2560-2568 Special Collection Procedures: Racehorses

2560. GENERAL PROVISIONS
In 1971, the Legislature found that subjecting ownership of racehorses to the general property tax resulted in a serious lack of uniformity between counties in assessment practices and taxation of racehorses. In enacting the new taxation scheme, the Legislature intended to establish a more equitable method of taxing racehorses and to provide incentives for owners to maintain their horses within the state (Rev. & Tax. Code §5701).

The tax imposed is on the privilege of breeding, training, caring for, or racing a racehorse and is in lieu of any property tax (Rev. & Tax. Code §5721).

2561. DEFINITION
"Racehorse" means each live horse, including a stallion, mare, gelding, ridgeling, colt, filly, or foal, that is or will be eligible to participate in or produce foals that will be eligible to participate in a horseracing contest in California wherein parimutuel racing is permitted under rules and regulations prescribed by the California Horse Racing Board. (See Rev. & Tax. Code §5703 for complete definition.)

2562. ANNUAL TAX
The annual tax is imposed on and shall be paid by the owner on the basis shown in Revenue and Taxation Code section 5722.

2562.1 EXEMPTION
Foals born to a racehorse mare during the current calendar year are exempt from the tax imposed by this part or by any other part of the Revenue and Taxation Code (Rev. & Tax. Code §5741).

2562.2 COLLECTION
The tax is determined as of 12:01 am on January 1 of the calendar year for which it is imposed, and it is immediately due and payable to the tax collector of the county in which the racehorse is domiciled (Rev. & Tax. Code §5761). The owner's declaration of domicile dictates the county of taxation. Temporary training or racing in another county does not affect the place of permanent domicile.

2562.3 DELINQUENCY
The tax imposed becomes delinquent at 5 pm on February 15 of the calendar year for which it is imposed (Rev. & Tax. Code §5762).

A delinquent penalty of six percent attaches at 5 pm on the day any tax imposed by this part becomes delinquent. An additional penalty of one percent attaches to the tax on the first day of the first calendar month commencing after the tax becomes delinquent and on the first day of each subsequent calendar month until the delinquent tax and penalties have been paid in full (Rev. & Tax. Code §5763).

2562.4 JEOPARDY DETERMINATION
If it is determined that payment of the tax will be jeopardized by delay, a computation should be made of the tax amount to be collected. The amount so determined shall be immediately due and payable. The tax due may be collected under such jeopardy determinations by any legal means, including the procedures established pursuant to Chapter 3.3 (commencing with Rev. & Tax. Code §2851), Chapter 4 (commencing with Rev. & Tax. Code §2901), Chapter 5 (commencing with Rev. & Tax. Code §3002), and Chapter 6 (commencing with Rev. & Tax. Code §3101) of Part 5 of Division 1 (Rev. & Tax. Code §5764).

2562.5 STATUTE OF LIMITATION
The tax described in this part may be imposed at any time within five years after the tax would have otherwise become due, and the penalties shall date from the time described in Revenue and Taxation Code section 5763 (Rev. & Tax. Code §5766).

2562.6 PENALTIES
If any person required by Revenue and Taxation Code section 5782 to file a report fails to file by the time specified, a penalty equal to ten percent of the tax and the penalties provided by Revenue and Taxation Code section 5763 may be imposed. If any person required to file the report by Revenue and Taxation Code section 5782 files any false or fraudulent report with intent to defeat or evade any tax due under this part, a penalty equal to 25 percent of the tax and the penalties provided by Revenue and Taxation Code section 5763 may also be imposed (Rev. & Tax. Code §5765).

2563. AUDITS BY ASSESSOR
The assessor may perform audits of the books and records of any racehorse owner who is subject to the tax imposed by this part, pursuant to Revenue and Taxation Code section 5765.

2564. EXAMINATION OF BUSINESS RECORDS
Upon the request of the assessor, an owner of racehorses of a type subject to the tax imposed by this part shall make available at his/her principal place of business, principal location, or principal address in California or at any place mutually agreeable to the assessor and the owner, a true copy of business records relevant to the number and type of racehorses located in any county of the state during any taxable period and the number of days spent in each county during that period. Records referred to in this section shall be retained by the owner for a period of five years from the date that any tax to which they relate becomes due (Rev. & Tax. Code §5768).

2565. ADMINISTRATION
The State Board of Equalization makes rules and regulations and prepares forms necessary to carry out the intent and purposes of this part (Rev. & Tax. Code §5781).

2566. REPORTING TAX DUE
On forms provided through the office of the assessor, the owner of a racehorse, either in person, through his/her representative, or by mail, shall report the tax due. The required reports may be filed with the tax collector of the county in which the racehorse is domiciled.

The reports shall be filed on or before 5 pm on the day the tax due becomes delinquent (Rev. & Tax. Code §5782).

2567. INTER-COUNTY COLLECTION REPORTING
The auditor of the county in which a report is filed shall transfer any taxes paid pursuant to this part that belong to another county as shown on the report. A copy of the report should be included, in order that the auditor of any county receiving transferred funds can allocate them in the manner provided for in Revenue and Taxation Code section 5790. See M-2562.2 regarding the proper county of domicile. Funds do not have to be transferred to another county based on racehorse boarding records of the county.

The tax imposed is determined as of 12:01 am on January 1 of the year for which it is imposed, and it is immediately due and payable to the tax collector of the county in which the racehorse is domiciled (Rev. & Tax. Code §5761).

2568. DISTRIBUTION OF PROCEEDS
All proceeds derived from the tax, interest, and penalties imposed by this part are allocated by the auditor, as promptly as is feasible, in the following manner (Rev. & Tax. Code §5790).

1) If the domicile of the racehorse was located within a city and any school district, the tax proceeds from such racehorse shall be distributed one-third to the city, one-third to the school district, and one-third to the county.

2) If the domicile of the racehorse was located outside of any city but within one or more school districts, the tax proceeds from such racehorse shall be distributed one-half to the school district(s) and one-half to the county.

3) If the domicile of the racehorse was located in both an elementary school district and a high school district, the tax proceeds allocable to school districts shall be divided equally between the elementary and the high school districts to the exclusion of all other school districts.

NOTE: The details of the allocation are supplied by the county auditor and approved by the board of supervisors. The details must fairly carry out the purposes of this section.