Tax Court: State can’t require SSNs to claim dependent children

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A Fort Wayne man who claimed a religious objection to obtaining Social Security numbers for his dependent children was entitled to claim those children as dependents on his state tax return after the Indiana Tax Court determined Monday the man provided the necessary documentation to prove the children are his dependents.

In William R. Larsen v. Indiana Department of State Revenue, 49T10-1503-TA-8, William Larsen never sought Social Security numbers for his three dependent children due to a religious objection. Additionally, none of the dependent children have an Internal Revenue Service-issued individual taxpayer identification number.

Larsen claimed federal dependency exemptions for each child on his 2013 federal income tax return, yet could not provide Social Security numbers or TINs. As a result, the IRS sent Larsen a letter requesting documentation to verify the children were his dependents. Larsen provided the requested information, and the IRS granted the federal dependency exemptions.

Larsen claimed similar deductions on his 2013 Indiana adjusted gross income tax return, provided each child’s name and explained his religious objections to obtaining Social Security numbers for them. However, the Indiana Department of State Revenue disallowed the deductions and assessed additional adjusted gross income tax.

After the department denied his protest, Larsen filed the instant appeal with the Indiana Tax Court, and the department subsequently moved for summary judgment. Specifically, the revenue department claimed it has authority to require Social Security numbers pursuant to Indiana Code 4-1-8-1 for purposes of internal verification and fraud prevention.

However, in a Monday opinion, Indiana Tax Court Judge Martha Blood Wentworth ruled I.C. 4-1-8-1 allows the department to merely request Social Security numbers for taxpayers, as it did in Larsen’s case. But under I.C. 6-3-1-3.5(a)(5)(A) – which says the Indiana dependency deduction is available for each federal dependency exemption “allowed” under Internal Revenue code – there is no requirement that a dependent’s Social Security number be provided, she wrote.

“Indeed, the only statutory eligibility requirement for an Indiana dependency deduction under Indiana Code section 6-3-1-3.5(a)(5)(A) is receipt of a federal dependency exemption,” the judge wrote.

Because Larsen provided documentation to verify the eligibility of his children for the federal dependency exemptions, he was also entitled to state dependency deductions, Wentworth held. The department’s motion for summary judgment was denied, and the judge granted summary judgment to Larsen.
 

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