Begley v. Begley

• Decision Date: 18 June 2020
• Docket Number: S-19-0247
• Citation: 466 P.3d 276
• Parties: Elizabeth Sue BEGLEY, Appellant (Defendant), v. Patrick Gordon BEGLEY, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

466 P.3d 276

Elizabeth Sue BEGLEY, Appellant (Defendant),

v.Patrick Gordon BEGLEY, Appellee (Plaintiff).

S-19-0247

Supreme Court of Wyoming.

June 18, 2020

Representing Appellant: Rennie Phillips Polidora, Jacobs Polidora, LLC, Laramie, Wyoming.

Representing Appellee: Michael E. Begley, Salt Lake City, Utah.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ, Justice.

[¶1] Elizabeth Sue Begley (Wife) and Patrick Gordon Begley (Husband) divorced in 2014. In 2019, Husband filed a motion asking the district court to order Wife to sign a joint return for their 2013 federal income tax and pay half of the tax and all penalties and interest. The court ordered Wife to sign the joint return and to pay half of the tax and ordered Husband to pay the other half of the tax and all penalties and interest. Wife claims the district court did not have authority to compel her to sign the joint tax return and it abused its discretion by ordering her to pay half of the tax.

[¶2] We affirm.

ISSUES

1. Did the district court have authority to order Wife to sign the joint income tax return?

2. Did the district court abuse its discretion by ordering Wife to pay half of the tax without considering the entire property and debt distribution?

FACTS

[¶3] As part of their 2014 divorce, the parties stipulated to the disposition of their marital property. They could not, however, agree on how to divide the marital debt. The divorce decree stated:

The parties are ordered to mediate the division of marital debt within 45 days of the date of this decree. If such mediation is successful, then the parties shall present the Court with an order incorporating the agreement for debt division. If the mediation is unsuccessful, then either party may request a trial setting, which trial shall be limited to the issue of division of the parties’ debt.

[¶4] After mediation, the parties reached an agreement on the allocation of their debt except the income tax liability for 2013, which had not yet been determined. Husband subsequently hired an accountant to prepare a joint income tax return, which showed a tax liability of approximately $10,000, including penalties and interest. Wife refused to sign the joint return.

[¶5] In March 2019, Husband filed a motion for an order requiring Wife to sign the joint return and to pay half of the tax or, in the alternative, to order Wife to pay the additional tax liability "engendered by her refusal" to sign the joint return. Wife responded, arguing the district court did not have the authority to require her to sign a joint return and she should not be responsible for the tax debt because it resulted from Husband's failure to pay taxes on his earnings. The district court held a hearing in April 2019, which addressed the tax issue and other matters not at issue here. Husband testified the balance then due on the 2013 taxes was approximately $15,000.

[¶6] After the hearing, the district court ordered Wife to sign the 2013 joint tax return. It ruled the parties were each responsible for half of the tax and Husband was responsible for the penalties and interest. The district court's written order addressed the tax issue as follows:

14. [Wife] shall sign [the joint] 2013 Tax Return so that [Husband's] tax burden is lower.

15. [Wife] shall be responsible for half (50%) of the actual tax liability for 2013.

16. [Husband] shall be responsible for all penalties and fines that have accrued.¹

(footnote added). Wife appealed.

DISCUSSION

1. Did the district court have authority to order Wife to sign the joint income tax return?

[¶7] Whether the district court had authority to order Wife to sign a joint income tax return is a question of law subject to de novo review. Bursztyn v. Bursztyn, 379 N.J.Super. 385, 879 A.2d 129, 134 (N.J. Ct. App. 2005) ("The court's authority to compel plaintiff to execute joint tax returns with defendant raises a legal issue which we review de novo.") (italics omitted); In re Marriage of Solis-Cantrill, 2016 IL. App. 3d 150716-U, 2016 WL 3671427 *4 (Ill. App. Ct. 2016) (unpublished) ("[T]he court's authority to compel the joint filing" of a federal income tax return "involves a question of law for our de novo review.") (italics omitted). See generally, Walker v. Walker, 2013 WY 132, ¶ 36, 311 P.3d 170, 177-78 (Wyo. 2013) (a court's authority to award a judgment for amounts owed under a divorce decree is a question of law reviewed de novo).

[¶8] Nothing in federal tax law prohibits a state divorce court from requiring a spouse to sign a joint tax return. See 26 U.S.C. § 6013 ; Butler v. Simmons-Butler , 308 Mich.App. 195, 863 N.W.2d 677, 692 (2014). However, appellate courts across the country differ on whether state trial courts have authority to order a spouse to file or sign a joint federal income tax return.

