ILLINOIS LAW RE CHILD SUPPORT — “101/102" — STATUTORY AND CASE LAW
this article covers Case Law
click: for article covering Statutory Law


By: Gunnar J. Gitlin
The Gitlin Law Firm, P.C., Woodstock, Illinois
©
2013
www.gitlinlawfirm.com




Table of Contents:

 

IV.  Case Law Interpretations of IMDMA §505(a)(3)

Requirement for Proper Net Income Calculations in Each Case

Method of Calculating Net Income

Gross Income

Adjusted Gross Income

Itemized or Standard Deductions and Exemptions

Federal Tax Rate

Social Security Tax

State Tax

Net Income

Health Care Premiums

Prior Obligations of Support

Depreciation and Business Expenses

Types of Cases

Quantification

Flowchart re Depreciation Cases

Debt Repayment Schedule

Reasonable and Necessary for Production of Income

Increase in Income

Reasonableness

Per Diem Deduction for Business Expenses / What Constitutes "Income"

Crossland — Rejected Deduction for Per Diem Business Expenses

Worrall — Allowed Deduction of Per Diem Business Expenses if Actual Amounts Spent Proven

Tegeler — For Self-Employed Individuals Day to Day Operating Expenses Do Not Constitute Income

 

Reasonable Expenditures for the Benefit of the Child and the Other Parent

General Expenses for the Benefit of the Child, Exclusive of Gifts

Child Care Expenses

Income Averaging Cases

One Time Income

Deviations from the Support Guidelines

Deviations In Cases with Extensive Parenting Time

Child Support to Visiting Parent

Deviations from the Guidelines in High Income Cases

Decision Leading to Change in Law as to Needs -- Van Kampen

Garrett

Ackerley

Singleteary

Perry

Scafuri

Lee

Graham v. Adams

Bush

Summary as to Deviation Cases

Credit Toward Support Obligation -- Social Security Benefits and Adoption Subsidies

 

V.  Consideration of Income Tax Refunds, Dependency Exemptions and the Child Care Credit

Pylawka — Case Arguably Requiring Maintenance to be Considered as Adjustment in Determining Net Income

Dependency Exemptions

 

VI.  Support and Maintenance Arrearages — Is it Property or is it Subject to a QDRO?

 

VII.  Failure to Withhold / Pay Over Income for Support

 

 


 

 


IV.Case Law Interpretations of IMDMA §505(a)(3):

 

            A.        Requirement for Proper Net Income Calculations in Each Case: Case law has held that it is improper for the court not to consider the effect of the parties' new filing status and the reallocation of the dependency exemptions. Thus, net income calculations are required in virtually every case. The trial court should require each lawyer to present net income calculations in every case where the amount of child support is at issue. A 2002 case that is excellent reading as to how net income is properly determined is IRMO Ackerley, 333 Ill.App.3d 382 (2d Dist. 2002). Ackerley is an Second District case, August 2002 case. Because Ackerley reads as a primer on the law as to calculation of support in complex cases, I enclose a copy of the bulk of the decision (with the portions addressing contempt and fees eliminated.)

 

In Ackerley the trial court ordered payment of a support arrearage of $90,975 and set a support obligation of $3,000 per month. By the terms of the marital settlement agreement, the husband had been required to pay a base amount of support plus an amount equal to 25% of any “net bonus as defined by statute” received by him from his employer. The agreement provided, “For verification purposes, father shall provide mother with copies of his W-2 forms or other tax related statements indicating the bonus he has received on or before January 31st of each calendar year for the preceding calendar year.” The ex-husband was current in his base support as well as the bonuses through January of 2000.

 

One issue was whether FICA payments should be deducted in determining the amount owed for the support arrearage. The discussion of this is interesting in part because the bonuses were received at the beginning of the year and there was withholding from the bonus checks due to the FICA contribution. The appellate court rejected this argument noting that the FICA contribution ceases after a certain income level. The case quoted from IRMO Olson, 223 Ill.App.3d 636 (1992), “Bimonthly payroll receipts for periods less than a year for a noncustodial parent with above-average income may not reflect true income because such partial records do not reflect increased income on reaching maximum FICA withholding.” The appellate court stated:

 

The mere fortuity that respondent received his bonuses early in January, which often terminated his FICA obligation for the balance of the year and allowed him to collect his base salary free of this tax, should not work to disadvantage petitioner and the children... In short, we find no error in attributing deductions for dependent health insurance and FICA taxes to respondent's base salary instead of to his bonuses.

 

Another issue was whether the trial court should have added back his tax refunds into the ex-husband's bonuses. The appellate court noted it was able to use the actual amount of income the ex-husband received as well as the actual tax he paid as shown on his tax returns. Ackerley comments that Section 505(a)(3)(a) allows for a deduction of federal income tax as “properly calculated withholding or estimated payments.” The appellate court stated:

 

Properly calculated withholding is, by definition, withholding that coincides with actual tax owed on one's gross income. Thus, in calculating respondent's net income, we deducted the actual federal income tax that he paid from the actual total income that he received. An alternate approach employed by some courts is to begin with net income and add back in any refunds, which represent overwithholding. See In re Marriage of Pylawka, 277 Ill. App. 3d 728, 733 (1996) ("Thus, if the noncustodial parent overwithholds on his W-2, thereby overpaying his Federal income tax, the amount should be added back to his net income for purposes of determining his support obligation under section 505(a) of the Act"). These approaches represent two sides of a single mathematical coin. Because we have the benefit of having respondent's tax returns for past years available, we have chosen to employ the former approach, as it simplifies the calculation. Further, we agree with respondent that the effect of respondent's wife's income on his tax refunds should have been ignored. We note, however, that respondent's wife's income was relatively trivial when compared with respondent's income. Thus, whether one accounts for her income makes little difference to the ultimate determination of the amount of the arrearage.

 

The Ackerley decision also addressed one method to determine the Federal tax attributable to the bonus. It stated:

 

We first determined the amount of federal income tax attributable to a bonus. To do so, we divided the bonus by the total income for the given year. This yielded a ratio of bonus to total income. We then multiplied the total federal income tax for the year by the ratio. This yielded a figure that represented a proportionate share of the tax attributable to the bonus. By attributing a proportionate share of the tax to the bonus, we eliminated the effect of tax bracketing used in the federal income tax system. We believe that eliminating this effect is equitable. Neither party should benefit or be prejudiced by the artifice of considering certain income as falling into a certain bracket. Moreover, in determining appropriate child support, we are not bound by the technicalities of federal income tax law. See In re Marriage of McGowan, 265 Ill. App. 3d 976, 979 (1994).

 

This decision is a well-reasoned and complex decision. It points to the complex nature of proper support calculations. The appellate court did not base the taxes on the highest marginal tax bracket or on the lowest marginal tax bracket. Instead, it determined the overall effective tax bracket and determined taxes on this basis. For a further discussion of this topic, see the outlines regarding tax calculations in support cases.

 

            B.        Method of Calculating Net Income: Attached is a worksheet for calculation of net income. This worksheet will let you know what to look for when you analyze net income calculations offered by either party. Some judges use a tax program in chambers to determine net income. An excellent program of this type is Family Law Software.

 

                        1.         Gross Income: Determine the gross income.

 

                        2.         Adjusted Gross Income: Determine the adjusted gross income by subtracting adjustments from the gross income. The common adjustments are maintenance payments and certain voluntarily retirement contributions.

 

                        3.         Itemized or Standard Deductions and Exemptions: From the adjusted gross income, subtract the exemptions and the deductions. For final hearings, assume the tax status following the divorce. Thus, if the child support payor is awarded a residence and you know the amount of itemized deductions, use itemized deductions. If itemized deductions are not known, then use the standard deduction. Use the total number of exemptions that the payor will be entitled to following the divorce.

 

                        4.         Federal Tax Rate: Apply the tax chart or a tax program to determine the federal tax. 

 

                        5.         Social Security Tax: Determine the social security tax. This is calculated based upon gross employment income with a cap for the FICA component. The health insurance (Medicare) portion does not have a cap. Calculation of net for self-employed individuals is more complicated. Judges should require attorneys to submit net income calculations in each such case. 

 

                        6.         State Tax: Next, state tax is calculated upon gross income. $2,000 is deduction per exemption. The taxpayer's paid real estate taxes are also an exemption.

 

                        7.         Net Income: Subtract federal, state and FICA from the adjusted gross income. Finally, subtract the deductions allowed per §505 as well as the total child care credit (discussed below).

 

            C.        Health Care Premiums: IRMO Stone, 191 Ill.App.3d 172 (4th Dist. 1989), was the first case to hold that the deduction for health and hospitalization insurance premiums is not limited to children covered by the support order but includes all premium amounts paid.   In IRMO Davis, 287 Ill.App.3d 846 (5th Dist. 1997), the appellate court held that the trial court erred in not allowed a father a deduction in determining child support for health insurance premiums he paid for himself.

 

The provision of §505(a)(4) of the Illinois Marriage and Dissolution of Marriage Act, however, differs in its treatment of health care premiums as a deduction in determining net income where the court order provides for health insurance per §505.2(b). This statute appears to limit the deduction to the "portion of the premiums for which the supporting party is responsible in the case of insurance provided through an employer's health insurance plan where the employer pays a portion of the premiums" in determining net income.

 

            D.        Prior Obligations of Support: The issue here is whether prior obligations of support refers to prior families or prior support orders. This refers to a family that is first in time as compared to another family. IRMO Zukausky, 244 Ill.App.3d 614 (2d Dist. 1993). IRMO Potts, 297 Ill.App.3d 148, 231 Ill.Dec. 692 (2d Dist. 1998), GDR 98-80.  However, a dissent by Justice Cook (in the 2005 Einstein v. Nijim decision)  attacked the reasoning of the Potts case.  The Cook dissent stated:

 

It has been suggested that the language of section 505(a)(3)(g) allowing the deduction of "[p]rior obligations of support or maintenance actually paid pursuant to a court order" (750 ILCS 5/505(a)(3)(g) (West 2000)) carries forward the rule that a divorced spouse's obligations to the first family must be met before the obligations to the second family can or will be considered. Potts, *** I would suggest that use of the term "prior obligations" simply expresses the desire that child support be calculated based on the current situation and not on consideration of future obligations or attempts to predict what may happen in the future.

Potts 's statement of the "first family" rule is not supported by the cases it cites. In re Marriage of Zukausky, 244 Ill. App. 3d 614, 624 (1993), mentions the rule but goes on to say "[t]he court should not ignore the supporting parent's obligations to a second family and should consider that factor in deciding the appropriate modification award for the first family." Roqueplot v. Roqueplot, 88 Ill. App. 3d 59, 63 (1980), involved a petition to modify child support after the petitioner married a woman who had five children. Support of other children may be disregarded where there is no legal or moral obligation to provide it. In re Marriage of Vucic, 216 Ill. App. 3d 692, 704 (1991).

 

A significant case addressing children by a previously relationship is Slagel v. Wessels, 314 Ill.App.3d 330, 247 Ill.Dec. 765 (4th Dist. 2000). The question in that case is whether the court may deviate downward from the support guidelines in a case where there is a prior support obligation. Slagel involved a fact pattern in which the mother's previous husband had died and as a result she had custody of three children by a previous marriage. Therefore, there was no support obligation of the mother. In rejecting a rote application of the guidelines, the opinion stated:

 

 

The guidelines are a useful method of insuring that child support is set in an amount that is reasonable and necessary. Section 505, however, does not provide comprehensive rules for every conceivable situation. It is recognized that there are times when it will be improper for the trial court to apply the guidelines. For example, in "split custody" cases, where each parent is the custodian of at least one of the parties' children, section 505's guidelines are not necessarily applicable. In re Marriage of Demattia, 302 Ill.App.3d 390, 393 (1999). [GDR 99-22].

 

The Slagel court met the argument that §505 addresses prior child support obligations. The opinion stated:

 

One could argue that the legislature dealt with this situation when it provided a deduction from "net income" for "[p]rior obligations of support or maintenance actually paid pursuant to a court order." 750 ILCS 5/505(a)(3)(g) (West 1998). We disagree. Wessels argues that there is no court order here. The "court order" requirement was designed to avoid the situation where the individual owing a duty of child support sought to avoid that obligation by asserting the payment of large amounts to a prior family that may not in fact have been made or that may have been made in excess of the needs of the prior family. There is no doubt that Slagel is the sole support for her three children, and she should be given some consideration for the payments that she is required to make on that account.

