Agee v. Agee

*808[¶ 31] MILLER, Chief Justice

(dissenting as to Issue 2 and writing the majority opinion with respect to Issue 3).

Issue 2.

[¶32] Whether Richard is entitled to credit on past-due child support for the time the children resided with him.

[¶ 33] It is undisputed that the parties’ children lived with Richard for extended periods of time from 1988 through 1993. In total, Angela lived with Richard over three years, Justin lived with Richard nearly four years, and Rebecca lived with Richard for a year.

[¶ 34] Richard did not seek abatement of his support obligation in court until Jewell sought to recoup past-due support payments. Citing the general rule that child support cannot be modified retroactively, the majority holds that he is not entitled to abatement of his past-due support obligation during the time from 1988 through 1993 that the children actually lived with him. The majority reiterates the rule of Houser v. Houser, 535 N.W.2d 882 (S.D.1995), where the Court held that abatement can only be used to decrease a future support obligation, not existing past-due payments. Id. at 886. I rejected this reasoning in my dissent to Houser, and I continue to oppose this inequitable and unnecessary restriction on abatement. “[A]batement is appropriate where the obligation has simply accrued; the obligation need not have been paid in full. Although forward-reaching abatement is certainly an option for a noncustodial parent, abatement of past-due payments is still proper.” Houser, 535 N.W.2d at 888 (Miller, J., dissenting) (citations and quotations omitted).

[¶ 35] The majority would require Richard to pay full child support to Jewell when he was raising the children in his own home. Richard should not be penalized for assuming the custody and care of his children. Nor should Jewell receive a financial windfall as a result of relinquishing her custody rights.

[¶ 36] I do not believe South Dakota’s child support laws require such absurd results. I contend Richard is entitled to abatement of his support obligation for periods exceeding twenty nine days when his children were residing with him. I would remand to the trial court for determination of the proper reduction in Richard’s support obligation.

Issue 3.

[¶ 37] Whether Jewell was entitled to reimbursement for federal income taxes paid, because Richard claimed dependency exemptions to which she was allegedly entitled?

[¶ 38] The original divorce decree granted physical custody of all three children to Jewell. However, pursuant to an agreement between the parties that was incorporated into the divorce decree, Richard could claim two of the children as dependents for federal income tax purposes. The agreement stated in relevant part:

Pursuant to Section 152(c) or Section 152(e) of the Internal Revenue Code, or any other applicable section of the Internal Revenue Code or Internal Revenue Service regulation, as enacted or hereinafter amended, commencing with the year 1983, the Plaintiff [Richard] shall be entitled to declare both Angela Col-lette Agee and Rebecca Agee as his dependents for income tax purposes assuming that he has remained current on child support. The Defendant Jewell Agee shall claim Justin Adam Agee as her dependent for income tax purposes.

[¶39] From 1989 through 1992, Jewell claimed the parties’ youngest daughter, Rebecca, as a dependent on her federal income tax form. Consequently, Jewell received an income exemption for Rebecca in each of these years. Jewell did not claim Angela or Justin as her dependents during these tax years. Neither of these children lived with her for six months or more in any of the years from 1989 through 1992.

[¶40] It is undisputed that Angela and Justin lived with Richard a majority of the time in 1989, 1990 and 1991.5 Richard listed *809Angela as a dependent on his tax form in each of these years. Justin lived with Richard for eight months in 1989 and for the entire year in 1990, 1991 and 1992. Richard claimed Justin as a dependent in each of these years.6

[¶ 41] Jewell emphasized to the trial court that the divorce decree grants Richard two dependency exemptions “assuming that he has remained current on child support.” Jewell argued that Richard was not entitled to claim Justin or Angela as dependents for tax purposes, because he had not remained current on child support payments. Evidence in the record indicated that Richard had failed to satisfy a judgment entered in 1986 for past-due support payments of $1,550 owed to Jewell. Jewell also asserted that Richard was in arrears for support payments due from July 1987 through June 1993.

