Brandriet v. Larsen

• Citation: 442 N.W.2d 455
• Decision Date: 09 January 1989
• Docket Number: No. 16122,16122
• Parties: Diselle J. (Larsen) BRANDRIET, Plaintiff and Appellant, v. Neal J. LARSEN, Defendant and Appellee. . Considered on Briefs
• Court: Supreme Court of South Dakota

Page 455

442 N.W.2d 455

Diselle J. (Larsen) BRANDRIET, Plaintiff and Appellant, v. Neal J. LARSEN, Defendant and Appellee.

No. 16122.

Supreme Court of South Dakota.

Considered on Briefs Jan. 9, 1989.

Decided June 21, 1989.

Thomas F. Burns of Gribbin, Burns & Eide, Watertown, for Neal J. Larsen.

Diselle J. (Larsen) Brandriet pro se.

MORGAN, Justice.

Diselle Larsen Brandriet (Diselle) appeals from an order modifying a decree of divorce which specified Neal Larsen's (Neal) visitation rights, set his child support payments, granted him a federal income tax exemption for one child, and removed his life insurance obligations. We affirm in part, reverse and remand in part.

Neal and Diselle were divorced in 1983. The decree of divorce incorporated a child custody, visitation, and property settlement agreement. In accordance with this agreement, Diselle was granted custody of the parties' two children, Jerod (now age 13) and Terra (now age 9), subject to reasonable visitation. Neal was ordered to pay $100 per child per month child support and to maintain life insurance on his life and the lives of the children, naming Diselle as beneficiary, until the youngest child attained the age of majority. The agreement and resultant decree were silent as to allocation of the federal income tax dependency exemptions for the children.

In July 1985, Diselle moved to Tacoma, Washington, with her new husband. After the move, the parties were unable to agree to terms of visitation. Neal moved the court to specify his visitation rights. Diselle moved to increase child support. Hearing was held on both motions and the orders at issue resulted.

Neal is employed as a fireman earning a regular monthly gross income of $1,589.48 and receives a monthly VA pension of $69.00. His new spouse is a nurse earning $14,000 annually. Diselle is employed as a registered nurse earning a regular monthly gross income of $1,780.00. Her new spouse is a 1987 law school graduate. Diselle testified as to family living expenses, and the trial court determined that the cost of raising the children in the lifestyle to which they are accustomed was $600 per month.

The trial court entered its order modifying the decree of divorce to specify Neal's visitation rights, to increase child support payments to $330 per month (to be reduced to $200 per month when Jerod reaches the age of majority "unless either party shall show at that time that such support is inadequate or excessive"), granted a dependent federal income tax exemption to Neal for Jerod and to Diselle for Terra, and terminated Neal's obligation to maintain life insurance upon his life with Diselle as named beneficiary.

Trial courts have jurisdiction relating to custody, care, and education of minor children and may modify child support payments when there is a change in conditions or circumstances. SDCL 25-4-45; Gross v. Gross, 355 N.W.2d 4 (S.D.1984). "This court does not sit as the trier of facts and will not disturb a child support award unless it appears that the trial court abused its discretion in entering its judgment." Id. at 7; Donohue v. Getman, 432 N.W.2d 281 (S.D.1988); Rykhus v. Rykhus, 319 N.W.2d 167 (S.D.1982). See also Peterson v. Peterson, 434 N.W.2d 732 (S.D.1989).

As her first issue, Diselle urges that the trial court erred as a matter of law in granting Neal a federal income tax dependency exemption for Jerod in the modification order of December 5, 1986. The trial court determined that because of the increase in child support, Neal was entitled to take Jerod as a dependent on his income tax return beginning with the year 1986. Diselle relies on the provisions of 26 U.S.C. Sec. 152(e)(1) for the proposition that, in the absence of a pre-1985 agreement or decree of divorce allocating the exemption to the noncustodial parent, only the custodial parent may claim the child as an exemption unless the custodial parent has waived that right by signing a consent form. Since Diselle has not waived her right and consented to Neal claiming the exemption, she argues that federal law does not provide or allow an involuntary waiver such as the trial court attempted to impose in this case.

Neal urges us to adopt the reasoning of Fudenberg v. Molstad, 390 N.W.2d 19 (Minn.App.1986), where the Minnesota Appellate Court held that, because it did not interfere with the congressional intent in the adoption of 26 U.S.C. Sec. 152(e), a trial court has authority to award the federal income tax dependency exemption to a noncustodial parent and to enforce such award by making the custodial parent's receipt of child support contingent upon signing the waiver.

