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Determining dependency in child support

August 17, 2011

Parents and family law attorneys have been given more guidance on what courts are required to do when crafting child support orders and determining which parent can claim a child as a dependent.

A new state statute that took effect July 1 ties together multiple concepts that before had only been recommended by the Indiana Child Support Guidelines. Family law attorneys say the changes will help them determine how to advise their clients on what to expect in the child support orders and legal process. But some lawyers say the changes don’t necessarily simplify the process and they believe that more complicated family law litigation could happen as a result.

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“All of these concepts previously existed in some form in statutes and Indiana case law, but they were difficult to reconcile,” said Carmel family law attorney Ryan Cassman at Coots Henke & Wheeler. “The recommendations were not always followed. The old practice of simply alternating the exemptions has been the norm, and I don’t think it will be easier now because that old way was very easy, and this will be complex, but hopefully fair.”

Indianapolis attorney Andrew Soshnick, a Baker & Daniels certified family law specialist and former chair of the Indiana State Bar Association’s family law section, says this statutory change hits at the heart of most child support cases because of the income focus. Neither the ISBA nor the Indiana Judicial Center have kept track of specifically how many of these provisions in the new law had been followed statewide in the past, but anecdotally attorneys say courts didn’t always include those factors as is now required.

“Most well-informed family law practitioners have already dealt with the tax exemption issue in a manner as contemplated under the new statute,” said Indianapolis attorney Carl Becker with Newton Becker Bouwkamp Pendoski. “This includes losing the right to utilize the exemption if the payor is not current on child support at the end of the year. But because there are often arguments regarding what has or has not been paid, this will provide for a mechanism of providing notice when the payee believes there is an arrearage while allowing the payor an opportunity to prove he or she is current.”

The changes were made in House Enrolled Act 1427, which moved through the legislative process mostly unopposed. Only a handful of senators strayed from supporting the bill after unanimous House approval, likely because it only codifies principles that the legal community has become familiar with and began seeing implemented since the revised guidelines took effect in January 2010.

Specifically, the amended parts of Indiana Code 31 delve into the definitions of “custodial” and “non-custodial” parents and require a court to specify in a child support order which parent can claim a child as a dependent for federal and state taxes. It established seven factors the court must consider in determining that, which Cassman says is one more than what the guidelines recommended. Those first six factors include the value of claiming that child at the marginal tax rate of each parent, the parental income levels, age and number of years that child would be a dependent under the parent’s care, the percentage of costs each parent pays in supporting the child, the monetary amount the parent might have incurred under a property settlement in divorce, and any financial aid benefit for postsecondary education.

dependentsBut family law attorneys say a seventh “catchall” provision allowing the court to consider any other relevant factors is one of the most significant changes. Before now, most lawyers and courts have focused on the second factor involving the parents’ income, and the value attached to each being factored in the dependency claim. Very few have honed in and based arguments or resolutions on the other factors, though. That may now change as the new law is implemented.

“The addition of the catchall provision may become relevant as lawyers and litigants focus on this change and develop arguments in each category, but in the short run it probably will not make much difference since the focus traditionally has been on incomes and the values of the exemptions,” Soshnick said. “Lawyers and litigants could create some sophisticated arguments and even think about offering expert testimony. Time will tell if it becomes more relevant.”

Other aspects of the new law are pretty tax-specific in purpose, but Cassman says they all serve the same practical effect: determining how litigants support a child. In order to claim a child as a dependent, a court is required to include in an order that the parent must have paid at least 95 percent of the child support for the calendar year.

That 95 percent payment aspect could be a point of contention in some cases, according to Cassmann. He wonders if extracurricular activities, educational costs, and medical reimbursements are considered “child support” for purposes of this provision as is contemplated in other parts of the 2010 guidelines.

The provisions would seem difficult to apply in some cases, such as where a payor has variable support revenue from commissions, bonuses, or irregular income. Cassmann says he found the Legislature’s use of the phrase “parent who pays support” rather than noncustodial parent interesting, because that would apply to negative support orders where a custodial parent actually pays the noncustodial parent as a result of income and parenting-time credit disparities.

Cassmann says this law is income-based and tax-focused in many aspects, and it stipulates that prosecuting attorneys or private attorneys who take up any Title IV-D paternity or child support matters as part of a case aren’t required to mediate, resolve, or litigate a dispute that arises about a parent’s right to claim a child as a dependent. That aspect of the new law could complicate the process for family law attorneys. Historically, attorneys, mediators, and judges would split the exemptions evenly and sometimes rotate them based on odd and even years.

“That approach felt somewhat fair, and frankly was easier than analyzing the true tax ramifications,” he said. “I think that approach is behind us and we will see more sophisticated analysis of the tax ramifications, as well as some creative arguments regarding how giving one parent or the other the right to claim would be beneficial to the child. We may see the use of CPAs more often to assist with this analysis.”•

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