Opinion
Case No. 99-20202, Chapter 7
February 17, 2000
ORDER SUSTAINING OBJECTION TO EXEMPTION
In this chapter 7 case, the debtor claimed an exemption in her Federal income tax refund consisting of an earned income credit. The chapter 7 trustee objected. The court deferred ruling pending the result of an appeal in a different case on the same issue, now concluded. The court is prepared to rule.
The debtor claimed an exemption in her "1998 Earned Income Credit/Tax Refund "of 75% of the refund pursuant to Wyoming Statute § 1-15-408(b) and 100% of the refund pursuant to Wyoming Statute § 42-2-113 (Lexis 1999). At the time the trustee objected to the exemption, the case of In re Trudeau was pending on appeal to the Bankruptcy Appellate Panel for the Tenth Circuit Court of Appeals. The issues in that case were the same, and the Panel decision is now a final order. In re Trudeau, 237 B.R. 803 (Bankr. 10th Cir. 1990).
The Bankruptcy Appellate Panel ruled that an earned income credit is not exempt under Wyoming Statute § 1-15-408(b) because it does not represent "earnings" or "disposable earnings" as defined by the statute. Nor is an earned income credit a form of public assistance exempt under Wyoming Statute § 42-2-102. Rather the credit is an incentive to work, not a form of welfare. Id. at 806.
Accordingly, the trustee's objection to the debtor's claim of exemption in her 1998 Federal tax refund and earned income credit is sustained, and the exemption is overruled.
ORDER DENYING MOTION TO RECONSIDER ORDER SUSTAINING OBJECTION TO EXEMPTION AND MOTION TO CERTIFY QUESTION
In this chapter 7 case, the debtor filed a Motion to Reconsider Order Sustaining Objection to Exemption and Motion to Certify Question. The order challenged was issued February 17, 2000, denying the debtor's claim of exemption in her federal tax refund and earned income credit (EIC) for the tax year 1998.
This exemption issue has been pending some time. When the trustee determined the debtor had a 1998 tax refund that was property of the estate, the debtor amended her schedules and claimed an exemption under 42 U.S.C. § 407. However, during the litigation on that issue, she also argued the EIC was exempt under Wyoming Statute § 42-2-113 which provides an exemption under Wyoming law in "public assistance and social services." She argued the EIC was a form of social welfare.
The court denied the exemption claimed under 42 U.S.C. § 407, and the debtor again amended her Schedule C. She claimed the exemption under Wyoming Statutes §§ 1-15-408(b) and 42-2-113 (Lexis 1999). The court deferred a ruling pending the results of an appeal in the case of In re Trudeau, no. 98-21647, where the same exemption issues were in question. Eventually, the Bankruptcy Appellate Panel for the Tenth Circuit Court of Appeals ruled in the Trudeau case. In re Trudeau, 237 B.R. 803 (10th Cir. BAP 1999). That court held an EIC is not exempt under either of the statutes cited by this debtor as creating an exemption.
The debtor in the Trudeau case appealed her case to the Tenth Circuit Court of Appeals, but agreed to dismiss her appeal under a settlement agreement with the chapter 7 trustee. The law in Trudeau is binding precedent in this District and on that basis, this court issued the February 17, 2000 order in this case, denying the claim of exemption. This motion followed.
The court will treat the debtor's motion to reconsider as a motion to alter or amend a judgment under Fed.R.Bankr.P. 7059 and Fed.R.Civ.P. 59(e). The debtor alleges the court has made a manifest error of law in determining that an EIC is not a form of public assistance or social services. The debtor urges the court to certify the issue to the Wyoming Supreme Court.
The debtor argues the BAP decision in Trudeau leaves open the possibility that an EIC is a form of "performance payment" exempt under Wyoming Statute § 42-2-113(b). This court disagrees and believes the issue was decided in Trudeau. Further, the court finds no merit in the debtor's argument that the issue should be certified to the Wyoming Supreme Court. The court believes the law is sufficiently clear cut that such certification is unnecessary.
The court disagrees with the debtor that an EIC is equivalent to a "performance payment" exempt under § 42-2-113 which provides: "public assistance and social services provided by this article are exempt from levy, execution attachment, garnishment or other legal process or debt collection remedy (emphasis provided)." First, and most obvious, an EIC is not a source of funds "provided by" the Wyoming Public Assistance and Social Services Act (WPASSA).
Second, an EIC is not a type of welfare grant. Sorenson v. Secretary of the Treasury, 475 U.S. 851, 858 (1986). Under the WPASSA, a "performance payment" is defined as "an amount payable to or on behalf of an eligible recipient." Wyo. Stat. § 42-1-102(a)(v). The Act defines public assistance in § 42-2-102(a)(vi) as financial assistance in the form of, among other things, a performance payment. Public welfare benefits are also defined as including "performance payments." Wyo. Stat. § 42-2-102(a)(vii). Public welfare benefits are described by a nonexclusive list which includes Medicaid, various forms of assistance and day care.
In the bankruptcy court's decision in Trudeau, this court ruled that if the Wyoming legislature had intended to exempt the earned income credit as a form of public assistance, it would have specifically done so. Although the Wyoming statutes are somewhat circuitous, they do not encompass the EIC created by Congress to negate the disincentive to work caused by Social Security taxes. Sorenson, 475 at 858. The EIC is paid pursuant to entirely separate statutory authority and for a stated different purpose.
The Wyoming Welfare Act does not provide an exemption for funds paid other than pursuant to the Act. Nor is an EIC a form of performance payment or welfare benefit contemplated by the exemption in the Wyoming statute.
This particular issue has been raised and argued and ruled upon many times in this court. The arguments are not new. There being no error of law, the debtor's motion to reconsider and her motion to certify this exemption question to the Wyoming Supreme Court is DENIED.