Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Rules and Regulations 44925 

VI. Document Availability 

45. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through the 

Commission’s Home Page (http://

www.ferc.gov) and in the Commission’s 

Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. 

Eastern time) at 888 First Street NE., 

Room 2A, Washington DC 20426. 

46. From the Commission’s Home 

Page on the Internet, this information is 

available on eLibrary. The full text of 

this document is available on eLibrary 

in PDF and Microsoft Word format for 

viewing, printing, and/or downloading. 

To access this document in eLibrary, 

type the docket number excluding the 

last three digits of this document in the 

docket number field. 

47. User assistance is available for 

eLibrary and the Commission’s Web site 

during normal business hours from 

FERC Online Support at 202–502–6652 

(toll free at 1–866–208–3676) or email at 

ferconlinesupport@ferc.gov, or the 

Public Reference Room at (202) 502– 

8371, TTY (202)502–8659. Email the 

Public Reference Room at 

public.referenceroom@ferc.gov. 

VII. Effective Date and Congressional 

Notification 

48. The final rule is effective 

November 27, 2017. The Commission 

has determined, with the concurrence of 

the Administrator of the Office of 

Information and Regulatory Affairs of 

OMB, that this rule is not a ‘‘major rule’’ 

as defined in section 351 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996. This final rule is 

being submitted to the Senate, House, 

and Government Accountability Office. 

By the Commission. 

Issued: September 20, 2017. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

Appendix 

Bonneville Power Administration 

(Bonneville) 

Edison Electric Institute (EEI) 

International Transmission Company d/b/a 

ITC Transmission, Michigan Electric 

Transmission Company, LLC, ITC Midwest 

LLC and ITC Great Plains, LLC (together, 

ITC) 

Midcontinent Independent System Operator, 

Inc. (MISO) 

New England States Committee on Electricity 

(NESCOE) 

New York Independent System Operator, 

Independent Electricity System Operator, 

ISO New England, Inc. and Electric 

Reliability Council of Texas, Inc. (together, 

Joint ISOs) 

North American Electric Reliability 

Corporation (NERC) 

[FR Doc. 2017–20669 Filed 9–26–17; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF TREASURY 

Internal Revenue Service 

26 CFR Part 31 

[TD 9824] 

RIN 1545–BN58 

Withholding on Payments of Certain 

Gambling Winnings 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations with respect to the 

withholding from, and the information 

reporting on, certain payments of 

gambling winnings from horse races, 

dog races, and jai alai and on certain 

other payments of gambling winnings. 

The final regulations affect both payers 

and payees of the gambling winnings. 

DATES: Effective date: These regulations 

are effective on September 27, 2017. 

Applicability Dates: For dates of 

applicability, see §§ 31.3402(q)–1(g) and 

31.3406(g)–2(h). 

FOR FURTHER INFORMATION CONTACT: 

David Bergman, (202) 317–6845 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

regulations in Title 26 of the Code of 

Federal Regulations under section 3402 

of the Internal Revenue Code (Code). 

The final regulations amend, update, 

and clarify the existing withholding and 

information reporting requirements for 

certain gambling winnings under 

§ 31.3402(q)–1 of the Employment Tax 

Regulations, and make conforming 

changes to § 31.3406(g)–2. 

On December 30, 2016, the Treasury 

Department and the IRS published a 

notice of proposed rulemaking (REG– 

123841–16) in the Federal Register, 81 

FR 96406, containing proposed 

regulations that would provide a new 

rule regarding how payers determine the 

amount of the wager in parimutuel 

wagering transactions with respect to 

horse races, dog races, and jai alai, and 

that would update the existing rules to 

reflect current law regarding the 

withholding thresholds and certain 

information reporting requirements. 

Over 2,700 written public comments 

were received in response to the notice 

of proposed rulemaking. No public 

hearing was requested. After careful 

consideration of the written comments, 

the proposed regulations are adopted as 

modified by this Treasury Decision. 

Explanation and Summary of 

Comments 

All of the written comments on the 

notice of proposed rulemaking were 

considered and are available at 

www.regulations.gov or upon request. 

Many of these comments addressed 

similar issues and expressed similar 

points of view. These comments are 

summarized in this preamble. 

