## Facts

- Married taxpayers with minor children were jointly assessed for income tax and incurred childcare expenses (e.g., household help or external childcare).
- They challenged tax assessments denying, in whole or in part, recognition of childcare costs under the Income Tax Act and denying a household allowance largely available to single parents.
- Prior proceedings in the tax courts and the Federal Finance Court rejected the taxpayers’ claims.
- The taxpayers filed constitutional complaints asserting that the statutory scheme disadvantaged marriage and family and treated comparable family burdens unequally.
- The constitutional court consolidated multiple complaints and reviewed both the final tax judgments and the underlying statutory provisions.

## Issues

1. Whether constitutional protection of marriage and family requires income tax law to exempt childcare needs as part of the family’s existential minimum from taxation.
2. Whether granting key tax relief (childcare recognition and/or a household allowance) primarily to single parents while excluding married parents living together with their children violates the prohibition on disadvantaging marriage and family and general equality guarantees.
3. Whether inadequate tax recognition of childcare burdens impermissibly affects occupational participation and has constitutionally relevant gender-equality effects.

## Decision

- The court held that childcare needs are a necessary component of the family’s existential minimum that must be kept free from income tax.
- The court ruled that the challenged framework was incompatible with constitutional guarantees to the extent it failed to exempt the childcare-related component of the existential minimum in a realistic and appropriate amount.
- The court further held that categorical exclusion of married parents living together with their children from comparable tax relief could amount to an unconstitutional disadvantage of marriage and intact families.
- The court required the legislature to amend the rules governing childcare cost recognition and the household allowance and provided interim handling directions for pending matters.

## Legal Principles

- The state must structure income taxation so that the existential minimum of all family members is not taxed; this includes the child’s care needs as part of the family burden.
- Childcare costs that are necessary for parents to work and maintain the family’s livelihood must be accounted for as constitutionally required, non-taxable family necessities, not treated as optional spending.
- The legislature may provide targeted support for single parents, but it may not attach a materially worse tax position to the existence of marriage or to parents exercising childrearing responsibilities within a marital family community.
- Family-related tax rules must treat comparable childcare burdens in a manner consistent with equality guarantees and must be calibrated realistically to actual expenses.
- The legislature retains discretion over the instrument chosen (deduction, allowance, credit, or other mechanism), but the outcome must satisfy the constitutional minimum-exemption requirement and avoid disadvantaging marriage and family.

## Conclusion

The court concluded that childcare needs belong to the constitutionally protected, tax-free family existential minimum and that tax rules granting significant relief to single parents while denying comparable relief to married parents living with their children are unconstitutional to the extent they disadvantage marriage and fail to exempt necessary childcare burdens; the legislature was ordered to correct the framework.


Familienlastenausgleich II (Family Burden Compensation Case), 99 BVerfGE 216 (F.C.C. Ger. 1998)