2018 Carbon Pricing Awareness Raffle (18CPAR) – Legal Details
Nothing on this page is intended to constitute legal or tax advice. All readers should consult their own legal and/or tax advisors.
The 2018 Carbon Pricing Awareness Raffle (18CPAR, also just CPAR) is held in the State of Massachusetts. It is governed by the General Laws of Massachusetts, Part IV, Title I, Chapter 271, Section 7A. These laws have been interpreted into regulations by the Attorney General of Massachusetts. These regulations are known as “940 CMR 12.00” and may be found here.
These are not the only laws and regulations that govern raffles. For example, for further information about raffles and federal taxation, consult IRS Notice 1340 Tax-Exempt Organizations and Raffle Prizes.
Climate XChange Education and Research (CXC), Inc., its members, officers, directors, agents, and representatives and their parent organizations, affiliates, subsidiaries, vendors, and advertising and legal advisors are not responsible for and shall not be liable for: (i) late, lost, delayed, damaged, misdirected, incomplete, illegible or unintelligible entries; (ii) failed, returned, or misdirected notifications based on inaccurate information provided by the entrants or winner; (iii) telephone, electronic, hardware, or software program, network, internet, or computer malfunctions, failures, or difficulties resulting from participation in this Raffle or otherwise; (iv) any condition caused by events beyond the control of CXC that may cause the Raffle to be disrupted or corrupted; or (v) any injuries, losses or damages of any kind caused by a prize or resulting from acceptance, possession, or use of a prize, or from participation in the Raffle. Climate XChange Education and Research, Inc., reserves the right, at its sole discretion, to cancel, terminate, modify or suspend the use of the software version of the raffle and instead conduct a non-electronic raffle.
Other local, state and federal laws and regulations may apply.
The Massachusetts Attorney General’s regulations, 940 CMR 12.04, “Record Keeping, Financial Control”, section (3)(b), states that the organization sponsoring a raffle shall maintain “a list of members authorized to sell raffle tickets or participating in any way in the promotion or operation of the raffle”. That list is:
- Marc Breslow
- Cathy Carruthers
- Tim Cronin
- Kalman Gacs
- August Granath
- Michael Green
- Amanda Griffiths
- Kristin Kelleher
- Peter Kirby
- Jonah Kurman-Faber
- Susan Labandibar
- Alan Langerman
- Jessica Langerman
- Katie MacDonald
- Maria Virginia Olano
- Susanna Place
- Claudine Schneider
- Peter Granville Smith
- Julianna Stoll
- Bonni Widdoes
- Zaurie Zimmerman
- Quinton Zondervan
The General Laws of Massachusetts, Part IV, Title 1, Chapter 271, Section 7A, state in part: “…no such member shall receive remuneration in any form for time or effort devoted to the promotion or operation of such raffle or bazaar.”
None of the members listed above, nor any other member, Board Member, volunteer, intern, or staff member of CXC is receiving or shall receive any remuneration of any kind for promoting or operating this raffle.
You must be 18 years old to purchase a raffle ticket. People under age 18 can’t purchase raffle tickets. Nor may persons under 18 years of age be the beneficiary of a ticket purchase.
Ticket purchaser — and beneficiary, if the beneficiary is not the same as the purchaser — must also be citizens of the United States or legal residents thereof and meet eligibility requirements outlined in 940 CMR 12.03(3), which states:
(3) No member or employee, or immediate family member of a member or employee, of a sponsoring organization who has been directly involved in the promotion or operation of a raffle shall be permitted to purchase tickets to the raffle or win the prize. The sale of tickets alone shall not constitute the promotion and sale of a raffle for purposes of 940 12.03.
For purposes of this Raffle, “Immediate family” is defined as the member/employee and his/her spouse, and their parents, children, brothers, and sisters. We also apply this rule to our Board Members, interns and volunteers. We also apply this rule to our vendors and partners and their Board Members, employees, interns and volunteers. We also apply this rule to anyone who specifically donates to CXC as part of underwriting the 2018 Carbon Pricing Awareness Raffle prize pool.
The intent of this rule is to avoid the creation of a conflict of interest or even the appearance of a conflict of interest.
