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N.J. woman suing state over lottery tax

New Jersey LotteryNew Jersey Lottery: N.J. woman suing state over lottery tax
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State retroactively slapped her with $1.58 million in taxes

ROCKAWAY, N.J. — A Rockaway, New Jersey, woman who won a $14.9 million prize in the New Jersey Lottery's Pick 6 drawing in 2009 is suing the state to get a $1.58 million income tax refund she says she is owed.

Kimberly Wearin's lawsuit, made public today in Superior Court in Morristown, says that when she won the prize on June 4, 2009 and took it as a lump sum, winnings from the state lottery were excluded from taxable income, under state law.

However, on June 29, 2009, an amendment to the law was enacted that made winnings of more than $10,000 subject to the state income tax and the law was made retroactive to Jan. 1, 2009, according to Wearin's attorney, Steven Klein.

The attorney said that Wearin paid the applicable tax in April 2010 but in June 2010, she filed an amended tax return excluding the lottery winnings from her income. The state Division of Taxation denied her amended return and also rejected an administrative appeal.

The suit names the state Department of Treasury, the state Division of Taxation and the state Lottery Division as defendants. It claims that the legal amendment taxing lottery winnings discriminates against Wearin and accuses the state of breach of contract. The suit seeks a judgment ordering the refund.

Attorney Jeff Schechter, who is part of Wearin's legal team, said she paid the tax in 2010 but then filed an amended return as part of a "conservative" strategy to avoid paying interest and penalties on the tax.

Schechter said their firm, Cole, Schotz, Meisel, Forman & Leonard of Hackensack, is pursing similar litigation on behalf of several other lottery winners affected retroactively by the 2009 amendment, including some who started being taxed in 2009 on annuities they had been paid for years.

Andy Pratt, a spokesman for the Treasury Department, said "We're not going to comment on pending litigation."

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67 comments. Last comment 5 years ago by haymaker.
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Todd's avatar - Cylon 2.gif
Chief Bottle Washer
New Jersey
United States
Member #1
May 31, 2000
23277 Posts
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Posted: June 7, 2011, 6:28 pm - IP Logged

This will be an interesting case to watch.

 

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    dallascowboyfan's avatar - tiana the-princess-and-the-frog.jpg
    Oklahoma
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    Member #82391
    November 12, 2009
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    Posted: June 7, 2011, 6:31 pm - IP Logged

    This will be an interesting case to watch.

    I Agree!

      Boney526's avatar - NjlpLogo
      New Jersey
      United States
      Member #99032
      October 18, 2010
      1439 Posts
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      Posted: June 7, 2011, 6:38 pm - IP Logged

      Good.  Retroactive taxes are BS.

        Avatar
        Franklin-n.c
        United States
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        April 12, 2006
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        Posted: June 7, 2011, 7:11 pm - IP Logged

        Just TAX us to Death and then dig us up and TAX us some more . Land of the free like Hell.

          Littleoldlady's avatar - basket
          Clarksville
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          July 15, 2002
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          Posted: June 7, 2011, 7:12 pm - IP Logged

          They need to take this as far as the Supreme Court if necessary.  Seems like to me it was a "money grab" by a cash strapped or not state.  How could they make it retroactive?  If they wanted it to start in Jan 2009 seems like to me someone should have gotten off their keyster and got the law passed before that time.  It stinks to high heaven.

          If you know your number is going to hit, have patience and then KILL IT!

          You never know when you will get another hit.

            dpoly1's avatar - driver
            PA
            United States
            Member #66141
            October 16, 2008
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            Posted: June 7, 2011, 8:47 pm - IP Logged

            We should sue the Federal & State Governments for ALL of our income taxes !!!!!!!!!!!

            Mad

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              NASHVILLE, TENN
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              February 20, 2006
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              Posted: June 7, 2011, 9:22 pm - IP Logged

              The Constituson prohibits ex post facto law, laws passed after the fact which results in incarceration.   This prohibition does not apply to tax laws.

              Bill Clinton, early in his Administration, retroactively increased corporate and personal income tax.  This law was contested all the way up to the Supreme Court.  The Court ruled the Constitutional ban on ex post facto laws did not apply to tax laws.  Many people and companies went bankrupt.  They were on the edge and could not weather the additional taxes.

              Does any one know why there is no boat building industry in America?  Bill Clinton and his merry den of democrats increased the tax on boats so much that the "rich" now go to Europe for their luxury craft.  John Kerry (he served in Vietnam, you know) has his built in Italy.  I wonder if he ever paid the tax?

                LANTERN's avatar - kilroy 28_173_reasonably_small.jpg
                Tx
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                Posted: June 7, 2011, 9:30 pm - IP Logged

                It also seems to me that it should not have been made retroactive, I can not say that they were discriminated against, but I can say that whoever made that law retroactive must be crazy, they and all others should get their tax money back and with added interest, such a thing should not be legal, it is crazy.

