Model 3 in Tesla raffle

[PeterK]

Climate XChange, a 501c3 nonprofit organization, has launched its second Carbon Pricing Awareness Raffle, to help fund its research and education efforts to implement carbon pricing in Massachusetts. Like the previous raffle in late 2015, the Grand Prize is a well-equipped ($120K) Model S (or a Model X this time), with $40,000 Federal taxes paid.

But this time around, the 2nd and 3rd prizes are also intended to get the winner behind the wheel of a Tesla. 2nd Prize is an early Model 3 reservation including $1000 deposit, plus $10,000 cash, plus $3666 Federal taxes on the winnings - enough to get pretty far towards owning a Model 3, and potentially early enough to benefit from the full $7500 Federal tax credit.

3rd Prize is an early Model 3 reservation including $1000 deposit, plus $5000 cash, plus $2000 Federal taxes on the winnings - enough to cover the down payment on a Model 3, and potentially early enough to benefit from the full $7500 Federal tax credit.

4th, 5th and 6th prizes are $2000, $1000 and $1000 cash respectively. Odds of winning a prize are 1 in 417 if all tickets are sold.

This is a once in a lifetime opportunity, and a chance to do well while doing good. Tickets are limited - get yours now at carbonraffle.org !

Note: Climate XChange and Carbon Pricing Awareness Raffle are not in any way affiliated with or sponsored by Tesla Inc.

 

[Pollux]

@PeterK, you're awesome! Even if I do say so myself!

Alan
-----
Full disclosure: I'm working with @PeterK on this raffle. In fact, he's one of my two bosses!

 

[Pollux]

BTW, if anyone's curious, there's a lot of history discussed here on TMC about the last Carbon Pricing Awareness Raffle and this one. Follow this link to see pages and pages and pages of back-story.

 

[brucet999]

Bought mine today. Must be selling well, as my ticket is lucky #151.

 

[Chewy3]

Are the tickets tax deductible? (Considered charitable donation)

 

[Thomas Edison]

Are the tickets tax deductible? (Considered charitable donation)

My understanding is that it's not a donation. If it was, then you could call it a donation when you spend money at a goodwill store.

 

[Chewy3]

My understanding is that it's not a donation. If it was, then you could call it a donation when you spend money at a goodwill store.

You are correct, it's not a donation. However it's not really a purchase either - aparently you can claim raffle tickets as a gambling loss (assuming you lose)

 

[JeffK]

So one can purchase a raffle ticket from any state?

 

[brucet999]

Are the tickets tax deductible? (Considered charitable donation)

Technically, the chance to win something of value is itself something of value, so cost of a raffle ticket is not a tax-deductible donation.

 

[ThisIsTrue]

Must be selling well, as my ticket is lucky #151.

And 12 hours later, mine is #189.

This is a once in a lifetime opportunity

Well, twice ...so far.

Happy to help support the cause!

 

[Pollux]

Hey, folks,

FYI: ticket is NOT tax deductible! Sorry! You are purchasing a "thing of value", i.e., you get a chance to win.

Ironically, the IRS calculations do permit subtracting the cost of the raffle ticket from the amount that Climate XChange has to pay the IRS for the Grand Prize Winner's prize (this is also true for the other prizes where we are paying the winner's taxes). So for the Grand Prize, valued @ $120K, we can legally pay the IRS ($120,000 - $250) X 0.3333 = $39,912.68. Because it's a tough number to put on websites and in various explanations, we say on the website and in those explanations "$40,000" or "$40K". And then, because it sucks to dig into the Raffle Rules and/or Legal Details only to discover that we would pay $39,912.68 instead of $40,000, we chose to round up the amount and pay exactly $40K rather than take our legally-entitled savings of $87.32.

The "not deductible" thing is true AFAIK for all raffles in the US, not just the Carbon Pricing Awareness Raffle. And if you feel like spending your spare time digging through our website to the rules and/or legal details, somewhere in there I've actually cited the IRS publication you can consult to verify this point. Ummm.... I'm going to guess IRS Notice 1340... and... YES, nailed it! A sure sign that I've been spending way too long looking at these details. In honor of my own involuntary familiarity with that notice, and even though I should seize every opportunity to push people towards the climatexchangeraffle.org website for some quick thoughts about carbon pricing and some drooling over prizes, I am linking to the aforementioned notice here. Because, really, why shouldn't you waste some time today reading IRS code?

Alan

 

[Pollux]

So one can purchase a raffle ticket from any state?