 

Slagel is a case of first impression in Illinois addressing this issue.

 

 

            E.        Depreciation and Business Expenses: Subsection 505(a)(5) defines net income as income from all sources minus certain deductions including:

 

(h) Expenditures for repayment of debts that represent reasonable and necessary expenses for the production of income... The court shall reduce net income in determining the minimum amount of support to be ordered only for the period that such payments are due and shall enter an order containing provisions for its self-executing modification upon termination of such payment period.

 

            1.         Types of Cases: Early case law regarding business expenses did not concentrate on the requirement of showing a debt repayment schedule. Cases shortly before the Supreme Court's Minear decision dealing with depreciation cases have emphasized this requirement: IRMO Nelson, 297 Ill.App.3d 651 (3d Dist. 1998), IRMO Davis, 287 Ill.App.3d 846 (5th Dist. 1997). However, the Illinois Supreme Court's IRMO Minear, 181 Ill. 2d 552 (1998), case indicated that the law is less than clear on this subject. The Minear ruling was a conservative one because it did not go beyond the issues presented. The Minear court sidestepped substantive legal arguments, noting that the husband never explained the basis for the depreciation expense in his financial statement and therefore the Minear Court ruled that the husband "failed to present evidence that would, under the rule he proposes, warrant exclusion of that expense." My comment to the Gitlin on Divorce Report of the Supreme Court's decision stated:

 

The Supreme Court could have easily decided to refuse to take cert. on this case. They probably accepted cert knowing that there was a division among the districts and wanting to clear up the issue. Unfortunately, after accepting cert and reviewing the record, they learned that there was nothing to state the nature of the depreciation expense. Being a conservative judiciary, the court did the proper thing and refused to suggest by way of broad dictum that had the expense been justified as reasonable and necessary that the expense would have been allowed.

 

 

 

By way of example, Nelson held that the child support payor was not allowed to deduct farm equipment depreciation from his net income because he failed to show the expense was an "expenditure for the repayment of debt." It further held that the child support payor was not allowed to deduct payments toward farm operating loan principal from his net income because allowing the deduction would have permitted the payor use of the same deduction twice.

 

            2          Quantification: Attached are two spreadsheets analyzing certain issues according to the relevant factors in the statutory and case law. The first spreadsheet analyzes the depreciation elements of the cases and the significant factors. The second spreadsheet analyzes the business expense cases (non-depreciation cases) and the significant factors.

 

One opinion, Gay on Behalf of Gay v. Dunlap, is divided into two parts because the determination of one expense was remanded to the trial court. The remainder of the expenses were not allowed.

 

The column regarding "Expense Allowed" refers to those cases in which the expense was ultimately allowed as a deductible reasonable and necessary business expense as an end result. This includes cases where the expense was allowed at the trial court level and the result was affirmed, and cases where the trial court did not allow the expense but there was a reversal.

 

The taxpayer type is not always clear from the opinion. Where it appears relatively clear, the taxpayer type is set forth. It is clear from the spreadsheet that in most cases the taxpayer is a Schedule C taxpayer. In only one case was the business incorporated: IRMO Heil. It is probably not coincidental that this is one of the few cases where at least a portion of the expense was allowed as a reasonable and necessary business expense.

 

            3.         Flowchart re Depreciation Cases: The IRMO Davis case presents what can be illustrated via a flow chart regarding depreciation cases. Note, however, that especially in light of the Illinois Supreme Court's Minear case as well as the Worrall case, it appears that the law is not at all fixed as to whether there is an emphasis on proof of a debt repayment schedule.

 

                                    a.         Debt Repayment Schedule: First determine if there is a debt repayment schedule.

                                                a.         If no             Generally non-deductible (but issue not definitely resolved per Minear/ Worrall)

                                                b.         If yes            Go to step b.

 

                                    b.         Reasonable and Necessary for Production of Income: Determine whether the payor maintains his or her burden of proof of demonstrating expense was reasonable and necessary expense for production of income. (See Minear, Worrall, etc.)

 

                                                1          Increase in Income: Did income increase as a result of the expense? If yes, go to step (2). If no, this still may be deductible if extenuating circumstances exist.

 

                                                            (a)       Extenuating Circumstances: If there are extenuating circumstances, did the payor have a good faith belief that his income would have increased as a result of the expense?

 

                                                                        i)         If no,   ·         Non-deductible.

                                                                        ii)        If yes,  ·          Go to step (2).

 

                                                2.         Reasonableness: Did the support payor maintain his or her burden of proof of demonstrating the expenses are reasonable?:

                                                            (a)       Straight-line = Reasonable according to Davis.

                                                            (b)       Non-straight line = Unreasonable: Convert to straight-line depreciation schedule.

 

The most difficult deduction for the court to handle is expenses for the repayment of debts that represent reasonable and necessary expenses for the production of income. Non-reimbursed business expenses may or may not be deductible, depending upon whether they are reasonable and necessary and whether there is a debt that is being repaid.

 

Good Faith Belief that Income Would Increase as a Result of Expenses:  In Gay on Behalf of Gay v. Dunlap, 279 Ill.App.3d 140 (4th Dist. 1996), the appellate court applied a good faith test to business expenses, i.e., whether those expenses were outlaid by a parent with a good-faith belief his or her income would increase as a result, and which actually did act to increase income, or would have done so absent some extenuating circumstances.

 

There is another argument, however, that business debts should be "limited to extraordinary, large ticket, nonrecurring expenses," based on the language of section 505(a)(3)(h): "The court ... shall enter an order containing provisions for its self-executing modification upon termination of such payment period," as urged by the dissent in Gay. The appellate court focused upon a specified repayment schedule in Posey v. Tate, 275 Ill.App.3d 822 (1st Dist., 1995). The Posey court held that the trial court did not abuse its discretion in allowing depreciation on rental properties to be deducted from income for purposes of setting child support, where the payor used a straight-line depreciation method and the expense could be presented in a specified repayment schedule. Contrast Posey to IRMO Cornale, 199 Ill.App.3d 134 (4th Dist. 1990), where the appellate court held that the trial court did not err in refusing to deduct from the support obligor's net income his expenses incurred for a rental property which, although an investment, produced no income.

Student Loans May be Only Partially Deductible:  A 2004 case addressing the so called business expense deduction is Roper v. Johns, 281 Ill.Dec. 655 (Fifth Dist. 2004), GDR 04-37, in which the Fifth District appellate court found that student loans (in this case for law school) may only be partially deductible based upon the rationale of the In re Marriage of Heil, 233 Ill. App. 3d 888, 892 (1992) case (hunting lodge expenses only 50% deductible).  The Roper court first commented:  "The only such deduction relevant here is the deduction for the repayment of loans for "reasonable and necessary expenses for the production of income." 750 ILCS 5/505(a)(3)(h). This court has recognized that student loans fall within this category. In re Marriage of Davis, 287 Ill. App. 3d at 854. Although we held that the loans at issue in In re Marriage of Davis were deductible in their entirety (see In re Marriage of Davis, 287 Ill. App. 3d at 856), our opinion should not be read as holding that student loan payments will always be completely deductible. Like other debt payments deductible under this provision, student loans must be both reasonable and necessary for the production of income. See In re Marriage of Davis, 287 Ill. App. 3d at 853 ("simply because an expense falls into the category of a debt repayment does not mean that it is necessarily deductible")."  The Roper court stated, "Moreover, our examination of the purposes to be served by allowing the deduction in the context of student loan payments convinces us that trial courts must have the flexibility to find that a partial deduction is warranted."

After reviewing the law in other jurisdictions as to the issue, the appellate court stated, "With these principles in mind, we next consider whether-and to what extent-the debt Jeff incurred in pursuing his education was reasonable and necessary. Illinois courts have defined "necessary" expenses as " 'those expenses outlaid by a parent with a good-faith belief his or her income would increase as a result, and which actually did act to increase income[] or would have done so absent some extenuating circumstances.' " In re Marriage of Davis, 287 Ill. App. 3d at 853 (quoting Gay v. Dunlap, 279 Ill. App. 3d 140, 149 (1996)). We have defined "reasonable" as not immoderate, extreme, or excessive considering the relationship between the amount of the expenditure and the amount by which the parent's income is expected to increase as a result. In re Marriage of Davis, 287 Ill. App. 3d at 853 (citing Gay, 279 Ill. App. 3d at 149)."  As to the amount of the partial deduction the appellate court finally reasoned, "In the instant case, Jeff's combination of degrees enhanced his earning capacity and was, therefore, necessary for the production of income. However, we do not believe that the expenditure was reasonable-at least not in its entirety-for two reasons. First, it was entirely possible for Jeff to attain those degrees without incurring such an overwhelming level of debt. He could have found a job using the skills he had acquired with his undergraduate business degree and either attended law school part time while working full time or waited a few years between college and law school so he could pay down some of his undergraduate loans and save money towards his law school tuition and expenses. Further, he could have applied to law schools with lower tuition. Second, we agree with the trial court that the amount of debt incurred was excessive in relation to the extent to which Jeff's income was enhanced."

 

Per Diem Deduction for Business Expenses:

 

            Crossland Rejected Deduction for Per Diem Business Expenses:

 

IRMO Crossland, 307 Ill.App.3d 292 (3d Dist. 1999), held that the per diem expenses allowable as federal income tax deductions for unreimbursed business expenses are not deductible in calculating net income for child support purposes. In Crossland, the former husband sought a deduction for his business expenses based on the Internal Revenue Service's $36-per-day allowable income tax deduction for business expenses rather than an actual expense allowance provided by his employer. The trial court denied the ex-husband's request and the Third District appellate court affirmed.

 

On appeal, the ex-husband did not argue that his expenses fell within any deduction listed in §505(a)(3)(h) of the Illinois Marriage and Dissolution of Marriage Act. Rather, the ex-husband argued the legislature never contemplated that a supporting parent would have to pay child support on gross receipts reduced only by those deductions listed in §505(a)(3), and he should be able to deduct ordinary and necessary expenses incurred in carrying on his trade. He further argued the IRS's per diem allowance was a reasonable estimation of his business expenses and, therefore, he should be able to deduct that allowance instead of the actual expenses incurred.

 

The appellate court did not directly address the ex-husband's argument that §505(a)(3) was not an exhaustive list of deductions for calculating net income for child support. Rather, it held the per diem allowance was an inappropriate deduction in calculating net income for child support because at least some portion of the allowance may represent income. Citing a workers' compensation case, it held to the extent the per diem allowance exceeds actual expenses, the per diem allowance is income rather than a reimbursement and is properly considered in calculating child support. The reviewing court further held the Internal Revenue Code's per diem allowance had no bearing on the issue of net income for child support. Because the allowance is available only as an itemized deduction, it does not reduce taxable income if the taxpayer does not have enough itemized deductions to surpass the standard deduction.

 

            Worrall — Allowed Deduction of Per Diem Business Expenses if Actual Amounts Spent Proven:  A 2002 Illinois appellate court decision addressing the business expense deduction is IRMO Worrall. Worrall, 334 Ill.App.3d 550 (2nd Dist. 2002) addressed whether the trial court was correct in determining the father's net income per Section 505 did not include certain per diem expenses. The father was a truck driver whose compensation consisted of his base pay plus an amount designated as per diem which was designed to cover expenses for meals and lodging while on the road.

 

A key ruling by the Worrall court was that:

 

The case law cited by the Department illustrates that the supporting parent bears the burden of establishing that a deduction applies, See e.g., In re Marriage of Minear, 181 Ill. 2d 552 (1998) (even assuming that depreciation of business assets could be deducted, supporting parent could not take the deduction because no evidence was offered to explain the claimed depreciation expense); IRMO Nelson, 297 Ill.App.3d 651 (1998), (party claiming a deduction for depreciation as a reasonable and necessary expense for the production of income was required to show that the expense was the repayment of a debt).

 

The appellate court commented that there is a distinction between income and a recoupment of capital. (Citing Villanueva v. O'Gara, 282 Ill.App.3d 147 (1996)). In that case the issue was what portion of the net proceeds from the settlement of a product liability lawsuit was “income” for the purpose of support modification. The holding in the case was that recoupment for disability, disfigurement, pain, suffering and reasonable past and future medical expenses do not equal income for the purpose of paying support.

 

Worrall stated:

 

It is important to recognize that Crossland did not definitively reach the question of whether amounts designated as “per diem” should be included in income for purposes of calculating child support. It was unnecessary to do so because no part of the child support obligor's pay was designated as per diem. Viewing Crossland as a whole, the limited holding of the case is that a parent owing support may not reduce his or her net income by an amount representing per diem if his or her employer does not designate any portion of his pay as “per diem.”

