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IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax KARAN J. ADAMS, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. ) ) ) ) ) ) ) ) ) )

TC-MD 050817D

DECISION

Plaintiff appeals Defendant's Proposed Refund Adjustment notices dated April 27, 2005, and April 20, 2005, for the 2003 and 2004 tax years, respectively. The case management conference held Wednesday, October 26, 2005, was converted into a trial. Karan Adams appeared on her own behalf. Nancy Grigorieff, Certified Public Accountant and Auditor, appeared on behalf of Defendant. I. STATEMENT OF FACTS Plaintiff wrote in her Complaint that she provides "everything" for her grandson, Quinton. Plaintiff explained that she claimed the Working Family Credit for tax years 2003 and 2004 because she paid for her grandson's child care. Plaintiff testified that she filed the appeal in order to get an answer to her question why she was not entitled to the Working Family Child Care Credit. The parties discussed the recent legislation passed by the last session of the Oregon legislature changing the definition of "qualifying child" to include a grandchild. Defendant stated that the effective date of the changes to the law is 2005. /// /// /// DECISION TC-MD 050817D 1

II. ANALYSIS The issue of whether a legal guardian can claim a Working Family Credit has been thoroughly discussed in the court's Decision and Judgment in Richmond v. Department of Revenue, TC-MD No 040802E.1 (Copy attached.) In Richmond, the court concluded "that a grandchild does not meet the definition of a `qualifying child' under ORS 315.262(1)(e) because a grandchild is not a `child of the taxpayer.'" Richmond Dec and Judg at 5. The facts in the Richmond case are identical to the facts in this case before the court. Regrettably, as explained in Richmond, the court must deny Plaintiff's assertion that she is entitled to claim the Working Family Credit for child care expenses incurred for the care of her grandson. III. CONCLUSION Now therefore, IT IS THE DECISION OF THIS COURT that Plaintiff's appeal is denied. Dated this ____ day of December 2005. ______________________________ JILL A. TANNER PRESIDING MAGISTRATE

If you want to appeal this Decision, file a Complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR. Your Complaint must be submitted within 60 days after the date of the Decision or this Decision becomes final and cannot be changed.

This document was signed by Presiding Magistrate Jill A. Tanner on December 2, 2005. The Court filed this document on December 2, 2005.

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The court discussed the Richmond Decision with the parties.

DECISION TC-MD 050817D

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IN THE OREGON TAX COURT MAGISTRATE DIVISION Small Claims Income Tax FRANCES L. RICHMOND, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. ) ) ) ) ) ) ) ) ) )

TC-MD 040802E

DECISION and JUDGMENT

Plaintiff appeals Defendant's determination that she does not qualify for the Working Family Credit for 2003. During the telephone case management conference held July 27, 2004, the parties agreed to the facts and submitted the case to the court for decision. Frances L. Richmond appeared on her own behalf. Laurie Fery, Auditor, appeared on behalf of Defendant. I. STATEMENT OF FACTS Plaintiff has been the legal guardian of her grandson since he was approximately 18 months old. Throughout the subsequent seven and a half years, Plaintiff assumed the financial burden of raising her grandson, including day care costs. Plaintiff has chosen not to adopt her grandson with the hope that her son will someday assume responsibility for the child's care. On her personal income tax return for tax year 2003, Plaintiff claimed the Working Family Credit. Plaintiff's total 2003 refund claimed, including the refundable Working Family Credit, amounted to $1,528. On April 5, 2004, Defendant sent notice to Plaintiff that it was denying the Working Family Credit and reducing Plaintiff's 2003 refund to $981. Plaintiff submitted to Defendant a written objection to the denial of the credit. On May 12, 2004, Defendant issued a Notice of Refund Denial that rejected Plaintiff's claim. Defendant concluded that, for Plaintiff to qualify DECISION and JUDGMENT TC-MD 040802E 3

for the credit, the child expenses incurred must be for her son, daughter, step-son, or stepdaughter. Plaintiff appeals Defendant's ruling claiming child care expenses incurred for her grandson should qualify under the statute. She further argues that her status as the child's legal guardian qualifies her for the credit. II. ANALYSIS ORS 315.2622 allows certain low-income taxpayers a refundable credit against their Oregon income taxes for the purpose of partially offsetting the taxpayer's child care costs. The statute provides, in pertinent part: "A qualified taxpayer shall be allowed a credit against the taxes otherwise due under ORS chapter 316 equal to the applicable percentage of the qualified taxpayer's child care expenses * * *." ORS 315.262(2). The legislature provided definitions for the terms "qualified taxpayer" and "child care expenses." See ORS 315.262(1). Broadly speaking, a "qualified taxpayer" is a taxpayer who meets the income requirements specified in ORS 315.262(1)(d). "Child care expenses" are defined as "costs associated with providing child care to a qualifying child of a qualified taxpayer." ORS 315.262(1)(b). From the text of the statute, it is clear that the legislature intended the Working Family Credit to be available only in limited circumstances. First, the credit is available only to a "qualified taxpayer." If a taxpayer fails to satisfy the income requirements specified in ORS 315.262(1)(d), the Working Family Credit is unavailable. Second, the credit is available to offset only those child care costs specifically identified in the statute. Because the definition of the term "child care expenses" includes only those costs incurred in providing child care to a ///

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All references to the Oregon Revised Statutes (ORS) are to 2001.

DECISION and JUDGMENT TC-MD 040802E

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qualifying child, the costs of providing child care to a nonqualifying child are not creditable under ORS 315.262(2). The key question is whether Plaintiff's grandson is a "qualifying child" for purposes of ORS 315.262(2). The statute defines the term "qualifying child" as "a child of the taxpayer who is under 13 years of age, or who is a disabled child, as that term is defined in ORS 316.099." ORS 315.262(1)(e) (emphasis added). Plaintiff acknowledges that she has not adopted her grandchild. For that reason, Plaintiff's grandchild is not a "child of the taxpayer." Accordingly, the court finds that Plaintiff's child care costs are not creditable under ORS 315.262. Plaintiff argues that she may claim her grandson as a dependent on both her state and federal returns and, as a consequence, he should similarly be viewed as her dependent for purposes of the credit. Oregon allows the same number of personal dependency exemptions "as allowed under section 151 of the Internal Revenue Code" for federal purposes. ORS 316.085(1)(a). The Internal Revenue Code (IRC) generally allows an exemption credit for each "dependent" of a taxpayer. IRC

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