Rule for Determining the Amount of the 

Wager in the Case of Horse Races, Dog 

Races, and Jai Alai 

The proposed regulations contained a 

new rule for determining the amount of 

the wager in the case of horse races, dog 

races, and jai alai to allow all wagers 

placed in a single parimutuel pool and 

represented on a single ticket to be 

aggregated and treated as a single wager. 

Commenters largely supported the 

proposed rules because they believe that 

the rules accurately and fairly reflect 

parimutuel wagering realities. 

Some commenters raised concerns 

that the single ticket requirement in the 

proposed regulations did not address 

electronic wagering. Commenters stated 

that in horse racing a paper ticket can 

only accommodate six separate lines of 

bets. In contrast, electronic wagering 

utilizes an ‘‘account wagering’’ system 

that can accommodate dozens (or even 

hundreds) of lines of bets in a single 

parimutuel pool, allowing bettors to 

place more, customized wagers. As a 

result, some commenters requested a 

special rule for electronic wagering. 

The proposed rule at § 31.3402(q)– 

1(c)(1)(ii) is specifically not limited to a 

paper ticket, but also includes an 

electronic record that is presented to 

collect proceeds from a wager or wagers 

placed in a single parimutuel pool. 

Therefore, the rule in proposed 

§ 31.3402(q)–1(c)(1)(ii) is not dependent 

on the applicable industry’s ticketing 

format. Further, despite the commenters 

concern regarding the limits on the 

number of lines a paper ticket can 

accommodate, the proposed regulations 

do not limit the number of bets on a 

single ticket nor do the proposed 

regulations contain a rule governing the 

number of bets that can be contained on 

a single, electronic record of a wagering 

transaction. 

Another commenter stated that the 

single ticket requirement puts a person 

making an electronic bet at a 

disadvantage because it removes the 

opportunity to place bets in a single 


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44926 Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Rules and Regulations 

parimutuel pool at multiple points in 

time throughout the allotted time period 

for wagering. The single ticket rule in 

the proposed regulations does not 

differentiate between electronic betting 

and placing a bet at a ticket window. 

Therefore, the proposed rule does not 

put an electronic bettor at a 

disadvantage. However, the comment 

brings to light that there is some 

confusion regarding how the rule 

applies in the context of electronic 

betting. 

The single-ticket requirement in the 

proposed regulations allows aggregation 

of wagers that are placed in the same 

parimutuel pool if they are represented 

on a single ticket. This is the case 

regardless of whether the ticket is paper 

or electronic. This requirement was 

included in the proposed regulations to 

limit the potential for fraud, such as a 

winning bettor collecting losing tickets 

from another bettor or bettors who 

placed bets in the same parimutuel pool 

to artificially increase the amount of the 

wager. In addition, the single-ticket 

requirement improves administrability 

because it does not require payers to 

collect information reflected on 

multiple tickets. As the preamble to the 

proposed regulations explains, the 

single ticket requirement was not 

intended to limit the amount of the 

wager to bets placed at a single point in 

time because a ticket containing prior 

bets in a single pool can be cancelled, 

and the original and additional wagers 

in that pool can be placed on a new 

ticket. The fraud and administrability 

concerns that apply to paper tickets do 

not apply equally to electronic records 

because each person’s bets are reflected 

on a single electronic wagering account. 

Accordingly, electronic bettors may 

aggregate wagers placed at different 

points in time without having to cancel 

prior wagers and place them on a new 

ticket as long as the wagers meet the 

requirements in the proposed rule—that 

is, they are placed in a single 

parimutuel pool and are represented on 

a single, electronic record. 

Because the comments received in 

response to the proposed rule do not 

justify any change, the final regulations 

adopt the proposed rule without 

modification. 

Effective/Applicability Dates 

The proposed regulations provided 

that final regulations would apply to 

payments made after the date they are 

published in the Federal Register. Some 

commenters requested a delayed 

effective date to allow time for industry 

stakeholders to update their systems 

and seek any necessary state regulatory 

approval. One commenter specficially 

suggested that 45 days following 

publication of the final regulations 

would be sufficient time to perform 

such updates. In addition, the 

commenters suggested that the final 

rules be effective for wagering 

transactions with respect to winning 

events that occur after the date that the 

final rules are published in the Federal 

Register. The Treasury Department and 

IRS agree with these comments. 