                BibleOnline  ParishesOnline  ChristianRadioOnline   MassOnline   Mass

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                  New Member

                  United States
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                  June 6, 2009
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                  Posted: June 7, 2011, 11:11 pm - IP Logged

                  This isn't an ex post facto argument.  The argument here is breach of contract.  Since the STATE operates the lottery AND sets tax law, by passing a retroactive tax on lottery winnings it effectively violated the terms of the contract under which the tickets were sold.  They were sold until June 29 with the understanding that winnings would not be taxable.  In effect, the state made the tickets less valuable after they had been sold.

                    rdgrnr's avatar - walt
                    Way back up in them dadgum hills, son!
                    United States
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                    April 28, 2009
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                    Posted: June 7, 2011, 11:22 pm - IP Logged

                    I wish the politicians who passed the law would have to pay it back out of their own pockets.

                    Blood sucking bastages.


                                                                 
                                         
                                                             

                     

                     

                     

                     

                                                                                                                       

                    "The only thing necessary for evil to triumph is for good men to do nothing"

                                                                                                                --Edmund Burke

                     

                     

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                      DFW, Texas
                      United States
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                      August 18, 2009
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                      Posted: June 8, 2011, 12:11 am - IP Logged

                      The constitutional ban against ex post facto laws is generally held to apply only to criminal laws (making something an offense, or increasing the penalty for an offense after an act has been committed).  It wouldn't apply here.  But I wonder about the wording of the contract between the state and the jackpot winner.  That wording could make or break this case.

                      I might also ask about equal protection of the law.  This law seems to be very specifically targeted, and it's possible the Fourteenth Amendment might have something to say about it.

                        Littleoldlady's avatar - basket
                        Clarksville
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                        Posted: June 8, 2011, 12:42 am - IP Logged

                        It does really depend I think on the wording of the law and its reasons for enactment.  I just got through reading about a case where the Supreme Court held that retroactive taxation was legal but as I said, it depends entirely on the wording of the state law that they passed. Her reasoning would have to be under the fifth amendment to the Constitution which prohibits government abuses.  According to what I read, the retroactive taxation cannot just be for reasons of raising revenue.  I think that is the ONLY reason they passed that law.  They figured out how much money the state was losing by not taxing lottery winnings and then they plugged the "hole" with the retroactive tax statute.  Now if they passed it for other reasons besides that, they will probably win in court.

                        If you know your number is going to hit, have patience and then KILL IT!

                        You never know when you will get another hit.

                          time*treat's avatar - radar

                          United States
                          Member #13130
                          March 30, 2005
                          2171 Posts
                          Offline
                          Posted: June 8, 2011, 12:48 am - IP Logged

                          The Constituson prohibits ex post facto law, laws passed after the fact which results in incarceration.   This prohibition does not apply to tax laws.

                          Bill Clinton, early in his Administration, retroactively increased corporate and personal income tax.  This law was contested all the way up to the Supreme Court.  The Court ruled the Constitutional ban on ex post facto laws did not apply to tax laws.  Many people and companies went bankrupt.  They were on the edge and could not weather the additional taxes.

                          Does any one know why there is no boat building industry in America?  Bill Clinton and his merry den of democrats increased the tax on boats so much that the "rich" now go to Europe for their luxury craft.  John Kerry (he served in Vietnam, you know) has his built in Italy.  I wonder if he ever paid the tax?

                          You stole my thunder. LOL

                          In neo-conned Amerika, bank robs you.
                          Alcohol, Tobacco, and Firearms should be the name of a convenience store, not a govnoment agency.

                            Avatar
                            DFW, Texas
                            United States
                            Member #78628
                            August 18, 2009
                            134 Posts
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                            Posted: June 8, 2011, 12:50 am - IP Logged

                            It does really depend I think on the wording of the law and its reasons for enactment.  I just got through reading about a case where the Supreme Court held that retroactive taxation was legal but as I said, it depends entirely on the wording of the state law that they passed. Her reasoning would have to be under the fifth amendment to the Constitution which prohibits government abuses.  According to what I read, the retroactive taxation cannot just be for reasons of raising revenue.  I think that is the ONLY reason they passed that law.  They figured out how much money the state was losing by not taxing lottery winnings and then they plugged the "hole" with the retroactive tax statute.  Now if they passed it for other reasons besides that, they will probably win in court.

                            This makes me wonder about limits of government power.  The tax was made effective at the beginning of the year.  If they can do that, could they make a tax effective at the beginning of the previous year?  Could they make a tax retroactively effective for the past 50 years?  Could they simply increase the income tax rate effective the past 50 years and expect everyone to send in the difference between what they paid and what they would have paid under the higher rates?  Why would a calender date, such as January 1, affect the time during which a retroactive law can be made effective?  If they can change laws in the past as far as the beginning of the year, what's to keep them from changing laws since the founding of the state?