 

In a decision which was surprisingly liberal (non-strict constructionist), the Second District Worrall went on to reject the reasoning of the Crossland decision. Worrall reasoned:

 

However, under the trial court's rationale, supporting parents earning the same total compensation and incurring the same expenses for meals and lodging might pay different amounts of child support depending on how much of the compensation, if any, is designated a per diem. An over-the-road truck driver who does not receive any compensation designated a per diem would apparently have to the show the applicability of a specific deduction under section 505(a)(3) of the Act (750 ILCS 5/505(a)(3) (West 2000)). This he or she might be unable to do because the only potentially applicable deduction is for "[e]xpenditures for repayment of debts that represent reasonable and necessary expenses for the production of income." (Emphasis added.) 750 ILCS 5/505(a)(3)(h) (West 2000). See Crossland, 307 Ill. App. 3d at 294 (over-the-road trucker "concede[d] that his business travel expenses do not fall within subsection 505(a)(3)(h) of the Act because they do not constitute repayment of debt"). We see no reason why the amount of support a parent pays should depend on notations on his pay stub that are simply designed to obtain advantageous tax treatment. To permit such a result would exalt form over substance. We therefore conclude that per diem allowances for travel expenses generally constitute income for the purpose of calculating child support. This income, however, is subject to reduction to the extent that the child support payer can prove that the per diem was used for actual travel expenses and not for his or her economic gain. ***

 

The decision thus held:

 

We therefore conclude that per diem allowances for travel expenses generally constitute income for the purpose of calculating child support. This income, however, is subject to reduction to the extent that the child support payer can prove that the per diem was used for actual travel expenses and not for his or her economic gain.

 

The appellate court then remanded the matter for a new hearing directing the trial court to include in the father's income the entire amount of the per diem travel allowance received reduced by the amount actually used for travel expenses with the father having the burden of proving the travel expenses. As to the burden of proof, the appellate court commented that, “unless the supporting parent bears the burden of proof, he or she will have no incentive to keep records of expenses for meals and lodging; such records are not necessary for tax purposes but might be useful against the parent in a child support proceeding.”

 

 

            IRMO Tegeler, 365 Ill. App. 3d 448 (Second Dist., 2006), is a more recent case addressing business expenses and it is the first case to take a liberal view regarding the "debt requirement" language.  In Tegeler one of the issues was the income of the ex-husband as a farmer and whether the trial court properly calculated the ex-husband's net income consistent with the provisions of Section 505(a)(3)(h) of the IMDMA – reasonable and necessary business expenses which are for the repayment of debt. The former wife argued that the trial court should not have subtracted the ex-husband's day-to-day operating expenses when determining his net income on an income averaging basis was less than $20,000 annually. The ex-wife claimed that the father presented no evidence that such expenses went toward the repayment of debts or that they represented reasonable and necessary expenses for his income production. Interestingly, the majority sided with the Cook dissent (and partial concurrence) in Gay v. Dunlop, 279 Ill. App. 3d 140 (1996). In Gay v. Dunlop, the appellate court held that money spent on gas, auto repairs, and insurance premiums, and certain other expenses, should not have been subtracted, because they were not expenses for the repayment of debts. In shades of Rimkus the appellate court stated, "We believe that Gay is distinguishable from the instant case." The appellate court then quoted from the Cook dissent where he noted that Section 505(a)(3) could be "troublesome" for more traditionally self-employed people:

 

"It seems clear there are obvious deductions which are not listed. For example, how is net income calculated for a merchant engaged in the sale of goods? Under section 505(a)(3) the court must begin with the total of the merchant's receipts from sales. Can there be a deduction for cost of goods sold? The only listed deduction which might apply is section 505(a)(3)(h), but that seems overly restrictive. There should be a deduction for cost of goods sold even if the merchant pays cash for them, even if there is no 'repayment of debts,' and even if the expense is a continuing one. I conclude the legislature intended to allow such obvious deductions even without specific language in section 505(a)(3). In the present case, for example, [the father] was not required to include the total commissions he earned and was entitled to a credit for the share taken by Coldwell Banker, including amounts it paid for his office expenses." Gay , 279 Ill. App. 3d at 151 (Cook, J., concurring in part and dissenting in part).

The appellate court justified its decision based upon the definition of income per Rogers II, defining income as "something that comes in as an increment or addition" as well as other similar definitions. The appellate court then stated, "As respondent's wealth is increased only by his gross farm revenues minus his day-to-day operating expenses, we conclude that the trial court properly adopted respondent's use of this figure as his "income" before subtracting the deductions specifically listed in section 505(a)(3)." The appellate court further justified is decision per the Worrall decision also addressing the issue of the definition of income (in the context of the per diem expenses paid to a truck driver.) Finally, the appellate court noted the limits of the Rogers decision as to loans and stated, "We believe that, in general, loans should not be considered income... A contrary interpretation that includes loans as income would often create unjust or absurd results...."

 

            F.        Reasonable Expenditures for the Benefit of the Child and the Other Parent: Common expenses of this type include child care expenses, premiums for life insurance and secondary school tuition expenses.

 

                        1.         General Expenses for the Benefit of the Child, Exclusive of Gifts:  Money a child support payor spends on a child (exclusive of gifts) should be deductible in determining his net income. IRMO Davis, 287 Ill.App.3d 846 (5th Dist. 1997).

 

                        2.         Child Care Expenses: In IRMO Stanley, 279 Ill.App.3d 1083 (4th Dist. 1996), one deduction from gross income was "day care contribution", per IRMO Serna, 172 Ill.App.3d 1051 (4th Dist. 1988). Stanley suggests in dictum that a justification for deducting the child care contribution is subparagraph (a)(2)(h) of §505, which authorizes a deduction for "reasonable expenditures for the benefit of the child and the other parent." Child care expenses are certainly reasonable expenses for the benefit of the child and the other parent. The problem is setting child support at a dollar certain while allowing a deduction for child care expenses in determining net.

 

            G.        Income Averaging Cases:

 

Perhaps one of the most underused methods of determining income for the purpose of paying either child support or maintenance is an income averaging approach. While there is a significant body of Illinois case law which looks favorably upon averaging income in appropriate cases, many lawyers underuse this device to determine income in cases where the payor's income varies significantly.

 

In IRMO Nelson, 297 Ill.App.3d 651 (3d Dist. 1998), the appellate court held that when child support obligor has fluctuating annual income, trial court properly determined child support by averaging obligor's net income over three consecutive years. The appellate court in Nelson commented favorably on the IRMO Freesen and IRMO Elies cases, discussed below. The Nelson three year figures were $43,000 in 1996, $74,000 in 1995 and $91,000 in 1994.

 

A similar ruling was regarding income averaging was made in Freesen, 275 Ill.App.3d 97 (4th Dist. 1995). The Freesen court held that where there are income fluctuations it is appropriate to consider prior years of income. Freesen stated:

 

Income need not fluctuate wildly before it is appropriate for the trial court to consider prior years of income in determining prospective income. We also note that there is no iron-clad rule requiring a trial court to consider only the last three years of income in arriving at net income for child support purposes. At least the three prior years should be used to obtain an accurate income picture. Beyond that, however, it must be left to the discretion of the trial court, as facts will vary in each case. While a court should not base net income findings upon the mere possibility of future financial resources, neither should it rely upon outdated information which no longer reflects prospective income.

 

At least three prior years of income should be used. It is suggested that Freesen represents a trend to consider an income averaging approach, whereas prior case law suggested the use of such an approach should be limited to very unusual circumstances. In Elies, 248 Ill.App.3d 1052 (1st Dist., 1993), the appellate court affirmed an award of child support based upon 3 year averaging where the income fluctuated significantly and reliability was not disputed. Finally, IRMO Schroeder, 215 Ill.App.3d 156 (4th Dist. 1991), held that deviations from current reliable current income data require a compelling showing of a definitive pattern of economic reversals.

 

The 1992 case of In re Marriage of Carpel also involved income averaging, but that case does not establish clear income averaging guidelines. It appeared Carpel was a three year averaging award in a case involving a lawyer. Carpel stated:

 

In a case such as this, the trial court should consider the supporting parent's previous income when trying to determine his prospective income. However, a court should not base its net income finding on the mere possibility of future financial resources (Harmon, 210 Ill. App. 3d at 96, 154 Ill. Dec. at 730) or on outdated data that no longer reflect prospective income. (In re Marriage of Schroeder (1991), 215 Ill. App. 3d 156, 161-62)”

 

IRMO DiFatta, 306 Ill.App.3d 656 (2d Dist. 1999), presented a new wrinkle regarding the income averaging cases. DiFatta held that where child support obligor is paid by the hour and his average hours of employment fluctuate significantly from year to year, a court may average the number of hours worked for the past ten years in determining net income for child support purposes. The DiFatta court approved the trial court's income averaging for ten years. That is a long time and sets an Illinois court of review record for the number of years for which a court can income average. The danger of following the DeFatta approach is in modifying support. If a period of ten years average earnings are used in setting support, it is more difficult to determine what would be sufficient for their to be a substantial change in circumstances.

 

A 2003 income averaging case is IRMO Garrett, 336 Ill.App.3d 1018 (Fifth Dist., 2003) where the appellate court approved income averaging where the average gross income was $214,000 without deviating from the guidelines.  More specifically, the appellate court approved of income averaging for three years approved despite having no broad fluctuation in annual incomes. (The appellate court found the husband's 1998 net income of $240,034, 1999 income of $237,897 and 2000 income of $164,836 “varied significantly from year to year.”)

IRMO Hubbs, 363 Ill. App. 3d 696 (Fifth Dist., 2006) presents the new development of applying ncome averaging when income from new employment is uncertain and where the non-custodial parent decides to take a job with more speculation as to commissions versus a job with an income certain.  The appellate court held that the trial court did not err in imputing to the husband a base gross income of $115,000 (based upon an average of the past three years of his previous employment.)  In addition, the husband was required to pay 13% of the gross income above this amount. The husband urged that the trial court erred in imputing income to him based upon his previous employment. On the income averaging issue the appellate court stated:

Where it is difficult to ascertain the net income of a noncustodial spouse, the circuit court may consider past earnings in determining the noncustodial spouse's net income for purposes of making a child support award. IRMO Karonis, 296 Ill. App. 3d 86, 92 (1998). Using an average income for the previous three years of employment is a reasonable method for determining net income where income has fluctuated widely from year to year. IRMO Nelson, 297 Ill. App. 3d 651, 655 (1998).

What is interesting is that in Hubbs there was income averaging based upon a past job in light of the uncertain nature of the income from the current job. In the husband's current job, his ultimate income would be based upon commissions. He received an advance of $7,500 monthly and these advances were loans which would then have to be repaid from commissions. The husband was responsible for all expenses related to the production of his income. The husband urged that the trial court should have determined his net income to be $2,367 per month. The appellate court applied the facts of the case to its decision as follows:

Mark's income for the previous three years was $133,000, $114,009, and $169,319, respectively. Mark also testified that he had recently rejected a job offer that would have paid him a salary of $120,000 a year. We believe that based on the evidence in this case, the circuit court acted properly in imputing Mark's gross income at $115,000. This figure is slightly below his average income for the previous three years and slightly below a salary that he could have earned had he accepted another position. Although the circuit court could have required Mark to pay a percentage of his net income to Peggy, we believe that it acted properly in determining gross income to be $115,000.


IRMO S.D. and N.D., 2012 IL App (1st) 101876, contains an excellent discussion regarding income averaging -- but in the context of a maintenance award. The former wife urged that the trial court erred in using a three year averaging of income:

Next S.D. contends that the trial court’s averaging of N.D.’s income for the years 2006, 2007, and 2008 was error because although his income decreased from 2006 to 2007, it rose from 2006 to 2008. She argues that the income data did not show a “definitive pattern of economic reversal” justifying the use of income averaging. As support, she cites Schroeder, 215 Ill. App. 3d 156 (1991). However, the trial court in that case averaged six years of income and the appellate court determined that some of the data was too old and unreliable. Id. at 161. It concluded that income averaging should only be used if a “definitive pattern of economic reversals” over several years is shown. Id. Also, the trial court here used data accepted by both parties for the past three years only. In Elies, 248 Ill. App. 3d 1052, 1060-61 (1993), the First District Appellate Court found that using the income average from the past three years was an appropriate method for determining available income for maintenance and support. Furthermore, it disagreed with Schroeder’s conclusion that income averaging should only be used if a definitive pattern of economic reversals over several years is shown. Id. We choose to follow Elies and find that the trial court did not err in utilizing income averaging to determine N.D.’s available income for maintenance.

