The CARES Act - Indiana Divorce Law and Child Support

We are surely just at the tip of the iceberg as to how the the Coronavirus Aid, Relief, and Economic Security (CARES) Act will impact Indiana divorces and child support orders. The blog posting reviews the potential implications of the CARES Act.

Individuals & Families

We have all heard that the CARES Act provides a tax rebate credit of a minimum of $600 up to $1,200 per taxpayer, plus $500 per child. These amounts (except the per-child payment) are doubled for filing jointly. However, those who have a reported child support arrearage are not eligible:

“The bill turns off nearly all administrative offsets that ordinarily may reduce tax refunds for individuals who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments.“The only administrative offset that will be enforced applies to those who have past due child support payments that the states have reported to the Treasury Department.” Source.

Retirement Account to Fund Divorce Payments and/or TO pay Child Support

Accessing retirement accounts, penalty-free may also effect divorced, or divorcing couples and may allow for payment of property settlement buy-outs and child support from retirement accounts. “The CARES Act allows individuals to withdraw up to $100,000 penalty-free from their retirement accounts through the end of 2020. This provision will help individuals who experience financial hardships and disruptions due to COVID-19 to access their own money without penalty.” Source.

Property Settlement, Income and Child Support

The CARES Act provides that net operating losses (NOLs) incurred in 2018, 2019, and 2020 may be carried back to offset taxable income earned during the five-year period prior to the year in which the NOL was incurred. 

The CARES Act also temporarily removes the taxable income limitation, therefore allowing taxpayers to utilize NOLs to offset 100 percent of taxable income in tax years 2018, 2019, and 2020. Taxpayers will be able to carry back the NOL's up to five years and recover income taxes paid in those years. This applies to NOL’s arising in 2018 and 2019, not only 2020. Losses incurred in tax years beginning before January 1, 2018 may be carried forward to tax years beginning after December 31, 2020 without being subject to the 80% income limitation. Source.

Some divorce agreements address how amended returns are handled. Typically, this comes in form of an agreement as to how to deal with additional tax owed, but here the possibility of a significant tax over-payment (refund) may be more exciting or problematic depending on your perspective. For instance, assume that Husband and Wife were divorced in 2018 and Husband kept a business that has NOL’s in 2020. Then, under the CARES Act he amends the 2018 return resulting in a refund. Should Wife share where the agreement indicates that all prior year refunds and/or obligations would be shared equally? At first blush, yes, but if the NOL’s are based on 2020 losses, then the answer maybe no, because the Husband in this example took the business free and clear and therefore allowing Wife to share in the refund - when it is based on 2020 NOL’s - maybe be contrary to the overall property division.

Also, Child Support….the concept of NOL’s being applied retroactively to prior year returns could affect child support matters as well. What if a child support order was based on the Payor’s income derived from a business and the application of the CARES act will allow the Payor to amend returns for prior years and reduce his losses for 2020. Potentially, this could allow the child support Payee to ask the Court to modify the support order as a result of the application of the NOL’s on the Payor’s income.

To discuss this please contact me. To see all of my postings on this topic search here. 

NEW Indiana Child Support Guidelines 2015

The Indiana Supreme Court issued an order amending the Indiana Child Support Guidelines on November 5, 2015.  Below I have summarized many of the changes.  A copy of the Order can be found here. 

