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The Scope of the Homestead Exemption

In Kansas, the homestead exemption is generally quite broad, allowing debtors to exempt their residence from forced sale under most circumstances. Under Kan. Stat. Ann. § 60-2301, the exemption extends to up to 160 acres of farming land or one acre within city limits, regardless of value. However, there are some limitations. For example, the exemption does not apply to sale for taxes or for the payment of obligations contracted for the purchase of the property or for the erection of improvements thereon. Additionally, in bankruptcy cases, federal law caps the “amount of interest” that the debtor has “acquired” in the homestead within the 1,215 days preceding the filing at $146,450. For joint debtors, this cap can be “stacked” to allow for a total exemption of $292,900.

ACREAGE LIMIT AND THE FEDERAL CAP

In the case of In re Rich, Case No. 12-10357 (Bankr. D. Kan. Apr. 16, 2013), the Court discusses the extent of the homestead exemption in Kansas, including the acreage limit and the federal cap on the amount of interest a debtor can acquire in the homestead. It also addresses how the exemption applies to joint debtors.

“Married Kansas debtors are entitled to exempt their homestead from execution by general creditors. The extent of the permitted exemption is measured in acres, not dollars, and a debtor’s homestead may have unlimited value . . . until that debtor seeks bankruptcy protection. Then federal law caps the “amount of interest” that the debtor has “acquired” in the homestead within the 1,215 days preceding the filing at $146,450.”

“Because the debtors are each entitled to “apply separately” the provisions of § 522 under subsection (m), each debtor’s homestead interest is capped at $146,450, meaning their total exemption is capped at $292,900. As there is nothing in the record to help me determine how much (if any) of the remaining $10,732 equity was acquired with the proceeds of the debtors’ former homestead as § 522(p)(2)(B) provides, the Trustee’s objection to their homestead exemption must be overruled. … The Bankruptcy Appellate Panel for the Tenth Circuit held as much in In re Nestlen In that case, Oklahoma joint debtors were permitted to stack their subsection (p) caps.”

CHANGES MADE BY BAPCPA THAT MAY LIMIT THE VALUE OF EXEMPT PROPERTY

In re Agnew, 355 B.R. 276 (Bankr. D. Kan. 2006), the Court discusses the Kansas homestead exemption, including changes made by BAPCPA that may limit the value of the exempt property.

This case concerns whether the Code limits Debtors’ homestead exemption thus originates in Kansas law, specifically K.S.A. 60-2301 which, as to agricultural land, grants a homestead in up to 160 acres occupied by the debtor as a residence, regardless of value. Until BAPCPA, there was no monetary limit on a bankruptcy homestead exemption claimed under Kansas law. However, BAPCPA added three new provisions to the Code, subsections 522(o), 522(p), and 522(q), which have the potential under certain circumstances the limit the value of the exempt homestead property.

APPLICATION OF THE FEDERAL BANKRUPTCY CODE TO STATE HOMESTEAD EXEMPTIONS

In re Nestlen, 441 B.R. 135 (B.A.P. 10th Cir. 2010), the Court in this case discusses the homestead exemption in Oklahoma, which is relevant to the research request as it addresses the application of the federal Bankruptcy Code to state homestead exemption laws.

Residents of Oklahoma may not opt to exempt property from the bankruptcy estate under § 522(d), but instead are limited to claiming exemptions under Oklahoma law. Under the Oklahoma Constitution and Oklahoma statutes, Oklahoma debtors are entitled to protect the entire value of their homestead from claims of creditors. 11 U.S.C. § 522(m). 11 U.S.C. § 522(b). Okla. Stat. tit. 31, § 1(B). Okla.

Relevant to this case, § 522(p)(1) prohibits a debtor from exempting any interest acquired in the Lookback Period to the extent it exceeds $136,875. Okla.

A limitation on the value of the urban homestead exemption arises only if more than 25% of the total square footage of the improvements on the claimed homestead is used for business purposes, in which case the exemption is limited to $5,000. See Okla. Stat. tit. 31, § 2(C). 11 U.S.C. § 522(p)(1).