The appellate court stated, “We choose to follow Elies and find that the trial court did not err in utilizing income averaging to determine [N.D.]'s available income for maintenance.”

 

These cases break down as follows:

 

 

 

            H.        One Time Income: The case law regarding non-recurring income had been that the court has discretion whether to consider such income in determining child support. For example, in IRMO Miller, 231 Ill.App.3d 481 (3d Dist. 1992), the appellate court held that:

 

While nonrecurring income may properly be included in calculating net income for purposes of child support (IRMO Hart (1990), 194 Ill.App.3d 839), this is not an inflexible rule, and the trial court has the discretion to exclude such income. To hold otherwise could lead to absurd results, as where a party's income is artificially inflated by a large capital gain on the sale of a residence. We believe that such determinations are best left to the sound discretion of the trial court.

 

Another significant case regarding one time income is IRMO Freesen, 275 Ill.App.3d 97 (4th Dist. 1995). Freesen is one of the cases addressing the income averaging topic (three years income averaging permissible). It also is a significant support case addressing passive income. The Freesen court ruled that the trial court did not err in deducting from the father's income the passive income he received from his employer, basing its ruling on the case of IRMO Harmon, 210 Ill.App.3d 92 (2d Dist. 1991), Gitlin on Divorce Reports, No. 91-32, where the Second District held that "when the unrefuted testimony is that the party does not actually receive the income from such a passive source, regardless of whether it is reported for Federal income tax purposes, it is not error for the trial court to refuse to consider the additional reported amounts when calculating net income." Harmon was a case in which the appellate court affirmed the trial court's refusal to consider the non-custodial mother's income from bonds and securities. Regarding passive income, although the opinion did not provide the details, apparently some of the additional income the mother received, she reported on her income tax returns as being received from passive sources which in fact she did not actually receive.

 

In 2004, I wrote: “Illinois family lawyers should keep a close watch on the Supreme Court’s review of the IRMO Rogers, 345 Ill.App.3d 77 (1st Dist., 2003) decision as to whether gifts and loans constitute income. Rogers (like Collingbourne) is now one of the seminal Illinois family law decisions.

The divorced father in Rogers earned only $15,000 annually from his teaching position. The trial court set his support obligation at $250 monthly. The mother appealed and argued that the trial court should have determined that his income was substantially higher because the father had received $46,000 in gifts and loans every year of the father’s adult life. Including those gifts and loans the mother urged that the father’s income was $61,000 not the $15,000 the father claimed. The ex-husband urged that consistent with In re Marriage of Harmon, 210 Ill. App. 3d 92 (1991) an annual gift of $10,000 should not be considered where there is uncertainty the gift would be received in the future.

The Rogers Supreme Court decisions, 213, Ill.2d 129 (2004), represents a water-shed for Illinois divorce lawyers. The Supreme Court noted that the first step in determining net income is to determine the ‘total of all income from all sources.’ The Supreme Court then stated:

As the word itself suggests, "income" is simply "something that comes in as an increment or addition ***: a gain or recurrent benefit that is usually measured in money ***: the value of goods and services received by an individual in a given period of time." Webster's Third New International Dictionary 1143 (1986). It has likewise been defined as "[t]he money or other form of payment that one receives, usually periodically, from employment, business, investments, royalties, gifts and the like." Black's Law Dictionary 778 (8th ed. 2004).

Under these definitions, a variety of payments will qualify as "income" for purposes of section 505(a)(3) of the Act that would not be taxable as income under the Internal Revenue Code... Based on the foregoing principles, we conclude, as the appellate court did, that the circuit court was correct to include as part of the father's "income" the annual gifts he received from his parents... They represented a valuable benefit to the father that enhanced his wealth and facilitated his ability to support Dylan.

Regarding the argument that consideration of future receipts of gifts and loans constitutes speculation, the Supreme Court stated:

Few, if any, sources of income are certain to continue unchanged year in and year out. People can lose their jobs, interest rates can fall, business conditions can wipe out profits and dividends. Accordingly, the relevant focus under section 505 is the parent's economic situation at the time the child support calculations are made by the court. If a parent has received payments that would otherwise qualify as "income" under the statute, nothing in the law permits those payments to be excluded from consideration merely because like payments might not be forthcoming in the future. As our appellate court has held, "the Act does not provide for a deduction of nonrecurring income in calculating net income for purposes of child support." In re Marriage of Hart, 194 Ill. App. 3d 839, 850 (1990).

The Supreme Court, however, allowed an out when it noted that, “the nonrecurring nature of an income stream is not irrelevant.” It then reasoned:

Recurring or not, the income must be included by the circuit court in the first instance when it computes a parent's "net income" and applies the statutory guidelines for determining the minimum amount of support due under section 505(a)(1) of the Act. If, however, the evidence shows that a parent is unlikely to continue receiving certain payments in the future, the circuit court may consider that fact when determining, under section 505(a)(2) of the Act (750 ILCS 5/505(a)(2) (West 2002)), whether, and to what extent, deviation from the statutory support guidelines is warranted. Moreover, if the payments should stop earlier than anticipated by the court, the parent obligated to provide support based on those payments may seek modification of the support order pursuant to section 510 of the Act

The case law in following Rogers, has been far less generous in terms of whether income should be considered as non-recurring.  An example of a bad case potentially making bad law in this regard is the Second District's 2005 IRMO Lindman, decision, 356 Ill.App.3d 462 (2d Dist. 2005).  Lindman held that the trial court did not err when it refused to grant petitioner’s petition to reduce child support because he lost his job and was receiving distributions of IRA awarded him in dissolution proceeding, because the distributions from his IRA were properly considered “income” within definition of Section 503of IMDMA, therefore making his net income greater than it was when child support was set. Significant factors in the trial court's award were the fact that the ex-husband lost his job due to alcohol abuse and that at the time of the divorce, he earned approximately $80,000 annually while the two years immediately before filing his petition for modification (2000 and 2001), the ex-husband had a gross income of $160,000 and $100,000, respectively. Lindman contains several quotes establishing the comprehensive sweep of what constitutes income for support purposes:

Consistent with the above understanding, Illinois courts have concluded that, for purposes of calculating child support, net income includes such items as a lump-sum worker's compensation award (In re Marriage of Dodds, 222 Ill. App. 3d 99 (1991)), a military allowance (In re Marriage of McGowan, 265 Ill. App. 3d 976 (1994)), an employee's deferred compensation (Posey v. Tate, 275 Ill. App. 3d 822 (1995)), and even the proceeds from a firefighter's pension (People ex rel. Myers v. Kidd, 308 Ill. App. 3d 593 (1999)).

We see no reason to distinguish IRA disbursements from these items. Like all of these items, IRA disbursements are a gain that may be measured in monetary form. Rogers, slip op. at 5. Moreover, IRA disbursements are monies received from an investment, that is, an investment in an IRA. See Black's Law Dictionary 789 (8th ed. 2004); see also http://www.investorwords.com/2641/IRA.html (last visited December 22, 2004) (defining an "IRA" as "[a] tax-deferred retirement account for an individual *** with earnings tax-deferred until withdrawals begin"). Thus, given its plain and ordinary meaning, "income" includes IRA disbursements.

Next, the court addressed the ex-husband's other arguments including the argument that the IRA distributions were non-recurring.  The Lindman appellate court was very clear as to the limitations of the opinion in terms of applying an abuse of discretion standard:

Thus, consideration of these arguments requires us to determine only whether the circuit court's net income calculations and its resulting refusal to modify petitioner's child support obligation amounted to an abuse of discretion. In re Marriage of Schacht, 343 Ill. App. 3d 348, 352 (2003). "A trial court abuses its discretion only when its ruling is ' " 'arbitrary, fanciful or unreasonable' " or " 'where no reasonable man would take the view adopted by the trial court.' " ' [Citations.]" With that in mind, we take petitioner's arguments in turn.

The Lindman court next stated: 

To begin with, "the Act does not provide for a deduction of nonrecurring income in calculating net income for purposes of child support." In re Marriage of Hart, 194 Ill. App. 3d 839, 850 (1990). Thus, if we were to conclude that such income is, by virtue of its lack of regularity, excluded from the net income calculation, we would read into the plain language of the statute limitations and conditions not expressed by the legislature. And there is a further problem with petitioner's theory. It presumes that the net income inquiry is concerned with what a parent's income will be at some time after the child support determination is made. It is not. Rather, the net income inquiry focuses on a parent's income at the time the determination is made. Should that income later change, the Act allows a parent to petition for modification of the support order. 750 ILCS 5/510 (West 2002). Indeed, that is precisely what petitioner did here. But what the Act does not do is allow the possibility of more or less income in the future to determine whether the parent will pay more or less child support today.

It is noteworthy that the language in the November 2004 Rogers Supreme Court decision is more limited as to the non-recurring income issue.  Lindman quoted from Rogers:

As the supreme court has said:

"Few, if any, sources of income are certain to continue unchanged year in and year out. People can lose their jobs, interest rates can fall, business conditions can wipe out profits and dividends. Accordingly, the relevant focus under section 505 is the parent's economic situation at the time the child support calculations are made by the court. If a parent has received payments that would otherwise qualify as 'income' under the statute, nothing in the law permits those payments to be excluded from consideration merely because like payments might not be forthcoming in the future." Rogers, slip op. at 7.

 


Eberhardt – IRA Distributions as Net Income: IRMO Eberhardt, 387 Ill. App. 3d 226, 232 (First Dist., 2008), addresses the claim that there is an improper double counting when improper double counting occurs when IRAs that are awarded in a property settlement are liquidated and viewed as income. The appellate court commented that the cases that they cited all turned on their facts including IRMO Lindman and IRMO Klomps. The appellate court cited Klomps for the following discussion:

"If we were to allow retirement income to be excluded from net income when setting child support merely because those benefits, prior to their receipt, were used to determine an equitable distribution of the parties' marital property, we would be adding provisions to the Act that do not exist. We will not twist the clear meaning of the Act to invent an otherwise nonexistent rule that would be contrary to the purpose of making 'reasonable provision for spouses and minor children during and after litigation.' [Citation.]" In re Marriage of Klomps, 286 Ill. App. 3d at 716-17.

Clearly, the facts were controlling in this case. Perhaps it is a matter of bad facts making somewhat bad law. In applying the facts and not finding an abuse of the trial court’s discretion the appellate court stated:

Here, as in Croak, [an out of state case relied upon] the court found Stephen to be evasive and less than straightforward about his finances. It found a pattern of nondisclosure. The court did not believe Stephen's story of a sudden downturn in business. The court addressed the double counting issue, calling it a misguided argument on Stephen's part because the IRA income was less of an influence on the court's decision than the perception that Stephen's testimony was not credible. The court also noted that Stephen apparently spent money for his own benefit rather than meeting his court ordered support obligations to his children.

I have commented that because of the importance of this issue, awareness of the case law cited is critical - especially in light of the Supreme Court’s in 2012 revisiting Rogers in another setting. The Gitlin on Divorce comment to the 1997 Klomps decision had stated:

The father in Klomps, the appellant, relied heavily on Harmon. The father's brief stated that Harmon "is authority that an item may be a marital asset or income, but not both." Harmon said nothing of the sort. The Second District in Harmon passed on whether various types of income of the child support obligors would be included in calculating net income. The Harmon court considered passive income the mother received from bonds or securities -- passive income which was reported on her tax return but not actually received, gift income, and also interest income. The interest income was being paid to her by the child support recipient, the father who was paying the mother $750 per month interest on account of a property settlement balance due to her of $90,000. The appellate court did not discuss rationale for excluding interest. It merely stated:

Finally, we also agree with respondent that the monthly interest payments which comprise her share of the marital assets should not be used to calculate her net income. (See In re Marriage of Hart (1990), 194 Ill. App.3d 839, 850.) We therefore conclude that the trial court did not abuse its discretion in determining respondent's net income. [Emphasis added.]

But Lindman and Eberhardt might be revisited at some time in the future light of the Illinois Supreme Court's 2012 McGrath decision.