Climate XChange Education and Research (CXC), Inc., is a Massachusetts nonprofit. It is compliant in its filings with the Massachusetts Attorney General’s office.
Climate XChange is also registered with the Massachusetts Secretary of State.
Climate XChange has received its 501(c)(3) approval letter from the US Internal Revenue Service. (Climate XChange also has a 501(c)(4) status affiliate, but this has no relevance for this raffle. Please contact us if you would like to donate funds to our 501(c)(4).)
CXC possesses a current Certificate for Solicitation, issued by the City of Boston.
CXC has obtained the necessary permit for conducting a raffle in the City of Boston, MA.
You may contact Climate XChange as follows:
Climate XChange Education and Research, Inc.
131 Cambridge Street
Boston, MA 02114
Raffle tickets are NOT tax-deductible, even when the raffle is being held by a tax-deductible organization. That is because a raffle ticket is regarded as a “thing of value”, i.e., you have a chance to win a prize. It is not treated as a vanilla donation. See Internal Revenue Service Publication 526, page 6.
The simplest way to perform the disclosures required of us by these regulations is to list each requirement of the regulations followed by our disclosure. Each piece of the regulation is quoted here in italics. You may find these regulations for yourself here. These mandated disclosures are listed in the specific section, 940 CMR 12.02: Disclosure.
For convenience, throughout this section we will refer to Climate XChange’s Carbon Pricing Awareness Raffle with the abbreviation, CPAR. References to a specific year’s raffle are noted in an abbreviation by including the final two digits of the year. For example, the 2018 Carbon Pricing Awareness Raffle is abbreviated 18CPAR.
(1) In any raffle conducted pursuant to M.G.L. c. 271, § 7A, the sponsoring organization must disclose the following information either on the raffle ticket itself or in a written notice given to the purchaser prior to the sale:
We provide our disclosures here, where they may be reviewed prior to purchasing a ticket. We also provide appropriate disclosures on the ticket itself.
(a) a full and fair description of the prize;
There are three Prizes in 18CPAR: One Grand Prize, a Second Place Prize, and a Third Place Prize.
All three Prizes include two components: (1) a payment made by Climate XChange directly to Tesla, Inc., on behalf of the Winner, to be used for purchase of a Tesla vehicle for the Prize Winner and (2) backup withholding tax payments made on behalf of the Prize Winner so that the Prize Winner does not have to provide that money, which money is normally required in advance of receiving the Prize. The backup withholding tax payments are specifically (a) a payment made to the United States Internal Revenue Service (IRS) and (b) a payment made to the Commonwealth of Massachusetts (MA) Department of Revenue (DOR).
Selected Tax Payments are Part of CPAR Prizes
The requirement for a DOR backup withholding tax payment is as follows:
- Climate XChange Education and Research, Inc., is a nonprofit incorporated in Massachusetts with its headquarters located in the Commonwealth.
- Raffles are a type of wagering. See MA Technical Information Release TIR 13-14: Withholding on Wagering Winnings and MA TIR 13-15: Income Tax, Withholding and Reporting Rules for Certain Gambling Income.
- Residents of Massachusetts are subject to Massachusetts tax on income from a Massachusetts source; see Massachusetts General Laws (MGL) Title IX Chapter 62: Taxation of Incomes.
- A nonresident of Massachusetts is also subject to Massachusetts tax on income from an MA source; see Massachusetts General Laws (MGL) Title IX Chapter 62 Section 5A: Taxation of income earned by non-residents; regulations; certain military personnel.
- Withholding is required on wagering income in Massachusetts if it is required under IRS Section 3402; see MA TIR 13-4, section B.
- Withholding for the Commonwealth of Massachusetts shall apply to winnings of $600 or greater; see MA TIR 13-4, section B.
- Withholding of wagering income is required under IRS Internal Revenue Code Section 3402.
- Nonresidents of the Commonwealth of Massachusetts are also subject to Massachusetts income tax on income from a Massachusetts source; see Massachusetts General Laws (MGL) Title IX Chapter 62 Section 5A.
- Therefore, a CPAR Prize is subject to withholding by the Commonwealth of Massachusetts.