THE IMPACT OF 11 U.S.C. § 522 ON UNLIMITED HOMSTEAD EXEMPTIONS

Dykstra Exterior, Inc. v. Nestlen (In re Nestlen), BAP No. WO-10-030 (B.A.P. 10th Cir. Dec. 21, 2010), in this case discusses the homestead exemption in Oklahoma, which is relevant to the research request as it addresses the application of 11 U.S.C. § 522 in a state with an unlimited homestead exemption.

Residents of Oklahoma may not opt to exempt property from the bankruptcy estate under § 522(d), but instead are limited to claiming exemptions under Oklahoma law. Under the Oklahoma Constitution and Oklahoma statutes, Oklahoma debtors are entitled to protect the entire value of their homestead from claims of creditors. 11 U.S.C. § 522(m). 11 U.S.C. § 522(b). Okla. Stat. tit. 31, § 1(B). Okla.

Relevant to this case, § 522(p)(1) prohibits a debtor from exempting any interest acquired in the Lookback Period to the extent it exceeds $136,875. Okla.

A limitation on the value of the urban homestead exemption arises only if more than 25% of the total square footage of the improvements on the claimed homestead is used for business purposes, in which case the exemption is limited to $5,000. See Okla. Stat. tit. 31, §§ 2(C). 11 U.S.C. § 522(p)(1).

KANSAS STATUTE AND KANSAS CONSTUTION DEFINING EXENT OF THE HOMESTEAD EXEMPTION

In the case Turner v. Keck (In re Keck), 363 B.R. 193 (Bankr. D. Kan. 2007), the Court discusses the Kansas homestead exemption, specifically referencing the state statute and constitution that define its extent.

Kansas is an opt-out state, which means that debtors’ homestead exemptions are determined by state law, subject to applicable Bankruptcy Code limitations. K.S.A. 60-2301 provides: “A homestead to the extent of 160 acres of farming land . . . occupied as a residence by the owner or by the family of the owner, or by both the owner and the family thereof, together with all improvements on the same, shall be exempted from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife, when that relation exists; but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements thereon.” Also see Kan. Const. art. 15, § 9.

HOMESTEAD EXEMPTION LIMITED BY THE MAXIMUM EXEMPTION CREDIT UNDER FEDERAL LAW

In re Stackley, Case No. 20-40715 (Bankr. D. Kan. May. 11, 2021), this case discusses the limits of the homestead exemption in Kansas, specifically noting that the exemption is limited to the “maximum credit allowed to the debtor” under the federal statute.

The Court finds that limitation is clear and unambiguous. The first sentence allows a debtor to exempt the “right to receive tax credits”‘ allowed under the federal and state EIC statutes.

There is no way to interpret this other than a reference to the preceding sentence which allows exemption of both the state and federal EICs, thereby requiring that the limit be applied to the aggregate of the federal and state EICs. Debtor argues that the foregoing interpretation of the limitation effectively precludes the state EIC exemption and “[h]ad the legislature intended the federal maximum credit clause to subsume the definition of the state maximum amount, it would have made no mention of the exemption of the state EIC in the statute.

OCCUPANCY AND OTHER REQUIREMENTS FOR ESTABLISHING THE HOMESTEAD EXEMPTION

In the case In re Ziccardi, Case No. 10-11965 (Bankr. D. Kan. May. 9, 2011), the Court discusses the requirements for establishing a homestead exemption in Kansas, including the issue of occupancy, and ultimately concludes that the property in question is the debtor’s homestead.

The Property is Ziccardis’ Exempt Honmestead KAN. STAT. ANN. § 60-2301 codifies Article 15, § 9 of the Kansas Constitution which established that “a homestead, occupied as a residence by the family of the owner” shall be exempted from forced sale. 11 U.S.C. § 522(b) exempts from the estate any property that could be exempted by a debtor at state law on the date of the petition. CFCU argues that the debtors do not occupy the homestead and, indeed, have never lived in it and clearly did not do so at the time of the petition.

I conclude that the property is the debtors’ homestead and has been since its purchase in 2008.

CFCU did not bear its burden to prove otherwise; the objection to the homestead exemption is therefore OVERRULED. 2.

