Monterey County v. Cornejo

• Decision Date: 18 July 1991
• Docket Number: No. S014436,S014436
• Citation: 283 Cal.Rptr. 405,53 Cal.3d 1271,812 P.2d 586
• Court: California Supreme Court
• Parties: , 812 P.2d 586 MONTEREY COUNTY, Plaintiff and Appellant, v. Robin Joseph CORNEJO, Defendant and Respondent.

Page 405

283 Cal.Rptr. 405

53 Cal.3d 1271, 812 P.2d 586

MONTEREY COUNTY, Plaintiff and Appellant, v. Robin Joseph CORNEJO, Defendant and Respondent.

No. S014436.

Supreme Court of California In Bank.

July 18, 1991.

John K. Van de Kamp and Daniel E. Lungren, Attys. Gen., Richard B. Iglehart, Chief Asst. Atty. Gen., John H. Sugiyama, Asst. Atty. Gen., Morris Beatus and Josanna Berkow, Deputy Attys. Gen., for plaintiff and appellant.

Ira Reiner, Dist. Atty., Harry B. Sondheim and Brent Riggs, Deputy Dist. Attys., Los Angeles, as amici curiae on behalf of plaintiff and appellant.

Segretti, Pitman & Erdbacher, Robert J. Pitman and John Viljoen, Salinas, for defendant and respondent.

ARABIAN, Justice.

We granted review to determine whether, in a proceeding brought by the district attorney for modification of a child support order and determination of arrearages, the trial court may allocate to the noncustodial parent the dependency deduction for state and federal tax purposes. We hold that the allocation was proper.

I. FACTS

The essential facts are undisputed. Respondent Robin Joseph Cornejo is the natural father of Jason A., born to Dina G. on September 17, 1980. The couple never married.

Respondent separated from Dina and the unborn child in January 1980. That same month, Dina began to receive welfare benefits (Aid to Families with Dependent Children (AFDC)) from Monterey County (County); she continued to receive public assistance until 1983.

In April 1980, the district attorney of the County filed a complaint on behalf of Dina and Jason for child support and reimbursement of public assistance. Respondent acknowledged paternity and agreed to pay child support of $100 per month. He also stipulated to Dina's continued physical and legal custody of Jason. The district attorney filed two subsequent actions in 1983 for upward modifications of the support order and a determination of arrearages.

The instant proceeding commenced in December 1988, when the district attorney again sought an increase in child support, to $385 per month, and a determination of arrearages, pursuant to Welfare and Institutions Code sections 11350.1 and 11475.1. ¹ In a responsive declaration respondent agreed to monthly child support payments of $250 and $25 per month toward arrearages. At the same time, respondent requested that he be allowed to claim the child as a dependent for federal and state income tax purposes. Respondent alleged that Dina had claimed the dependency deduction each year since Jason's birth. The district attorney opposed the request on three grounds: (1) that the trial court's "jurisdiction" in child support enforcement actions under section 11350.1 was limited to the issues of support and paternity and did not extend to tax matters; (2) that it was "inappropriate" to litigate the custodial parent's tax benefits in an action to which she was not a party; and (3) that a reallocation of the deduction would require a further adjustment of child support.

The parties ultimately agreed upon a modification of child support to $272 per month, and arrearages of $2,546.32, leaving the allocation of the dependency deduction as the sole unresolved issue. Following a hearing, the trial court ordered that respondent "shall be allowed to claim the minor child ... as a dependent for state and federal income tax purposes until further order of the court."

The Court of Appeal affirmed, holding that the trial court possessed the statutory authority to allocate the tax deduction, and that Dina's interests were adequately protected in the enforcement proceeding.

The Attorney General filed a petition for review on behalf of the County. ² In addition to the statutory and due process claims raised below, the County alleged that federal tax law divested the trial court of jurisdiction to allocate the dependency deduction to the noncustodial parent. While generally we will not consider arguments which could have been but were not timely made in the Court of Appeal (Cal.Rules of Court, rule 29(b)(1)), we granted review because the federal preemption claim presents an important jurisdictional issue of first impression in this state.

II. DISCUSSION

A. Federal Tax Dependency Exemption

Our analysis centers on section 152(e) of the Internal Revenue Code (section 152(e)). Prior to January 1, 1985, the pertinent provisions of that section provided that unless otherwise specifically agreed to in a writing by the parties or addressed in a court decree, a noncustodial parent was entitled to claim a dependency exemption where that parent paid more than $1,200 toward the support of a child in any calendar year and the custodial parent "does not clearly establish that he [or she] provided more for the support of such child during the calendar year than the parent not having custody." (Int.Rev.Code of 1954, § 152(e)(2)(B), as amended in 1976.) State decisions had uniformly interpreted the pre-1985 version of section 152(e) to allow state court allocation of the exemption to the noncustodial parent. (See, e.g., Grider v. Grider (Ala.Civ.App.1979) 376 So.2d 1103; Greeler v. Greeler (Minn.Ct.App.1985) 368 N.W.2d 2; Morphew v. Morphew (Ind.Ct.App.1981) 419 N.E.2d 770; Pettitt v. Pettitt (La.Ct.App.1972) 261 So.2d 687; Westerhof v. Westerhof (Mich.Ct.App.1984) 357 N.W.2d 820; Niederkorn v. Niederkorn (Mo.Ct.App.1981) 616 S.W.2d 529; MacDonald v. MacDonald (1982) 122 N.H. 339, 443 A.2d 1017).