- Additionally, a CPAR Prize Winner who does not reside in Massachusetts may be required to file an income tax return in the Commonwealth, if the Winner’s gross income exceeds $8,000; see Mass.gov Personal Income Tax for Nonresidents. Note that all 18CPAR Prizes have values in excess of $35,000.
The Commonwealth of Massachusetts withholding rate is 5%; see Mass.gov Learn about gambling and the lottery in Massachusetts.
The IRS federal backup tax withholding payment is described by IRS Notice 1340, page 2, “Organization Pays Withholding Tax”.
Furthermore, because Climate XChange pays these withholding taxes on behalf of the Prize Winner, the payments themselves are treated as income to the Prize Winner. Therefore, Climate XChange “grosses up” each payment to account for the taxes required on the payment itself. Further, from the perspective of the Internal Revenue Service, the payment that CXC makes to the Commonwealth of Massachusetts is itself additional taxable income; while from the perspective of the Commonwealth of Massachusetts, the payment that CXC makes to the Internal Revenue Service is also additional taxable income. CXC “grosses up” both payments until the calculations yield zero additional required dollars.
Grand Prize Description
18CPAR’s Grand Prize consists of (a) a payment of US$89,763, called the Prize Vehicle Payout, by Climate XChange directly to Tesla, Inc., on behalf of the Winner, to be used for purchase of a Tesla Model S sedan or Model X SUV or Model 3 Performance sedan with Performance Upgrade and any options, accessories, and/or fee(s) as will fit within the Prize Vehicle Payout; (b) a payment of US$32,058 to the Internal Revenue Service for the backup tax withholding required for this Prize; and (c) a payment of US$6,412 to the Massachusetts Department of Revenue for the backup withholding tax required for this Prize.
The total expenditure by CPAR on the Grand Prize is the sum of the Prize Payout plus the two withholding tax payments: US$128,233. We call this sum the Total Prize Payout.
The Alternate All-Cash Prize for the Grand Prize is $89,763.
See also Additional Description for All Prizes, below.
Second Prize Description
18CPAR’s Second Prize consists of (a) a payment of US$58,950, called the Prize Vehicle Payout, by Climate XChange directly to Tesla, Inc., on behalf of the Winner, to be used for purchase of a Model 3 sedan with any options, accessories, and/or fee(s) as will fit within the Prize Vehicle Payout; (b) a payment of US$21,054 to the Internal Revenue Service for the backup tax withholding required for this Prize; and (c) a payment of US$4,211 to the Massachusetts Department of Revenue for the backup withholding tax required for this Prize.
The total expenditure by CPAR on the Second Prize is the sum of the Prize Payout plus the two withholding tax payments: US$84,215. We call this sum the Total Prize Payout.
The Alternate All-Cash Prize for the Second Prize is $58,950.
See also Additional Description for All Prizes, below.
Third Prize Description
18CPAR’s Third Prize consists of (a) a payment of US$39,825, called the Prize Vehicle Payout, by Climate XChange directly to Tesla, Inc., on behalf of the Winner, to be used for purchase of a Model 3 sedan with any options, accessories, and/or fee(s) as will fit within this payment, of which $1,000 of this payment is already held by Tesla as a deposit on an Early Reservation; (b) a payment of US$14,223 to the Internal Revenue Service for the backup tax withholding required for this Prize; and (c) a payment of US$2,845 to the Massachusetts Department of Revenue for the backup withholding tax required for this Prize.
The Early Reservation was acquired by an individual who waited in line the morning reservations became available on March 31, 2016, then donated the reservation along with its $1,000 deposit to Climate XChange. Besides the deposit, the Early Reservation may additionally benefit the Prize Winner by accelerating the delivery date of the Third prize; however, the actual delivery date is in the sole control of Tesla.
The total expenditure by CPAR on the Third Prize is the sum of the Prize Payout plus the two withholding tax payments: US$56,893. We call this sum the Total Prize Payout.
The Alternate All-Cash Prize for the Third Prize is $39,825.
See also Additional Description for All Prizes, below.
