Zingale v. Rabin (In re Zingale)

Summarized by Michael Coury , Glankler Brown, PLLC
13 years 6 months ago

Citation:

Zingale v Rabin, (In re Zingale), Case no. 11-3740

Tag(s):

Ruling:

Ohio Rev. Code Ann. section 2329.66(A)(9)(g) allows a debtor to claim an exemption in "payments" made under Section 24 or 32 of the Internal Revenue Code. Section 24 establishes the child tax credit (CTC) and allows the credit to be used to offset tax liability and any remaining credit to be refunded to the taxpayer as an overpayment. The Debtors sought to attribute a portion of their CTC which had been used as an offset against their taxes to part of their overall refund and to exempt that amount under the Ohio exemption statute. The Court held that the term "payment" as used in the Ohio statute did not encompass the non-refundable portion of the CTC.The Sixth Circuit affirmed the BAP but found it unnecessary to determine whether the non-refundable portion of the CTC was property of the estate since the Court found that the non-refundable portion of the CTC did not constitute a "payment" within the meaning of the Ohio exemption statute. The Court found that the IRS's treatment of non-refundable CTC supported the interpretation that the non-refundable portion of the CTC was not a payment but rather a credit, while the refundable portion was treated by the IRS as a payment. The remaining arguments of the Debtors were also rejected.

Procedural context:

The Chapter 7 Trustee objected to the Debtor's attempt to exempt a portion of the Debtor's tax refund based on the non-refundable portion of the Child Tax Credit (CTC). The Bankruptcy Court sustained the Trustee's objection and reduced the exemption by the amount of the non-refundable portion. On appeal, the BAP affirmed finding that the non-refundable portion of the CTC is used to offset the Debtor's taxes for that tax year and does not create a refund which is property of the estate.The Sixth Circuit affirmed the BAP on different grounds.

Facts:

The Debtors filed a joint Chapter 7 case and listed a joint interest in an income tax refund as "unknown". When the Debtors later filed their tax return, they amended their Schedule B to list a total refund of $8,542, and specified $4000 of that amount as attibutable to the Child Tax Credit. They then amended Schedule C to claim the $4000 of the refund as an exempt CTC under Ohio Rev. Code. Ann. Sec. 2329.66(A)(9)(g). The Trustee objected to that part of the exemption which was predicated on the "non-refundable portion" of the CTC, as not being exempt under the Ohio statute.

Judge(s):

Siler and White, Circuit Judges; Reeves, District judge.

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