In the case In re Hodes, 402 F.3d 1005 (10th Cir. 2005), the Court discusses the Kansas homestead exemption in detail, noting that Kansas has opted out of the federal bankruptcy exemption scheme and that the state’s homestead exemption is unlimited.

Because Kansas has opted out of the federal bankruptcy exemption scheme, the Hodeses may only claim exemptions available under Kansas law. See id; In re Douglas, 59 B.R. 836, 838 (Bankr.D.Kan. 1986) (“Kansas has opted out of the federal exemption scheme thus limiting the debtor to exemptions available under Kansas law.”); see also 11 U.S.C. § 522(b)(1); Kan. Stat. Ann. § 60-2312 (1994). Kansas’ homestead exemption originally derived from the state Constitution and has subsequently been codified by statute: A homestead to the extent of . . . one acre within the limits of an incorporated town or city, occupied as a residence by the family of the owner, together with all the improvements on the same, shall be exempted from forced sale under any process of law. . . . KAN. CONST. art. 15, § 9; KAN. STAT. ANN. § 60-2301 (1994). Unlike the vast majority of states, which impose a dollar limit on debtors’ homestead exemptions, Kansas’ homestead exemption is unlimited; bankrupt Kansas homeowners may protect the full value of their homes. “Homestead” generally signifies a dwelling house with customary appurtenances and includes outbuildings that are necessary for use where the family resides.

In re Ginther, 282 B.R. 16 (Bankr. D. Kan. 2002)

In re Ginther discusses the applicability of the Kansas homestead exemption to a property located outside of Kansas, and concludes that the exemption does not apply in that situation.

Thus, the proceeds from a voluntary sale of a Kansas homestead to be used to purchase a Colorado homestead, are not exempt. The debtors have manifestly stated their intention not to return to Kansas. Indeed, three months before filing this case, debtors attempted to purchase a home in Colorado Springs, relenting only when the economic uncertainties triggered by the events of September 11, 2001 occurred. Had debtors purchased a residence in Colorado, without question it would not have qualified for the Kansas homestead exemption in a subsequent Kansas bankruptcy filing. This Court agrees with the bankruptcy court in Peters, supra where it is stated:

In re Sauer, 403 B.R. 722 (Bankr. D. Kan. 2009)

ion to Homestead Exemption Issue The trustee, as the party objecting to debtors’ claim of exemption, bears the burden of proving that the exemption is not properly claimed.

  1. Kansas Homestead Exemption, KAN. STAT. ANN. § 60-2301 Kansas is one of those states that has opted out of the federal exemption scheme in bankruptcy and therefore, Kansas debtors are limited to state law exemptions. Kansas statutorily provides for a homestead exemption at KAN. STAT. ANN. § 60-2301.

George and Darla’s right to claim the homestead exemption is determined as of the date of their bankruptcy petition.

Debtors are entitled to exempt as their homestead, no more than one acre within city limits.

 

In re Kester, 339 B.R. 749 (B.A.P. 10th Cir. 2006)

We reject the Trustee’s assertion that allowing Debtors to claim a homestead exemption in property voluntarily transferred to a self-settled trust will compromise the bankruptcy process.

Given the strong policy statements of the Kansas Supreme Court that the homestead exemption should be construed liberally in order to “protect the family and society from the hardships which occur when a family loses its home,” the homestead exemption should be allowed. … The Trustee makes a rather cryptic argument that because the Kansas homestead exemption statute refers to “owners” of real property, then it must be limited to natural persons, and concludes the Trust may not claim the Debtors’ homestead as exempt. The bankruptcy court held that the equitable interest of the Debtors in the Real Property held by the Trust supports a claim of homestead exemption by the Debtors, who are natural persons.

 

In re Hartman, 335 B.R. 176 (Bankr. D. Kan. 2005)

  1. CONCLUSIONS OF LAW Debtor seeks to avoid Ewert’s judgment lien on his homestead, the parties’ former marital residence, pursuant to 11 U.S.C. § 522(f)(1), which provides, in pertinent part: All statutory references are to the Bankruptcy Code, 11 U.S.C. § 101, et seq., unless otherwise specified. Notwithstanding any waiver of exemptions, but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is — (A) a judicial lien, other than a judicial lien that secures a debt — (i) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement; and (ii) to the extent that such debt — (I) is not assigned to another entity, voluntarily, by operation of law, or otherwise; and (II) includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support;. . .

