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154A.110 Prizes taxable -- Withholdings from prize -- Verification rules and
prize payments, exceptions -- Unclaimed prize money -- Corporation's
liability -- Ineligibility to purchase tickets and receive prizes -- Conditions
for assignment of prize.
(1)
(2)
Proceeds of lottery prizes shall be subject to Kentucky state income tax. Any
attachments, garnishments, or executions authorized and issued pursuant to
statute shall also be withheld if served upon the process agent of the
corporation. This section shall not apply to a retailer.
The board shall adopt rules to establish a system of verifying the validity of
tickets claimed to win prizes and to effect payment of such prizes, except that:
(a) No prize, nor any portion of a prize, nor any right of any person to a prize
awarded shall be assignable, except as provided in subsection (6) of this
section. Any prize, or portion thereof, remaining unpaid at the death of a
prize winner shall be paid to the estate of such deceased prize winner or
to the trustee under a revocable living trust established by the deceased
prize winner as settlor, provided that a copy of such a trust has been filed
with the corporation along with a notarized letter of direction from the
settlor and no written notice of revocation has been received by the
corporation prior to the settlor's death. Following such a settlor's death
and prior to any payment to such a successor trustee, the corporation
shall obtain from the trustee and each trust beneficiary a written
agreement to indemnify and hold the corporation harmless with respect to
any claims that may be asserted against the corporation arising from
payment to or through the trust. Notwithstanding any other provisions of
this section, any person, pursuant to an appropriate judicial order, shall be
paid the prize to which a winner is entitled.
(b) No ticket shall knowingly be sold to any person under the age of eighteen
(18), but this section does not prohibit the purchase of a ticket by a
person eighteen (18) years of age or older for the purpose of making a gift
to any person of any age. In such case, the corporation shall direct
payment to an adult member of the person's family or the legal guardian
of the person on behalf of such person. The person named as custodian
shall have the same powers and duties as prescribed for a custodian
pursuant to the Uniform Transfers to Minors Act.
(c) No prize shall be paid arising from claimed tickets that are stolen,
counterfeit, altered, fraudulent, unissued, produced or issued in error,
unreadable, not received or not recorded by the corporation within
applicable deadlines, lacking in captions that conform and agree with the
play symbols as appropriate to the lottery game involved, or not in
compliance with such additional specific rules and public or confidential
validation and security tests of the corporation appropriate to the
particular lottery game involved.
(d) No particular prize in any lottery game shall be paid more than once, and
in the event of a binding determination that more than one claimant is
entitled to a particular prize, the sole remedy of such claimants is the
award to each of them of an equal share in the prize.
(e) A holder of a winning cash ticket from a Kentucky lottery game shall claim
(3)
(4)
(5)
(6)
a prize within three hundred sixty-five (365) days (for a ticket issued
before January 1, 1995), and within one hundred eighty (180) days (for a
ticket issued on or after January 1, 1995), or for a multistate lottery game
within one hundred eighty (180) days, after the drawing in which the prize
was won. In any Kentucky lottery game in which the player may
determine instantly if he has won or lost, he shall claim a prize within
three hundred sixty-five (365) days (for lottery games commenced or
tickets printed or reprinted before January 1, 1995), and within one
hundred eighty (180) days (for lottery games commenced or tickets
printed or reprinted on or after January 1, 1995), or for a multistate lottery
game within one hundred eighty (180) days, after the end of the lottery
game as announced by the corporation. However, a holder of a pull-tab
lottery ticket shall claim a prize within the time period and in the manner
printed on the ticket. If a valid claim is not made for a prize within the
applicable period, the prize shall constitute an unclaimed prize for
purposes of subsection (3) of this section.
(f) No prize shall be paid upon a ticket purchased or sold in violation of this
chapter. Any such prize shall constitute an unclaimed prize for purposes
of subsection (3) of this section.
Any unclaimed prize money may be retained by the corporation and added to
the pool from which future prizes are to be awarded or used for special prize
promotions, or may be appropriated by the General Assembly directly from the
corporation for any public purpose. For fiscal years 2000-2001 and 2001-2002,
any unclaimed prize money in excess of six million dollars ($6,000,000) shall
be transferred to the affordable housing trust fund established by KRS
198A.710.
The corporation is discharged of all liability upon payment of a prize.
No ticket shall be purchased by and no prize shall be paid to any of the
following persons:
(a) Any member of the board of directors, officers, or employees of the
corporation;
(b) Any vendors or related entities, or any member of the board of directors,
officers, employees of, partners in, or owners of any vendors or related
entities to the vendors; or
(c) Any spouse, child, brother, sister, or parent residing as a member of the
same household in the principal place of abode of any such person.
The right of any person to receive payments due under a prize that is paid in
installments over time by the corporation, excluding prizes payable for the
winner's life, may be voluntarily assigned, in whole or in part, if the assignment
is made to a person or entity designated pursuant to an order of the Circuit
Court located in the judicial circuit where the headquarters of the corporation is
located. The Circuit Court shall issue an order approving a voluntary
assignment, specifying the exact dollar amount of each prize payment or
payments assigned, or any portion thereof, the dates of the payments being
assigned, the name of the assignor as it appears on the lottery claim form or
the full legal name of the assignor if different than the name as it appears on
the lottery claim form, and the full legal name of the assignee to whom the
(7)
(8)
assigned payments will be made, and directing the corporation to make the
specified payments to the assignee, if all of the following conditions have been
met:
(a) The assignment is in writing, executed by the assignor either before or
after July 12, 2006, and by its terms, subject to the laws of this
Commonwealth;
(b) The assignor provides a sworn affidavit attesting that the assignor:
1.
