Mance v. Mance
| Decision Date | 09 October 2021 |
| Docket Number | CN20-02690 |
| Parties | LAUREN MANCE, Petitioner, v. BRANDON MANCE, Respondent. |
| Court | Delaware Family Court |
Date Submitted: September 30, 2021
Petition Nos.: 20-11857 (Ancillary Matters)
Keith M. Horner, Esquire; HORNER LAW, LLC, Attorneys for Petitioner
David C. Gagne, Esquire; GIORDANO, DELCOLLO, WERB & GAGNE, LLC Attorneys for Respondent
ORDER ON MATTERS ANCILLARY TO DIVORCE
The value of exemptions and tax credits has increased such that it is more frequently raised in Property Division cases in the Family Court. Case law in the Family Court has attempted to address the assignment requests, but it appears that the Supreme Court of Delaware has not ruled on the matter. In this case, the parties have raised the issue and the Court addresses it with consideration of the Court's authority and prior persuasive precedent.
On September 30, 2021, the Court conducted a hearing regarding matters ancillary to divorce. Present in Court[1] were Lauren Mance ("Wife"), represented by Keith M. Horner, Esquire and Brandon Mance ("Husband"), represented by David C. Gagne, Esquire. At the outset of the hearing, Counsel submitted a Partial Stipulation and Order Resolving Ancillary Matters ("Partial Stipulation"). Reserved for decision are: (1) the parties' requests to divide the tax exemptions for the parties' two children; and (2) division of marital personal property. This Order decides the first issue. The second issue is referred to mediation with a mutually selected mediator.
The parties were married on July 7, 2012 and separated on March 5, 2020. A decree of divorce was issued on December 19, 2020.
The Partial Stipulation, in essence, divides the non-retirement assets 55% to Husband and 45% to Wife.
The parties have two minor children: Chase Mance, born 9/21/2014, and Alexa Mance, born 11/28/2016 (collectively, "Children"). The parties have shared residential placement of the Children pending mediation of an uncontested Petition for Custody filed by Wife.
A. Division of Marital Personal Property
The identification and classification of personal property has been an ongoing issue for the parties. Husband claims certain items are premarital or non-marital. Other items, such as high end stereo equipment, may or may not have significant value that is difficult to assess. Wife has prepared two lists of personal property and Husband has selected one of the lists. However, prior to division of the personal items the parties hired a company to "remove the junk," as they phrased it, and some of the items removed are on the two lists. Neither party was prepared to present evidence establishing which items are non-marital, which items were removed, or where the items are to be found.
Inasmuch as the parties were not in a position to introduce testimony concerning their personal property, the Court ordered the parties to participate in Alternative Dispute Resolution with a mediator mutually selected by Counsel. If the parties cannot agree upon a mediator, Counsel shall each submit three names from which the Court shall select one. The parties shall report back to the Court by December 6, 2021 on whether the matter has been res0lved or if a brief hearing is required.
B. Division of Child Dependency Exemption Between Parties
The parties identified "Dependent tax exemptions" as an asset in dispute on the pretrial stipulation.
Husband's position is that Wife claimed both children in 2020 and Husband seeks permission to claim both children in 2021. Husband further suggests that after 2021, each party should claim a child and alternate the youngest when there is only one remaining deduction so long as they have shared residential placement. In support of the request, Husband relies on L.S. v. L.R.S., 2007 WL 4793935 (Del.Fam.Ct., Jan. 17, 2007).
Wife's position was that the request is premature because there is no final custody order in place. Wife further asserts that the exemption is controlled by IRS regulations. In support of her position, Wife relies on S. v. S., 2012 WL 1560401 (Del.Fam.Ct., Mar. 26, 2012).
1. Child Tax Exemption and Tax Credit
Prior to recent changes in the tax code, parties were able to claim a dependent child as an exemption on their federal tax return thereby reducing their tax obligation. In 1997, a child tax credit was created by the Taxpayer Relief Act, Public Law 105-34, to provide a $500 per child non-refundable credit in tax relief to middle- and upper-middle income families.[2]
In 2001, passage of the Economic Growth and Tax Relief Reconciliation Act, Public Law 107-16, increased the credit over time to $1, 000 per child and made it partially refundable under the earned income formula. The refundable portion is referred to as the "Additional Child Tax Credit."[3]
Legislation passed in 2003 and 2004 accelerated implementation of the child tax credit. The Emergency Economic Stabilization Act in 2008, [4] and the American Recovery and Reinvestment Act in 2009, [5] expanded the amount given to taxpayers whose income was too low to qualify for the credit or to be eligible for the full credit. The "refundability threshold" was lowered to $3, 000 for 2009 and 2010. These changes were made permanent by the Protecting Americans from Tax Hikes Act in 2015.[6]
By 2017, the maximum credit per child had risen from $400 for 1998 to a permanent $1, 000 with a maximum refundable credit per child of $1, 400. Additionally, the "phaseout threshold" for a head of household filer increased from $75, 000 in 1997 to $400, 000 in 2017.[7]
In 2018, the tax reform bill doubled the credit to $2, 000 per qualifying child. In 2019, the credit again increased to $3, 600 for children under six and to $3, 000 for children between six and seventeen.[8]
In 2021, the United States Treasury and Internal Revenue Service announced that families of nearly 60, 000, 000 children would receive $15, 000, 000, 000 in the first payments of an expanded and newly advanceable child tax credit. In Delaware alone, the Treasury Department identified 169, 000 children for payments totaling $42, 628, 000.[9]
The Internal Revenue Service ("IRS") issued a publication for Divorced or Separated Individuals for use in preparing 2020 tax returns. The document, Publication 504, contains twenty-nine pages of explanation of who can claim children under what circumstance and in what amounts. Newly divorced individuals are often baffled by the regulations as well as the unexplained logic in the document.[10]
Essentially, a person eligible to file as a head of household can claim a "qualified child" as an exemption on his or her tax return. If the child lived with the filing person more than half the year, and the child is single, the child is a "qualifying person."[11] However, there are additional tests for Children of Divorced or Separated Parents (or Parents Who Live Apart) covered in a separate section of Publication 504.
Divorced parents, the only parties to which Property Division applies, have a set of rules to determine whether their child is "qualified" to be claimed as a dependent. The governing law, 16 U.S.C. § 152(e), as with the entire tax code, starts with general considerations and narrows the issues as the statute progresses. In general, a child is qualified to be claimed by a filing person if:
Additionally, there are IRS defaults as to which person is considered to be the "custodial" parent and "non-custodial" parent. A person is treated as the custodial parent when the child lived with the parent for the greater number of nights during the year. If the parents are divorced or separated, the "overnight rule" becomes more complicated. A child is treated as living with a parent for a night if the child sleeps at the home whether or not the parent is present, or if the child is in the company of the parent while vacationing together. If the number of overnights is equal, the exemption is given to the parent with the higher adjusted income.[14]
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