CTC Refund Not Exemptible Under Missouri Exemption Statute

Posted by NCBRC - January 20, 2014

A recent BAP decision found that the debtor may not exempt her federal Child Tax Credit refund under Missouri’s exemption for “public assistance.” Hardy v. Fink (In re Hardy), No. 13-6029 (B.A.P. 8th Cir. Dec. 23, 2013) (notice of appeal to 8th Cir. filed January 2, 2014). The chapter 13 debtor sought to exempt her CTC refund under MO. REV. STAT. § 513.430.1(10)(a), which permits exemption of “public assistance benefits.” The trustee objected arguing that the tax credit did not qualify as public assistance because the credit is available to residents whose income is higher than those who qualify for public assistance in Missouri. The court rejected as overly broad the debtor’s definition of “public assistance benefit,” as any assistance that benefits the public. Instead the court turned to dictionary definitions for its conclusion that the recipient must be “needy” to receive public assistance and the federal Child Tax Credit was not limited to those families considered “needy.” Compare In re Zingale, 451 B.R. 412 (B.A.P. 6th Cir. 2011), aff’d Zingale v. Rabin (In re Zingale), 693 F.3d 704 (6th Cir., 2012) (CTC refund exemptible under Ohio Rev.Code § 2329.66(A)(9)(g) that exempts IRS CTC “payments”); In re Connors, 348 B.R. 1 (Bankr. D. Me. 2006) (because Maine law specifies the legislation to be considered “public assistance” for exemption purposes and does not include EITC or CTC federal tax refunds, neither are exempt).

The court dismissed the debtor’s argument that the refundable portion of the CTC should be considered separately for exemption purposes because the refund represents the excess after the tax credit is fully used and, therefore, only residents with low income would be entitled to it. See In re Johnson, 480 B.R. 305 (Bankr. N.D. Ill. 2012) (refundable portion of Adoption Tax Credit is “public assistance benefit” under Illinois law because while non-needy may receive the tax credit, limited financial means are a prerequisite to receiving a refund); In re Koch, 299 B.R. 523 (Bankr. C.D. Ill. 2003) (while CTC credit adheres to benefit of higher income families, refund is only available to those with low income and therefore constitutes “public assistance”). The court rejected the argument on the basis that the debtor failed to support the argument with any evidence that, in fact, only needy residents would be entitled to the refund.

Hardy opinion


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