Therefore, the final regulations are 

applicable to reportable gambling 

winnings paid with respect to a winning 

event that occurs on or after 45 days 

from the date the final regulations are 

published in the Federal Register. If 

they so choose, payers may rely on the 

provisions of the final regulations for 

payments made after the date the final 

regulations are published in the Federal 

Register, regardless of when the related 

winning event occurred. 

Other Comments 

Several commenters raised concerns 

regarding the thresholds for information 

reporting and withholding for certain 

gambling winnings. Another commenter 

requested that the regulations provide 

an exception to withholding under 

section 3402(q). Neither the threshold 

for information reporting with respect to 

gambling winnings not subject to 

withholding nor exceptions to section 

3402(q) withholding were the focus of 

the proposed regulations. In addition, 

the withholding thresholds are defined 

by statute. These comments are outside 

the scope of the proposed regulations, 

and therefore the comments have not 

been adopted in the final regulations. 

Special Analyses 

Certain IRS regulations, including this 

one, are exempt from the requirements 

of Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. 

It is hereby certified that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. Although this rule may affect a 

substantial number of small entities, the 

economic impact is minimal because 

this rule merely provides guidance as to 

the statutory withholding rules and 

filing of information returns for payers 

who make reportable payments of 

certain gambling winnings and who are 

required by sections 3402 and 6041 to 

withhold and make returns reporting 

those payments. This rule reduces the 

existing burden on payers to comply 

with the statutory requirement by 

simplifying the process for payers to 

verify payees’ identities with a broader 

range of documents that are more 

readily available. 

This rule also will result in a 

reduction in the number of forms filed. 

Instead of treating all components of a 

bet made by a gambler in a single 

parimutuel pool as a separate amount 

wagered, the rules treat all amounts 

wagered in a single parimutuel pool 

reflected on a single ticket as the 

amount wagered for purposes of 

determining whether reporting or 

withholding is needed. For the reasons 

stated, the final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

Accordingly, a regulatory flexibility 

analysis under the Regulatory 

Flexibility Act (5 U.S.C. Chapter 6) is 

not required. 

Pursuant to section 7805(f) of the 

Internal Revenue Code, the notice of 

proposed rulemaking preceding these 

regulations was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on the regulations’ impact on small 

businesses, and no comments were 

received. 

Drafting Information 

The principal author of these 

regulations is David Bergman of the 

Office of the Associate Chief Counsel 

(Procedure and Administration). 

However, other personnel from the 

Treasury Department and the IRS 

participated in their development. 

List of Subjects in 26 CFR Part 31 

Employment taxes, Fishing vessels, 

Gambling, Income taxes, Penalties, 

Pensions, Reporting and recordkeeping 

requirements, Social security, 

Unemployment compensation. 

Adoption of Amendments to the 

Regulations 

Accordingly, 26 CFR part 31 is 

amended as follows: 

PART 31—EMPLOYMENT TAXES AND 

COLLECTION OF INCOME TAX AT 

SOURCE 

■ Par. 1. The authority citation for part 

31 continues to read in part as follows: 

Authority: 26 U.S.C. 7805 *** 

■ Par. 2. Section 31.3402(q)–1 is 

amended: 

■ 1. By revising paragraphs (a)(1), (b), 

and (c)(1) and (4). 

■ 2. By redesignating paragraphs (d), (e) 

and (f) as paragraphs (f), (d), and (e), 

respectively. 

■ 3. By revising newly designated 

paragraphs (d) and (e). 

■ 4. By removing, in newly designated 

paragraph (f), Example 3 and Example 


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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Rules and Regulations 44927 

11, redesignating Examples 4 through 10 

as Examples 3 through 9, and adding 

examples 10 through 16. 

■ 5. By removing, in newly designated 

paragraph (f) the language ‘‘example 4’’ 

in newly designated Example 4 and 

adding in its place the language 

‘‘example 3’’ and by removing the 

language ‘‘example 6’’ in newly 

designated Example 6 and adding in its 

place the language ‘‘example 5’’ 

wherever it appears. 

■ 6. By adding paragraph (g). 

The revisions and additions read as 

follows: 

§ 31.3402(q)–1 Extension of withholding to 

certain gambling winnings. 

