It Could Happen To You
In the film, a struggling police officer named Charlie Lang (Nicholas Cage) uses his lottery ticket to tip a waitress named Yvonne Biasi (Bridget Fonda). They then win $4 million. Unfortunately for the officer, his wife subsequently divorces him, and she is awarded their entire $2 million share. After making some investments and succumbing to coercion, Yvonne depletes her funds. As a result, the two original winners are back to their blue-collar status. But they did win something that money can’t buy:
Yvonne: Because of me, you have nothing.
Charlie: Because of you, I have you.
Sharing a winning lottery ticket can cause problems in real life too. In this story, a dream came true for an illegal immigrant, who had a winning $3 million stratch-off instant lottery ticket.
When he presented the ticket to a New York store clerk, the clerk told the illegal immigrant that he would be deported if he claimed the winnings. The dream quickly turned into a nightmare. The clerk convinced the winner to give the clerk the ticket. The clerk promised to claim the ticket and then give the immigrant the winnings.
You probably can guess what happens: The clerk claimed the ticket but never paid the winner. The immigrant then sought legal counsel, and an investigation resulted in charges brought against the store clerk and two other men involved in the scam for first-degree grand larceny.
Let’s clear this up: The New York Lottery does not ask for the immigration status of ticket winners.
Will the illegal immigrant obtain all of his winnings? He should, but it may not happen. After collecting the first $150,000 annual payout, the store clerk sold the rights to the winnings to a company named Advance Funding for $600,000. We’ll see what happens.
Now for the part you’ve been waiting for, the tax consequences. Fortunately, the NYS Department of Taxation and Finance put together a comprehensive FAQ for New York State lottery winners.
Essentially, NYS residents must pay NYS tax on the full amount of NY lottery winnings, and NYS will withhold at the highest effective rate. For NYS nonresidents, only prizes in excess of $5,000 are subject to NYS income tax.
What would happen in Connecticut? Indeed, this story grabbed the attention of the Connecticut Lottery Corporation. Regarding citizenship status, the answer is the same as it is in New York: Anyone can claim a prize. Regarding tax consequences, it’s a bit more complicated, because the answer depends on three factors: the type of lottery winnings, amount of gross income for the year, and residency status. Informational Publication 2009(38) has the details.
Speaking of Connecticut, I was recently perusing the state’s online Law Library covering gambling. Apparently, someone asked the state to comment on the legality of online poker. In response, the Office of Legislative Research put together a well-written report that’s worth the read.
It’s refreshing to see that state governments are both willing to and capable of addressing politically controversial and complex legal issues, especially when the state isn’t required to comment on the subject.