McGrath – Funds an Unemployed Parent Regularly Withdraws from Savings Account Should Not be included In Calculating Net Income Under §505(a)(2) of the IMDMA
IRMO McGrath, 2012 IL 112792 (May 24, 2012) concluded, as I had predicted:

Because the trial court improperly included money that respondent withdraws from his savings account in its calculation of net income for child support purposes, we reverse its judgment and remand the cause for a new calculation of respondent’s child support obligation. The trial court should calculate respondent’s net income without regard to amounts that he regularly withdraws from his savings account. The court may then consider whether 28% of this amount is inappropriate based on, inter alia, respondent’s assets. If the court determines that the amount is inappropriate, it should make the specific finding required by section 505(a)(2) and adjust the award accordingly.

Because of the importance of the decision, I quote from the key discussion points:

Money that a person withdraws from a savings account simply does not fit into any of these definitions. The money in the account already belongs to the account’s owner, and simply withdrawing it does not represent a gain or benefit to the owner. The money is not coming in as an increment or addition, and the account owner is not “receiving” the money because it already belongs to him. ¶ 15 The appellate court’s analysis went off track when it stated that “[t]here are no provisions in the Act excluding Martin’s monthly withdrawals from the definition of ‘net income’ ” (2011 IL App (1st) 102119, ¶ 11), for it is the term “income” itself that excludes respondent’s savings account withdrawals. The appellate court should not have been looking for savings account withdrawals in the statutory deductions from income, because those withdrawals were not income in the first place. We note that, although petitioner’s attorney believed that the ultimate amount of child support arrived at by the trial court was appropriate, he conceded at oral argument that the appellate court’s analysis was problematic and, when pressed, agreed that he was not going to the mat in defense of that analysis.

The trial and appellate courts were rightly concerned that the amount generated by respondent’s actual net income was inadequate, particularly when the evidence showed that respondent had considerable assets and was withdrawing over $8,000 from his savings account every month. The Act, however, specifically provides for what to do in such a situation. If application of the guidelines generates an amount that the court considers inappropriate, then the court should make a specific finding to that effect and adjust the amount accordingly. One factor that the court can consider in determining that the amount is inappropriate is “the financial resources and needs of the non-custodial parent.” 750 ILCS 5/505(a)(2)(e) (West 2010). Thus, calculating respondent’s net income correctly does not have to mean that respondent is “absolved of his child support obligation” (2011 IL App (1st) 102119, ¶ 11), as the appellate court feared.

Essentially, the point of Roger and now McGrath is that the trial court should deviate from the support guidelines more often to properly consider situations such as this. I had written, “But expect that the Illinois Supreme Court will reverse the trial and appellate court in McGrath and remand the case with instructions.”


Baumgartner -- Proceeds from Sale of Residential Property Were Not Income: Another case addressing non-recurring income in light of Rogers is IRMO Baumgartner, (1st Dist., 2008). But this case should have been somewhat of a "gimme" regarding what does not constitute income. A purported issue was whether proceeds from the sale of residential property that were used to purchase a new residence were income for child support purposes. The appellate court in Baumgartner stated that since the IMDMA does not define “income” it was proper to review the definition of income per Rogers as a gain or recurrent benefit, measured in money and as money from employment, business, investments, royalties, gifts and the like. Surprisingly, the appellate court then stated:

Under section 505(a)(3) and the definition of income cited in Rogers II, we are constrained to agree with Susan that the proceeds from the sale of property such as a residence would qualify as income.

The Baumgartner appellate court immediately qualified this statement:

Nonetheless, we do not agree that the circuit court erred in refusing to include the proceeds in its determination of net income. As a practical matter, it stands to reason that to a certain extent the sale proceeds represent a return on payments made by Craig out of income already accounted for in the determination of his child support obligation.

The appellate court then stated:

A similar situation [passive income not actually received] occurs where a parent sells his or her residence and uses the proceeds to purchase a new residence. The sale proceeds are not actually available to the parent to spend as income... We cannot say that the proceeds from the sale of residential property can never be considered income for child support purposes. Here, however, the sale of Craig's California residence was necessitated by his employment situation, and the proceeds were utilized to purchase his residence in Illinois where he had obtained employment. Under these circumstances, the circuit court did not err in excluding the proceeds from the sale of Craig's California from his income for child support purposes.

In fact, it was this decision that in 2012 was relied upon in an unpublished decision that did not consider IRA distributions as income for child support purposes, based on the facts of that case.

In oral arguments the first argument presented to Petitioner's counsel was that the trial court could have chosen to deviate from the guidelines after considering the regular withdrawals as income.

Anderson -- Reverse Stock Split Did Not Constitute Income: IRMO Anderson, 405 Ill. App. 3d 1129 (3rd Dist., 2 010), addressed what constitutes income – in this case whether a reverse stock split constituted income for the purpose of child support. First, the appellate court quoted from the definitions of income in Rogers and in Worrall. The Anderson court first quoted from Rogers regarding a variety of payments constituting income under section 505(a)(3):

Courts have included individual retirement account (IRA) disbursements representing deferred employment earnings, receipt of company stock from employment stock options, worker’s compensation awards and the proceeds from pensions as income under the Dissolution Act. See In re Marriage of Lindman, 356 Ill. App. 3d 462 (2005); In re Marriage of Colangelo, 355 Ill. App. 3d 383 (2005); Department of Public Aid ex rel. Jennings v. White, 286 Ill. App. 3d 213 (1997); In re Marriage of Klomps, 286 Ill. App. 3d 710 (1997). However, using the same statutory definition, other courts have determined that withdrawals from self-funded IRAs and proceeds from the sale of residential property do not constitute income under section 505(a)(3). See In re Marriage of O’Daniel, 382 Ill. App. 3d 845 (2008); In re Marriage of Baumgartner, 384 Ill. App. 3d 39 (2008).

In In O’Daniel, the appellate court determined that the father’s IRA disbursements did not constitute income because IRA accounts are ordinarily self-funded by the individual account holder. The court noted that "[w]hen an individual withdraws money he placed into an IRA, he does not gain anything as the money was already his.  Therefore, it is not a gain and not income." O’Daniel, 382 Ill. App. 3d at 850. In reaching its conclusion, the court reasoned that the only portion of the IRA that would constitute a gain for the individual, and therefore income for purposes of child support, would be the interest or appreciation earnings from the IRA. O’Daniel, 382 Ill. App. 3d at 850; see also Baumgartner, 384 Ill. App. 3d at 57 (where parent sells home and uses proceeds to purchase new home, proceeds are not actually available as income).

The appellate court then stated:

In this case, the proceeds from the reverse stock split of Michael’s AEC shares did not involve a gain or recurring benefit or employment compensation. *** The cash proceeds took the place of the former shares of stock. Michael then used those proceeds to purchase gold coins. The asset already belonged to Michael, and the proceeds were used to purchase another investment asset. Accordingly, the proceeds do not qualify as income for child support purposes.

The appellate court then provided a caveat:

In reaching our conclusion, we note that the distribution of stock may constitute income for child support purposes if the stock is sold pursuant to an employment bonus-based option. See Colangelo, 355 Ill. App. 3d 383. Here, however, the sale of Michael’s stock was necessitated by the company’s decision to implement a reverse stock split of minority shareholders, a decision over which Michael had no control. He then utilized the proceeds to purchase other investment assets. Under these circumstances, the proceeds do not qualify as "net income" under section 505(a)(3).


Executive Summary re Consideration of Non-Traditional income Following Rogers:

Gifting or Loan Cases:

IRMO Anderson and Murphy: Where there is a history of gifts from the parents , but not in a predictable pattern, the gifts are considered in setting child support.

IRA Distribution Cases:

IRMO Lindman, In this fact specific case the trial court did not err when it refused to grant petitioner's petition to reduce child support. Father had lost his job and was receiving distributions of IRA awarded him in dissolution proceeding. The IRA distributions were properly considered §505 "income," therefore making his net income greater than when support was set.

IRMO Eberhardt, Issue: Whether there is an improper double counting when improper double counting occurs when IRAs that are awarded in a property settlement are liquidated and viewed as income. Comment: All similar cases turn on the facts. In this case given father's credibility gap, the appellate court affirmed the consideration of IRA distributions as income.

Regular Withdrawal Cases:

IRMO McGrath, Trial court can base support on non-custodial parent's regular withdrawals where payor unemployed for extended time period. But expect a reversal by the Illinois Supreme Court.

Stock Split Or Other one Time Income Cases:

IRMO Anderson, Reverse stock split did not constitute income because there was no gain, employment compensation or recurring benefit.

 

            I.         Deviations from the Support Guidelines:

 

            There are four lines of case law which are commonly addressed in the deviation cases:

 

1) cases where there is equal or nearly equal parenting time for each party;

2) cases where the payor is in the high income category;

3) cases whether custody of the children is split;

4) cases where the cusotdial parent's income is more than the non-custiodial parent's income.

The split custody cases will be addressed in my outline regarding rules of thumb in divorce cases. 

 

                        1.        Deviations In Cases with Extensive Parenting Time:

 

A case that is often taken out of context for the proposition that the trial court should not consider extensive parenting time to the non-residential parent as a possible deviation factor is IRMO DeMattia, 302 Ill.App.3d 390, 235 Ill.Dec. 807 (4th Dist. 1999), GDR 99-22. The DeMattia court, however, only affirmed the refusal of the trial court to deviate downward from minimum statutory child support guidelines; although father had extensive visitation. The Fourth District court held that the payor was not entitled to automatic child support reduction.

 

The appellate court expressed that it was not making a broad-based rule about downward deviations from the minimum child support guidelines:

 

We do not suggest a trial court could never deviate downward from the guidelines based on the noncustodial parent's extended provision of care for his or her children. We do not seek to discourage noncustodial parents from having substantial contact with their children. The benefit a noncustodial parent receives from having substantial involvement with his or her children cannot be measured by dollars. There should not be an automatic deduction in child support because a noncustodial parent has the opportunity to spend substantial time with the children and fulfill a parental responsibility. Caring for one's own children is not day care nor is it a chore for which to be compensated. Our decision is not a criticism of [the husband] for asking this interesting question, but we decline the invitation to add a new layer of complexity to custody and support decisions. Our decision is limited to the facts in this case. (Emphasis in original.)

 

A case somewhat contrary to DeMattia is IRMO Reppen-Sonneson, 299 Ill.App.3d 691 (2d Dist. 1998). It held that the trial court not obligated to rely on statutory guidelines where parents equally shared custody of children. Child support by husband to wife below statutory guidelines was affirmed. In Reppen-Sonneson, the husband was required to pay 15% of his net income for support of three children. The appellate court stated:

 

The parties agreed to share in the legal and physical custody of their three children. Because both parents share the custody of the children, the trial court was not obligated to rely on the statutory guidelines. In this case, only [the father] was ordered to pay $75 per week in child support. In addition to providing the sole support, [the father] pays the children's health insurance and 75% of any extraordinary medical expenses such as orthodontia. [The father] has just as much responsibility in caring for the children as [the mother]. We do not find that the court abused its discretion.

 


IRMO Smith, 2012 IL App (2d) 110522, the parties had entered into a Joint Parenting Order which designated neither as primary and allowed each party visitation on alternating weekends and half the week days. The financial circumstances of the case were that:

Their 2007 tax return indicated that Sharyl’s gross income for that year was $72,465, and Lloyd received $13,196 from Social Security. In 2008, Sharyl’s gross income was $76,030, and Lloyd received $13,817 from Social Security. In 2009, Sharyl’s gross income was $74,928; Lloyd received $14,621 from Social Security. In addition, Lloyd receives a Social Security allotment for Alyssa because he is receiving Social Security disability.

Regarding support, the trial court stated:

“Next, there is essentially an uncontroverted presentation on the net income for Sharyl Smith, that being the amount of $3,556. If so, it is true that 20 percent of that amount should drop that monthly child support payment from $805 to $711.20, effective as of the first point in time that the payment was made or would have been made payable. In other words, as of the date of judgment.”



The 2012 Smith decision is one of those rare decisions where the appellate court reversed the trial court when it awarded guideline support. In this case custody was shared under the JPA. The appellate court commented:

Second, the rule of law “announced” in Reppen-Sonneson makes it clear that the trial court can use its discretion in choosing how to determine child support when custody of the child(ren) is shared. See Reppen-Sonneson, 299 Ill. App 3d at 695 (“When custody is shared, the court may apportion the percentage between the parents (In re Marriage of Duerr, 250 Ill. App. 3d [232,] 238 [(1993)]), or may disregard the statutory guidelines in the Act and instead consider the factors listed in section 505(a)(2) (In re Marriage of Steadman, 283 Ill. App. 3d 703, 708-09 (1996)).”).

