          IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA


                                  January 2016 Term
                                                                         FILED
                                  _________________
                                                                      June 3, 2016
                                                                       released at 3:00 p.m.
                                     No. 15-0190                     RORY L. PERRY, II CLERK
                                                                   SUPREME COURT OF APPEALS
                                  _________________                     OF WEST VIRGINIA




                                       ERIC M.,
                                       Petitioner

                                           v.

                                     LAURA M.,

                                      Respondent


                  ________________________________________

                  Appeal from the Circuit Court of Berkeley County

                    The Honorable Michael D. Lorenson, Judge

                            Civil Action No. 12-D-620


               REVERSED AND REMANDED WITH DIRECTIONS

                 _________________________________________

                              Submitted: February 24, 2016
                                  Filed: June 3, 2016


Kirk H. Bottner, Esq.                           Cinda L. Scales, Esq.
Charles Town, West Virginia                     Martinsburg, West Virginia
Attorney for Petitioner                         Attorney for Respondent




JUSTICE WORKMAN delivered the Opinion of the Court.
                              SYLLABUS BY THE COURT




              1. “In reviewing a final order entered by a circuit court judge upon a review

of, or upon a refusal to review, a final order of a family court judge, we review the findings

of fact made by the family court judge under the clearly erroneous standard, and the

application of law to the facts under an abuse of discretion standard. We review questions

of law de novo.” Syllabus, Carr v. Hancock, 216 W.Va. 474, 607 S.E.2d 803 (2004).



              2. “W.Va. Code, 48A-1B-12 [1997] now requires that the exemption be

allocated to the custodial parent, except in cases of shared custody, where the parties have

agreed otherwise, or where granting the exemption to the non-custodial parent will result in

increased income and child support to the custodial parent. In shared custody cases, the

dependent exemption shall be allocated between the parties in proportion to their adjusted

gross incomes for child support calculations. In a shared custody situation where allocation

would be of no tax benefit to a party, the circuit court or family law master need make no

allocation to that party.” Syllabus, in part, Spence v. Spence, 199 W.Va. 609, 486 S.E.2d 778

(1997).
Workman, Justice:



              This is an appeal by Eric M. (hereinafter “the father”)1 from an order of the

Circuit Court of Berkeley County refusing his appeal from family court. The family court

had refused to allocate tax exemptions for the two minor children of the father and Laura M.

(hereinafter “the mother”) in accordance with West Virginia § 48-13-801 (2015), finding that

the parties had a prior agreement which made such statutory application unnecessary.



                             I. Factual and Procedural History

              The parties were divorced on September 4, 2012. Two children, B. and C.,

were born of the marriage. The original divorce order provided that, for tax exemption

purposes, the father would claim B. and the mother would claim C. On March 14, 2014, the

mother filed a motion in family court for modification of the divorce order, with specific

regard to child support, medical support, and tax exemptions. She requested an order

providing that when one of the children reaches the age of majority and there is only one

child remaining to be claimed as a tax exemption, that one exemption should be rotated

between the parents on an annual basis.2

       1
         “We follow our past practice in . . . cases which involve sensitive facts and do not
utilize the last names of the parties.” State ex rel. W.V. Dep’t of Human Servs. v. Cheryl M.,
177 W. Va. 688, 689 n.1, 356 S.E.2d 181, 182 n.1 (1987) (citations omitted).
       2
       The older child, B., will turn eighteen in 2017. The younger child, C., will turn
eighteen in 2022.

                                              1

                On April 23, 2014, the father filed an answer and counter-claim, requesting the

court to amend the divorce order to include details of an agreed-upon joint parenting plan and

to allocate the tax exemptions in the manner set forth in West Virginia Code § 48-13-801.3

The father requested the application of the statutory requirement that the tax exemptions be

proportioned between the parents according to income, and he further clarified that he was

requesting the statutory application only “if no agreement is reached.”



                A family court hearing was held on April 28, 2014, resulting in the court’s

denial of the father’s request to modify the tax exemption allocation pursuant to the statutory




       3
           West Virginia Code § 48-13-801 provides as follows:

                       Unless otherwise agreed to by the parties, the court shall
                allocate the right to claim dependent children for income tax
                purposes to the payee parent except in cases of extended shared
                parenting. In extended shared parenting cases, these rights shall
                be allocated between the parties in proportion to their adjusted
                gross incomes for child support calculations. In a situation
                where allocation would be of no tax benefit to a party, the court
                need make no allocation to that party. However, the tax
                exemptions for the minor child or children should be granted to
                the payor parent only if the total of the payee parent’s income
                and child support is greater when the exemption is awarded to
                the payor parent.

Id. (emphasis provided). We note that the statute was previously codified as West Virginia
Code § 48A-1B-12. In a 2001 change, it was recodified as section 48-13-801. The only
alteration was the substitution of the terms “payor” and “payee” for the previous terms,
“noncustodial” and “custodial.”

