04/08/1998 01:40 PM Senate JUD

                                                                               
         SB 306 - TAX EXEMPTIONS IN CHILD SUPPORT CASES                        
                                                                               
                                                                               
SENATOR DAVE DONLEY, prime sponsor of SB 306, said the current                 
federal tax law allows a tax deduction for a person even if this               
person fails to make child support payments, unless they                       
voluntarily sign over the deduction to the custodial parent or the             
custodial parent takes them back to court. SENATOR DONLEY said his             
original bill set up a system whereby the non-custodial parent                 
would fill out a form during the settlement, to be held by the                 
court until such time the non-custodial parent was in arrears and              
the court would release the form, which would trigger the reversion            
of the tax credit to the custodial parent. SENATOR DONLEY said the             
court system had objected to the expense and trouble of keeping                
these forms on file and had no better suggestions to offer, so the             
bill had been modified to require a judge to include a provision in            
a child support order that stipulates if the payor receiving the               
tax deduction fails to pay, the deduction will revert to the                   
custodial parent.  SENATOR DONLEY said this bill is not as good as             
the original bill and won't be as easy for the custodial parent,               
but will be better than the current system and addresses the                   
concerns of the court system.                                                  
                                                                               
SENATOR PARNELL moved the adoption of the new committee substitute,            
version H. Without objection, it was so ordered.                               
                                                                               
Number 098                                                                     
                                                                               
SENATOR ELLIS asked if the person wanting the exemption would need             
to request the document in writing, or if an automatic issuance had            
been considered. SENATOR DONLEY replied that was how the original              
bill had been set up. Now, the person seeking the exemption may                
have to go to the court again but it would be easier for them since            
the court order would already be in their favor if the payor is in             
arrears.                                                                       
                                                                               
SENATOR ELLIS thought that the Internal Revenue Service (IRS) held             
a dim view of conditional exemptions. SENATOR DONLEY replied that              
if the court orders the award of the exemption, the IRS will go                
along with it.                                                                 
                                                                               
CHAIRMAN TAYLOR remarked that federal tax law allows the exemption             
to the parent who is paying more than 50 per cent of support and               
this is difficult to determine. He said this exemption seemed to be            
awarded by the court as a part of the settlement, and said he was              
concerned about a person who may be paying more than 50 per cent of            
their net pay plus arrearage might lose this exemption on top of               
all that. SENATOR DONLEY explained that current law provides that              
if a non-custodial parent cannot pay, they are allowed to enter                
into an agreement of a payment schedule that is liveable. If they              
do not fall more than four months behind on this payment schedule,             
they are allowed to keep the deduction. CHAIRMAN TAYLOR asked if               
this also applied to keeping any licenses this person held and                 
SENATOR DONLEY said it did.                                                    
                                                                               
Number 198                                                                     
                                                                               
CHAIRMAN TAYLOR said that a significant change of circumstance is              
required before a change to a support order and a request for such             
a change can only be filed once every six months. He said he, as a             
judge, has required each party to send a copy of their tax return              
to the court and to their ex-spouse. This allows each spouse as                
well as the court a self-enforcing mechanism to appropriately                  
adjust a support order. This mechanism is self-enforcing due to the            
fact that perjury committed on a tax return is a felony. CHAIRMAN              
TAYLOR asked if there was any way to work some kind of provision               
like this into the bill.                                                       
                                                                               
MS. CECILIA LACARA, Deputy Director of the Child Support                       
Enforcement Division (CSED) of the Department of Revenue, testified            
that she had not seen the latest version of the bill but had no                
position for or against the original bill. She mentioned it will               
cost something to track compliance and likely would require the                
hire of a temporary person for part of the year. CHAIRMAN TAYLOR               
asked if the division already tracks those people who are in                   
arrears. MS. LACARA said the way an arrearage is now traced is in              
the form of a long audit statement, the division had envisioned a              
simple one page form.                                                          
                                                                               
SENATOR DONLEY reported that the section of the bill dealing with              
CSED was the same in both versions of the bill.                                
                                                                               
CHAIRMAN TAYLOR moved to the next order of business, SB 190.                   
         SB 306 - TAX EXEMPTIONS IN CHILD SUPPORT CASES                        
                                                                               
                                                                               
CHAIRMAN TAYLOR expressed his intent to hold on to this bill for               
now and entertained a motion to move CSSB 306(JUD). SENATOR PARNELL            
so moved and without objection, it was so ordered.