[¶ 42] Jewell’s claim went beyond a general assertion that Richard was not entitled to dependency exemptions for Angela and Justin. Jewell further claimed that Richard should reimburse her for the additional taxes she paid from 1989 through 1992 when she did not claim Justin or Angela as dependents. According to Jewell, she paid an additional $2,263 in federal income tax due to her failure to take dependency exemptions for either of these children from 1989 through 1992. [¶ (a) ]

[¶ 43] The trial court agreed that, because Richard was not current on his child support payments, he was not entitled to the dependency exemptions for Justin or Angela. Furthermore, the court ordered Richard to reimburse Jewell for the additional $2,263 she paid in taxes from 1989 through 1992 as a result of not having claimed these children as dependents for tax purposes.

[¶ 44] The dissent on this question frames the issue as “Whether Richard was entitled to federal income tax exemptions.” However, we respectfully submit' that is not the issue on appeal. The trial court did not stop at a simple determination that Richard is not entitled to the exemptions. The trial court further ruled that Richard must reimburse Jewell for $2,263 in purportedly excess tax payments. The issue Richard raises on appeal is whether the trial court erred in ordering him to reimburse Jewell for this amount. We are convinced the trial court did err.

[¶ 45] First, the parties’ divorce agreement does not prevent Richard from claiming dependency exemptions for Angela and Justin. The agreement gave physical custody of the children to Jewell. Therefore, the provision allocating the exemptions between the parties is based on the premise that Jewell is the custodial parent. Indeed, in awarding two of the exemptions to Richard, the agreement specifically refers to federal statutes permitting allocation of the exemption to the noncustodial parent. See 26 U.S.C. § 152(c) and (e). Once Richard assumed actual physical custody of Angela and Justin, this provision of the agreement ho longer applied. Therefore, in the absence of a specific provision that covered the situation, the trial court should have relied on the federal law which allocates the exemption to the custodial parent. See 26 U.S.C. § 152(e)(1).

[¶46] Second, Jewell has failed to show that she is legally entitled to the dependency exemptions for Justin and Angela. Generally, the income exemption for a dependent child goes to the divorced parent who has custody of the child for a greater portion of the calendar year. Id. It is undisputed that Justin and Angela were in Richard’s custody more than half of each of the relevant calendar years. Consequently, under the general rule, Richard was entitled to the exemptions and Jewell was not. Although there are various exceptions to this rule, Jewell does not argue that any of these exceptions apply to make her eligible for the *810dependency exemptions. See 26 U.S.C. § 152(e), (e)(2), (e)(3), and (e)(4). Nor does the record indicate that any of these exceptions were satisfied. In essence, the trial court ordered Richard to reimburse Jewell for tax payments she was obligated to make. As we have previously observed: “Trial courts do not have the authority to award dependency exemptions for federal income taxes. Federal tax law mandates that, absent three exceptions not applicable here, the exemption goes to the custodial parent.” Voelker v. Voelker, 520 N.W.2d 903, 909 (S.D.1994) (citing 26 U.S.C. § 152(e)(1)).

[¶ 47] Third, even if Jewell was entitled to the dependency exemptions, the trial court erred in requiring Richard to reimburse Jewell for excess tax payments. Richard did not prevent Jewell from claiming any dependency exemptions to which she was legally entitled. Jewell was always free to file her income tax forms in the manner she saw fit. Additionally, any excess tax payments made by Jewell went to the federal government, not Richard. Jewell should seek redress from that entity, by filing amended tax returns or taking other appropriate action to receive a refund.

[¶ 48] We reverse and remand as to issue three, because the award of $2,263 to Jewell was improper.

[¶ 49] AMUNDSON, J., concurs.

[¶ 50] GILBERTSON, J., concurs as to Issue 3.

[¶51] KONENKAMP, J., concurs in part and dissents in part as to Issue 3.

[¶ 52] SABERS, J., dissents.

. On May 6, 1993, Richard filed an affidavit with ffie court detailing the children's living arrangements from 1988 through 1992. According to this affidavit, Angela lived with Richard from February 1988 until July 1991. Justin lived with Richard from January 1989 until August 1989, *809when Justin returned to Jewell’s home. In December 1989, Justin moved back to Richard's home and lived with Richard until January 28, 1993. Jewell does not dispute these statements.

. Richard asserted that the parties' youngest child, Rebecca, lived with him for six months in 1992, from July through December. Richard claimed Rebecca as a dependent on his 1992 tax form. Consequently, both Richard and Jewell claimed Rebecca as a dependent in 1992. Because neither party raises any issues concerning the proper allocation of Rebecca’s dependency exemption, we need not address this question.