(a) Withholding obligation—(1) 

General rule. Every person, including 

the Government of the United States, a 

State, or a political subdivision thereof, 

or any instrumentality of any of the 

foregoing making any payment of 

‘‘winnings subject to withholding’’ 

(defined in paragraph (b) of the section) 

must deduct and withhold a tax in an 

amount equal to the product of the third 

lowest rate of tax applicable under 

section 1(c) and the payment. The tax 

must be deducted and withheld upon 

payment of the winnings by the person 

making the payment (‘‘payer’’). See 

paragraph (c)(5)(ii) of this section for a 

special rule relating to the time for 

making deposits of withheld amounts 

and filing the return with respect to 

those amounts. Any person receiving a 

payment of winnings subject to 

withholding must furnish the payer a 

statement as required in paragraph (d) of 

this section. Payers of winnings subject 

to withholding must file a return with 

the Internal Revenue Service and 

furnish a statement to the payee as 

required in paragraph (e) of this section. 

With respect to reporting requirements 

for certain payments of gambling 

winnings not subject to withholding, see 

section 6041 and the regulations 

thereunder. 

* * * * * 

(b) Winnings subject to withholding— 

(1) In general. Winnings subject to 

withholding means any payment from— 

(i) A wager placed in a Stateconducted lottery (defined in paragraph 

(c)(2) of this section) but only if the 

proceeds from the wager exceed $5,000; 

(ii) A wager placed in a sweepstakes, 

wagering pool, or lottery other than a 

State-conducted lottery but only if the 

proceeds from the wager exceed $5,000; 

or 

(iii) Any other wagering transaction 

(as defined in paragraph (c)(3) of this 

section) but only if the proceeds from 

the wager: 

(A) Exceed $5,000; and 

(B) Are at least 300 times as large as 

the amount of the wager. 

(2) Total proceeds subject to 

withholding. If proceeds from the wager 

qualify as winnings subject to 

withholding, then the total proceeds 

from the wager, and not merely amounts 

in excess of $5,000, are subject to 

withholding. 

(c) Definitions; special rules—(1) 

Rules for determining amount of 

proceeds from a wager—(i) In general. 

The amount of proceeds from a wager is 

the amount paid with respect to the 

wager, less the amount of the wager. 

(ii) Amount of the wager in the case 

of horse races, dog races, and jai alai. 

In the case of a wagering transaction 

with respect to horse races, dog races, or 

jai alai, all wagers placed in a single 

parimutuel pool and represented on a 

single ticket are aggregated and treated 

as a single wager for purposes of 

determining the amount of the wager. A 

ticket in the case of horse races, dog 

races, or jai alai is a written or electronic 

record that the payee must present to 

collect proceeds from a wager or wagers. 

(iii) Amount paid with respect to a 

wager—(A) Identical wagers. Amounts 

paid with respect to identical wagers are 

treated as paid with respect to a single 

wager for purposes of calculating the 

amount of proceeds from a wager. Two 

or more wagers are identical wagers if 

winning depends on the occurrence (or 

non-occurrence) of the same event or 

events; the wagers are placed with the 

same payer; and, in the case of horse 

races, dog races, or jai alai, the wagers 

are placed in the same parimutuel pool. 

Wagers may be identical wagers even if 

the amounts wagered differ as long as 

the wagers are otherwise treated as 

identical wagers under this paragraph 

(c)(1)(iii)(A). Tickets purchased in a 

lottery generally are not identical 

wagers, because the designation of each 

ticket as a winner generally would not 

be based on the occurrence of the same 

event, for example, the drawing of a 

particular number. 

(B) Non-monetary proceeds. In 

determining the amount paid with 

respect to a wager, proceeds which are 

not money are taken into account at the 

fair market value. 

(C) Periodic payments. Periodic 

payments, including installment 

payments or payments which are to be 

made periodically for the life of a 

person, are aggregated for purposes of 

determining the amount paid with 

respect to the wager. The aggregate 

amount of periodic payments to be 

made for a person’s life is based on that 

person’s life expectancy. See §§ 1.72–5 

and 1.72–9 of this chapter for rules used 

in computing the expected return on 

annuities. For purposes of determining 

the amount subject to withholding, the 

first periodic payment must be reduced 

by the amount of the wager. 

