Child Support Income Tax Exemption

New Court of Appeals Case: Child Support Income Tax Exemption

In a recent decision by the Oklahoma Court of Civil Appeals, Barnes v. Barnes, 2017 OK CIV APP 38, the court found that Income Tax Exemptions for minor children are child support issues and not property issue.  This distinction is important because as a support issue, the right to claim the children can be modified upon a change of circumstances.

In Barnes, the parents divorced in June, 2014, with a decree that awarded the parties joint custody of two children. The decree did not specify which parent would have the right to claim the children for tax purposes. 

The mother declared both of the children as dependents in 2014.  In February , 2015, the father filed a motion to modify the child support provisions of the decree due to changes in employment and changes of both parties' residences. He also sought to claim one child as a dependent on his income tax return. The parties agreed to modify his child support obligation and visitation, but could not agree on the tax exemption. 

After trial, the judge awarded the father the 15-year-old child as a dependent and awarded the mother the 8-year-old child as a dependent. The mother appealed. The father did not file a brief and therefore this is a case with only an  appellant’s brief.

On appeal, mother argued that the income tax exemption is part of the property division and therefore not subject to modification.  The appellate panel disagreed, noting that those states that have considered the issue have held that the income tax exemption is part of the child support calculus.  See e.g., Foster v. Foster, 662 N.W.2d 191 (Neb. 2003); Dumas v. Tucker, 119 S.W.3d 516 (Ark. 2003).  The panel also noted that another division of the Court of Civil Appeals held that the parental right to claim the exemption is modifiable and therefore implicitly held that this is a child support issue.  Wilson v. Wilson, 1991 OK CIV APP 79, 831 P.2d 1. This panel agreed.

The mother also argued that the trial court erred in not applying 26 U.S.C. §152(e) of the Internal Revenue Code, which states a child shall be treated as being the dependent of the noncustodial parent for a calendar year only if: 

(1) "the custodial parent signs a written declaration [waiving the right to claim the child]," 

(2) the "custodial parent [does] not claim such child as a dependent for [that taxable year]," and 

(3) "the noncustodial parent attaches such written declaration to the noncustodial parent's return for [that taxable year]."

She claimed that because she did not sign a written declaration waiving the right to claim the dependent exemption the trial court could not change the exemption.

The panel rejected this argument because it found that §152(e) applies only when one party has custody and the other does not.  In this case the parents had joint custody and therefore the panel said §152(e) in not applicable.

Because this is an issue of child support, the right to claim the children can be modified upon a change of circumstances.  The panel held that it was clear that the father lost his job in the oil field and therefore there was a change of circumstances sufficient to change the child support and a modification of the dependent tax exemption.