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 Carbon Pricing Awareness 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 2019–2020 Carbon Pricing Awareness Raffle, we offer a choice of Tesla vehicles as the Grand Prize. The Second Place Prize and Third Place Prize are both cash! Because the tax burden on the Grand Prize Winner would be large (see below), we also pay the US 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, CXC 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 CXC could pay Tesla to deliver your Prize! Ouch!!
Grand Prize: Model X SUV or Model S sedan or Model 3 Performance+ (up to $137,033 for the car by itself)
- we pay the IRS up to $48,770; you would have had to pay, in advance
- we pay the Massachusetts Department of Revenue up to $9,290; you would have had to pay
- …so we pay total tax payments of up to $58,060 so you don’t have to pay
- …which means that CXC lays out a Grand Total of up to $195,093 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
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 (FMV) 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 S or Model X or Model 3 Performance+ valued at just over $130,000, the Winner would be required to send 25% of that value to Climate XChange to be forwarded to the IRS — over $48,000! 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 — almost $9,500. 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 FMV, 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.
Possible State incentives, up to $5,000: In some States, the purchaser of an electric vehicle is eligible for an incentive from that State. Tesla, Inc., maintains its own list of State incentives, which may be found here.
There are only a few things you should know when purchasing a ticket for the Carbon Pricing Awareness 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. Each purchaser will also receive an electronic raffle ticket delivered to their email address.
We also print out and store your physical ticket at CXC headquarters, which you may choose to pick up. We use the ticket stub to enter your ticket into the Drawing. More details about that here.
Please sign your ticket once you receive it. For the electronic copy of your ticket and attached stub, click on the signature button in the email you received with your ticket(s), indicating your acknowledgement of receipt of the electronic ticket. The signature is important to us, because it lets us know that you received the ticket. However, even if you don’t sign 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 Carbon Pricing Awareness 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 three Prizes. 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 email@example.com 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 US Mail and will not do so. It is against Federal law to send a raffle ticket through the US Mail (see 18 U.S.C. Section 1302), so please don’t.
Fantastic! You’ve won the Grand Prize or one of the other 2 Prizes! Here’s what you must do.
Claiming a Prize
You must claim the Prize. We’ll help. If you happen to be present for the Drawing, you’ll scream, and someone from Climate XChange (CXC) will rush over to congratulate you and bring you up in front of the audience and we’ll all celebrate with you!
If you’re not present at 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 US 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 have contacted CXC, 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, state and town 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
A 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). Depending on the Prize, you can choose the Model X SUV, the Model S sedan or the Model 3 compact 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.
In 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 cancelled. These cars may have additional mileage and use but are still sold by Tesla as new cars. These cars are fully eligible for any applicable US federal EV tax credit or State incentives. 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”.
CXC believes that the Grand Prize Winner is likely to be happiest with a brand-new, build-to-order vehicle. However, you may choose a Tesla inventory car or a CPO vehicle, if you prefer.
Federal Tax Credit & State Incentives
A Tesla car delivered after December 31, 2019 will not qualify for the Federal EV tax credit. Note that there may also be applicable State incentives of up to $5,000. You may see Tesla’s list of state incentives here. Please consult your tax professional.
“Cash In” and “Cash Out”
Cash In: The Grand Prize Winner has the option to add his/her own money to the Prize, so that he/she can take delivery of a more expensively-configured vehicle than the Prize itself would otherwise permit.
Cash Out: The Grand Prize Winner may elect to configure a Tesla vehicle of lower cost than provided for by the Prize. In this case, Climate XChange will send the Winner a check for the difference. However, to qualify for a Cash Out, the Winner must use the Prize to acquire a Tesla vehicle (new, inventory or CPO) from Tesla, Inc. Read more here.
Wednesday, September 18, 2019: Ticket Sales Begin
Raffle tickets will be sold up to the maximum of 4,000 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.
Thursday, February 13, 2020 @ 2 p.m. ET: Ticket Sales Conclude
Ticket sales end Thursday, February 13, 2020, at 2 p.m. Eastern Time… unless sales end earlier due to reaching the maximum number of valid tickets that will be sold. See here for further details. Raffle ticket sales are final.
February 14, 2020 @ 3 p.m. ET: Drawing
The Carbon Pricing Awareness Raffle Drawing will be conducted at 3 p.m. Eastern Time at Climate XChange’s former headquarters, located at:
Old West Church 131 Cambridge Street Boston, MA 02114
All ticket holders are invited to be present for the drawing but need not be present to win.
The Drawing will be streamed over the Internet; instructions for locating and joining the stream will be published on the website a few days before the Drawing is held.
Winners will be notified!!!
The Climate XChange Carbon Pricing Awareness Raffle team operates in partnership with providers for areas such as accounting/audit advice, legal advice and website construction. Click here for more information.
We want you to know that this Raffle has expenses associated with it, which means that not all of the money taken in by CXC for a raffle ticket goes directly to CXC 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.
Also, we want you to know that a large chunk of our expenses does double duty by raising attention for carbon pricing through the mechanism of this Raffle itself while also raising funds for our mission. For many people, encountering the Raffle will be their only contact with the idea that market-based mechanisms can be used to abate carbon emissions. It’s why we’ve named this the “Carbon Pricing Awareness Raffle”.