* * * * * 

(4) Certain payments to nonresident 

aliens or foreign corporations. A 

payment of winnings that is subject to 

withholding tax under section 1441(a) 

(relating to withholding on nonresident 

aliens) or 1442(a) (relating to 

withholding on foreign corporations) is 

not subject to the tax imposed by 

section 3402(q) and this section when 

the payee is a foreign person, as 

determined under the rules of section 

1441(a) and the regulations thereunder. 

A payment is treated as being subject to 

withholding tax under section 1441(a) 

or 1442(a) notwithstanding that the rate 

of such tax is reduced (even to zero) as 

may be provided by an applicable treaty 

with another country. However, a 

reduced or zero rate of withholding of 

tax must not be applied by the payer in 

lieu of the rate imposed by sections 

1441 and 1442 unless the person 

receiving the winnings has provided to 

the payer the documentation required 

by § 1.1441–6 of this chapter to establish 

entitlement to treaty benefits. 

* * * * * 

(d) Statement furnished by payee—(1) 

In general. Each person who is making 

a payment subject to withholding under 

this section must obtain from the payee 

a statement described in paragraph 

(d)(2) of this section. 

(2) Contents of statement. Each person 

who is to receive a payment of winnings 

subject to withholding under this 

section must furnish the payer a 

statement on Form W–2G or 5754 

(whichever is applicable) made under 

the penalties of perjury containing— 

(i) The name, address, and taxpayer 

identification number of the winner 

accompanied by a declaration that no 

other person is entitled to any portion 

of such payment, or 

(ii) The name, address, and taxpayer 

identification number of the payee and 

of every person entitled to any portion 

of the payment. 

(3) Multiple payments. If more than 

one payment of winnings subject to 

withholding is to be made with respect 

to a single wager, for example in the 

case of an annuity, the payee is required 

to furnish the payer a statement with 

respect to the first payment only, 

provided that the other payments are 

taken into account in a return required 

by paragraph (e) of this section. 

(4) Reliance on statement for identical 

wagers. If the payee furnishes the 

statement which may be required 

pursuant to § 1.6011–3 of this chapter 


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44928 Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Rules and Regulations 

(regarding the requirement of a 

statement from payees of certain 

gambling winnings), indicating that the 

payee (and any other persons entitled to 

a portion of the winnings) is entitled to 

winnings from identical wagers, as 

defined in paragraph (c)(1)(iii)(A) of this 

section, and indicating the amount of 

the winnings, if any, then the payer may 

rely upon the statement in determining 

the total amount of proceeds from the 

wager under paragraph (c)(1) of this 

section. 

(e) Return of payer—(1) In general. 

Every person making payment of 

winnings for which a statement is 

required under paragraph (d) of this 

section must file a return on Form W– 

2G at the Internal Revenue Service 

location designated in the instructions 

to the form on or before February 28 

(March 31 if filed electronically) of the 

calendar year following the calendar 

year in which the payment of winnings 

is made. The return required by this 

paragraph (e) need not include the 

statement by the payee required by 

paragraph (d) of this section and, 

therefore, need not be signed by the 

payee, provided the statement is 

retained by the payer as long as its 

contents may become material in the 

administration of any internal revenue 

law. In addition, the return required by 

this paragraph (e) need not contain the 

information required by paragraph 

(e)(1)(v) of this section provided the 

information is obtained with respect to 

the payee and retained by the payer as 

long as its contents may become 

material in the administration of any 

internal revenue law. For payments to 

more than one winner, a separate Form 

W–2G, which in no event need be 

signed by the winner, must be filed with 

respect to each such winner. Each Form 

W–2G must contain the following: 

(i) The name, address, and taxpayer 

identification number of the payer; 

(ii) The name, address, and taxpayer 

identification number of the winner; 

(iii) The date, amount of the payment, 

and amount withheld; 

(iv) The type of wagering transaction; 

(v) Except with respect to winnings 

from a wager placed in a Stateconducted lottery, a general description 

of the two types of identification (as 

described in paragraph (e)(2) of this 

section), one of which must have the 

payee’s photograph on it (except in the 

case of tribal member identification 

cards in certain circumstances as 

described in paragraph (e)(3) of this 

section), that the payer relied on to 

verify the payee’s name, address, and 

taxpayer identification number; 

(vi) The amount of winnings from 

identical wagers; and 

(vii) Any other information required 

by the form, instructions, or other 

applicable guidance published in the 

Internal Revenue Bulletin. 

