Wait…what? There are taxes to be paid on winning a raffle prize?!
Yes! That’s absolutely the case. Prize Winners owe taxes on Prizes won in ALL raffles, not just the The Seventh Annual Climate XChange Tesla Raffle (The Raffle). And it’s Big Bucks when the Prizes are expensive.
Here’s how much money is involved. And, if you’re interested, keep reading on to learn the details.
Important note: Nothing on this page is intended to constitute legal or tax advice. All participants should consult your own legal and/or tax advisor.
Our Grand Prize Includes Tax Payments On Your Behalf
For the Seventh Annual Climate XChange Tesla Raffle, we offer a choice of Tesla vehicles as the Grand Prize. The Second through Fifth Prizes are all cash! Because the tax burden on the Grand Prize Winner would be large (see below), we also pay the U.S. withholding tax on your Prize on your behalf. Turns out that there’s also a Massachusetts withholding tax that you would owe…so we pay that one, too! And for reasons you can learn in the details below, Climate XChange even pays more than you would. Equally as bad, if you had to pay the withholding taxes yourself on The Grand Prize, you would even have to send them in before Climate XChange could pay Tesla to deliver your Prize! Ouch!!
Grand Prize — Your choice of the Model X Plaid Luxury SUV, Model S Plaid Luxury Sedan, Model Y Midsize SUV, or Model 3 Midsize Sedan (with a value for the vehicle of up to a maximum of $165,640).
We pay the sales tax and registration fee up to $10,653
We pay the IRS up to $62,742 on your behalf
We pay the Massachusetts Department of Revenue up to $11,952 on your behalf
In the aggregate, we pay total tax payments of up to $85,346 so you don’t have to pay them directly, which means that CXC pays out a total of up to $250,986 for the Grand Prize
Second Prize — the Prize payout to Prize winner is $10,000
Winner responsible for taxes on prizes
Third Prize — the Prize payout to Prize winner is $5,000
Winner responsible for taxes on prizes
Fourth Prize — the Prize payout to Prize winner is $3,000
Winner responsible for taxes on prizes
Fifth Prize — the Prize payout to Prize winner is $2,000
Winner responsible for taxes on prizes
You may not know this: as a Prize Winner, you may immediately owe withholding taxes to the IRS. Below, we explain why that’s a problem and also why we make the Grand Prize better by dealing with this problem!
When a Winner wins a raffle prize, United States law and IRS regulations treat the raffle prize as income to the Winner, so those laws and regulations require that the Winner pay taxes on the Fair Market Value of that Prize. When the Prize is small, $5000 or less, those taxes are solely the responsibility of the Winner. In the event that the value of the Prize is $5,001 or more, the organization sponsoring the raffle must withhold the required amount of taxes on the Prize. The sponsoring organization then remits these taxes to the IRS.
In many (most?) cases, raffles require the Winner to come up with the necessary cash in advance, either by sending the appropriate amount to the sponsoring organization or by allowing the sponsoring organization to deduct money from the Prize (if, say, the Prize has a cash component). In the case of Climate XChange’s Grand Prize, a Tesla Model X, Model S, Model Y, or Model 3 valued at over $165,000 (plus MA state sales tax and registration fee), the Winner would be required to send 25% of that value to Climate XChange to be forwarded to the IRS — over $44,000! And you’d have to send us that money before you received your Prize.
It turns out that the Commonwealth of Massachusetts also requires a withholding tax payment. That’s because Climate XChange is based in Massachusetts and the Commonwealth’s taxation laws follow the federal taxation laws. So Massachusetts treats a Prize awarded by a Massachusetts-based nonprofit (that’s us, Climate XChange) as Massachusetts-derived income to the Winner. And that’s taxable. In the case of the Grand Prize, the Winner would have to send us 5% of that value — over $8,000. In advance, of course.
Because we at Climate XChange believe that most people don’t have this kind of money lying around to send to the IRS and the Massachusetts Department of Revenue (DOR) whenever they feel like it, we decided that the Grand Prize should include, as part of the Prize itself, the required U.S. and Massachusetts withholding tax payments for the Prize. The IRS and DOR understand and allow for this possibility. However, because the tax payment we make on your behalf is also something of value to you, it turns out that we have to pay taxes on the taxes that we are paying for you! We have to pay the IRS 33.33% of the Prize’s Fair Market Value, rather than the 25% you would have to pay directly, for the privilege of paying your U.S. prize tax for you, because when we pay those taxes on your behalf, that counts as income to you. Then, Massachusetts wants another 5%. But wait…it gets worse…the money we send to Massachusetts counts as income for you from the IRS perspective. So we have to pay tax to the IRS on the taxes we paid on your behalf to Massachusetts. Then, from the Massachusetts perspective, we’ve just given you more income by sending a larger tax payment to the IRS, so now we have to pay tax on that to Massachusetts! This craziness goes on for a while until the taxable amounts become small enough that we reach a dollar or less. (Incidentally, while the regulations allow us to subtract the price of the raffle ticket from the amount we send the IRS and the DOR, we no longer bother, as the amount we would save is tiny compared to the amounts we have to pay.)