Hi, @JeffK, as best we know, you can purchase. There ARE rules that govern raffle operations for raffles created in that state. For instance, we ourselves are governed by Massachusetts General Law 271 section 7A, as clarified and interpreted by Massachusetts Attorney General regulations 940 CMR 12.00 - 12.06. (You can find links to those things on our website, by the way.) We are registered with the MA AG's office and also with the MA Secretary of State's office. There's a permit that must be obtained from the City of Boston, where CXC HQ resides. (Also *all* linked from the website!) And so there are MA-specific rules we must observe. Chief among them would be the payment of 5% of the gross proceeds to the State of Massachusetts, within 10 business days of the closing of the raffle; no ifs, ands or buts. But also there are mandated disclosures -- things we must say; rules about whether members can benefit directly from the raffle, e.g., by commission (CAN'T!); a rule that limits raffles to non-profits; and so on.

But there's no law that we have found that prevents a raffle based in, say, Florida, from selling tickets in Massachusetts, and that Florida-based raffle does NOT have to operate by the MA rules. Presumably, it has to operate by the FL rules, assuming FL has rules about raffles, and that their rules are about more than just selling suckers swampland.

Then, of course, there's *federal* law, which intersects in weird ways that ricochet around the raffle.

Ummm... so, yeah, as far as we know, you're good to buy a ticket. And the one consistent theme we've found across the states we've examined so far is that they all want to be sure that the Winners are "compliant" with the rules of taxation. So, excise tax, use tax, whatever you want to call it.

You must also keep in mind that I'm not an attorney (although we use one ourselves for the raffle, frequently); I am not an accountant, a CPA, a tax professional or even a dentist; and so although I'm unusually handsome, witty and charming, you may in no way rely on my advice or anything I've said whatsoever! It's as if my words are vapor! Go consult your attorney, tax professional, better half, etc.

Alan

 

[Pollux]

Hi, @Chewy3 & @Thomas Edison, I hope I've addressed your points. If not... please keep those cards & letters coming!

 

[Pollux]

And 12 hours later, mine is #189.



Well, twice ...so far.

Happy to help support the cause!

THANKS!!!

 

[Pollux]

In case you're wondering, this is what I look like after encountering IRS code, MA AG law & regulations, etc. Stunned, dazed, refusing to believe in the horror of it all:

 

[JeffK]

Don't tell my wife unless I win....

 

[ThisIsTrue]

Ironically, the IRS calculations do permit subtracting the cost of the raffle ticket from the amount that Climate XChange has to pay the IRS for the Grand Prize Winner's prize (this is also true for the other prizes where we are paying the winner's taxes).

Ohhhhhhhhhhhhh! You figured out a way to deal with the part I shrugged off: that the $40K extra would be taxable, so what about the tax on that? If you paid that, then there would be tax on that, repeat to infinity.

But you pay the IRS the $40K directly? Clever!

 

[JeffK]

Ohhhhhhhhhhhhh! You figured out a way to deal with the part I shrugged off: that the $40K extra would be taxable, so what about the tax on that? If you paid that, then there would be tax on that, repeat to infinity.

But you pay the IRS the $40K directly? Clever!

Otherwise it'd be turtles all the way down

 

[MrRandyB]

Ticket # 199

Happy to help support

 

[Pollux]

Ohhhhhhhhhhhhh! You figured out a way to deal with the part I shrugged off: that the $40K extra would be taxable, so what about the tax on that? If you paid that, then there would be tax on that, repeat to infinity.

But you pay the IRS the $40K directly? Clever!

As if the IRS hadn't considered every possible cent...

So if YOU are responsible for the prizes on the taxes -- which is the case in many (most? nearly all?) raffles, then the IRS requires that you immediately withhold 25%. The raffle sponsoring organization is on the hook to make sure that this withholding happens. The result is that, if the prize is cash, the sponsoring organization usually just deducts 25% and sends the rest to you (but you must choose this treatment). If the prize is a real thing, like a car, then the sponsoring organization congratulates you on your win and asks you to immediately forward 25% to them, which they in turn forward to the IRS. In this case, you must pay even before you take possession of the vehicle. Understandably, that's a problem for many people! For CXC's Grand Prize, valued at $120K, which we pay to Tesla to build the car for you, you'd have to come up with 25% of $120K equals $30K *immediately* for us to send onwards to the IRS to satisfy your withholding requirement. Basically, two years ago, I entered a reputable raffle with a Tesla as a prize, and was stunned to realize that if I did win, I'd have to SEND them a ton of cash before I ever saw the car. It was that moment that catalyzed within me this simple thought: how the hell does an ordinary person win one of these things?!

In the case of the CXC Carbon Pricing Awareness Raffle, we take responsibility for your federal income tax payment on the vehicle. But, as you notice, there's a tax-on-the-tax recursion problem. Fortunately, the IRS is on the job, up to the task, ready for come what may. Through the use of -- get this -- "an algebraic formula" -- and I'm quoting! -- the IRS has determined that a raffle sponsoring organization must pay 33.33% rather than the 25% you would pay. And that's how we get to the $40K. Unless we want to factor in the cost of the raffle ticket, and drive our number down to $39,912.68.

Now, honestly, isn't this more than you'd ever want to know about raffles and prizes and taxes?

Alan