(2) Identification. The following items 

are treated as identification for purposes 

of paragraph (e)(1)(v) of this section— 

(i) Government-issued identification 

(for example, a driver’s license, 

passport, social security card, military 

identification card, tribal member 

identification card issued by a federallyrecognized Indian tribe, or voter 

registration card) in the name of the 

payee; and 

(ii) A Form W–9, ‘‘Request for 

Taxpayer Identification Number and 

Certification,’’ signed by the payee that 

includes the payee’s name, address, 

taxpayer identification number, and 

other information required by the form. 

A Form W–9 is not acceptable for this 

purpose if the payee has modified the 

form (other than pursuant to 

instructions to the form) or if the payee 

has deleted the jurat or other similar 

provisions by which the payee certifies 

or affirms the correctness of the 

statements contained on the form. 

(3) Special rule for tribal member 

identification cards. A tribal member 

identification card need not contain the 

payee’s photograph to meet the 

identification requirement described in 

paragraph (e)(1)(v) of this section if— 

(i) The payee is a member of a 

federally-recognized Indian tribe; 

(ii) The payee presents the payer with 

a tribal member identification card 

issued by a federally-recognized Indian 

tribe stating that the payee is a member 

of such tribe; and 

(iii) The payer is a gaming 

establishment (as described in § 1.6041– 

10(b)(2)(iv) of this chapter) owned or 

licensed (in accordance with 25 U.S.C. 

2710) by the tribal government that 

issued the tribal member identification 

card referred to in paragraph (e)(3)(ii) of 

this section. 

(4) Transmittal form. Persons making 

payments of winnings subject to 

withholding must use Form 1096 to 

transmit Forms W–2G to the Internal 

Revenue Service. 

(5) Furnishing a statement to the 

payee. Every payer required to make a 

return under paragraph (e)(1) of this 

section must also make and furnish to 

each payee, with respect to each 

payment of winnings subject to 

withholding, a written statement that 

contains the information that is required 

to be included on the return under 

paragraph (e)(1) of this section. The 

payer must furnish the statement to the 

payee on or before January 31st of the 

year following the calendar year in 

which payment of the winnings subject 

to withholding is made. The statement 

will be considered furnished to the 

payee if it is provided to the payee at 

the time of payment or if it is mailed to 

the payee on or before January 31st of 

the year following the calendar year in 

which payment was made. 

(f) * * * 

Example 10. (i) B places a $15 bet at the 

cashier window at the racetrack for horse A 

to win the fifth race at the racetrack that day. 

After placing the first bet, B gains confidence 

in horse A’s prospects to win and places an 

additional $40 bet at the cashier window at 

the racetrack for horse A to win the fifth race, 

receiving a second ticket for this second bet. 

Horse A wins the fifth race, and B wins a 

total of $5,500 (100 to 1 odds) on those bets. 

The $15 bet and the $40 bet are identical 

wagers under paragraph (c)(1)(iii)(A) of this 

section because winning on both bets 

depended on the occurrence of the same 

event and the bets are placed in the same 

parimutuel pool with the same payer. This is 

true regardless of the fact that the amount of 

the wager differs in each case. 

(ii) B cashes the tickets at different cashier 

windows. Pursuant to paragraph (d) of this 

section and § 1.6011–3, B completes a Form 

W–2G indicating that the amount of 

winnings is from identical wagers and 

provides the form to each cashier. The 

payments by each cashier of $1,500 and 

$4,000 are less than the $5,000 threshold for 

withholding, but under paragraph 

(c)(1)(iii)(A) of this section, identical wagers 

are treated as paid with respect to a single 

wager for purposes of determining the 

proceeds from a wager. The payment is not 

subject to withholding or reporting because 

although the proceeds from the wager are 

$5,445 ($1,500 + $4,000 ¥ $55), the proceeds 

from the wager are not at least 300 times as 

great as the amount wagered ($55 × 300 = 

$16,500). 

Example 11. B makes two $1,000 bets in a 

single ‘‘show’’ pool for the same jai alai 

game, one bet on Player X to show and one 

bet on Player Y to show. A show bet is a 

winning bet if the player comes in first, 

second, or third in a single game. The bets 

are placed at the same time at the same 

cashier window, and B receives a single 

ticket showing both bets. Player X places 

second in the game, and Player Y does not 

place first, second, or third in the game. B 

wins $8,000 from his bet on Player X. 

