Reversal was required where Department failed to consider grandfather’s criminal conviction exemption request in order to take custody of Indian minor. Parents’ rights were terminated and minor Autumn was freed for adoption. Because Autumn had Indian heritage, the dependency proceedings fell within the provisions of the Indian Child Welfare Act (ICWA). ICWA obligated the court to place Autumn with a member of her family, a member of her tribe, or with another Indian family. The maternal grandmother’s home, where Autumn’s six siblings lived, was one of two ICWA-compliant and potentially viable placement options. However, grandmother lived with grandfather, who had a prior criminal conviction. Based on the Department’s representation this conviction was nonexemptible, the court placed Autumn in a non-Indian home with a distant relative. Parents appealed, and the appellate court reversed. The Department misconstrued the applicable statutes when it concluded grandfather’s conviction was nonexemptible and thus failed to evaluate the exemption request on the merits. The case was remanded with instructions that the Department evaluate grandfather’s request for a criminal records exemption and report that decision to the parties. Should the Department deny the exemption, the record must establish that it exercised sound discretion in doing so.