It is uncontroverted that the lien impairs Debtor’s homestead, and thus the second element is satisfied.

 

In re Cummings, 40 B.R. 208 (Bankr. D. Kan. 1983)

The Bankruptcy Court held that since the debtor had paid a substantial part of his alimony or property settlement obligations, and had been current on his child support obligations when his bankruptcy petition was filed, and had made payments thereafter, the debtor was therefore entitled to the homestead exemption.

Since the homestead exemption laws are for the benefit of the family and are to be liberally construed, Iowa Mutual Ins. Co. v. Parr, 189 Kan. 475, 370 P.2d 400 (1962), this Court finds the Bankruptcy Judge’s decision that the debtor was eligible for a homestead exemption should be affirmed. … The debtor’s acres are outside of an incorporated town or city and so this requisite of K.S.A. 60-2301 is met.

Consequently, the Bankruptcy Court held that all of the defendant’s acres, including his residence, came under the homestead exemption for farming land, except for the shop building, asphalt plant, and radio tower. Since most of these acres were cultivated by either the debtor or his lessee, this decision is clearly correct.

In re Earned Income Tax Credit Exemption Constitutional Challenge Cases, 477 B.R. 791 (Bankr. D. Kan. 2012)

If their conditions are met, subsections ( o ) and (p) cap the amount of the homestead exemption a Kansas bankruptcy debtor may claim; a non-bankrupt Kansas debtor enjoys an unlimitedhomestead exemption. The 2005 law also imposed domiciliary requirements on debtors seeking to exempt property under state law. See§ 522(b)(3)(A).

Other than subsections ( o ) and (p), and the domicile requirements, Congress has not limited state law exemptions.

 

In re Vazquez, 606 B.R. 432 (Bankr. D. Kan. 2019)

A Kansas chapter 7 debtor may “exempt from property of the estate” that property which is exempt under Kansas law.

A debtor therefore may only exempt property that is his or hers on the date the case is filed or meets the requirements of the Kansas exemption laws. See 11 U.S.C. § 522(b)(1)-(3).

The Kansas homestead exemption is codified in § 60-2301. Kansas courts liberally construe exemption laws in favor of the intended beneficiaries and objectives of the exemption.

 

Cushenberry v. Marsh (In re Marsh), Case No. 18-10722 (Bankr. D. Kan. Feb. 28, 2019)

Marsh’s homestead exemption protects up to one acre of land in an incorporated city with unlimited value as KAN. STAT. ANN. § 60-2301 provides. Accordingly, what Marsh “could” exempt is the entire property having a value that is equal to the value of the exempted homestead. … When she filed this case on April 24, 2018, Marsh claimed to own a one-half interest in Hyacinth.

Marsh’s homestead exemption protects up to one acre of land in an incorporated city with unlimited value as KAN. STAT. ANN. § 60-2301 provides. Accordingly, what Marsh “could” exempt is the entire property having a value that is equal to the value of the exempted homestead.

 

In re Rose, No. 21-10094 (Bankr. D. Kan. Jan. 10, 2022)

The homestead, as a properly exempted asset, is excluded from property of the estate available to satisfy debts.

The property, properly exempted by Debtor as his homestead, is no longer property of the bankruptcy estate. Exempt property is generally excluded from property of the estate available to satisfy debts that arose before the commencement of the bankruptcy case. An exception is when a creditor holds a lien in the exempt property that is not avoided as a judicial lien. So, the Court must now consider whether there is, or could be, a lien in the homestead or the retirement account that would warrant the parties to return to state court.

 

In re Withington, 594 B.R. 696 (Bankr. D. Colo. 2018)

Under the Court’s interpretation, the Debtors in this case are eligible to claim the bankruptcy homestead exemption under § 522(d)(1). It provides that a debtor may exempt “[t]he debtor’s aggregate interest, not to exceed $23,675 in value, in real property … that the debtor or a dependent of the debtor uses as a residence.”