Because winning on both bets does not 

depend on the occurrence of the same event, 

the bets are not identical bets under 

paragraph (c)(1)(iii)(A) of this section. 

However, pursuant to the rule in paragraph 

(c)(1)(ii) of this section, the amount of the 

wager is the aggregate amount of both wagers 

($2,000) because the bets were placed in a 

single parimutuel pool and reflected on a 

single ticket. The payment is not subject to 

withholding or reporting because although 

the proceeds from the wager are $6,000 

($8,000 ¥ $2,000), the proceeds from the 

wager are not at least 300 times as great as 

the amount wagered ($2,000 × 300 = 

$600,000). 

Example 12. B bets a total of $120 on a 

three-dog exacta box bet ($20 for each one of 


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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Rules and Regulations 44929 

the six combinations played) at the dog 

racetrack and receives a single ticket 

reflecting the bet from the cashier. B wins 

$5,040 from one of the selected 

combinations. Pursuant to the rule in 

paragraph (c)(1)(ii) of this section, the 

amount of the wager is $120, not $20 for the 

single winning combination of the six 

combinations played. The payment is not 

subject to withholding under section 3402(q) 

because the proceeds from the wager are 

$4,920 ($5,040 ¥ $120), which is below the 

section 3402(q) withholding threshold. 

Example 13. B makes two $12 Pick 6 bets 

at the horse racetrack at two different cashier 

windows and receives two different tickets 

each representing a single $12 Pick 6 bet. In 

his two Pick 6 bets, B selects the same horses 

to win races 1–5 but selects different horses 

to win race 6. All Pick 6 bets on those races 

at that racetrack are part of a single 

parimutuel pool from which Pick 6 winning 

bets are paid. B wins $5,020 from one of his 

Pick 6 bets. Pursuant to the rule in paragraph 

(c)(1)(ii) of this section, the bets are not 

aggregated for purposes of determining the 

amount of the wager because the bets are 

reflected on separate tickets. Assuming that 

the applicable rate is 25%, the racetrack must 

deduct and withhold $1,252 (($5,020 ¥ $12) 

× 25%) because the amount of the proceeds 

of $5,008 ($5,020 ¥ $12) is greater than 

$5,000 and is at least 300 times as great as 

the amount wagered ($12 × 300 = $3,600). 

The racetrack also must report B’s winnings 

on Form W–2G pursuant to paragraph (e) of 

this section and furnish a copy of the Form 

W–2G to B. 

Example 14. C makes two $50 bets in two 

different parimutuel pools for the same jai 

alai game. One bet is an ‘‘exacta’’ in which 

C bets on player M to win and player N to 

‘‘place.’’ The other bet is a ‘‘trifecta’’ in 

which C bets on player M to win, player N 

to ‘‘place,’’ and player O to ‘‘show.’’ C wins 

both bets and is paid $2,000 with respect to 

the bet in the ‘‘exacta’’ pool and $3,100 with 

respect to the bet in the ‘‘trifecta’’ pool. 

Under paragraph (c)(1)(iii)(A) of this section, 

the bets are not identical bets. Under 

paragraph (c)(1)(ii) of this section, the bets 

are not aggregated for purposes of 

determining the amount of the wager for 

either payment because they are not wagers 

in the same parimutuel pool. No section 

3402(q) withholding is required on either 

payment because neither payment separately 

exceeds the $5,000 withholding threshold. 

Example 15. C makes two $100 bets for the 

same dog to win a particular race. C places 

one bet at the racetrack and one bet at an offtrack betting establishment, but the two pools 

constitute a single pool. C receives separate 

tickets for each bet. C wins both bets and is 

paid $4,000 from the racetrack and $4,000 

from the off-track betting establishment. 

Under paragraph (c)(1)(ii) of this section, the 

bets are not aggregated for purposes of 

determining the amount of the wager because 

the wager placed at the racetrack and the 

wager placed at the off-track betting 

establishment are reflected on separate 

tickets, despite being placed in the same 

parimutuel pool. No section 3402(q) 

withholding is required because neither 

payment separately exceeds the $5,000 

withholding threshold. 

