State may not withhold on Australian Lotto winners.
The International Lotto Fund of Australia is in the business of participating in lottery games worldwide on a large scale. The fund won a lottery jackpot prize of more than $27 million from the Virginia Department of Lottery. The lottery department said it would withhold 30% of each prize payment as federal income tax and 4% of each payment as Virginia state income tax.
The fund claimed it was exempt from federal withholding under the United States-Australia income tax treaty. It submitted a properly completed form 1001 (which allows a foreign entity to claim a treatybased exemption from withholding) to the lottery department.
Under Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. sections 881 and 1442, payers of certain U.S.-source income must withhold 30% of payments to non* resident alien Resident Alien
A foreigner who is a permanent resident of the country he or she resides, but does not have citizenship.
Resident and non-resident aliens have different filing advantages and disadvantages. individuals and foreign corporations. However, under section 894(a), withholding is not required if the payee The person who is to receive the stated amount of money on a check, bill, or note.
payee n. the one named on a check or promissory note to receive payment.
PAYEE. The person in whose favor a bill of exchange is made payable. is exempt under a treaty.
The lottery department continued to withhold despite the fund's exemption claim. The fund asked the federal district court for a preliminary injunction A temporary order made by a court at the request of one party that prevents the other party from pursuing a particular course of conduct until the conclusion of a trial on the merits.
A preliminary injunction is regarded as extraordinary relief. ordering the state lottery department not to withhold and to accept form 1001.
Result: For the fund. The court issued the preliminary injunction, since the fund proved it was entitled to injunctive relief. The fund will suffer "irreparable harm" in the form of lost business opportunities and damage to its reputation if withholding is allowed, while the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. will still be able to collect the tax later if the exemption, on examination of all the facts, does not prove valid.
* International Lotto Fund v. Virginia State Lottery This article is about the lottery in the US state of Virginia. For the lottery in West Virginia, go to West Virginia Lottery.
The Virginia Lottery is run by the commonwealth and started in 1989. It is one of the 12 Mega Millions members. Department (DC E. Va., 1992).