                                               2

framework.4 The family court did not thoroughly explain its decision in the order, but it did

state on the record during the April 28, 2014, hearing that the parties will likely seek

modification when the oldest child reaches majority. In discussing West Virginia Code §

48-13-801, the family court observed: “It’s very peculiar. . . . But you’ll be in here again

anyway, won’t you, because you’re going to have just one child after [the older child] . . .

reaches the age of majority. So, we don’t need to address that issue today.” Counsel for the

father began to explain his position, but the family court interrupted and said: “I’m not going

to do that. I’m going to keep it, each have one, and you can appeal that if you want to. I

think it’s ridiculous.”



              On June 23, 2014, the father appealed to the circuit court, and the matter was

thereafter remanded to the family court for clarification regarding the denial of the father’s

motion to allocate the tax exemptions according to statute. By order entered September 19,

2014, the family court clarified its prior order and explained that the parties had agreed to

“equal custodial allocation” and that the father had requested re-allocation of the tax

exemptions only if no agreement was reached.5 Thus, the family court denied the father’s

request for the statutory tax exemption allocation. The family court also noted the statutory

       4
        The family court did, however, incorporate the terms of the joint parenting plan, a
matter to which neither party objects on appeal.
       5
       The family court explained: “As the parties reached an agreement, and the [father]
requested the tax deduction be split only if there were no agreement, the Court felt it
appropriate to deny the [father’s] request made in court after the agreement was reached.”

                                              3

language indicating that the exemption is to be granted to the payor only if the total of the

“payee [the mother in this case] parent’s income and child support is greater when the

exemption is awarded to the payor parent [the father in this case].” The family court

observed: “It did not appear that the [mother’s] income and child support would be greater

if the payor was awarded the exemption.”



              By order dated January 27, 2015, the circuit court refused the father’s appeal

of the family court order. The father thereafter appealed to this Court.



                                  II. Standard of Review

              In the syllabus of Carr v. Hancock, 216 W.Va. 474, 607 S.E.2d 803 (2004),

this Court explained:

                     In reviewing a final order entered by a circuit court judge
              upon a review of, or upon a refusal to review, a final order of a
              family court judge, we review the findings of fact made by the
              family court judge under the clearly erroneous standard, and the
              application of law to the facts under an abuse of discretion
              standard. We review questions of law de novo.

With the standard as guidance, we examine the issues raised in this appeal.



                                      III. Discussion

              The determinative issue on appeal is whether the parties had reached an oral

agreement regarding the allocation of tax exemptions for the children, the existence of which

                                              4

would render application of the statutory guidelines unnecessary, by virtue of the statutory

language. See W.Va. Code § 48-13-801 (providing statutory allocation is applicable

“[u]nless otherwise agreed to by the parties . . . .”). Based upon the assertions of the parties

on appeal and a review of the transcript of the family court hearing, it appears that the

parties’ oral agreement addressed issues such as weekly custodial time, vacation time in the

summer, and future reliance upon the agreed parenting plan. Additionally, the oral

agreement provided that the father would be responsible for daycare expenses, child support

would be paid pursuant to child support guidelines, and medical expenditures were to be

modified to provide for an equal split between the parents.



              Thus, the question for this Court is whether such a general agreement on

various tangential issues was sufficient to preclude application of West Virginia Code § 48­

13-801. The father essentially contends no agreement was reached on the specific issue of

reallocating the tax exemptions. The mother argues that because the father requested the

statutory tax exemption allocation only if an agreement could not be reached, the existence

of an oral agreement on the other issues satisfies that condition and eliminates the need for

statutory application.



              We are unpersuaded by the mother’s argument. The case sub judice is an

extended shared parenting situation, as contemplated by West Virginia Code § 48-13-801.


                                               5

Thus, unless otherwise agreed by the parties, the right to claim dependent children for income

tax purposes shall be allocated according to statutory guidelines. This Court finds the oral

agreement regarding custodial allocation and other tangential issues did not eliminate the

need to allocate the tax exemptions according to the statutory requirements. The record does

not reveal an agreement between the parties on the specific issue of tax exemption allocation.

It is impossible to know, in hindsight, precisely what the father may have intended in his

answer and counter-claim when he initially stated his request for re-allocation of the tax

exemptions “if no agreement is reached.” However, it is clear that the statute ineluctably

requires allocation of the tax exemptions to be calculated in a particular manner unless the

parties otherwise agree. Thus, the family court erred in finding no need to apply the statute

in this case.



                Further, the family court’s secondary conclusion that no portion of the

exemption could be allocated to the father was premature. Indeed, the statute does provide

that the “tax exemption should be granted to the payor parent only if the total of the payee

parent’s income and child support is greater when the exemption is awarded to the payor

parent.” W.Va. Code § 48-13-801. However, an appropriate financial analysis would be

required to properly evaluate that issue. The paradigm enunciated by the statute was

addressed in Spence v. Spence, 199 W.Va. 609, 486 S.E.2d 778 (1997). In examining the

statutory language now codified as West Virginia Code § 48-13-801, this Court in Spence


                                              6

explained the operation of the statute and held as follows in pertinent portion of the sole

syllabus point:

              W.Va. Code, 48A-1B-12 [1997] now requires that the
              exemption be allocated to the custodial parent, except in cases
              of shared custody, where the parties have agreed otherwise, or
              where granting the exemption to the non-custodial parent will
              result in increased income and child support to the custodial
              parent. In shared custody cases, the dependent exemption shall
              be allocated between the parties in proportion to their adjusted
              gross incomes for child support calculations. In a shared
              custody situation where allocation would be of no tax benefit to
              a party, the circuit court or family law master need make no
              allocation to that party.