However, the interest of each Debtor in the homestead is exempt up to the dollar limit. Thus, joint filing debtors may “stack” two bankruptcy homestead exemptions.

This allows them to exempt a total of $47,350 in home equity.

 

Rajala v. Liberty Bank (In re Buerge), Case No. 11-20325 (Bankr. D. Kan. Oct. 15, 2013)

The Kansas homestead is not an estate; it is a constitutional right implemented as an exemption that is remedial in nature. Upon allowance of the homestead exemption, the debtors’ residence was no longer property of the bankruptcy estate. See KS. CONST. art. 15, § 9, and KAN. STAT. ANN. § 60-2301 (2012).

For example, by its very nature, a § 522(f) motion seeks to avoid liens that impair a debtor’s interest in exempt property. Colon, 345 B.R. at 727.

 

In re Johnson, Case No. 01-15118 (Bankr. D. Kan. Mar. 12, 2003)

Based on the Court’s order that the Trustee must abandon any interest in the property, the Court need not decide the issue of whether joint debtors who are still married, but living apart, at the time of filing a joint bankruptcy may each claim a piece of real estate as exempt under the Kansas homestead exemption.

The Debtors listed both the Poplar and the 4th Street properties as exempt under the Kansas homestead exemption, K.S.A. 60-2301.

 

In re Rothwell, Case No. 04-41153-JMK (Bankr. D. Kan. Feb. 3, 2005)

The Hilt court also considered the Congressional purpose behind lien avoidance, as did the Supreme Court in Sanderfoot. That purpose is to allow debtors to “undo the actions of creditors that bring legal action against the debtor shortly before bankruptcy. Bankruptcy exists to provide relief for an overburdened debtor.

The court further found when a divorce decree ultimately grants property to one spouse or the other, a wholly new fee simple interest is created, and it is that new fee simple interest to which the former spouse’s judicial lien contemporaneously attaches. To satisfy this condition required for lien avoidance, Margaret Hilt would have had to have a preexisting fee simple interest in the homestead, which under state law she did not have prior to the entry of the divorce decree.

 

 

In re Jaramillo, No. 18-13231-j7 (Bankr. D.N.M. Apr. 14, 2020)

 

 

The Debtors elected the federal bankruptcy exemptions under § 522(d). Each debtor in a joint case is entitled to claim the federal bankruptcy exemptions.

 

The dollar amount of the statutory exemptions in effect when the Debtors filed their voluntary petition fixes the available exemption amount. See In re Pacheco, 342 B.R. 352, 357 (Bankr.

 

D.Mass. 2013) (“Bankruptcy Code § 522(b)(2) permits a state to ‘opt out’ of the federal exemption scheme, thereby requiring their residents to exempt property under state, federal non-bankruptcy or local law only.”) (quoting In re Gentile, 483 B.R. 50, 51 n.2 (Bankr.

 

 

In re Sager, Case No. 03-13626-DLS, Adv. No. 03-5308 (Bankr. D. Kan. Feb. 25, 2005)

 

 

The Bankruptcy Code, although generally permitting conversion of assets prepetition, also includes vehicles to prevent abuse of that process.

 

The issue of fraudulent conversion of nonexempt assets into an exempt homestead is frequently litigated in Florida, which like Kansas, has an unlimited homestead exemption. An illustrative case is European American Bank v. Lapse (In re Lapse).

 

The court denied discharge based upon several alternative code sections and further held that the debtor’s homestead exemption would be denied to the extent that proceeds from the creditor’s perfected security interest in accounts could be directly traced to the homestead’s acquisition. The court stated: … Commentators on the Kansas homestead exemption identified the Court’s rationale in Long v. Murphy, discussed above, to be “that the defendant did not acquire an exempt homestead, as the court did not purport to create or recognize an exception to the general rule that creditors cannot seek collection of their claims from an exempt homestead.”

 

 

In re Hess, 618 B.R. 13 (Bankr. D.N.M. 2020)

 

 

If the homestead is owned jointly by two persons, each joint owner is entitled to an exemption of sixty thousand dollars ($60,000). N.M.S.A. § 42-10-9. New Mexican exemption statutes are to be construed liberally in favor of debtors.