Any and all other taxes, fees, surcharges, excises, and so on, whether from the United States, the Winner’s state, the Winner’s locality, or anywhere else on the planet, are the responsibility of the Prize Winner.
For further details, including any restrictions or caveats, see the Legal Details section of the website.
The Grand Prize vehicle may be eligible for additional benefits, depending on the winner’s location and income, and the vehicle’s price and U.S. manufacturing content. The Inflation Reduction Act of 2022 provides for new federal EV incentives from January 1, 2023, though most Tesla vehicles will not qualify based on purchase price.
In some locations, the purchaser of an electric vehicle is eligible for an incentive from their state, local government, or utility. Tesla, Inc., maintains its own list of state and local incentives, which may be found here.
There are only a few things you should know when purchasing a ticket for the Seventh Annual Climate XChange Tesla Raffle . If you want more details, you can find them here.
The price of a single ticket is $250.
All ticket sales are final.
Receiving Your Receipt & Ticket
Each purchaser will receive an electronic purchase receipt delivered to their email address from Climate XChange, with a link to sign and download their ticket PDF file. Each purchaser who agrees to receive text notifications will also receive a text with a link to sign and download their ticket PDF file.
We will print all raffle ticket stubs and enter your ticket stub into the Drawing. More details about that here.
In order to download your ticket from the link delivered by email or text, you must sign it by entering your initials, indicating your acknowledgement of receipt of the purchase confirmation. The signature is important to us, because it lets us know that you downloaded the ticket. However, even if you don’t sign and download the ticket and even if we never hear back from you, your ticket stub will still be entered into the Drawing and you will still have a chance to win one of the Raffle’s Prizes!
The ticket and attached stub already include the signature of an authorized representative of Climate XChange.
The ticket’s stub will be entered into the Drawing and will be eligible for all five Prizes. We will draw the Grand through Fifth Prizes, in that order, and announce them in reverse order from Fifth to Grand Prize. If the stub is drawn for a Prize, the ticket/stub will not be re-entered into the Drawing and therefore will not be eligible for additional Prizes.
How To Make a Purchase
Use the Buy Tickets button on this web page or any other part of the website.
Checking the Status of Your Order
You may check the status of your order by emailing firstname.lastname@example.org or calling us at (617) 624-0919.
We Don’t Use the US Mail
CXC does not have the option to mail raffle tickets via U.S. Mail and will not do so. It is against federal law to send a raffle ticket through the U.S. Mail (see 18 U.S.C. Section 1302), so please don’t.
Fantastic! You’ve won the Grand Prize or one of the other four Prizes! Here’s what you must do.
Claiming a Prize
You must claim the Prize. We’ll help. On the day of the drawing, we’ll use the contact information you supplied when you purchased your raffle ticket to attempt to contact you. The Winner shall be notified by telephone and/or email and, if necessary, Certified U.S. Mail. We’ll keep trying your telephone number and/or email address for up to 90 days. After 90 days, if we haven’t been able to reach you, we will consider that you have forfeited your Prize.
Once you are in contact with Climate XChange, you will need to confirm your identity. Your name must match the name under which we sold you the raffle ticket. You will need a government-supplied photo identification, such as a Driver’s License or a Passport. In some cases, we may choose to accept alternate forms of identification and/or a high-resolution scan of the identification.
Once we have verified your identity and confirmed that you are a Winner, you must supply us with the following information:
– Your Full Name
– Your Taxpayer Identification Number (this is usually your Social Security Number)
– A signed affidavit attesting to winning and accepting the Prize — we will supply you with this document — to be returned to us as a physical document, with notarization
We will issue a Form W-2G to you at the appropriate time. We will also report your Prize win to the IRS, as we are mandated to do by law and regulation. For any Prize where we have promised to pay withholding tax payments on your behalf, we will timely file the necessary paperwork and payment. See IRS Notice 1340.
