Sweepstakes-style contests dangling the chance to win lunch, dinner, or one-on-one face time with the next potential president are all the rage ahead of 2016. Jeb Bush, Hillary Clinton, Marco Rubio, and Ben Carson have gotten into the act in recent weeks.
But buried in the fine print is a costly catch: These “free” trips to meet the candidate of your dreams can come with a hefty tax bill. Your flights, hotel stay, chauffeur, even your meal are all considered taxable by the Internal Revenue Service.
In fact, the total tax tab for that free lunch can soar above $500. And the winners can be completely unaware.
Zeus Rodriguez, along with his wife, won lunch with Bush last month at a Miami Beach burger joint (Jeb ordered a Paleo-diet-approved bison burger wrapped in lettuce). Bush’s Right to Rise PAC estimated that the two flights, an evening in a posh Miami hotel, ground transportation, and the meal amounted to a $2,275 gift. (And that’s before the PAC said it was throwing in a pair of tickets to a Marlins baseball game.)
That makes Rodriguez’s tax bill for a lunch that Bush had advertised as “all-expense paid” a steep $568.75, presuming he and his wife make at least a combined $75,000 in 2015.
“Winners will receive an IRS 1099 form for the value of the prize,” the contest’s rules read.
Rodriguez, the president of a school-choice group in Wisconsin, said when reached by phone, “I’m not a fine-print reader, but it doesn’t surprise me” to owe taxes. He compared it to scoring big on Wheel of Fortune. Plus, he said, the chance for a private sit-down with a likely Republican presidential candidate that he admires—not to mention a quick getaway in Miami with his wife—made it a relative bargain.
“For the price of the taxes,” he said, “it is well worth it.”
The contests are certainly worth it for the campaigns. Bush’s PAC said it selected Rodriguez from 12,331 entrants into the contest. The chance to collect such a trove of email addresses and names is the reason that Ben Carson is raffling off a lunch with him in Dallas later this month, Marco Rubio is offering donors a chance to spend his birthday with him in Las Vegas, and Hillary Clinton is advertising on Facebook a chance to meet her.
The Carson campaign values its trip and meal at $2,275. Rubio’s is estimated at $1,500. And Clinton’s is valued at $2,000.
There is, of course, one way to avoid taxes on those sums. “If they win, they don’t have to accept it,” said Deana Bass, a Carson spokeswoman, though she added, “It certainly would be great if this were not taxed.”
The fine print of Carson’s contest (which is nearly identical to Bush’s, down to the dollar-value estimates of the flight, hotel, transportation, and meal) says the campaign will deliver an IRS 1099 form to the winner. Rubio’s makes no mention of tax implications. And Clinton’s says, in all capital letters, “ALL FEDERAL, STATE AND LOCAL TAXES ASSOCIATED WITH THE RECEIPT OR USE OF ANY PRIZE ARE THE SOLE RESPONSIBILITY OF WINNER(S).”
Marcus Owens, a lawyer with the IRS for 25 years and now an attorney at Loeb and Loeb in Washington, D.C., said that those issued a 1099 form could be caught fairly easily by the IRS if the taxes go unpaid. “The IRS actually has a computer matching program for those 1099s,” Owens said.
Flights, hotels, meals, transportation, and other perks are all taxable, he said. The only part of the winnings that is untaxed is the time with the candidates themselves. “The IRS takes the position that the actual face time with the person is of no value,” Owens said.
One campaign is taking a different tack when it comes to sweepstakes, though it may not be to the benefit of potential winners. Ted Cruz this week offered supporters a chance to meet him at this weekend’s Southern Republican Leadership Conference in Oklahoma. But, unlike his rivals, Cruz’s campaign wasn’t offering to pay the winner’s way. “Winner will be responsible for costs of transportation to attend the meeting,” the fine print read.
Not only that, but Cruz was offering the winner a chance to meet him only “for up to 10 minutes,” and “in the event Senator Cruz is unable to meet with the winner, for any reason, winner will instead receive a signed photograph of Senator Cruz.”
Political sweepstakes aren’t new to 2016. President Obama and Mitt Romney both used them to lure in smaller donors during the 2012 presidential race. And a meal with Obama was used last year to raise money for the Democratic Party in the midterms.
Still, it’s not clear how many past winners even know they owe taxes, as not all campaigns appear to tell them, often just indicating in the fine print that the taxes are the winners’ responsibility.
“No, I was not aware of that,” said Hannah Banks, a Boston-area architect who won the dinner with Obama last year that was raffled off by the Democratic Senatorial Campaign Committee, when reached by phone this week. “Should I be asking them for [a 1099], just to be on the up and up?”
The DSCC sweepstakes valued the trip for Banks and her husband at $1,325. She said she never received a 1099 from the DSCC, or any estimate of the taxes owed.
Obama stayed for about 50 minutes, Banks said. “It was sort of the highlight of my life,” she said. “So yes, I’d be happy to pay the taxes.”
As for the meal, at Joe’s Seafood, Prime Steak & Stone Crab in downtown D.C., she and the other winning pair were advised to order appetizers to avoid the interruption of too much plate shuffling while Obama was there.
The president ordered only a green tea.
“What do you do when the leader of the free world has no food and you do?” she recalled. “We all looked at each other uncomfortably across the table and just went ahead.”
What We're Following See More »
"Developers of the Keystone XL pipeline secured approval Monday for the pipeline to run through Nebraska, clearing a key hurdle in the years-long fight to build the project. The decision came after a rupture in TransCanada’s Keystone system spilled an estimated 210,000 gallons of oil in South Dakota last week, an incident that rankled opponents of the XL expansion. Nebraska regulators approved plans for Keystone XL to cross the state, though the approval didn't cover TransCanada's preferred route through the state. The commission voted 3-2 to move the project forward. The approval comes eight months after President Trump issued a presidential permit for the $8 billion, 860 barrel per day project."
"President Trump plans to designate North Korea as a state sponsor of terrorism on Monday, years after the hermit nation was removed from the list during the George W. Bush administration. Speaking to members of his Cabinet, Trump said the designation "should have happened a long time ago." The White House expects the move to put further pressure on North Korean leader Kim Jong Un to abandon his nuclear and ballistic missile programs." Under the designation, North Korea will be subject to further penalties and sanctions.
Special counsel Robert Mueller "is now demanding documents from the department overseeing his investigation." A source tells ABC News that "Mueller's investigators are keen to obtain emails related to the firing of FBI Director James Comey and the earlier decision of Attorney General Jeff Sessions to recuse himself from the entire matter."
"President Donald Trump would not insist on including repeal of an Obama-era health insurance mandate in a bill intended to enact the biggest overhaul of the tax code since the 1980s, a senior White House aide said on Sunday. The version of tax legislation put forward by Senate Republican leaders would remove a requirement in former President Barack Obama’s signature healthcare law that taxes Americans who decline to buy health insurance."