 

In Owen v. Owen , 500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991) the Supreme Court stated: No property can be exempted (and thereby immunized), however, unless it first falls within the bankruptcy estate.

 

Debtor may claim the homestead exemption to the extent of the value of the estate’s interest in the lease.

 

Because the trustee controls BHA 13445 via Debtor’s 100% ownership interest, the trustee could easily terminate the lease at any time, giving Debtor 30 days to vacate.

 

 

Parr v. Rodriguez (In re Parr), BAP No. CO-17-021 (B.A.P. 10th Cir. Jan. 26, 2018)

 

 

In the course of that proceeding, the Trustee recognized that if the debtor’s interest in the Englewood Property is determined to be the debtor’s exempt homestead, the estate will have to pay the debtor the value of the homestead property up to the statutory limit to which Parr is entitled.

 

Under the version of the homestead statute then in effect, Parr could have exempted up to $60,000 unless he qualified as an “elderly owner,” in which event he could exempt up to $90,000.

 

The dollar limit is higher for elderly homeowners.

 

 

In re Lewis, No. 21-13041-SAH (Bankr. W.D. Okla. Sep. 15, 2022)

 

 

  1. Debtor Lewis may exempt certain property interests, effectively removing them from the bankruptcy estate. In re Landgrebe, 2009 WL 3253933, at *1 (10th Cir. BAP Sept. 23, 2009) (citing 11 U.S.C. § 522(b)(1)).

 

Under 11 U.S.C. § 522(b), Oklahoma has opted out of the federal exemptions, limiting Debtors’ exemptions to those available under Oklahoma law. In re Reshetov, 2011 WL 4102770, at *1 (Bankr. N.D. Okla. 2011).

 

 

Larry Russell Homes Co. v. Maynor (In re Maynor), No. WO-21-027 (B.A.P. 10th Cir. Feb. 3, 2022)

 

 

Bankruptcy Code § 522 provides for the exemption of property from the bankruptcy estate created by § 541. A debtor may exempt from property of the estate a list of property contained in § 522(d) unless the applicable state law does not authorize the debtor to choose these federal bankruptcy exemptions.

 

A debtor may also exempt from property of the estate any property that is exempt under applicable state, local, and nonbankruptcy federal law. … Debtor lived and worked in Oklahoma for two years prior to filing bankruptcy in Oklahoma. In his bankruptcy case, citing the Oklahoma exemption statutes, Debtor claimed a homestead exemption in real property in North Carolina, where he allegedly intends to return after his Oklahoma employment ends. The Bankruptcy Court overruled an unsecured creditor’s objection to Debtor’s claimed homestead exemption, concluding Debtor’s prepetition domicile was in North Carolina and the extraterritorial reach of the Oklahoma homestead exemption law allowed Debtor to claim the North Carolina property as his homestead.

 

 

In re Beach, 21-10762-ta13 (Bankr. D.N.M. Feb. 7, 2022)

 

 

Debtors claim a $120,000 New Mexico homestead exemption on the house. N.M. Stat. Ann. § 42-10-9. When determining a chapter 13 debtor’s noncontingent, liquidated, and unsecured debts, the debtor’s homestead exemption reduces the amount of home equity available to a judgement lien holder. See, e.g., In re Smith, 435 B.R. 637 (9th Cir. BAP 2010): In ascertaining the extent to which the judgment lien, included in Schedule D rather than in Schedule F, was unsecured for § 109(e) purposes, Scovis considered not only the scheduled value of the property, the amount of the first trust deed and the amount of the judgment lien, but also the debtors’ declared California homestead exemption.

 

 

🟥 In re Anderson, 374 B.R. 848 (Bankr. D. Kan. 2007)

 

 

The Court today holds that § 522(p)(1) is inapplicable to a debtor who purchases his homestead prior to the 1,215-day period immediately preceding the filing of debtor’s bankruptcy petition. The trustee’s motion for summary judgment is therefore DENIED. Summary judgment is GRANTED in favor of debtor on the trustee’s objection to debtor’s homestead exemption based upon § 522(p)(1).

 

The bankruptcy court disagreed, overruling the objection and allowing the debtors’ claim of homestead exemption: