Opinion
No. 0-560 / 09-1848.
Filed September 9, 2010.
Appeal from the Iowa District Court for Polk County, Michael D. Huppert, Judge.
Mary Banta appeals the district court's finding of default and award of attorney fees in its ruling on application for rule to show cause. AFFIRMED.
Lora L. McCollom of Skinner, Nielsen McCollom, P.L.C., West Des Moines, for appellant.
Theodore F. Sporer of Sporer Flanagan, P.L.L.C., Des Moines, for appellee.
Considered by SACKETT, C.J., and POTTERFIELD and TABOR, JJ.
This appeal requires us to determine whether the language in a divorce decree awarding a child dependency tax exemption to one parent "as long as [the child] is eligible pursuant to the Internal Revenue Service Code" is enforceable by contempt once the child becomes eighteen years old and is no longer the subject of a child support award.
I. Background Facts and Proceedings
Mary Banta and Samy El-Baroudi (Sam) were divorced on November 23, 2004. The decree of dissolution of marriage awarded the parties joint legal custody and joint physical care of their two children — Benjamin, born in 1990, and Madeline, born in 1995. The decree allowed Sam to "claim Benjamin as a deduction and/or exemption on his state and federal income tax returns as long as he is eligible pursuant to the Internal Revenue Service Code."
In July 2008, Benjamin turned eighteen years old, after graduating from high school. Child support was no longer required of Benjamin's parents. On the advice of her tax preparer, Mary claimed Benjamin as a dependent on her 2008 federal and state income tax returns: Mary's tax preparer testified that according to the information she received from Mary, Benjamin resided primarily with her, and Sam no longer contributed to payment of Benjamin's expenses. Sam also claimed Benjamin as a dependent on his 2008 federal and state income tax returns in reliance on the divorce decree.
On April 17, 2009, Sam filed an application for order to show cause, alleging Mary acted in contempt of the decree by claiming Benjamin as a dependent for purposes of the tax exemption. After a hearing, the district court ruled on October 6, 2009, that Sam had failed to prove Mary willfully defied the decree but had proved Mary to be in default under the decree. The court ordered Mary to amend her state and federal income tax returns for 2008 and to pay $1000 toward Sam's attorney fees.
Mary appeals, arguing the district court erred by finding her in default and ordering her to pay Sam's attorney fees. Both parties request appellate attorney fees.
II. Standard of Review
Our standard of review is for correction of errors at law. Iowa R. App. P. 6.4; In re Marriage of Swan, 526 N.W.2d 320, 327 (Iowa 1995). "If it is claimed that a ruling is not supported by substantial evidence, we examine the evidence . . . to assure ourselves the proper proof supports the judgment." In re Marriage of Spears, 529 N.W.2d 299, 304 (Iowa Ct. App. 1994). We are not bound by the trial court's conclusions of law and may inquire whether the trial court applied erroneous rules of law that materially affect its decision. Id.
We review the court's award of attorney fees for an abuse of discretion. In re Marriage of Colby, 569 N.W.2d 157, 159 (Iowa Ct. App. 1997).
III. Merits
Mary argues on appeal that the district court's authority to allocate a tax exemption for Benjamin ended when he turned eighteen and was no longer subject to child support. Mary cites In re Marriage of Kupferschmidt, 705 N.W.2d 327, 338 (Iowa Ct. App. 2005), in support of her argument.
Sam concedes that Kupferschmidt supports Mary's argument, but he argues that the Kupferschmidt court misapplied the earlier and controlling decision in In re Marriage of Rolek, 555 N.W.2d 675 (Iowa 1996). Sam asserts that the Kupferschmidt court erroneously relied on Rolek for the proposition that the authority to allocate tax exemptions for dependents lasts only as long as a child support award for the dependent. Sam argues that the trial court's authority to allocate tax exemptions continues for an adult child as long as the child is eligible pursuant to the Internal Revenue Service Code since the court's authority arises from its duty to make a comprehensive equitable financial settlement between the parties. He cites the following language from Rolek in support of this argument: "We conclude that an allocation of these exemptions to parents not otherwise eligible to take them under federal law is within the authority of the dissolution court to achieve an equitable resolution of the economic issues presented." 555 N.W.2d at 679.
The Kupferschmidt court correctly distinguished the analysis of the Rolek court on the allocation of tax exemptions for minor children and the separate issue whether the trial courts have continuing authority to allocate the tax dependency exemption for an adult child receiving a postsecondary education subsidy. Kupferschmidt, 705 N.W.2d at 338. The Kupferschmidt court then proceeded to decide the question that had not been presented to the Rolek court, namely the application of the relevant factors to parents of adult children who may choose to take their own exemption. Id. The Kupferschmidt court determined that continuing the trial court's authority to allocate tax exemptions as allowed in Rolek was problematic and illogical in the context of an adult child receiving a college subsidy. Id.
We agree with Mary's contention that under Kupferschmidt, a trial court is not authorized to continue an allocation of dependency tax exemption for an adult child receiving a postsecondary education subsidy. However, Kupferschmidt was decided after Mary and Sam's divorce decree clearly stated that Benjamin's tax exemption would be taken by Sam "as long as [Benjamin] is eligible pursuant to the Internal Revenue Service Code." It is not disputed that Benjamin was eligible pursuant to the Internal Revenue Service Code. Mary was in default under the divorce decree as it was written and in the absence of any application to modify its terms. We affirm the finding of default and the court's order to Mary to amend her 2008 state and federal income tax returns and pay any penalties incurred by Sam.
We note, however, that while Benjamin is under the age of twenty-four and a student, either parent may still be eligible to claim Benjamin as an exemption under the Internal Revenue Code. See 26 U.S.C. 152(c)(3), (e). Our holding applies only to the district court's authority to allocate that exemption.
IV. Attorney Fees
The district court awarded attorney fees pursuant to Iowa Code section 598.24 (2009), which authorizes the court to tax reasonable attorney fees against a party who has been found in default of a dissolution decree. Because we find Mary was in default of the decree, we affirm the district court's award of attorney fees. In our discretion, we deny both parties' requests for appellate attorney fees.