Additional Description for All Prizes
Any and all additional taxes, fees, assessments or payments of any kind to any organization whatsoever, including but not limited to the IRS, DOR, the Prize Winner’s state or local authorities, beyond the amounts listed in this section are the sole responsibility of the Prize Winner.
The Tesla Model S sedan, Model X SUV or Model 3 selected by the Prize Winner may be built to order, i.e., customized; or may be an Inventory Vehicle offered by Tesla; or may be a Certified Pre-Owned vehicle offered by Tesla.
Under no circumstance shall CPAR pay Tesla more than the Prize Vehicle Payout on behalf of the Prize Winner.
CPAR allows the Prize Winner to select a Tesla-supplied vehicle which has a total price less than the Prize Vehicle Payout. As long as the Prize Winner takes possession of a Tesla-supplied vehicle, at that time CPAR will make a “cash out” payment to the Prize Winner in the amount of the difference between the price of the selected vehicle and the Prize Vehicle Payout. Thus, the total payout from CXC to the Prize Winner directly and to Tesla on the Prize Winner’s behalf will always be the same as the Prize Vehicle Payout. CPAR will still make the withholding payments to the IRS and the DOR as described in each Prize Description.
CPAR allows the Prize Winner to select a Tesla-supplied vehicle which has a total price greater than the Prize Vehicle Payout. However, CPAR will only send the Prize Vehicle Payout amount to Tesla. Any additional money required to purchase the vehicle is the sole responsibility of the Prize Winner. In this case, CPAR will still make the withholding payments to the IRS and the DOR as described in each Prize Description.
With the exception of a “cash out”, CPAR will only send the Prize Vehicle Payout to Tesla, Inc. The Prize Vehicle Payout may not be used to buy a privately-sold vehicle or a non-Tesla dealer vehicle.
A Prize Winner may select a Tesla model different than originally envisioned by CXC; for example, a Second or Third Prize Winner might select a Certified Pre-Owned Model S instead of a new, built-to-order Model 3. However, the paragraph above describing a Prize Winner selecting a Tesla-supplied vehicle with a total price greater than the Prize Vehicle Payout still applies.
For each Prize, CPAR’s Prize payment to Tesla will be completed no later than December 1, 2019 and the Prize Winner must take delivery of the Prize vehicle no later than December 25, 2019. Prize Winners should note that vehicle delivery dates are the sole responsibility of Tesla, Inc., and Climate XChange has no control over them, so Prize Winners should plan accordingly. However, as the likeliest vehicle configuration for the Third Prize is a base Tesla Model 3 which is not yet being produced and delivered by Tesla, CXC waives the payment and delivery date provisions of this paragraph for the Third Prize only.
It is Climate XChange’s intent that each Prize will be delivered within the 2019 tax year and will be accounted for as a 2019 transaction. That said, each Prize Winner is invited to initiate configuration of their Tesla vehicle as soon as 10 business days following the Drawing. CPAR will make the required order confirmation deposit available to Tesla as soon as the Prize Winner has concluded configuration and is ready to initiate production and purchase of the vehicle. CPAR will pay the remainder of the Prize Payout to Tesla when Tesla is ready for final payment, in its customary process.
Description of Alternate All-Cash Prize
CPAR also offers each Prize Winner the option of selecting an Alternate All-Cash Prize. Amounts are listed in the Prize Descriptions, above. In this case, a Prize Winner may choose to receive the entire prize as a money prize, with no Tesla vehicle component whatsoever. Should a Prize Winner choose this option, the Prize Winner must be prepared to pay all backup withholding taxes required by law before receiving the money prize.
In particular, as described in IRS Notice 1340, immediate backup withholding is required in the amount of 25%. The Commonwealth of Massachusetts requires 5%. The Prize Winner must first send this money to Climate XChange, which will in turn forward these amounts to these tax authorities. Then, Climate XChange will issue a payment check to the Prize Winner in the full amount described in the Prize Description. For example, in 18CPAR the Grand Prize has an Alternate All-Cash Prize value of $89,763. Of that amount, $22,441 must be sent to the IRS and another $4,488 must be sent to the DOR.