The appellate court concluded that because the trial court essentially blindly applied the guidelines, there was an abuse of discretion.

 

Child Support to Visiting Parent: In IRMO Cesaretti, 203 Ill.App.3d 347 (2d Dist. 1990), the court held that where parties share parenting time relatively equally, the trial court did not err in requiring the custodial parent to pay child support to the non-custodial parent in view of the disparity in parties' incomes. In Cesaretti the husband urged that once legal and physical custody is placed in one parent, the custodial parent has no obligation to pay support to the non-custodial parent. The appellate court rejected the husband's argument, noting that while the trial court had awarded husband temporary custody, the child nevertheless was to spend approximately equal time with each parent. The appellate court held that given such a custody arrangement, the trial court did not err in ordering the custodial parent to pay child support to the non-custodial parent. The husband testified at trial that he had a yearly gross income of more than $20,000 and that his monthly expenses were approximately $1,000. The wife testified that she earned approximately $7,000 a year and her monthly expenses were more than $2,000. The appellate court noted it is equitable that the parent with the disproportionately greater income should bear the greater share of the costs for support. Thus, the appellate court held that the trial court's award of $75 per week to the non-custodial parent was not in error.

 

Another “reverse” child support type case is IRMO Pitts, 169 Ill.App.3d 200 (5th Dist. 1988). Pitts ruled that the non-custodial parent, who has one month of visitation during summer and who is in financial need, was entitled to child support during visitation. The evidence in Pitts showed that the wife was disabled and her only reliable source of income was $527 per month disability pay from the Illinois Teacher's Retirement System. Her parents also gave her $300 per month. The husband earned $2,000 per month from his law practice.

 

                        2. Deviations from the Guidelines in High Income Cases:

 

             Decision Leading to Change in Law as to Needs -- Van Kampen: One Illinois appellate court decision refused to deviate from the child support guidelines despite the high income of the support obligor. In IDPA ex. Rel. Temple v. Van Kampen, 243 Ill.App.3d 767 (3d Dist. 1993), the third appellate court district held that because the needs of the child were not a statutory consideration in Section 505 of the Illinois Marriage and Dissolution of Marriage Act (IMDMA), the trial court did not err in refusing to deviate from the guidelines. In reaction to the Temple case, in 1995 the Illinois legislation amended the IMDMA to provide that the needs of the children were a statutory consideration per Section 505(a)(2)(a). This section now provides that in determining whether to deviate from the support guidelines the trial court must consider “the financial resources and needs of the child.” Previously, the guidelines had merely provided that the court in deviation from the guidelines should consider only the financial resources of the child. (See Gitlin on Divorce: Section 10-3(I)(4)) for a discussion of the legislative history behind this amendment.)

The most recent deviation case is IRMO Berberet, 2012 IL App (4th) 110749 which contains a good review of the case law. It does not involve a case involving high income of the support payor, but instead, represents a case where the payor's income was less than the payee's income. The appellate court stated:

 

The court found that if the guideline amount was awarded, Rebecca's net monthly income would exceed David's by nearly $4,000, the difference between $7,035 per month and $3,046. As a result, the court determined that David would experience financial constraint if he was required to pay the guideline amount of support. Last, the court determined that if the support guidelines were imposed David's involvement with the children would be adversely affected: "David would be substantially unable to participate in the children's school, athletic and social activities or to enjoy any recreational activities with the children. Such a result is not in the children's best interests." The court did not abuse its discretion in awarding the downward deviation in support.

Illinois case law addressing deviations from the support guidelines in high income cases will be briefly reviewed:

 

             Garrett: In IRMO Garrett , 336 Ill.App.3d 1018 (5th Dist. 2003), followed the guidelines despite the fact that the payor's income was substantial.  A significant quote from Garrett stated:

 

Harry complains that the child support is a windfall to Elizabeth and that in its award the trial court should have considered the personal finances of Elizabeth. According to Harry, Elizabeth has elected to live so frugally that only a portion of the child support is actually spent. Harry believes that Elizabeth has effectively circumvented the intent of the child support order and basically converted these funds intended for the children into spousal maintenance. There is no evidence, however, in the record to support the proposition that Elizabeth has in any way misappropriated child support money for her own use. The court will not engage in gross speculation in that regard. The fact that Elizabeth has placed money in savings to provide for future uncertainties is commendable. Responsible adults do not spend every penny available to them. This court does not want to instruct that unless a custodial parent spends the allotted child support money within the month it is received, the court will deem the excess unnecessary.

The trial court set support at $3,507 monthly while the needs of the mother's household (with no financial contribution on her behalf) were $3,422.  The appellate court then stated, "We are aware that the amount paid in child support currently exceeds the monthly expenses for the entire household, but a child's entitlement to a level of support is not limited to his or her "shown needs."

             Ackerley: In IRMO Ackerley 333 Ill.App.3d 382 (2d Dist. 2002), addressed the issue of deviating from the support guidelines in high income cases. In Ackerley there was a duty to support only one child. The appellate court noted that the financial resources of the ex-husband were more than ample to meet his needs. It also noted that it was “inferrable” that his son would have enjoyed a high standard of living had the marriage not dissolved. Finally, it noted that the financial resources of the ex-wife were much smaller than that of her ex-husband. The decision rejected the husband's argument that his frugal lifestyle should be a reason for a greater deviation from the guidelines:

 

Respondent complains that the amount of child support set by the trial court constitutes approximately 90% of petitioner's stated monthly expenses. We first note that, assuming respondent is correct, the needs of the petitioner and her son are but two factors a court is directed to consider as part of a multipart, totality-of-the-circumstances test. Other factors, as set forth in the preceding paragraph, militate for a significant award. See 750 ILCS 5/505(a)(2) (West 2000). Second, it is inferrable that, if the marriage had not dissolved, petitioner's son would have been enjoying a higher standard of living. Had he been enjoying the same standard of living while residing with petitioner, it is apparent that the family's monthly expenses would have been higher. A support award need not be limited to the shown needs of the child. In re Marriage of Lee, 246 Ill. App. 3d 628, 643 (1993).

 

Respondent also poses the related question of "how many pagers, cell phones and cars does one child need?" We will not assume that petitioner will spend all of the child support money on luxuries or frivolities. In an incongruous fashion, respondent asks that we make this assumption about petitioner but complains bitterly because the trial court characterized his lifestyle as luxurious. *** Respondent relies on In re Marriage of Bush, 191 Ill. App. 3d 249, 261 (1989), for the proposition that courts are "not required to equate large incomes with lavish life-styles." We have no quarrel with this proposition. However, that a court is not required to draw such an inference says nothing regarding whether a court may do so. Moreover, whether respondent leads a frugal lifestyle is only pertinent to half the inquiry set forth in section 505(a)(2)(e), which focuses on both the needs and resources of the noncustodial parent. 750 ILCS 5/505(a)(2)(e) (West 2000). Even if respondent's needs are few, his resources are considerable. In sum, assuming a frugal lifestyle for respondent is not sufficient to tip the balance in respondent's favor such that the trial court abused its discretion in setting child support.

 

What was noteworthy of this decision is the fact that the support award was $3,000 per month which was based upon an income of $167,000 per year at the time of trial. The trial court set the support, however, at an amount certain and did not require payment of bonuses or other income for support.

 

             Singleteary: In IRMO Singleteary, 293 Ill.App.3d 25, 227 (1st Dist., 1997), the father's income very substantially increased following the divorce. In Singleteary, the father's gross income increased from $90,000 to $300,000 per year. The marital settlement agreement in Singleteary provided the father would pay $864 per month, or 20% of his net income (whichever was greater), for child support for one child. The Singleteary appellate court found that the trial court properly modified child support for one child from $864 per month to $2,000 per month, despite it being substantially below the child support guideline amount, because the appellate court held that $2,000 per month was adequate to maintain the child's lifestyle. Singleteary stated:

 

Where the individual incomes of both parents are more than sufficient to provide for the reasonable needs of the parties' children, the court is justified in setting a figure below the guideline amount. In determining the child support obligation of a high-income parent, the court must balance competing concerns. On the one hand, child support awards are not intended to be windfalls. On the other hand, the court must consider the standard of living the children would have enjoyed absent parental separation and dissolution.

 

In affirming the trial court's award of $2,000 per month for child support the appellate court reasoned that this amounted to more than twice the amount of the original child support award. Singleteary also ruled that the child's "shown needs and lifestyle to which he is accustomed can be adequately maintained on a total award of $2,000 per month."

 

             Perry: In Re Perry, 260 Ill.App.3d 374 (1st Dist. 1994), held that the trial court must consider the needs of the child in setting child support. The father in Perry urged that sufficient evidence was presented to the trial court for deviating from the support guidelines. The appellate court made no ruling on this contention since the case had to be remanded to the trial court to make express findings in support of the deviation. The appellate court noted that in remand the trial court should consider, among other things: 1) the fact that the mother sought 100% of the child's expenses from the father; and 2) the argument that when the noncustodial parent's income is high, there is justification in deviating from guideline support. The Perry court cited Marriage of Scafuri, 203 Ill.App.3d 385, 149 (1990); and Marriage of Lee, 246 Ill.App.3d 628 (4th Dist. 1993) which are discussed below.

 

             Scafuri: In Scafuri, 149 Ill.Dec.124 (2d Dist. 1990), the trial court awarded child support award of $10,000 per month according to the statutory guidelines. The appellate court reversed and without remanding ordered child support of $6,000 per month -- 19% of the payor's net income (there were three minor children). The Scafuri court ruled: (1) The child support guidelines of Section 505 of the IMDMA: "shift the burden of presenting evidence to the parent who is asking the court to deviate from the guidelines in setting a child support award;" (2) "When dealing with above-average incomes, the specific facts of each case become more critical in determining whether the guidelines should be adhered to.”

 

             Lee: The trial court in Lee, 246 Ill.App.3d 628 (4th Dist. 1993), deviated from the support guidelines and ordered payment of support at $3,000 monthly for one child, noting that the amount was “more than adequate” to support the child. The husband appealed urging that there should have been a greater deviation and the appellate court affirmed the trial court's award. In Lee, the husband's net income from 1988 through 1991 ranged from $234,000 ($19,500 per month) to $324,400 ($27,000 per month). These two sums, respectively, would have produced monthly child support of $3,900 and $5,400. The trial court awarded a child support figure "somewhat under the statutory guidelines". If we assume that the husband's net income was a midway point between these two figures ($280,000 per year or $23,000 monthly), then the trial court's child support award that was affirmed was approximately 13% of the husband's net income.

 

             Graham v. Adams: The 1993 Fourth District case of Graham v. Adams, 239 Ill.App.3d 643 (4th Dist. 1993), involved a deviation from the support guidelines where the father had a net income in a range lower than the above cases -- $8,000 per month (approximately $96,000 per year). According to the statutory guidelines the required child support would be $1,600 per month for one child. The trial court, however, set child support at $400 per month. The Illinois Department of Public Aid appealed and the appellate court affirmed the trial court. The appellate court stated:

 

As this court has recently noted, "the support schedules contained in the statute have less utility as the net income of the parties increases because the schedules are premised upon percentages related to average child-rearing expenses." [Citation omitted.] In cases such as the present, where the parties both have above-average incomes, the specific facts govern whether the court should adhere to the guidelines. [Citation omitted.] Child support is not intended to provide children with an extravagant lifestyle but is designed to insure adequate support payments for the upbringing of the children. [Citation omitted.]

 

Thus, Graham affirmed an award of child support which was 5% of the payor's net income rather than 20% of his net income.

 

             Bush: IRMO Bush v. Turner, 191 Ill.App.3d 249 (4th Dist. 1989), ruled that it was an abuse of discretion for the trial court to order child support equal to 20% of the husband's net income where the husband's net annual income was $150,000 per year ($12,500 per month). The trial court had ordered husband to pay $800 child support per month to wife but also ordered the husband to pay into a trust account for the child's benefit an amount equal to approximately 20% of his net income less the amount of the $800 per month cash payment to wife. In reversing the trial court's award, the Bush court calculated that husband would pay child support of approximately $30,000 per year. The court noted there was no evidence that the child's needs were not being met and that the record of typical expenditures for the child tended to support an award of child support close to $800 per month. Thus, the Bush court held that the trial court's overall award of 20% of the husband's net income was excessive and constituted an abuse of discretion. The appellate court instructed the trial court in setting an appropriate amount of child support to take into account the lifestyle the child would have enjoyed absent the dissolution, but cautioned the court against ordering too great an amount of support for this reason:

 

Despite the requirement that a court consider a child's station in life, the courts are not required to automatically open the door to a windfall for children where one or more parents have larger incomes. A larger income does not necessarily trigger an extravagant lifestyle or the accumulation of a trust fund. . .. We are not required to equate large incomes with lavish lifestyles.

