State of Rhode Island - Division of Taxation
Ruling Request No. 93-05
Re: Request for Ruling Relating to the Taxation of Lottery Winnings Under the Personal Income Tax Law
Request for Ruling
You request a ruling on behalf of your client as to the taxation of a lottery prize won prior to 1990 but paid over a number of years beyond 1990.
Your client won a lottery prize from the Rhode Island lottery prior to 1990. At the time she won the prize she was informed that it was not taxable under the Rhode Island personal income tax law. The lottery prize is being paid over a period of years beyond 1990.
Since 1990, your client has paid a tax on the lottery winnings under the Rhode Island personal income tax law.
Your client should not have to pay a tax on any lottery winnings received subsequent to 1990 because she won the lottery prize prior to 1989.
Prior to July 1, 1989 prizes received from the Rhode Island lottery were exempt from the Rhode Island personal income tax pursuant to RIGL 42-61-17. However, Public Law 1989, Chapter 126, Article 21, removed the exemption of lottery winnings from the personal income tax law. Section 4 of P.L. 1989 stated that "This Article shall take effect upon passage and apply to prizes and winnings received after date of passage."
See also the pertinent provisions of Regulation PIT 90-14, entitled "Lottery and Pari-Mutual Winnings and Prizes":
Effective on and after July 1, 1989, amounts received from or paid on behalf of the Rhode Island Lottery as winnings and prizes are taxable under the provisions of the Rhode Island personal income tax (44-30, R.I.G.L., as amended). Additionally, subject to provisions of this regulation, these amounts and winnings received from pari-mutual betting licenses in Rhode Island are subject to withholding taxes similar to the Internal Revenue provisions for gambling winnings.
II. EFFECTIVE DATE EXPLAINED
A. The taxability of Rhode Island Lottery winnings and prizes and the withholding requirements applied to the Rhode Island Lottery and to pari-mutual betting licensees in Rhode Island are applied according to the date on which the winnings and prizes are received after the effective date above.
B. Winnings and prizes received means amount received by the taxpayer on or after July 1, 1989 regardless of the date of the Lottery drawing, the date of the winner determination or the date of the pari-mutual betting event and regardless of whether the prize or winnings are paid to the winner in installments over a period of time by the Director of Lotteries, pari-mutual betting license or by a third party annuity or other contractual payor.
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It is clear that under both law and regulation, Rhode Island Lottery winnings and prizes received after July 1, 1989 are taxable under the personal income tax law regardless of the date of the drawing.
Your client is required to pay a tax on any lottery winnings received subsequent to July 1, 1989 regardless of the actual drawing date of the lottery.
R. Gary Clark
April 21, 1993