The Prize Winner may instead choose to allow Climate XChange to perform withholding from the Prize itself, in which case Climate XChange will send the winner a payment check of the net proceeds of the Prize after accounting for the withholding deductions.
Prize Winners may also be eligible for a federal Electric Vehicle tax credit based on delivery date; this tax credit is up to $3,750 in January – June, 2019 and up to $1,875 in July – December, 2019. Prize Winners may also be eligible for State incentives up to $5,000, depending on the Winner’s State of residence, as of September 9, 2018. In some States, Electric Vehicle incentives may include reimbursement for charging infrastructure or non-cash incentives such as access to HOV lanes.
All Other Payouts Disclaimed
The Prize Winner is responsible for any and all other expenses related to the Prize, including but not limited to, additional taxes subject to the individual’s particular circumstances, local taxes, title and registration fees, attorney and tax preparation fees, and so on.
(b) the appraised value of the prize;
Grand Prize — the Prize Vehicle Payout to Tesla is US$89,763. CXC will make withholding tax payments to Internal Revenue Service of US$32,058 and to Commonwealth of Massachusetts Department of Revenue of US$6,412. The total of these three items is US$128,233. The Alternate All-Cash Prize is US$89,763. No further analysis or appraisal is required.
Second Prize — the Prize Payout to Tesla is US$58,950. CXC will make withholding tax payments to Internal Revenue Service of US$21,054 and to Commonwealth of Massachusetts Department of Revenue of US$4,211. The total of these three items is US$84,215. The Alternate All-Cash Prize is US$58,950. No further analysis or appraisal is required.
Third Prize — the Prize Payout to Tesla is US$39,825, of which $1,000 is already held by Tesla as a deposit on an Early Reservation. CXC will make withholding tax payments to Internal Revenue Service of US$14,223 and to Commonwealth of Massachusetts Department of Revenue of US$2,845. The total of these three items is US$56,893. The Alternate All-Cash Prize is US$39,825. No further analysis or appraisal is required.
(c) date or dates when the prize will be available for inspection;
Each Prize consists of a payment to Tesla, Inc., a federal withholding tax payment and a Massachusetts withholding tax payment. The vehicle the Prize Winner might select from Tesla may be (a) build to order, (b) inventory or (c) certified pre-owned. A potential or actual ticket purchaser may inspect all production models Tesla offers by doing any of the following:
- Visit a Tesla showroom during standard business hours. Showrooms may be found at tesla.com.
- Request a test drive from Tesla Motors, Inc. A test drive may be arranged by contacting a showroom or through the tesla.com website.
- Consult the Tesla Motors website, tesla.com. This website contains ample material describing the vehicles, options, accessories, support and prices. Many purchases have been made of Tesla vehicles and accessories without the purchaser even visiting a Tesla showroom.
However, 18CPAR makes no guarantees about when Tesla will produce the base Model 3, which is the vehicle most likely to be configured in conjunction with Third Prize; in what quantity; with what availability; and at what pricing.
(d) if there is a minimum number of tickets to be sold; what the minimum is and the procedure to be employed to secure a refund in the event the minimum is not reached;
The minimum number of tickets to be sold is 1.
Prize availability shall be as follows:
The Grand Prize, as described above and elsewhere, will be available once the minimum number of tickets has been sold.
The Second Prize will become available once 2 tickets have been sold.
The Third Prize will become available once 3 tickets have been sold.
No refunds are planned due to failure to meet ticket sale minimums, as the minimum number of tickets to be sold is 1. If the entire raffle is canceled, CXC will issue refunds to all ticket holders.
(e) the maximum number of tickets to be sold if any;
The maximum number of tickets that will be sold is 4,000.
Odds of winning depend on the number of tickets sold. If the maximum number of tickets are sold the odds of an individual ticket winning one of the 3 Prizes (i.e., the odds of winning a car) will be 1,332:1. If the maximum number of tickets are sold the odds of an individual ticket winning the Grand Prize will be 3,999:1.
(f) the fact that the value of the prize will be treated as ordinary income to the winner for federal and state income tax purposes and that the winner may be required to pre-pay a portion of the tax liability prior to receiving the prize;
All of the Prizes in this raffle will be treated as ordinary income for federal and state income tax purposes.
