through the AHTF. It's a bit of a scam if you ask me.


    • #3
      We donate to the AHTF on a regular basis. Wonderful organization which helps support bonafide riders with their expenses. They must submit an annual budget to the foundation and during the year submit expense reports.
      Distributions/grants are then made to the riders depending on their allowed expenses. The AHTF takes a percentage of the donation, 7% or 8% I believe for operating expenses. The donations are fully tax deductible.


      • #4
        There is a way to "earmark" funds for a particular rider though, and that's not the most legal in the non-profit world.


        • #5
          You are not supposed to be able to get a tax deduction on a horse from which you might benefit, so if you are owner and might sell the horse or get something else, you are not entitled to a tax deduction for expenses related to that horse, according to my tax person
          OTTBs rule, but spots are good too!


          • Original Poster

            Originally posted by FairWeather View Post
            There is a way to "earmark" funds for a particular rider though, and that's not the most legal in the non-profit world.
            This is what I was questioning with my example. It sounds like anyone could "donate" their money to a certain trainer for their own riding expenses (lessons, coaching at shows, training, board) and get a tax write off for it which seems wrong. Although if the AHTF is taking a 7-8% fee it might not work out to be financially beneficial... someone better at math than I am would need to figure that out.


            • #7
              Yes, you can earmark funds with AHTF. It's very wink wink, nudge nudge.


              • #8
                Earmarking is acceptable under certain conditions from what I understand. AHTF has been in business many years, before many other 501c3's were even a gleam in someone's eye. it has helped many riders. They've always been nice to deal with for me. In addition they used to provide funds for events, too.
                Proud & Permanent Student Of The Long Road
                Read me: EN (http://eventingnation.com/author/annemarch/) and HJU (http://horsejunkiesunited.com/author/holly-covey/)


                • #9
                  Not under the conditions where it benefits any one person. The classification then changes to a private foundation I think.


                  • #10
                    Alright.... here's my take

                    Originally posted by FairWeather View Post
                    Yes, you can earmark funds with AHTF. It's very wink wink, nudge nudge.
                    If this is the case then that is tax fraud as I read the code. I am a nonprofit law junkie and I think that this is either a misunderstanding of how the organization works or fraud. Let's hope it's the former.

                    See the IRS's summary here. To be a 501(c)(3) the benefits of the organization must inure to a class of people that is not so limited as to be directed at a limited group of specific people. For example, you can define the class as "minors living in X neighborhood" but not "Minors living at 123 Front Street in X neighborhood." To earmark donations for use by a specific rider does not conform to that limitation as far as I can tell.

                    The ATF states on their website that they are a 501(c)(3) organization and provides grants to "Riders who are bona fide national or international level competitors are eligible to apply for grants from the American Horse Trials Foundation to further their preparation for Olympic or World Championship competition. The American Horse Trials Foundation expanded its program to include grants for USEA recognized Events. Additionally, the program includes grants for qualified Young Riders and Riders competing in the Show Jumping, Dressage, Endurance and Driving disciplines."

                    I assume that the ATF falls under the scope of 501(c)(3) by "fostering national or international amateur sports competition." The eligibility requirements to get funding from the ATF are listed here. You will notice that at the bottom of page 2 is says that "donations may not be "earmarked" for the benefit of a 3
                    particular Rider. That is, donations must be made without qualification to the AHTF. The selection of the individual recipients of funds donated to the AHTF will be made by the Grant Committee and the Board of Trustees." So, they should not be earmarking according to their own policies. That said, I know that a number of riders ask that you state that you would like the money sent to go to them. I hope that the ATF board is mighty careful about their grant awarding process because this certainly seems like a close call to me.

                    In addition, to be a Public Foundation the organization must be funded by the public (as opposed to private benefactor). The threshold requirements on this front are that more than 2% of the organizations income or $5,000 cannot come from a single donor. See this "summary" - it's not that straightforward, unfortunately.

                    OP - I think that the bottom line regarding your question is twofold. First, even if you tell the ATF that you want your money to go to support a certain rider they are not supposed to just channel it through but are required by the IRS to make an independent decision as to how to allocate funds among riders. Second, each donor is limited in what they can give to the ATF so you would have to owe your trainer less than 5K.