We first review the rather unusual procedural steps taken in the trial court. The matter of the amendment of the decree was before the trial court in 1986, on a motion by Neal to spell out visitation rights and a motion by Diselle to increase child support payments. As a part of the decision entered on December 5, 1986, the trial court, in addition to modifying the decree as requested by the parties, determined:

[Neal] shall be allowed to take Jerod Larsen as a dependent on his income tax return, beginning in the year 1986, and [Diselle] shall be allowed to continue to take Terra Larsen as a dependent on her income tax return.

Subsequently, two additional adjustments were made to the modification order. The first, upon application of Neal, was an order entered on November 12, 1987, appointing the Codington County Clerk of Courts to execute the waiver form, Form 8332 of the Internal Revenue Service, apparently because Diselle had failed or refused to do so. In its memorandum opinion, absent any findings of fact or conclusions of law, the trial court further determined that "[i]f such Order of the Court were (sic) subsequently found to be inappropriate on appeal, in the absence of [Diselle] acting in compliance with the Court's previous Order, the Court would, sua sponte, consider holding [Diselle] in contempt of court upon being advised of her failure to act." The second adjustment, not pertinent to this issue, made pursuant to a stipulation between the parties, was an adjustment raising the amount of child support by some $16.00 per month, due to an oversight in omitting a small monthly pension payment from Neal's income, and an amended order to that effect was entered on December 10, 1987. No mention was made in the amended modification order of the appointment of the clerk of courts to act for Diselle.

Some background is required for any discussion of the changes brought about by the Internal Revenue Code amendment in 1984. The granting of divorces and the attendant family adjustments has traditionally been a matter for the state courts to adjudicate upon laws enacted by the state legislatures. On the other hand, of course, the enactment and collection of the federal income taxes has always been a matter of federal jurisdiction. Prior to the 1984 amendment, state courts have at times attempted to assign the dependency exemption to the parties. This assignment, however, was always subject to the party qualifying for the exemption under the requirements of the Internal Revenue Code, primarily in meeting the threshold requirements of monetary contribution to the support of the child for whom the exemption was claimed. We are unaware of any case where a parent was criticized or held in contempt in a state court where he or she had claimed the deduction in filing a return although the other parent had been allocated the dependency exemption by the state court. In other words, the Internal Revenue Service (IRS) was not bound by the state court action and apparently neither were the parties.

The amendment was proposed as part of the Deficit Reduction Act of 1984, P.L. 98-369. In the minutes of the House Committee, there was discussion of the problems with the rules which often resulted in costly disputes between the parents involving the IRS, which had little tax revenue at stake. The amendment would provide more certainty by allowing the custodial spouse the exemption unless he or she waived the right to claim the exemption, thus relieving the IRS of involvement. Pertinent to our discussion is the following:

For [the noncustodial parent's] exemption to apply, the custodial parent will have to sign a written declaration that he or she will not claim the child as a dependent for the year, and the noncustodial parent will have to attach the written declaration to his or her tax return. That declaration may be made for one or more specified calendar years. The parties may make a permanent declaration a copy of which the noncustodial parent attaches to each year's return, or the declaration may be made by the custodial spouse annually in order to better insure the receipt of child support payments. (Emphasis added.)

H.R. No. 432, 98th Cong., 2d Sess., pt. 2, reprinted in 1984 U.S.Code Cong. and Admin. News 697, 1140-41.

Since the enactment of 26 U.S.C. Sec. 152(e), a split of authorities has developed among the state courts that have considered its application in state divorce actions. The essential query is whether or not the trial court has the authority to allocate the exemption. One line of authority, the direct action courts, finds allocation permissible upon the theory that:

State court allocation of the exemption does not interfere with Congressional intent. It does not involve the IRS in fact finding determinations. State Court involvement has no impact on the IRS. Thus, allocation of the exemption is permissible.

Fudenberg, 390 N.W.2d at 21. This line of authority is also followed in North Dakota, Wisconsin, West Virginia, and Arizona. In Fleck v. Fleck, 427 N.W.2d 355 (N.D.1988), the North Dakota Supreme court adopted the Fudenberg decision in determining the right to allocate in the original divorce proceeding after 1984 and to order execution of the consent form. (The Fleck decision held that the trial court did not err for...