Tax Refund Based on Credit Held Exempt From Colorado Bankruptcy

A Colorado taxpayer in bankruptcy doesn’t have to turn over any part of his federal income tax refund to the trustee, because the refund can be “attributed to” a child tax credit, the Tenth Circuit affirmed Tuesday.

The US Court of Appeals for the Tenth Circuit upheld lower court rulings that no portion of Jose Garcia-Morales’ $1,455 federal income tax refund, which was based on a refundable child tax credit, needs to be turned over to the trustee in his Chapter 7 bankruptcy. Colo. Rev. Stat. § 13-54-102(1)(o) provides an exception for an income tax refund “attributed to” an earned ...