Two-in-one bill tackles tax evasion and lottery winner privacy

By Kate Northrop

A big lottery bill that simultaneously aims to crack down on tax evasion and enforce lottery winner privacy passed with flying colors in the Oregon House of Representatives last week.

Lawmakers are looking to make some significant changes to the Oregon Lottery this legislative session that will significantly impact players claiming prizes.

On March 17, the Oregon House of Representatives passed House Bill 3115 by a vote of 52-1, bringing player anonymity one step closer to Oregon lottery players.

According to the bill, the name and address of a prize winner would be exempt from disclosure under Oregon State Law. The Oregon Lottery or commission would need written permission from the winner in order to disclose their personal information.

Surprisingly, the potential for anonymity is not the main focus of the bill. In fact, it received several opposing written testimonies from Oregon residents for its crackdown on ticket reselling.

Ticket reselling occurs when a winner of a big prize is approached by another individual looking to purchase their winning ticket at a discounted value, coining the term, "discounting." The discounter will offer a price lower than the full value of the ticket, and in return, the winner receives cash for the ticket right away. It's a tradeoff that many players are willing to accept since it often means not having to travel several hours to a claims office, not risking losing the ticket in the mail, hiding their identity, or not waiting several weeks for the payout.

Meanwhile, the discounter will claim the prize with the Lottery, taking in a profit.

The problematic behavior, legislators argue, is that the practice enables tax evasion. Oregon residents who owe debts or child support will turn to discounters to avoid having these debts deducted from their prize, in addition to the tax already applied to winnings. It's a win-win situation for the actual winner and discounter, if this situation applies.

Selling or transferring the ownership of lottery tickets is not explicitly illegal in Oregon, but state legislators are not too keen on letting it go on any further.

Since buying a lottery ticket is, for the most part, anonymous, it's impossible to estimate lost tax revenues, the Oregon Department of Revenue said.

"We don't love it," Lottery Senior Manager of Communications and Policy Matt Shelby told The Oregonian. "We don't even like it. But how do you curb it?"

Other states have experienced their fair share of the practice. In 2023, a father and son duo were sentenced to five and four years, respectively, for carrying out a decade-long discounting scheme that cheated the IRS out of over $6 million by claiming false gambling losses.

Prior to the sentencing, the Massachusetts Lottery enforced one of its policies that suspends players who win with a frequency deemed "factually or statistically improbable" and barred the family from cashing in anymore tickets.

United States Attorney Rachael S. Rollins made an example of the family to highlight what would happen to those looking to cheat the system and take "millions of hard-earned taxpayers' dollars."

But many Oregonians are not too keen on the idea of tightening restrictions on ticket reselling. In fact, it's a practice that some have turned into a long-running and profitable business model.

Max McNamar is one such individual. He's raked in over $4 million in winnings, having claimed nearly 1,600 winning tickets valued at $600 or more, The Oregonian learned in conversation with him. Rather than a schemer, he considers himself a "businessman" and a "broker."

The 74-year-old regularly advertises his services, handing out cards to bartenders and individuals promoting immediate cash for a winning ticket. He offers 70 cents on the dollar, higher than local pawnshops he says typically pay 60 cents on the dollar, he told the newspaper.

Players have sold him winning tickets for a variety of reasons, McNamar said in his interview. In his previous experiences, they've done it to avoid taxes, they have no identification, they don't have a primary address, they don't have transportation to get to a claims office, they don't want their spouse to know about the winnings, or they want immediate cash to continue gambling.

In his view, the state should not be deducting additional taxes from a full prize considering revenue it already takes in from ticket sales, as well as losses players incur on losing tickets before finally winning big.

It's an opinion that several other Oregon residents agree with, evidenced by written testimony House Bill 3115 received during the House Committee on Commerce and Consumer Protection public hearing in January.

One resident, Erik B., argued that imposing restrictions on selling a ticket creates an additional headache for players who live nowhere near a Lottery office.

"I oppose this measure because it should not be a crime to sell a piece of paper that is worth money to someone who wants to take responsibility for said piece of paper," Erik wrote in his submission. "From Medford it is an 8-hour plus round trip to the closest lottery office. They're open Monday through Friday only, so for 94% of people, they have to take a day off of work, if they can at all, to go up to the lottery office."

"Lottery winnings are property of the winner," Catherine Binkley said, who also opposed House Bill 3115. "Just as one has the right to sell any other form of personal property, the same should remain the same for lottery tickets as personal property."

After the bill officially passed in the House, it moved on to the Senate, where it had its first reading on Tuesday. It was referred to the House Committee on Labor and Business. Should the bill pass, it would be illegal to sell, offer to sell, purchase, or offer to purchase a winning ticket or share for another person for compensation.