However, in this raffle, the Prize Winners are NOT required to pre-pay a portion of the tax liability prior to receiving a regular Prize (as opposed to an Alternate All-Cash Prize). CPAR will prepay the federal and Massachusetts withholding tax liability for the Prizes to the extent as described above and elsewhere. CXC will not pay any portion of any additional taxes, fees or costs for any Prize beyond what has explicitly been provided elsewhere in the CPAR Rules.
Some Prizes may offer Alternate All-Cash Prizes, as described above and elsewhere. Alternate All-Cash Prizes may be subject to withholding as described above and elsewhere. CPAR does not add any tax payments to Alternate All-Cash Prizes.
(g) the fact that the Internal Revenue Service takes the position that no portion of the ticket price will qualify as a charitable contribution for federal income tax purposes;
Sad but true. Even though the raffle ticket is being sold by Climate XChange Education and Research, Inc., a Massachusetts non-profit that has 501(c)(3) tax-exempt status, the purchase of a raffle ticket is regarded as acquiring a “thing of value”. The raffle ticket gives the purchaser a chance to win a prize. Therefore, the purchase of a ticket is not a charitable contribution for federal income tax purposes.
(h) the drawing date for the raffle;
The 18CPAR drawing will be New Year’s Day, January 1, 2019. The drawing will be held at 131 Cambridge Street, Boston, MA.
(i) the estimated percentage of the ticket price which will be used for charitable purposes in the event that only the minimum number of tickets are sold;
The Raffle itself is used as part of CXC’s educational mission. The Raffle raises awareness of (1) Carbon Pricing, (2) Carbon Pricing legislative efforts in Massachusetts and elsewhere and (3) Climate XChange Education and Research, Inc. The Raffle has an additional desirable benefit of raising awareness of Tesla, Inc., a maker of zero emission automobiles which demonstrate the practical replacement of traditional internal combustion engine vehicles.
In the event the Raffle sells only the minimum number of tickets (1), 100% of the proceeds will be used to cover Raffle expenses and none will be available to be used for charitable purposes.
In the event the Raffle sells at least (approximately) 1,500 tickets, CXC will have net proceeds greater than the sum of the Raffle’s Expenses plus the Prizes. From that point onwards, CXC’s net proceeds will be used to fund its charitable and educational purposes, which are focused on education and advocacy for the enactment of carbon-pricing legislation in Massachusetts and elsewhere. 100% of the net will go to this purpose.
At 4,000 tickets, CXC will net an estimated 57% of the gross proceeds of the Raffle, all of which will be used to fund CXC’s mission. (Note that by far the largest portion of CPAR expenses is the Prize Pool.) This percentage is lower than CXC would otherwise prefer, which is the result of (a) implementing an extremely generous set of Prizes and (b) not being able to convince Tesla, Inc., to donate one or more vehicles for the Prizes. However, CXC views CPAR as simultaneously providing education about Carbon Pricing while fundraising. Thus, CXC views most raffle expenditures — such as on advertising — as expenditures that further its educational mission as well as its fundraising.
(j) the exact nature of the charitable purpose for which the proceeds will be used;
Climate XChange Education and Research, Inc., focuses on education and advocacy for enacting carbon-pricing legislation at the State level. The Raffle’s net proceeds will be used for 501(c)(3)-compliant activities in support of this mission.
(k) any other facts the disclosure of which may have influenced the purchaser or prospective purchaser not to enter into the transaction.
The Raffle has a high proportion of funds spent on the Prizes. We believe the Prizes attract attention to Carbon Pricing and to CXC. They are particularly suited in and of themselves to the organization’s mission. Therefore, CXC accepts a lower proportion of net proceeds from the Raffle in return for higher visibility and a set of prizes that befit the ultimate goal of lowering carbon emissions.
(2) Each ticket must bear a clear and conspicuous warning to the effect that depositing the ticket or any other material in connection with the raffle in the federal mails is a violation of federal law and may lead to criminal penalties.
This is the warning on the CPAR ticket:
Mailing a raffle ticket is illegal and may result in criminal penalties.