Section 152(e) was problematic for the Internal Revenue Service (IRS), however, because it often involved the IRS as an unwilling mediator in factual disputes between divorced or separated parents over which parent provided more support for the child and was thus entitled to the dependency exemption. Accordingly, the law was amended by the Tax Reform Act of 1984 (Pub.L. No. 98-369, 98 Stat. 494) to provide that the custodial parent is always entitled to the exemption unless he or she signs a written declaration disclaiming the child as an exemption and the noncustodial parent attaches the declaration to his or her return. (Int.Rev.Code of 1954, § 152(e)(2).) ³

The reasons for the amendment to section 152(e) are set forth in the legislative history of the Tax Reform Act of 1984, as follows: "The present rules governing the allocations of the dependency exemption are often subjective and present difficult problems of proof and substantiation. The Internal Revenue Service becomes involved in many disputes between parents who both claim the dependency exemption based on providing support over the applicable thresholds. The costs to the parties and the Government to resolve these disputes is relatively high and the Government generally has little tax revenue at stake in the outcome. The committee wishes to provide more certainty by allowing the custodial spouse the exemption unless the spouse waives his or her right to claim the exemption. Thus, dependency disputes between parents will be resolved without the involvement of the Internal Revenue Service." (Legislative History of the Deficit Reduction Act of 1984 (Pub.L. No. 98-369 H.R.Rep. No. 432, pt. II, 98th Cong., 2d Sess., reprinted in 1984 U.S.Code Cong. & Admin.News, at 697, 1140.))

Since the amendment to section 152(e), the vast majority of jurisdictions considering the issue have concluded that state courts retain jurisdiction to allocate dependency exemptions to noncustodial parents. (Gamble v. Gamble (Ala.Civ.App.1990) 562 So.2d 1343; (Lincoln v. Lincoln (Ct.App.1987) 155 Ariz. 272, 746 P.2d 13; Serrano v. Serrano (1989) 213 Conn. 1, 566 A.2d 413; In re Marriage of Einhorn (1988) 178 Ill.App.3d 212, 127 Ill.Dec. 411, 533 N.E.2d 29; Ritchey v. Ritchey (Ind.Ct.App.1990) 556 N.E.2d 1376; In re Marriage of Kerber (Iowa Ct.App.1988) 433 N.W.2d 53; Hart v. Hart (Ky.Ct.App.1989) 774 S.W.2d 455; Rovira v. Rovira (La.Ct.App.1989) 550 So.2d 1237; Wassif v. Wassif (1989) 77 Md.App. 750, 551 A.2d 935; Bailey v. Bailey (1989) 27 Mass.App. 502, 540 N.E.2d 187; Fudenberg v. Molstad (Minn.Ct.App.1986) 390 N.W.2d 19; Nichols v. Tedder (Miss.1989) 547 So.2d 766; Corey v. Corey (Mo.Ct.App.1986) 712 S.W.2d 708; In re Marriage of Milesnick (1988) 235 Mont. 88, 765 P.2d 751; Babka v. Babka (1990) 234 Neb. 674, 452 N.W.2d 286; Gwodz v. Gwodz (App.Div.1989) 234 N.J.Super. 56, 560 A.2d 85; Zogby v. Zogby (N.Y.1990) 158 A.D.2d 974, 551 N.Y.S.2d 126; Cohen v. Cohen (1990) 100 N.C.App. 334, 396 S.E.2d 344; Fleck v. Fleck (N.D.1988) 427 N.W.2d 355; Hughes v. Hughes (1988) 35 Ohio St.3d 165, 518 N.E.2d 1213, cert. denied 488 U.S. 846, 109 S.Ct. 124, 102 L.Ed.2d 97; Hooper v. Hooper (Tenn.Ct.App.1988); Motes v. Motes (Utah Ct.App.1989) 786 P.2d 232; In re Marriage of Peacock (1989) 54 Wash.App. 12, 771 P.2d 767; Cross v. Cross (1987) 363 S.E.2d 449; Pergolski v. Pergolski (Ct.App.1988) 143 Wis.2d 166, 420 N.W.2d 414.) ⁴

As the court in Motes v. Motes, supra, 786 P.2d 232, succinctly stated, "the amendment was merely intended to enhance the administrative convenience of the IRS, not to interfere with state court prerogatives." (Id. at p. 237; see also Fudenberg v. Molstad, supra, 390 N.W.2d at p. 21 ["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."].)

The same courts also generally agree that, while a court order by itself is insufficient under section 152(e) to accomplish an allocation to the noncustodial parent, state trial courts retain the authority to allocate the dependency exemption by ordering the custodial parent to execute the necessary waiver. (See, e.g., Cross v. Cross, supra, 363 S.E.2d at p. 457; Wassif v. Wassif, supra, 551 A.2d at p. 940; Motes v. Motes, supra, 786 P.2d at pp. 236-239; Nichols v. Tedder, supra, 547 So.2d at pp. 772-780; Fudenberg v. Molstad, supra, 390 N.W.2d at p. 21; Pergolski v. Pergolski, ...