                    For those interested, the IRS's overview of what constitues an Amateur Sport Organization is here. I can't seem to find the IOC's definition of an amateur but that is the other qualifying description used by the ATF. I'm guessing that it's pretty liberal given that all of our eventing olympians these days are professionals by most standards. Do note that promoting training for the Olympics and/or Pan Ams is a permitted purpose but that providing athletic facilites and equipment is not. Welcome to the crazy lines in the sand drawn by the IRS....

                    Anyhow, I think that the OP has asked a good question. I have not doubt that the ATF does good well-meaning work but, like most nonprofit organizations, they walk a fine line in a few areas. I firmly believe that people should know how their money gets put to use and why it is deductible. If anyone every has any questions about these types of things guidestar.org is a great database of the information that all nonprofits have to report to the IRS annually.
                    "We can judge the heart of a man by his treatment of animals" Immanuel Kant


                    • #11
                      In general practice, AHTF donations are written to AHTF, but given to a particular athlete, who then sends in that check with his/her own expenses which are reimbursed. The name of the athlete cannot be on the check itself, but there is definitely at least a practical expectation by most participating riders that their specific expenses will be reimbursed (see, e.g., Doug Payne's recent EN article on syndication with the note that the syndication expenses could be deducted through AHTF). I suspect that AHTF keeps fairly clean books and wouldn't be surprised if they have survived an audit or two, but I'd bet dollars to donuts that the overwhelming majority of funds spent by AHTF are not blanket grants made out to recipient riders they deem worthy, but are instead funded by checks collected by specific riders and intended for those riders' expenses (even if not so expressly stated).


                      • #12
                        Also...the OP's hypo wouldn't work either. The AHTF doesn't pay a rider for their time in training. Some expenses can perhaps get covered but the rider first has to qualify for the program, apply and submit a proposed plan.

                        So if you are trying to get to Burghley---you let them know that is your goal (and that falls within their purpose). You let them know the costs---travel expenses (25K for horse and rider), entry, etc. If approved they will pay the costs directly but riders are expected to fundraise for the organization.

                        The grants must fall within the purpose of the foundation so the recipients must meet the qualifications and the expenses must meet the qualifications.
                        ** Tact is the ability to tell someone to go to hell in such a way that they look forward to the trip. ~Winston Churchill? **


                        • Original Poster

                          It sounds like a big grey area that could get you in trouble depending on who's reading the rules. If as VicariousRider states that one is limited to a $5,000 donation then how is Doug Payne requesting syndicate shares of 20k plus annual expenses? (Not picking on DP - just that his EN syndicate post made me curious about the AHTF.)

                          GotSpots - I'm glad you mentioned seeing the syndication expenses as being deductible on EN because I just went back to read it and the tax deductible wording has been removed.

                          Anyway, it seems strange that you can donate money to a specific rider to buy a horse and that's tax deductible.


                          • #14
                            Originally posted by BestHorses View Post
                            It sounds like a big grey area that could get you in trouble depending on who's reading the rules. If as VicariousRider states that one is limited to a $5,000 donation then how is Doug Payne requesting syndicate shares of 20k plus annual expenses? (Not picking on DP - just that his EN syndicate post made me curious about the AHTF.)

                            GotSpots - I'm glad you mentioned seeing the syndication expenses as being deductible on EN because I just went back to read it and the tax deductible wording has been removed.

                            Anyway, it seems strange that you can donate money to a specific rider to buy a horse and that's tax deductible.
                            For those looking for the EN post here it is.

                            And here is the "Experience Eventing" USET Syndication website.

                            As I read all of it, the buy-in cost (ie: $20K) is not deductible but the expenses might be if the rider is willing to take grants from the AHTF rather than getting payment directly and those expenses are less than $5K per year. Certainly the tax deductibility is a draw for some owners and to attract those owners (maybe high income with less devotion to the sport itself or just getting introduced to the sport - or just interested in tax deductions) might try to swing this. It it obviously prefaced on the fact that the riders believe that they will be compensated from the AHTF sufficiently. While there is probably no "policy" on that front, history probably tells the riders that they will get what they need and appropriately account for.

                            As another aside, not all people can take advantage of these write-offs anyhow. There is a ceiling to what people can deduct and sometimes only certain losses can offset certain gains (AKA basketing regimes) so people who already have maximized their deductions won't be eligible anyhow.
                            "We can judge the heart of a man by his treatment of animals" Immanuel Kant