We also expect Winners of any of the Prizes to allow us to use their name, likeness, and state as part of our celebration and promotion of this raffle, online and offline, and as part of any future raffles we may conduct. By entering the raffle you are providing your consent for such use of your name and likeness.
Alternate All-Cash Prize
The Grand Prize Winner may opt for an Alternate All-Cash Prize in place of a vehicle. See the Prize Details for amounts and Legal Details for conditions.
Ordering Your New Tesla
All new Tesla vehicles are “build-to-order” (see next section). For the Grand Prize, you can choose the Model X Plaid or Long Range SUV, the Model S Plaid or Long Range Luxury Sedan, the Model Y Midsize SUV, or the Model 3 Midsize Sedan. We stand ready to help you with this process, not to mention, pay for it. If you wish, we will work with you to create an account for you on Tesla’s website. We can also give you advice about configuring the car. Of course, you ultimately decide exactly what you want in your new Tesla: major options, colors, interiors, and so on. Once you have finalized your configuration, we will pre-pay Tesla the amounts as described elsewhere.
Your vehicle will be built by Tesla, Inc., as they would any other purchaser’s vehicle, and it will be delivered in their standard timeframes. We recommend you consult a Tesla sales representative or the Tesla website to determine vehicle delivery times.
At its sole discretion, Tesla, Inc., may deliver the vehicle to your home. Otherwise, it will be available at the Tesla Store or Service Center nearest your home or place of work.
Inventory & Certified Pre-Owned (CPO) Vehicles
Tesla has a number of so-called “inventory” cars: these are demo cars that were built for Tesla showrooms or build-to-order cars whose orders were canceled. These cars may have additional mileage and use but are still sold by Tesla as new cars. They are available for immediate purchase, but the customer has no option to reconfigure them in any way.
Tesla also has a Certified Pre-Owned (CPO) vehicle program that makes used cars available for immediate purchase. These cars are sold “as is.”
Climate XChange believes that the Grand Prize Winner is likely to be happiest with a brand-new, built-to-order vehicle. However, you may choose a Tesla inventory car or a CPO vehicle, if you prefer.
Federal Tax Credit & State Incentives
From January 1, 2023, some Tesla vehicles and some buyers may qualify for the new federal EV tax credit. In addition, there may be applicable state, local and utility incentives. You may see Tesla’s list of state and local incentives here. Please consult your tax professional.
Cash In: The Grand Prize Winner has the option to add their own money to the Prize, so that they can take delivery of a more expensively-configured vehicle than the Prize itself would otherwise permit (this can happen in the event of Tesla introducing new options, model variants or pricing after the Raffle starts, or the winner facing state/local taxes and fees that are higher than in Massachusetts). Climate XChange shall not be responsible for paying Tesla any amount over $165,640 for the vehicle itself, plus up to $10,653 in state/local sales taxes and registration fees.
Thursday, September 15, 2022: Ticket Sales Begin
The Climate XChange Annual Tesla Raffle website will be available and ticket sales will begin before midnight Eastern Time. Find us at CarbonRaffle.org, ClimateXChangeRaffle.org or Climate-XChange.org.
Raffle tickets will be sold up to the maximum of 5,000 valid tickets. Ticket sales will cease as soon as the maximum is reached or the sales period expires.
For details, see here.
Raffle ticket sales are final.
February 22, 2023 @ 2 p.m. ET: Ticket Sales Conclude
Ticket sales end February 22, 2023, at 2 p.m. Eastern Time, unless sales end earlier due to reaching the maximum number of valid tickets to be sold. See here for further details. Raffle ticket sales are final.
February 24, 2023 @ 3 p.m. ET: Drawing
The Climate XChange Annual Tesla Raffle Drawing will be conducted at 3 p.m. Eastern Time (the live-stream will begin at 2 p.m. showing all tickets being loaded into the raffle drum, but the actual drawing of the tickets will take place at 3 p.m.) at Climate XChange’s former headquarters, located at:
Old West Church
131 Cambridge Street
Boston, MA 02114
The Drawing will be live-streamed over the Internet; instructions for locating and joining the stream will be published on the CXC and Raffle websites and emailed to all ticket buyers a few days before the Drawing is held.
Winners will be notified!!!
We want you to know that this Raffle has expenses associated with it, which means that not all of the money taken in by Climate XChange for a Raffle ticket goes directly to Climate XChange for its charitable and educational purposes. Some of these expenses are not subject to our choice while others involve conscious trade-offs on our part. For more information, click here.