Is of sound mind, in full command of his or her faculties, and is not
acting under duress;
2.
Has had the opportunity to receive independent legal, financial, and
tax advice concerning the effects of the assignment;
3.
Understands that he or she will not receive the prize payments, or
portions thereof, for the years assigned;
4.
Understands and agrees that with regard to the assigned payments,
the Commonwealth, the corporation, and its respective officials and
employees will have no further liability or responsibility to make the
assigned payments to the assignor;
5.
Has been provided with a one (1) page written disclosure statement
in bold type, fourteen (14) point font or larger, setting forth:
a.
The payments being assigned, by amounts and payment
dates;
b.
The purchase price being paid; and
c.
The amount, if any, of any origination or closing fees that will
be charged to the lottery winner; and
6.
Has disclosed the existence or nonexistence of a current spouse;
and, if married, unless the court finds the assignor may make the
assignment without the spouse's consent, the assignor has
submitted to the court a signed and notarized statement wherein the
spouse consents to the assignment.
Written notice of any petition seeking court approval of an assignment under
subsection (6) of this section and of a court hearing, if any, concerning the
proposed assignment shall be delivered by certified mail, return receipt
requested, to the corporation's registered agent at least fifteen (15) days prior
to entry of the court order or a court hearing, if any. The corporation is not a
necessary or indispensable party and is not required to appear in or be named
as a party to any action seeking court approval of a voluntary assignment, but
may intervene as of right in any such proceeding.
A voluntary assignment under subsection (6) of this section shall not include or
cover payments or portions of payments that are, at the time of entry of the
court order, subject to offset or withholding due to:
(a) A defaulted or delinquent child support obligation;
(b) A debt owed to a state agency; or
(c) Any attachments, garnishments, or executions authorized and issued
pursuant to statute and served upon the process agent of the corporation
as set forth in subsection (1) of this section;
(9)
(10)
(11)
(12)
(13)
(14)
unless appropriate provision is made in the court order to satisfy the obligation
or obligations giving rise to the offset or withholding at the time of closing of the
assignment transaction. Each court order shall provide that any delinquent
child support obligation owed by the assignor as of the date of the court order
and any debts owed to a state agency by the assignor as of the date of the
court order shall be offset by the corporation first against remaining payments
or portions thereof then due the assignor and then against payments due the
assignee each year until paid in full.
A court order approving a voluntary assignment under subsection (6) of this
section, together with any other order issued in connection with any one (1)
prize drawn, shall not require the corporation to divide any single prize
payment among more than three (3) different persons or entities.
The Commonwealth, the corporation, and their respective officials and
employees shall be discharged of all further liability upon payment of a prize
pursuant to court order issued under subsection (6) of this section. It shall be
the responsibility of the assignor or the assignee to provide the corporation
information necessary for the corporation to identify the parties to any
assignment under subsection (6) of this section and to make the payments
assigned.
The Kentucky Lottery Corporation may establish a reasonable fee, not to
exceed one thousand dollars ($1,000), to defray any administrative expenses
associated with processing each assignment made pursuant to subsection (6)
of this section. The fee amount shall reflect the direct and indirect costs
associated with processing the assignments. A court order approving an
assignment under subsection (6) of this section shall direct the assignee to pay
the fee to the corporation no later than ten (10) days after entry of the order.
A certified copy of a court order approving a voluntary assignment under
subsection (6) of this section shall be delivered by certified mail, return receipt
requested, to the corporation's registered agent at least thirty (30) days prior to
the date upon which the first assigned payment is to be paid to the assignee.
Within ten (10) days of receipt of the court order, the corporation shall
acknowledge in writing to both the assignor and the assignee its receipt of the
court order and that the corporation shall thereafter make the prize payments in
accordance with the court order.
Subsection (6) of this section supersedes and prevails over any provision in
the Uniform Commercial Code, including KRS 355.9-406.
The right to assign prize payments pursuant to subsection (6) of this section
shall be suspended upon:
(a) The publication by the United States Internal Revenue Service,
hereinafter referred to in this subsection as the "Service," of a revenue
ruling or other public ruling of the Service, which rules that, based upon
the right of assignment provided in subsection (6) of this section,
Kentucky lottery prizewinners who do not assign any prize payments
would be subject to an immediate income tax liability for the value of the
entire prize rather than annual income tax liability for each installment
when paid; or
(b) The issuance by a court of competent jurisdiction of a published decision
holding that, based upon the right of assignment provided in subsection
(6) of this section, a lottery prizewinner who does not assign any prize
payments under that subsection would be subject to an immediate
income tax liability for the value of the entire prize rather than annual
income tax liability for each installment when paid.
Effective:July 12, 2006
History: Amended 2006 Ky. Acts ch. 41, sec. 1, effective July 12, 2006. -Amended 2000 Ky. Acts ch. 469, sec. 1, effective July 14, 2000. -- Amended
1998 Ky. Acts ch. 215, sec. 1, effective July 15, 1998. -- Amended 1994 Ky.
Acts ch. 170, sec. 6, effective July 15, 1994. -- Created 1988 (1st Extra. Sess.)
Ky. Acts ch. 1, sec. 16, effective December 15, 1988.
Legislative Research Commission Note (1988). Although references to the sale
of "shares" were deleted in the Senate committee substitute, due to a clerical
error, such reference was not deleted in subdivision (2)(e) of this section. The
Reviser of Statutes, pursuant to KRS 7.136, has removed the words "or share"
to conform.
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