Syl., in part, 199 W.Va. at 609, 486 S.E.2d at 778.



              As also observed in Spence, a court “should weigh the net effect on the child

of allocating the tax exemption to either [parent].” Id. at 612, 486 S.E.2d at 781. This Court

also recognized that “the first sentence [of the statute] would seem to mandate that the

[payee] parent should always receive the dependent’s income tax exemption.”                 Id.

“However, the last sentence of the section tempers the first, and allows the allocation of the

exemption to the [payor] parent in situations where the net effect benefits the child.” Id.

(emphasis added). Thus, it is the net financial effect upon the child which is paramount in

the determination.



              Other jurisdictions have also addressed these financial realities, “recogniz[ing]


                                              7

-- as indeed they must -- that the dependency exemption provides a financial benefit to the

parent entitled to claim it and thus must be considered in setting child and alimony

support[.]” Monterey Cty. v. Cornejo, 812 P.2d 586, 591 (Cal. 1991). The Supreme Court

of California also explained in Cornejo:

              The respective incomes of the parents may be such that if the
              noncustodial parent is allowed the exemption, his or her income
              tax may be reduced by an amount greater than the increase in the
              tax liability of the custodial parent deprived of the exemption.
              This circumstance will obtain where, as is often the case, the
              custodial parent’s adjusted gross income is less than the adjusted
              gross income of the noncustodial parent.

Id. at 592 (citation omitted). “In such a case, the effect of awarding the exemption to the

noncustodial parent is to increase the after-tax spendable income of the family as a whole,

which may then be channeled into child support or other payments.” Id. (citation omitted);

see also In re Marriage of Lovetinsky, 418 N.W.2d 88, 90 (Iowa Ct. App. 1987)

(“[D]ependency deductions are connected directly with the requirements of a noncustodial

parent to provide support and the allocation of the allowance has a direct effect on the

financial resources available to the child.”); Sarver v. Dathe, 439 N.W.2d 548, 551 (S.D.

1989) (“[A]llocation of this tax exemption affects the financial situation of the parties and

constitutes a factor in considering ability to pay child support. These are absolutely

interlocking considerations.”).



              In the present case, the family court appears to have made two erroneous legal


                                              8

determinations. First, it found statutory application unnecessary due to the existence of a

generalized oral agreement. Second, it found the father ineligible for the tax exemptions

even if the statute were applied. In so ruling, the family court rendered a conclusion on the

impact of the final sentence of the statute without the benefit of a comprehensive underlying

financial evaluation. In its September 19, 2014, order, the court explained: “it did not appear

that the [mother’s] income and child support would be greater if the payor [father] was

awarded the exemption.” There is no evidence in the record to support that conclusory

statement. Consequently, this Court remands this matter for application of the principles of

West Virginia Code § 48-13-801 and an evaluation of the financial effects of the tax

exemption allocations upon the children. Based upon the father’s contribution of sixty-nine

percent of the total income and the mother’s contribution of thirty-one percent, the statute

would appear to require the tax exemption to be allocated in those proportions.6 Pursuant to

the final sentence of the statute, however, the financial implications of granting the

exemptions to the payor father must be examined. Thus, on remand, a financial analysis will

be required and would necessarily include evidence regarding those computations.7

       6
        In this regard, the father asserts that an equitable allocation would be achieved by
dividing the tax exemptions into three parts, allowing the father to claim two of the three
parts and the mother to claim one of the three parts on a rotating, annual basis.
       7
        The parties refer to the chronological order in which the family court addressed the
issues presented. The mother contends that the father inappropriately requested modification
of tax exemption status after all other issues were discussed. The father argues the opposite,
contending that his request for tax exemption allocation preceded the discussion of the
custodial issues. The record is clear that the father requested re-allocation of the tax
exemptions in his answer, filed on April 23, 2014. The chronology of the ensuing discussion

                                              9

                                      IV. Conclusion

              Based upon the foregoing, the January 27, 2015, order of the Circuit Court of

Berkeley County refusing the appeal is reversed. This Court remands this matter to the

circuit court for entry of an reversing the family court’s decision and remanding to the family

court for further proceedings consistent with this opinion.



                                                   Reversed and remanded, with directions.




is not dispositive. Once the father requested allocation of the tax exemption and the parties
did not reach an agreement on the issue of the tax exemption, West Virginia Code § 48-13­
801 should have been examined by the family court.

        We also find the mother’s argument on the issue of statutory intent unavailing. The
statute is clear; in the absence of an agreement between the parties, it requires an allocation
of the tax exemption in a shared parenting case to be made in proportion to the parties’
adjusted gross income, with certain exceptions. Those issues must be addressed and resolved
upon remand.

                                              10
