9.2.1 Ownership of Tax Refunds

Ownership of tax refunds is governed by state law.1  Because Louisiana is a community property state, division of a tax refund may require an analysis of the community and separate nature of the underlying income earned. In Louisiana, the classification of property as community or separate is fixed at the time of acquisition.2

For most low-income taxpayers, the Earned Income Credit (EIC) accounts for most of their tax refund. The portion of the refund attributable to the EIC is the separate property of the spouse who was entitled to the credit regardless of state law concerning the classification of income as community or separate property.3  Because the spouse with the earned income and/or the right to claim a dependent is entitled to the credit, the other spouse does not have a community property interest in any portion of the EIC

• 1See, e.g., Rev. Rul. 2004-72, I.R.B. 2004-30; Rev. Rul. 74-611, 1974-2 C.B. 399; see also Gray v. United States, 553 F.3d 410 (5th Cir. 2008) (analyzing interest in tax refund under Texas community property laws). Note that the allocation of tax refunds in non-community property states may involve an analysis of the spouse’s earnings, payments, and separate tax liabilities. See, e.g., I.R.M. 25.18.5.3; Rev. Rul. 80-7, 1980-1 C.B. 296; In re Palmer, 449 B.R. 621 (Bankr. D. Mont. 2011).
• 2Robinson v. Robinson, 1999-3097 (La. 1/17/01), 778 So.2d 1105. By comparison, stimulus refund payments may be owned 50-50 without regard for the parties’ respective incomes. See, e.g., In re Thompson, 396 B.R. 5 (Bankr. N.D. Ind. 2008).
• 3Rev. Rul. 87-52, 1987-1 C.B. 347.