Background of the Federal Constitutional Court’s decision on the child tax allowance 2014
By decision dated October 8, 2024 (Ref.: 2 BvL 3/17), the Federal Constitutional Court (BVerfG) dismissed as inadmissible the referral by a tax court for constitutional review of the amount of the child tax allowance for the year 2014. The decision highlights the strict requirements that apply to the reasoning and structuring of judicial proceedings pursuant to Art. 100 (1) GG.
Objective of the procedural review
In the underlying case, a tax court had expressed serious doubts as to whether the set child tax allowance for 2014 under Section 32 (6) EStG met the constitutional minimum requirements for the subsistence level for tax purposes. The court identified a possible conflict with the fundamental mandate of protection under Art. 1 (1) in conjunction with Art. 20 (1) GG and intended to involve the Federal Constitutional Court in a specific review of the provision.
Key considerations of the Federal Constitutional Court
However, the Federal Constitutional Court rejected the submission on formal grounds. The decisive factor was that the referring tax court had not met the requirements for substantiation.
Requirements for substantiation
It is essential that courts, in the context of a specific judicial review, must present in a comprehensible and thorough manner to what extent and for what reasons the provision in question might conflict with the Basic Law. This requires an in-depth constitutional examination—particularly with regard to case law and legal literature as well as a complete factual basis for establishing a constitutional violation.
The tax court had not made sufficient determinations regarding the actual quantitative subsistence level in 2014 and had inadequately considered existing measures at the household level, such as social transfers or family-related benefits. There was also a lack of a differentiated discussion of the relevant case law of the Senate and current standards of interpretation.
Significant legal guidelines
The BVerfG states that ensuring the tax-free subsistence level for children derives from Art. 1 (1) in conjunction with the principle of the welfare state. The legislature is obliged to take these value decisions into account when setting tax allowances, especially the child tax allowance. However, even in recent case law, a margin of discretion is recognized, the constitutional boundaries of which must be carefully illuminated. Such a margin of assessment must be clearly indicated and evaluated by the referring courts to enable constitutional review.
Consequences for practice and justiciability
Tax-free minimum subsistence level and judicial review
This decision makes it clear that the tax consideration of the child’s minimum subsistence and family-related burdens remains a core concern of constitutional jurisprudence. For taxpayers, this means that any deviation from the established BVerfG case law regarding the subsistence minimum generally requires a well-founded factual and legal basis.
Especially for business participants, companies, and high-net-worth individuals involved in individual or corporate tax planning, the decision underscores the importance of well-founded tax reasoning and the necessity of careful procedural preparation. Procedural errors at the judicial level—such as inadequate substantiation—can have substantial consequences for pending proceedings and their chances of success.
Further developments
The recent decision is embedded in an ongoing discussion about the appropriateness and structure of the child tax allowance as well as related tax provisions. Companies, investors, and private individuals should always anticipate current and future developments in supreme court case law when considering tax planning options.
The case also illustrates the necessity of carefully documenting all relevant circumstances and statements to ensure effective judicial review in the event of a dispute. The scope of the decision thus also extends to future disputes regarding family- and child-related support mechanisms in German tax law.
Legal support in tax law
Questions regarding tax allowances, the tax-free minimum subsistence level, and family-related benefits often raise complex legal issues. A structured and comprehensive approach is essential to identify and mitigate potential risks in corporate or personal tax planning at an early stage. In the event of specific legal questions about current regulations and their judicial handling, the lawyers at MTR Legal Rechtsanwälte are available for personal consultation.