Example 16. C places a $200 Pick 6 bet for 

a series of races at the racetrack on a 

particular day and receives a single ticket for 

the bet. No wager correctly picks all six races 

that day, so that portion of the pool carries 

over to the following day. On the following 

day, C places an additional $200 Pick 6 bet 

for that day’s series of races and receives a 

new ticket for that bet. C wins $100,000 on 

the second day. Pursuant to the rule in 

paragraph (c)(1)(ii) of this section, the bets 

are on two separate tickets, so C’s two Pick 

6 bets are not aggregated for purposes of 

determining the amount of the wager. 

Assuming that the applicable rate is 25%, the 

racetrack must deduct and withhold $24,950 

(($100,000 ¥ $200) × 25%) because the 

amount of the proceeds of $99,800 ($100,000 

¥ $200) is greater than $5,000, and is at least 

300 times as great as the amount wagered 

($200 × 300 = $60,000). The racetrack also 

must report C’s winnings on Form W–2G 

pursuant to paragraph (e) of this section and 

furnish a copy of the Form W–2G to C. 

(g) Applicability date. The rules in 

this section apply to payments made 

with respect to a winning event that 

occurs after November 13, 2017. For 

rules that apply to payments made with 

respect to a winning event on or before 

that date, see § 31.3402(q)–1 as 

contained in 26 CFR part 31, revised 

April 1, 2017. 

■ Par. 3. Section 31.3406–0 is amended 

by adding an entry for paragraph (h) to 

§ 31.3406(g)–2 to read as follows: 

§ 31.3406–0 Outline of the backup 

withholding regulations. 

* * * * * 

§ 31.3406(g)–2 Exception for reportable 

payments for which backup withholding is 

otherwise required. 

* * * * * 

(h) Applicability date. 

* * * * * 

■ Par. 4. Section 31.3406(g)–2 is 

amended by revising paragraphs (d)(2) 

and (3) and adding paragraph (h) to read 

as follows: 

§ 31.3406(g)–2 Exception for reportable 

payment for which withholding is otherwise 

required. 

* * * * * 

(d) * * * 

(2) Definition of a reportable gambling 

winning and determination of amount 

subject to backup withholding. For 

purposes of withholding under section 

3406, a reportable gambling winning is 

any gambling winning subject to 

information reporting under section 

6041. A gambling winning (other than a 

winning from bingo, keno, or slot 

machines) is a reportable gambling 

winning only if the amount paid with 

respect to the wager is $600 or more and 

if the proceeds are at least 300 times as 

large as the amount wagered. See 

§ 1.6041–10 of this chapter to determine 

whether a winning from bingo, keno, or 

slot machines is a reportable gambling 

winning and thus subject to 

withholding under section 3406. The 

amount of a reportable gambling 

winning is— 

(i) The amount paid with respect to 

the amount of the wager reduced, at the 

option of the payer; by 

(ii) The amount of the wager. 

(3) Special rules. For special rules for 

determining the amount of the wager in 

a wagering transaction with respect to 

horse racing, dog racing, and jai alai, or 

amounts paid with respect to identical 

wagers, see § 31.3402(q)–1(c). 

* * * * * 

(h) Applicability date. The rules apply 

to reportable gambling winnings paid 

with respect to a winning event that 

occurs after November 13, 2017. For 

rules that apply to payments made with 

respect to a winning event on or before 

that date, see § 31.3406(g)–2 as 

contained in 26 CFR part 31, revised 

April 1, 2017. 

Kirsten Wielobob, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: August 21, 2017. 

David J. Kautter, 

Assistant Secretary for Tax Policy. 

[FR Doc. 2017–20720 Filed 9–25–17; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket Number USCG–2016–1041] 

RIN 1625–AA08 

Special Local Regulation; Fautasi 

Ocean Challenge Canoe Race, Pago 

Pago Harbor, American Samoa 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is 

establishing a permanent special local 

regulation for the Fautasi Ocean 

Challenge canoe races in Pago Pago 

Harbor, American Samoa. These annual 

events historically occur four separate 

weekend or holiday days each year. The 

annual dates include one day in April 

and three separate days between 

Veteran’s Day and the Thanksgiving 

holiday weekend. Each of the four days, 

canoe races are held between 7 a.m. to 

4 p.m. This action is necessary to 

safeguard the participants and 


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