 

Summary as to Deviation Cases

☞Singleteary:

The gross income of the husband $300,000.
$15,322 per month net income.
Guideline support would have been $3,066.40.
$2,000 per month support was affirmed which was 13% of the husband's net income rather than 20%.

☞Perry:
The key holdings were that needs must be considered. Payment of those needs is not solely responsibility of parent who pays support.

☞Scafuri:
There were three children.
$10,000 monthly per guidelines was the result of trial court's decision
$6,000 per appellate court = 19% of net income rather than 32%.

☞Lee: Net income from 1988 through 1991 ranged from $234,000 ($19,500 per month) to $324,400 ($27,000 per month).
Range of support per guidelines: $3,900 and $5,400
Order $3,000 and husband appealed.
Based upon an average of these two figures ($280,000 per year or $23,000 monthly), the trial award was 13% of the husband's net income rather than 25% of his net income.

☞Graham:
Net Income $8,000 monthly.
Guideline Support would have been $1,800.
Trial court’s award of $400 per month affirmed.

☞Ackerley:
Base gross income was a $167,000 per year at time of trial.
Child support award of $3,000 per month for one child.
Guideline support would have been $5,510 per month but trial court found it would be a windfall.
Court did not order payment of support on bonuses.

In Re Keon C., 344 Ill. App. 3d 1137 (4th Dist. 2003):
• Professional basketball player parentage case.
• Child support set at $8,000 monthly. The father earned 1.4 M but this would increase in 2003 to 4.5M. The Mother urged guideline support would be $13,946 monthly while father urged it would be $12,905 monthly – both based upon then current earnings.

The above cases indicate that where there is a high wage earner, there should be a deviation from the child support guidelines. Illinois law essentially provides that the amount of support is a reasonable accommodation between two competing interests: the ability of the non-custodial parent to pay (if he has high wages) as against the needs of the non-custodial parent.

 

What if Custodial Parent's Income is Higher than Non-Custodial Parent's Income?

IRMO Berberet, 2012 IL App (4th) 110749, involves the type of cases that are occurring more and more frequently, i.e., the custodial parent has a greater income than the non-custodial parent. The mother appealed from the trial court's deviation and the appellate court stated:

Rebecca argues that the trial court abused its discretion in deviating downward from the guideline amount of child support set forth under section 505(a) of the Act.

Based on the record, we find that the trial court correctly followed the procedure set forth in section 505(a) of the Act for deviating from the support guidelines. The court calculated the amount of support required under the guidelines, $1,433 per month, and determined that the amount was not appropriate. In accordance with section 505(a) of the Act, the court also stated the reasons for its variance from the guidelines. As authorized under section 505(a)(2)(e) of the Act (750 ILCS 5/505(a)(2)(e) (West 2010)), the court considered the financial resources and needs of the noncustodial parent. The court found that if the guideline amount was awarded, Rebecca' s net monthly income would exceed David's by nearly $4,000, the difference between $7,035 per month and $3,046. As a result, the court determined that David would experience financial constraint if he was required to pay the guideline amount of support. Last the court determined that if the support guidelines were imposed David's involvement with the children would be adversely affected: "David would be substantially unable to participate in the children's school, athletic and social activities or to enjoy any recreational activities with the children. Such a result is not in the children's best interests." The court did not abuse its discretion in awarding the downward deviation in support.

 

             J.         Social Security Benefits and Adoption Subsidies as a Credit towards a Support Obligation

In 2004, the Illinois appellate court addressed an issue of first impression:  whether the court should grant a credit for an adoption subsidy for three children (the parties had five minor children).  In that case the mother had received from the state of Iowa a credit of approximately $1,450 per month for support of the three adopted children.  See IRMO Newberry.  The trial court had first noted the line of cases illustrated by IRMO Henry, 156 Ill.2d 541 (1993) which held that social security benefits may satisfy the obligor's support obligation. The court noted that the payment from Iowa was "somewhere between a gratuitous and an earned benefit" but that without question it was a benefit generated by the parties willingness to adopt the children and the purpose was to help support them.  The appellate court ruled:

 

In our opinion, the circuit court's treatment of the Iowa adoption subsidies properly recognized them as resources of the children available for their support. See Strandberg, 664 N.W.2d 887. Considering that the amount of the parties' net income is approximately equal, and the amount of the subsidies paid for three of the children is proportionately greater than their share of an unallocated 45% of David's income, we cannot say that the court erred in granting credit against David's support obligation. The $804.40-per-month award determined by reducing the percentage of David's net income to be paid for child support appears to blend the children's needs with what is fair and what is workable. See In re Marriage of Rogers, 283 Ill. App. 3d 719 (1996) (citing Lemon v. Kurtzman, 411 U.S. 192, 36 L. Ed. 2d 151, 93 S. Ct. 1463 (1973)). We conclude that the court did not err in its treatment of the adoption subsidies.

It is noteworthy that the appellate court ruled that the case involved a deviation from the support guidelines because the trial court only required the father to pay support for two children (of 25%) of his net net income.  The appellate court noted that there were specific reasons justifying the trial court's deviation from the support guidelines.

 

 

V.Consideration of Income Tax Refunds, Dependency Exemptions and the Child Care Credit:

   

            A.        Pylawka — Case Arguably Requiring Maintenance to be Considered as Adjustment in Determining Net Income:

 

In light of IRMO Pylawka, 277 Ill.App.3d 728 (2d Dist. 1996), it may be urged that the fact that maintenance is a deduction to the maintenance payor should be considered in determining an appropriate amount of child support. Pylawka seems to hold that in proceedings to modify child support, the tax refund attributable to maintenance payments made to the former wife should be considered in determining a party's net income.

 

It is urged that the essence of Pylawka, however, was that the trial court erred when it determined child support on the basis of income tax withholding and did not necessarily require that maintenance be allowed as an "above the line" adjustment in determining net income. For the sake of simplicity, keep in mind that to the extent that maintenance is allowed as an adjustment in determining net income, this increases the net income.

 

What are the arguments in that child support should be determined after allowing a deduction for maintenance? The recipient could argue that Illinois case law (Ackerley and Pylawka) require net income to be determined based upon the taxes that will actually be paid. Clearly, the payor will have a high net income (considered alone) when the payor pays maintenance. Thus, in such cases it is more likely that the payor will receive a substantial refund if the payor uses appropriate withholding. The arguments that the payor would make, however, are that providing that maintenance is a deduction in determining the net income would result in a number of unsound complications in Illinois family law cases and, therefore, such a deduction should not be allowed. One example of such a deduction would be the fact that maintenance will often end within a relatively short period of time from the judgment. Thus if maintenance were allowed as a deduction, the payor would want a provision in the settlement agreement which would provide that upon the termination of maintenance, child support would in fact decrease. However, the recipient could argue that the potential for an increase in income may offset the loss of the maintenance deduction. Even if the court reserves the ability to modify support downward based upon this potential change in circumstances (even as a matter de novo — without showing a substantial change in circumstances) there still is the issue of the cost-effectiveness of going to court to modify support in this instance.

 

Another public policy argument that the payor could make is that the maintenance rules of thumb, etc., must already consider the deductibility of maintenance and that there may be a potential for a sort of double consideration of this deduction. The bottom-line is that Illinois family lawyers should be aware that in determining income for the purpose of support, the maintenance deduction is a critical one to consider — especially in those cases with a substantial maintenance award.

 

            B.        Dependency Exemptions:

 

The general rule under the Internal Revenue Code is that the custodian of the children is entitled to take the children as dependent exemptions. However, if the custodian agrees that the non-custodial parent may take the children as exemptions and agrees to sign Internal Revenue Service Form 8332 so stating, the non-custodial parent is entitled to claim the children.

 

There is no issue under Illinois law that the trial court has the power to order the custodial parent to sign a waiver that he or she will not claim the child as a dependency exemption. The trial court also has the power to allocate the dependency exemptions in post decree matters. See IRMO Van Ooteghem, 187 Ill.App.3d 696 (3d Dist. 1989). In McCloud, 197 Ill.App.3d 95 (3d Dist. 1989), the Third District held it was error to award the exemptions to the parent providing support absent circumstances warranting the transfer to him. The Fifth District in IRMO Rogliano, 198 Ill.App.3d 404 (5th Dist. 1990), held that the trial court should allocate the exemption based upon which parent will contribute the majority of the support for the child. See also IRMO Clabault, 249 Ill.App.3d 641 (2d Dist. 1993).

 

Later case law has begun to fine tune this issue in cases where it is a close call as to which parent is contributing the majority of the support for the children. IRMO Moore, 307 Ill.App.3d 1041 (5th Dist. 1999), involved post-divorce proceedings in which the ex-husband claimed the children's expenses were $1,520 per month and his child support amounted to 51.9% of those expenses. He argued the party paying the majority of the children's expenses is entitled to the dependency exemptions, citing three cases: Clabault, Fowler (197 Ill.App.3d 95 (3d Dist. 1990)) and Rogliano. The ex-wife agreed with the ex-husband's reading of the cases he cited, but argued that he did not provide a majority of the children's support because the children's expenses were more than $1,520 per month.

 

The Moore court held the allocation of dependency tax exemptions is an element of a support award. As such it is a topic over which a trial court has “considerable discretion.” Moore commented that although Rogliano held that in allocating exemptions the court should consider which parent will provide the majority of the child's support, and although Clabault affirmed an award of all exemptions to the parent providing more than 51% of the children's support, these holdings did not require an award of all tax exemptions to the parent paying the majority of the children's support. The Moore court stated that because the children's expenses were found to be more than $5,120 per month, the ex-husband was not paying more than 51% of the children's support, rendering the Rogliano and Clabault holdings inapplicable. The appellate court found no abuse of discretion in dividing the tax exemptions between the two parents who each paid approximately half of the expenses for the children.

 

Any judgment of dissolution of marriage should specify that the parties shall execute such I.R.S. forms as are required to effect the allocation of the dependency exemptions. While Illinois case law seems to hold that the trial court should allocate the dependency exemption based upon which parent will contribute the majority of child support, this would make no sense in cases where the child support payor is in the highest income tax brackets because of the phase-out of the exemption at the high income end. The court should take a practical approach in these cases and allocate the exemptions to each party based upon who would take the greater economic benefit from them.

 

A case which was similar to the Moore holding is Stockton v. Oldenburg, 305 Ill.App.3d 897 (4th Dist. 1999). The trial court apparently found the parties equally contributed to the rearing of the child, and awarded each party the tax exemption in alternate years. The appellate court stated that this was neither an abuse of discretion nor against the manifest weight of the evidence.

 

 

VI.Support and Maintenance Arrearages — Is it Property or is it Subject to a QDRO?:

 

            A.       QDRO for Support Arrearages Generally and the DOL's Position Paper:

 

            In identifying income for child support and maintenance arrearages, one of the more sophisticated issues is whether a Qualified Domestic Relations Order (QDRO) can be entered to enforce the arrearage. In presentations to family lawyers over the past several years, I have pointed out that a lawyer can have a QDRO entered in order to provide for a child support or maintenance arrearage. Many lawyers are surprised by this “revelation” because they view QDROs as only for the purpose of allocating marital property. The Department of Labor's booklet regarding qualified domestic relations orders, titled QDROs: The Division of Pensions Through Qualified Domestic Relations, discusses this topic.

 

One of its Questions and Answers stated:

 

Must a domestic relations order dealing with retirement benefits be issued as part of a divorce proceeding to be a QDRO?  No. A domestic relations order that provides for child support or recognizes marital property rights may be a QDRO whether or not it is part if a divorce decree. Thus, a qualified domestic relations order could be entered to enforce a child support arrearage if there is a defined contribution plan which allows for lump-sum distributions. Remember, however, the proposed Alternate Payee would have to pay tax on the distribution. Q 1-8.

