Gregory R. Hampton, a New York Giants fan, might have been the biggest winner in the National Football League (NFL) draft. Hampton won 100 years of season tickets as part of the league’s ‘Tickets for 100 Years’ centennial contest. It was probably the most valuable get of the night (yes, even over the Cardinals taking Kyler Murray), but at what cost?
Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as prizes and awards.
The tax clause gained notoriety in 2004 when then-talk show host Oprah Winfrey told 276 members of her studio audience that they had each won a new Pontiac G-6 sedan. It sounded great until the audience realized that they were responsible for paying federal and state income tax on the cars; the retail price of each car was approximately $28,500 (audience members were issued forms 1099-MISC for reporting purposes). The resulting tax bills made the news, and not the good kind of news. It was no surprise, then, that in 2010, when Oprah gave her audience a trip to Australia, she really meant all-expense-paid, including taxes.
So, when NFL Commissioner Roger Goodell announced that Hampton was the NFL’s Contest Grand Prize Winner, I wasn’t surprised to see a question pop up on Twitter about the tax consequences (okay, granted, Adam is an EA and tax geek like me, but still). In response, I headed over the NFL contest website to figure out the details. Here’s what I found.
First, the grand prize winner will take home:
- Two (2) season tickets for the NFL team of his/her choice for the 2019 through 2118 NFL seasons (subject to the terms herein) (the “Season Tickets”)
- One (1) season pass of NFL Red Zone for the 2019 through 2118 NFL seasons (subject to inflation)
- One (1) season pass of NFL Game Pass for the 2019 through 2118 NFL seasons (subject to inflation)
The approximate retail value of the prize package is $425,673.00 – but it includes one more item:
- Estimated taxes paid on Grand Prize Winner’s behalf (to help offset income tax liability imposed in connection with the Season Tickets) (to be based on prevailing supplemental federal tax rate each season and approximation of applicable state taxes based on prevailing rates)
In other words, the NFL is grossing up the prize to account for the taxes. Grossing up is a term that you may also see in employment contracts and it means that the person or entity writing the check or issuing the prize is tacking on some extra dollars to help cover the tax liability. And as confusing as it sounds, the amount that’s grossed-up is taxable, too (so yes, you have to gross up a little more).
To claim his prize, Hampton must agree to fill out a form W-9. The contest’s terms and conditions make it clear that a form 1099 will be issued. Additionally, other than what’s clearly stated as a part of the prize, “[a]ll federal, state and local taxes…are the sole responsibility of winner.”
Hampton was nominated as the world’s greatest football fan by his two sons, Jaydon and Jordon. He’s a lifelong Giants fan which means he deserved to win something this year (don’t @ me – even this Eagles fan will admit that his story is lovely and it’s pretty cute that his dog is named Saquon).