[¶9] Before we examine the cases, it is worthwhile to consider some basic characteristics of jointly filed federal income tax returns. Under the federal tax code, a husband and wife may file a joint income tax return. 26 U.S.C. § 6013(a). In general, married people receive more favorable tax treatment by filing jointly. Butler , 863 N.W.2d at 690 ; Bock v. Dalbey, 283 Neb. 994, 815 N.W.2d 530, 533 (2012). However, each married individual has the right to choose whether to file jointly or separately. 26 U.S.C. §§ 6012, 6013 ; Leftwich v. Leftwich, 442 A.2d 139, 144 (D.C. Ct. App. 1982) (citing Heim v. Commissioner, 251 F.2d 44, 47 (8th Cir. 1958) ). When a couple files jointly, "the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several." 26 U.S.C. § 6013(d)(3).

[¶10] Turning to the cases, Wife cites to Leftwich and Bock in support of her position that the district court did not have authority to order her to sign the joint return. In Leftwich , 442 A.2d at 144-45, the District of Columbia Court of Appeals ruled the trial court did not have discretion to order a party to sign a joint tax return. The Leftwich court stated that allowing a trial court to order a party to sign a joint return "would nullify the right of election conferred upon married taxpayers by the Internal Revenue Code." Id. at 145. It would also require the party to take on joint and several liability for tax that he or she may not individually owe. See id. See also, Matlock v. Matlock, 750 P.2d 1145, 1145-46 (Okla. Civ. App. 1988) (trial court cannot compel parties to file a joint return because the tax code gives them the option of filing jointly or separately); In re Marriage of Butler, 346 N.W.2d 45, 47 (Iowa Ct. App. 1984), overruled on other grounds by In re Marriage of Hoffman, 493 N.W.2d 84, 89 (Iowa Ct. App. 1992) (same).

[¶11] In Bock, 815 N.W.2d at 536-37, the Nebraska Supreme Court agreed with Leftwich and ruled a trial court cannot compel a party to file a joint tax return. The court noted that, under 26 U.S.C. § 6013(d)(3), spouses filing a joint tax return are jointly and severally liable for the full tax debt. Id. at 533. The court also stated that federal tax courts are not bound by a state court's allocation of the tax among the debtors. Id. at 535. The court ruled when a party "unreasonably" refuses to sign a joint return, the trial court can address the greater tax burden on the marital estate by adjusting the disposition of the marital property. Id. at 537.

[¶12] Wife also claims Banks v. Banks, 648 So.2d 1116 (Miss. 1994), supports her view. Banks did not state, as a matter of law, that a court is precluded from ordering divorcing parties to sign a joint tax return. The primary issue in that case was whether a provision in the parties’ settlement agreement required the wife to sign joint tax returns. The Mississippi Supreme Court ruled that, under the language of the agreement, the wife was not required to sign the return. Id. at 1122. It also noted other reasons the wife should not have to sign the return, including that it would expose her to joint and several liability for the tax without any potential benefit to her, the husband had a history of not complying with court orders, and the husband was at fault for the tax problem. Id. at 1122-23. This discussion seems to indicate that, under other circumstances, a Mississippi court may have the discretion to order a spouse to sign a joint tax return. In fact, in Fitzgerald v. Fitzgerald, 914 So.2d 193, 198-99 (Miss. Ct. App. 2005), a Mississippi appellate court distinguished Banks and specifically recognized trial courts have discretion to order divorcing parties to file joint tax returns.

[¶13] Other jurisdictions expressly hold a court has discretion to order a party to sign a joint tax return as part of its equitable powers to distribute marital assets and liabilities. In Bursztyn, 879 A.2d at 136, the New Jersey appellate court ruled:

[W]e conclude that trial courts should have discretion to compel the filing of joint tax returns. In New Jersey, the Legislature has directed courts to consider the tax consequences of their rulings on alimony and equitable distribution. N.J.S.A. 2A:34-23(b)(12) ; N.J.S.A. 2A:34-23.1(j). Moreover, we have stressed the broad discretionary powers of the Chancery Division in matrimonial actions, even with respect to federal tax issues. Gwodz v. Gwodz, 234 N.J.Super. 56, 60-63, 560 A.2d 85 (App.Div.1989). Therefore, it seems reasonable that courts should consider the effect upon the marital estate of filing joint or separate tax returns, and, where appropriate, preserve the marital estate by compelling joint returns.

We do not find persuasive the argument that individuals have a federal statutory right to choose whether to file joint or separate income tax returns which may not be abridged by state courts. In matrimonial actions, courts routinely issue orders which have significant effects on individuals’ rights. For example, courts may infringe upon a parent's right to relocate from one state to another. By contrast, limiting an individual's statutory right to choose

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