 

            B.       IRMO Thomas, 339 Ill.App.3d 214 (2nd Dist. 2003)

 

The IRMO Thomas decision is discussed in an article regarding child support (and maintenance) QDROs.  In this article I was critical of the portion of the Thomas decision which suggests that a QDRO should be limited to the benefits in existence at the time of the divorce.  My hope is that this decision is not followed by case law in districts other than the Second District and that the Illinois Supreme Court may eventually address this issue. 

 

 

VII.Failure to Withhold / Pay Over Income for Support:

Attorney Gunnar J. Gitlin drafted legislation addressing the limited nature of the previous version of the statutory law regarding penalties due to failure to withhold income.  A separate article addresses this issue in further depth

There are several key changes made in 2012 including:

The total penalty for a payor's failure, on one occasion, to withhold or pay to the State Disbursement Unit an amount designated in the income withholding notice may not exceed $10,000.

An action to collect the penalty may not be brought more than one year after the date of the payor's alleged failure to withhold or pay income.

The new requirements add to what the withholding notice must state at Section 20(7) of the IWSA:

(7) in bold face type, the size of which equals the largest type on the notice, state the duties of the payor and the fines and penalties for failure to withhold and pay over income and for discharging, disciplining, refusing to hire, or otherwise penalizing the obligor because of the duty to withhold and pay over income under this Section;

Finally, in 2012 there are new paragraph (j) to Section 45 regarding "Additional Duties."

(j) If an obligee who is receiving income withholding payments under this Act does not receive a payment required under the income withholding notice, he or she must give written notice of the non-receipt to the payor. The notice must include the date on which the obligee believes the payment was to have been made and the amount of the payment. The obligee must send the notice to the payor by certified mail, return receipt requested.

After receiving a written notice of non-receipt of payment under this subsection, a payor must, within 14 days thereafter, either (i) notify the obligee of the reason for the non-receipt of payment or (ii) make the required payment, together with interest at the rate of 9% calculated from the date on which the payment of income should have been made. A payor who fails to comply with this subsection is subject to the $100 per day penalty provided under subsection (a) of Section 35 of this Act.

Again, though, see the more complete outline regardiing this issue. 

 

VII.  Other Case Law Re Support Enforcement:

 

A.  Burden of Proof Re Payments is on Payor after Court Takes Judicial Notice of Existence of Support Obligation

A 2004 case addressing teh burden of proof in arrearage cases is the Second District's IRMO Smith decision.  No. 2-03-0183 (2004).  What was interesting was that the ex-wife's testimony was based upon "guesstimates" of the arrearage.  The discussion regarding the burden of proof is significant in that it correctly places the burden on the payor when it states, "In this case, Sharon's reference to the dissolution judgment and child support orders established the existence of William's support obligation. William, then, bore the burden of proving that he paid the obligation. Admitting that neither party presented compelling evidence on the issue of payment, the court found that William failed to meet his burden of proof. We conclude that the court's finding is not against the manifest weight of the evidence."

B. Support Paid to Mother Rather than Through Clerk of the Court

IRMO Paredes, No. 1-05-1525 (1st Dist., February 16, 2007) presents a warning to Illinois lawyers and to child support payors in any case where the mother may have been on public aid.  The Paredes court ruled that the trial court erred when it gave the father, the obligor, credit for the support payments paid to the mother, rather than making payments through the Clerk for use of HFS (formerly IDPA). By receiving public assistance, the custodian assigned her child support obligation to the Department to the extent of assistance that she received. The appellate court noted that the support order specifically required that obligor make payments through the Clerk and that there was specific testimony at the prove-up as to payments through the clerk of the court and as to the knowledge of the then husband as to his wife’s being on public aid: “So, any payments are going to be made through the clerk of the circuit court and end up going to public aid, you understand that...” However, of further note was the testimony that, “In response to a letter from HFS, he went to a child support office and showed “them” receipts indicating he had made payments directly to Maria. According to Jose, “they” looked at the receipts and told Jose things were fine. Jose left the meeting and continued to pay support directly to Maria.

The trial court in this matter found, “as a matter of law, that any payments made directly from Jose Paredes to Maria Paredes and never credited by [the Department] (as shown in the Certified Accounting) are child support payments within the meaning of the [Illinois Marriage and the Judgment for Dissolution of Marriage].”

In its analysis, the appellate court first reviewed the provisions of §10-1 of the Illinois Public Aid Code (305 ILCS 5/10-1) which provide that “by accepting financial aid” a spouse or a parent or other person having custody is deemed to have made an assignment to the Department of all rights to support up to the amount of the financial aid provided. The appellate court then stated that, “Under the plain language of Section 10-1, during that time, Maria automatically assigned to the Department her rights to receive child support payments to the extent she received public aid, and Jose was obligated to make those child support payments to the Department. (Emphasis added).” The appellate court then ruled that, “Accordingly, we agree with the Department that Jose’s payments to Maria cannot be counted against the debt he owes the Department and that the circuit court’s determination to the contrary is in error.” Second, the appellate court noted that modification of support is an exclusively judicial function, citing Blisset (the seminar 1998 Illinois Supreme Court decision) and Jungkans, 364 Ill. App. 3d 582 (Second Dist., 2006). Keep in mind, however, that Jungkans would appear to be a decision which would be cited as much in the father’s favor than the mother. (This was the decision in which the Second District court held that the trial court erred when it held that it lacked authority to consider former husband’s defense of equitable estoppel to child support collection proceeding which asserted that former wife was equitably estopped from collecting child support that accrued, over nine years, after one of two children of the parties went to live with former husband and he, with agreement of former wife, reduced child support he was paying in half.)

The appellate court next reasoned that the non-judicial agreement between the parties for direct payments is unenforceable and void, and therefore, the original arrangement in the judgment for divorce remained in effect. Unfortunately, while this reasoning simply does not make sense where actual payments are made for child support to the support recipient. The nature of the somewhat strained reasoning of the opinion of the inapt citations to IRMO Dwan (holding that the trial court properly refused to give father a credit toward child support arrearage for payments made to third parties and IRMO Borland, 88 Ill. App. 3d 576, 580 (1980) (holding that it was error for the trial court to allow a set-off against the arrearages for the amount paid directly by respondent paid directly to his adult children).

Next, the appellate court cited the Department’s appellate arguments that the trial court’s ruling was contrary to public policy because it would thwart the Department’s ability to effectively collect support. It urged that the decision would creates an incentive for parties who owe the Department not to pay through the clerk’s office. The Department argued that the trial court’s decision frustrates the ability of the Department to effectively monitor the payment of support because tracing individual private payments is simply cost-prohibitive. The appellate court stated:

The Department’s arguments regarding public policy are well-taken. Viewed in conjunction with our determinations above, the public policy considerations presented by the Department support our decision to reverse the circuit court’s judgment.

What is striking is the last portion of the decision which states:

We are mindful of Jose’s arguments that the true party in error in this case is Maria and that it would “violate fundamental principles of justice, equity and good conscience” to make him “pay money twice [while Maria is] able to keep $13,505 over what she was entitled to receive without any obligation of her making repayment to the State.

The appellate court remarkably suggests:

Nevertheless, we emphasize that our decision in this appeal does not foreclose or limit Jose’s ability to file a private action against Maria under a theory of, for example, contribution, indemnification, or unjust enrichment, to recover the $13,505 he paid directly to her and which she did not report to the Department.

One wonders how Jose would be able to cost-effectively recover the funds the appellate court suggests that he might be able to obtain under one of the theories they suggest. 

VIII.  Imputing Income

Often, courts are faced with the issue of a child support payor who terminates his (or her) employment. Historically, case law in Illinois has stressed the issue of whether the termination of employment was made in bad faith, i.e., in an effort to avoid a child support obligation.  However, several cases have addressed the issue that more often occurs -- where an individual quits a job to take another job with potentially better long term prospects which at first pays substantially less than the previous job.  A significant Illinois decision regarding this issue is IRMO SweetIRMO Sweet,316 Ill.App.3d 101 (2nd Dist. 2000), GDR 00-88.  Sweet imputed income in modification proceedings where a payor started his own business and voluntarily left his employment with an exterminating business.  While this court commented that the termination was in bad faith, the focus on this case was on whether an individual could remain self-employed at a lower rate of income.  One of the key factors is which party has the burden of proof.  The Sweet decision commented upon this and stated:

A party seeking to decrease his or her child support obligation based on a voluntary change in employment must demonstrate that the action was taken in good faith and not to evade financial responsibility to his or her children. In re Marriage of Maczko, 263 Ill. App. 3d 991, 994 (1992); Mitteer, 241 Ill. App. 3d at 227. Absent good faith, the voluntary termination of employment does not warrant an abatement of child support. In re Marriage of Dall, 212 Ill. App. 3d 85, 95-96 (1991).


Then the Sweet court made the comment, "Rather, if a court finds that a party is not making a good-faith effort to earn sufficient income, the court may set or continue that party's support obligation at a higher level appropriate to the party's skills and experience."  In Sweet the husband earned a net income of $15,000 per year prior to his termination of employment and then earned less each year while self-employed.  Therefore, the facts of Sweet should be kept in consideration in a case where it is urged that the court should impute income to a self-employed individual.  The court then stated, "While a party's desire to remain self-employed is not insignificant, the above cases show that the interests of the other spouse and the children may sometimes take precedence."

A 2004 case in which the court imputed income was IRMO Adams.  (3d District April 2004)  In this case, the husband argued that the trial court erred in setting child support while he was unemployed because after he voluntarily quit his job he sought and obtained a higher paying job.  The appellate court stated:

It is well established that courts have the authority to compel parties to pay child support at a level commensurate with their earning potential. Sweet .  A court may impute additional income to a noncustodial parent who is voluntarily underemployed. Sweet.

In this case, Steven voluntarily terminated his employment in Washington D.C. because he had better career prospects in Germany. As shown by his testimony, Steven was confident that he would make more money in Germany. Therefore, it appears that he received a benefit from setting child support based on his prior income, which was lower than his expected future income. In any event, we find that the trial court did not exceed its authority in setting child support based on Steven's prior income because he was voluntarily unemployed and his prior income reflected his earning potential.

IRMO Hubbs, 363 Ill. App. 3d 696 (Fifth Dist., 2006) addressed imputed income.  The new development of this case is use of imputing income based upon the previous job without stressing the bad faith termination of previous employment but based upon the rejection of a job offer and the uncertain nature of the current income because it was based upon commissions.  The Hubbs court held that the trial court did not err in imputing to the husband a base gross income of $115,000 (based upon an average of the past three years of his previous employment.) In addition, the husband was required to pay 13% of the gross income above this amount. The husband urged that the trial court erred in imputing income to him based upon his previous employment.

What is interesting is that in Hubbs there was income averaging based upon a past job in light of the uncertain nature of the income from the current job. In the husband's current job, his ultimate income would be based upon commissions. He received an advance of $7,500 monthly and these advances were loans which would then have to be repaid from commissions. The husband was responsible for all expenses related to the production of his income. The husband urged that the trial court should have determined his net income to be $2,367 per month. The appellate court applied the facts of the case to its decision as follows:

Mark's income for the previous three years was $133,000, $114,009, and $169,319, respectively. Mark also testified that he had recently rejected a job offer that would have paid him a salary of $120,000 a year. We believe that based on the evidence in this case, the circuit court acted properly in imputing Mark's gross income at $115,000. This figure is slightly below his average income for the previous three years and slightly below a salary that he could have earned had he accepted another position. Although the circuit court could have required Mark to pay a percentage of his net income to Peggy, we believe that it acted properly in determining gross income to be $115,000.

 

IRMO Tegeler, 365 Ill. App. 3d 448 (Second Dist., 2006), the ex-wife argued that bank records showed that respondent spent an average of $72,000 per year from 2002 through 2004 on personal items, ski trips, restaurants, and cash withdrawals and that he never explained how his checking account was funded. The appellate court stated:

Respondent partially explained the source of funding for his checking account. However, to the extent that respondent's personal spending exceeded his "net income" of $50,000 to $70,000 per year, we agree that the source of such money is unexplained and should be considered as an additional resource for child support. In arriving at our conclusion, we emphasize that respondent testified that his checking account was funded solely from farming proceeds and not, for example, from loans. We also note that the unexplained funds do not appear to have been carried over from prior years' savings; according to bank statements in the record, respondent's checking account had a balance of $844.25 on January 15, 2002. Of course, any checks that correspond to the deductions allowed in section 505(a)(3) or to documented expenditures for the farm should not be included as unexplained resources, because they have already been taken into account in calculating respondent's net income.



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Updated on:  April 25, 2013

April 25, 2013