By Prianka Sharma, Assistant Chief Counsel
Rolling green meadows, clear blue skies, and the sound of horse hoofs galloping, greeted Advocacy as they toured Salters Alliance Farms on July 31. After a busy morning attending a small business roundtable in Lexington, Ky., Advocacy staff was excited to learn about the challenges of being in the thoroughbred racing industry, and where better to learn than the horse capitol of the world.
Owner Julie Salters gave Advocacy staff a tour of the sprawling, 2,000 acre farm that she originally leased seven years ago before taking over the barn three years ago. She manages approximately 25 horses, though she does not own all of them herself. Salters leases parts of the land to other thoroughbred owners, and acts as an intermediary, helping clients find farm space for their horses. She currently has tenants from Ireland and the Middle East.
Salters said that her goal is to breed good horses, not only so that they race well, but so that they can be sold to proper homes after retirement from racing. Some horses race six to nine years and then have the rest of their lives to do other things such as be show horses. It is very important to her that once a horse is retired from racing, they go to a good home and is well taken care of.
As a small horse farm, funding is a problem. Salters said that it was difficult for her to obtain an SBA small business loan because she was not making enough money; however, she needed the loan in order to be able to make a profit. She also stated that there were many regulations that her loan officer had to comply with regarding how much they were able to loan to her and the interest rates available on the loans. She also stated that because she leases rather than owns her farm, she does not receive any tax benefits. In addition, she has to pay higher fees for maintenance of the farm because the landlord sets their own standards for upkeep. Salters also spoke about how she wishes there was a scale for self-employment tax that was based on earned income rather than a set amount. This would level the playing field for small businesses that are just starting out and are often met with heavy taxes when they do not have a lot of earned income.
Salters also spoke about how the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service has various regulations related to the protection of horses pursuant to the Horse Protection Act. Kentucky, however, recently passed a bill re-classifying horses as livestock instead of domestic animals. She fears this may reopen livestock slaughter houses because it would remove current protections that horses have as domestic animals. The benefit to horses being classified as livestock is that there is a tax exemption for sales tax on feed for livestock. Currently, however, the Kentucky legislature has not explicitly stated that horse feed may be exempt so she is not able to take advantage of this benefit.
Salters has also found navigating the process for H2A visas for workers challenging; she stated that she ends up borrowing immigrant labor from larger farms because she is simply too small to be able to apply for workers on her own. Currently Salters Alliance Farms has one employee who works twenty hours per week on barn upkeep and feeding the horses. The rest of the employees are contracted, or borrowed hourly workers from other farms.
Another challenge is that currently each individual state regulates the horse racing industry differently; therefore if she wants to race her horses in more than one state she must apply for individual licenses, pay fees to each state, and submit to any veterinarian inspections or other requirements of that particular state. If the federal government were to try to come up with an overall system for licensing and regulating the racehorse industry this may make it easier than having to comply with each separate state requirement; however, Salters cautions that this may ultimately impose further burdensome requirements on the industry if the federal government regulates with a heavier hand than the state.
Being such a new business owner, Salters said that she is still trying to navigate the industry and figure out ways to grow her business. Advocacy was impressed with how much Salters had already accomplished, and how large and well-maintained her property is.
It was a unique experience for Advocacy staff, who left hopeful that Salters will be able to acquire more business, and that other small horse farms will also be able to compete with the large, or international, thoroughbred horse operations.