The Nebraska Court of Appeals in Bock V. Dalbey (19 Neb. App. 210, filed September 27, 2077) upheld a lower court divorce decision ordering the wife to file joint federal income tax returns with her husband for the years 2008 and 2009. The wife argued on appeal that the court’s order violates the Supremacy Clause of the U.S. Constitution (Article VI, Clause 2) which renders invalid a state law that conflicts with federal law enacted within the scope of federal power and requires that state judges follow preempting federal law. The court found that the lower court did not abuse its discretion and that no conflict existed between federal and Nebraska law because it viewed the matter at hand as a domestic relations matter over which state courts have jurisdiction. Other state courts have found similarly that a state court has authority to exercise its discretion in a divorce proceeding to require filing a joint federal income tax return: New Jersey (Bursztyn v. Bursztyn 379 N.J. Super, 385, 879 A. 2d 129 (2005)), North Dakota (Oldham v. Oldham, 677 N.W. 2D 196, (2004)), Ohio (Bowen v. Bowen, 132 Ohio App. 3d 616, 725 N.E. 2d 12165(1999)), Minnesota (Theroux v. Boehmler, 410 N.W. 2d 354, Minn. App. (1987)), Arkansas, Cox v. Cox, 17 Ark. App. 93, 704 S.W. 2d 171 (1986)).
A number of other state courts have held to the contrary that a state court in a divorce proceeding lacks equitable powers to order an unwilling spouse to sign a joint return: New York (Teich v. Teich 240 A.D. 2d 258, 658 N.Y.S. 2d 599 (1997)), Connecticut (Kane v. Parry, 24 Conn. App. 307, 588 A. 2d 277 (1991), Oklahoma (Matlock v. Matlock, 750 P. 2d 145, Okla. App. (1988)), Iowa (In. re Marriage of Butler, 346 N.W. 2d 45, Iowa App. (1984)), D.C. (Leftwich v. Leftwich, 442 A. 2d 139 (1982), Oregon (Lewis and Lewis, 81 Or. App. 22, 723 P. 2d 1079 (1986)). In Teich the New York Appellate Court stated that federal law gives each spouse the unqualified freedom to decide whether to file jointly or separately. The Oklahoma Appeals court in Matlock stated that to give such authority to a state court judge would be tantamount to removing the right of election conferred upon married couples under the Internal Revenue Code.
No federal court has ruled on the Supremacy Clause as it relates to the election to file a joint tax return but I believe the better view is that expressed by the New York, Oklahoma and other courts that have declined to uphold the power of a state court judge to order spouses to file jointly. Although the law of most states requires income taxes consequences to be considered in dividing marital property these laws merely recognize that dividing marital assets without considering the tax attributes of each asset would lead to inequitable results. Assume a marital estate with only two assets: an IRA account containing $1 million and a home worth $1 million that had cost $1,000,000. The spouse receiving the home would pay no tax on the asset received while the spouse receiving the IRA would pay income tax at graduated rates on every dollar removed from the account thus receiving net far less in value than $1 million.
There is also little controversy that a state court may order a spouse to relinquish the tax exemption for a child and sign Form 8332 to accomplish that end. Such an order deals directly with child support and custody issues and does not carry with it the potentially more serious consequences that might flow from being ordered to file a joint return. A spouse may rightly not wish to file jointly for many reasons including:
1. A joint return carries with it “joint and several liability” for the tax shown on the return and for taxes that may later be assessed with regard to the return year. While Section 6015 offers limited relief to a so-called “innocent spouse” the facts justifying relief from “joint and several liability” can be difficult to establish. The right of indemnification from the other spouse is an imperfect protection because IRS collection efforts may cause hardship to the spouse who was ordered to file jointly against his or her will.
2. A joint return is signed under express penalties of perjury. Filing a return false as to any material matter, even if no tax is owed, is a felony punishable by up to three years imprisonment and/or a fine up to $250,000 (IRC Section 7206). How does a spouse who does not believe in the honestly of her former spouse sign the declaration on a joint return? The return declaration states, “”under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”
3. Filing a joint return will involve communicating information to the tax preparer, often retained by the other spouse. This information will lose Fifth Amendment protection.
A state court judge should not impose its judgment over a spouse’s right to elect or not to elect joint filing. It should not impose these obligations and risks on an unwilling spouse when federal law specifically affords spouses the right to elect or not to elect to file jointly. Moreover, regardless of the Supremacy Clause, it is unwise to so order. Requiring the parties to join in the joint endeavor of filing a joint income tax return following the divorce is a recipe for additional litigation when one spouse wants to file separately for whatever reasons. If the court finds those reasons to be spiteful or irrational, the court can charge the refusing spouse with the additional tax liability engendered by his or her contumacious refusal. But, the court should not order the joint filing forcing the unwilling spouse to risk contempt or assume the potentially harsh consequences of signing a joint return.
© 2011 by Robert S. Steinberg
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