• clarifying that the Guidelines apply to “educational support”;
• the Guidelines apply not only to dissolution and paternity actions, but also juvenile proceedings, as well as third-party custodian and guardianship matters;
• deleting language setting minimum support at $12.00 weekly;
• that “if there were specific living expenses being paid by a parent which are now being regularly and continually paid by that parent’s current spouse or a third party, the assumed expenses may be considered imputed income to the parent receiving the benefit”;
• an adjustment to support for subsequent legally adopted children;
• as to health care coverage, if the coverage is provided without cost to the parent(s) then zero should be entered as the amount; and, if health insurance coverage is provided through an employer, only the child(ren)'s portion should be added, and only if the parent actually incurs a cost for it;
• clarified how to credit social security benefits to a custodial parent;
• updating the Guidelines to follow the “new” emancipation age law;
• defines which education expenses are controlled expenses and which are extracurricular expenses;
• incorporates the Affordable Care Act –“The rebuttable presumption that all children have insurance available at a reasonable cost recognizes the purpose of the Affordable Care Act. Courts should consider any exemption under the Affordable Care Act as sufficient to rebut the presumption that insurance is available at a reasonable cost” ;
• a new provision regarding “Self-Monitoringand Compliance” with the requirement to provide coverage, based on the tax penalties in the Affordable Care Act;
• a removal of the HIPW worksheet and provisions;
• the following language related to the FAFSA form and whether the Court should enter a post-secondary expense order; and
• a consideration of how the right to claim a child as a dependent on a parent’s taxes may affect health insurance subsidies or tax penalties under the Affordable Care Act; shall be prorated by the number of persons covered to determine a per person cost.

To discuss this further please contact me.  

Same-Sex "Parents" - Visitation and Parenting Time - Indiana Law

On October 31, 2013 the Court of Appeals decided an important case in Indiana holding that a person who is the non-biological, same-sex parent of a child has standing to seek a visitation order with the child.  In doing so the Court of Appeals challenges the legislature to review its definition of "parent" (see below) 

In reaching the holding the Court  of Appeals details the policy reasons and merits of allowing visitation to grandparents, opposite-sex stepparents, foster parents and third parties in general.  Summarizing its reasoning the Court stated:

"By recognizing a right to third-party visitation, this court has acknowledged that a child's interest in maintaining relationships with those who have acted in a parental capacity will sometimes trump a natural parent's right to direct the child's upbringing. Moreover, although the reasons our Supreme Court articulated in Worrell for denying standing to former foster parents are beyond dispute, the rationale for limiting third-party visitation to stepparents alone is less clear. It appears to us that the Court viewed a stepparent relationship as a strong indicator that a custodial and parental relationship exists. But surely custodial and parental relationships may exist with third parties other than stepparents. Indeed, the situation presented here is characterized by even stronger indicia of a custodial and parental relationship. This is so because the parties originally intended for the biological mother's partner to fulfill the role of the child's second parent and actively encouraged the development of a parental bond between the partner and the child."

Importantly, the Court explained that a same-sex partner is not automatically entitled to visitation:

"Thus, in the particular factual circumstances of this case, a partner who did not give birth to the child has standing to seek visitation with the child. This is not to say that a former domestic partner is automatically entitled to visitation in these circumstances—it must still be established that visitation is in the child's best interests. We therefore reverse the trial court's conclusion that Partner lacked standing to seek visitation with Child and remand with instructions to reconsider Partner's request for visitation under the standard set forth in our third-party visitation cases."

So, while a same-sex partner may have visitation, Indiana has not held that they are entitled to visitation per the Indiana Parenting Time Guidelines. Yet. 

Finally, one of most interesting parts of the opinion is where the Court of Appeals urges the legislature to address this issue:

"Since King, the status of the law surrounding a lesbian partner's right, if any, to enjoy the rights of a legal parent of a child born to her partner under the circumstances presented here remains uncertain.[5] When this court decided In re A.B., we solicited guidance from the General Assembly on this issue. In the years that have passed since then, none has been forthcoming. The existing statutory framework does not contemplate the increased use of assisted reproductive technologies. Accordingly, it provides no guidance in situations where an intended parent lacks a genetic connection to the child. That deficiency is exacerbated by the growing recognition of less traditional family structures. Our system of government entrusts the General Assembly, not the courts, to fashion a framework for deciding matters as tethered to social mores and sensibilities as this subject is. We feel the vacuum of such guidance even more acutely now than we did eight years ago, when King was decided. Indeed, what began as a trickle is rapidly becoming a torrent, and the number of children whose lives are impacted by rules that have yet to be written only increases with the passage of time. They, and we, would welcome a legislative roadmap to help navigate the novel legal landscape in which we have arrived."

To discuss this please contact me. To see all of my postings on this topic search here.