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.