«CHILD AND SPOUSAL SUPPORT [REVISED 2012] ABOUT CJER The California Center for Judicial Education and Research (CJER), as the Education Division of ...»
An “extraordinary case” in which the court should consider the income of the new spouse or nonmarital partner may include when one parent has (i) voluntarily or intentionally quit work or reduced his or her income, or (ii) intentionally remains unemployed or underemployed and relies on the income of the new spouse or nonmarital partner. Fam C §4057.5(b).
If the court considers any portion of the new spouse’s or nonmarital partner’s income under the “extraordinary case” exception, discovery for the purposes of determining this income must be based on W2 and 1099 income tax forms, unless the court determines that this would be unjust or inappropriate. Fam C §4057.5(c). The court must also allow a hardship deduction based on the minimum living expenses for any stepchildren of the parent subject to the order. Fam C §4057.5(d). See §201.29.
JUDICIAL TIP: It is sometimes hard to distinguish between a “new spouse or partner” income case and an “earning capacity” case. See §201.18. How the court treats it will depend on a number of factors. If the moving parent does not raise the issue of new spouse or partner income, but raises the issue of voluntary §201.17 California Judges Benchguide 201–18 reduction in income, then the court may want to treat it as an earning capacity case and impute income to the nonmoving spouse based on earning capacity. If the moving parent raises the issue of new spouse or partner income, then the court will need to make appropriate findings after discovery and determine how to treat it.
The court is not precluded by Fam C §4057.5 from considering a new spouse’s income when determining the supporting parent’s actual tax liability under Fam C §4059(a), for purposes of computing the supporting parent’s net disposable income. When a parent has married a wageearning spouse with whom he or she files a joint tax return, accurate calculation of the parent’s actual tax liability is not possible unless the couple’s combined gross income is considered. County of Tulare v Campbell (1996) 50 CA4th 847, 854, 57 CR2d 902; Marriage of Carlsen (1996) 50 CA4th 212, 218–219, 57 CR2d 630. But see Marriage of Carlton (2001) 91 CA4th 1213, 1218–1219, 111 CR2d 329 (this rule does not apply when new spouse and parent file separate returns).
E. [§201.17] Evidence of Income A child support award must be based on admissible evidence of the parents’ income. A parent’s gross income, as stated under penalty of perjury, on recent tax returns, is presumed to be a correct statement of the parent’s income. Marriage of Loh (2001) 93 CA4th 325, 332, 112 CR2d
893. The court may also consider the parents’ income and expense declarations and pay stubs, as well as the testimony of experts and the parents themselves. Marriage of Rosen (2002) 105 CA4th 808, 824, 130 CR2d 1; Marriage of Loh, supra, 93 CA4th at 335. A child support award may not be based, however, on so-called lifestyle evidence of a parent’s income, e.g., evidence that a parent has purchased a new home or drives an expensive automobile. 93 CA4th at 327.
When a parent owns a business, the presumption that the parent’s income as stated on recent tax returns is correct may be rebutted by a statement of income on a loan application. Marriage of Calcaterra and Badakhsh (2005) 132 CA4th 28, 34–36, 33 CR3d 246 (loan application of father who owned a small business and several rental properties listed much higher income and assets than the figures shown on his recent tax returns).
A parent who admits to being an extraordinarily high earner and to an ability to pay any amount of child support may not refuse to reveal his or her actual income when the appropriate amount of support is in dispute.
Marriage of Hubner (2001) 94 CA4th 175, 183–187, 114 CR2d 646.
Unless the parents stipulate to the appropriate amount of support, both the court and the other parent are entitled to know the high earner’s actual 201–19 Child Support and Spousal Support §201.18 income, regardless of his or her admission of an ability to pay any reasonable child support ordered. 94 CA4th at 184. See Estevez v Superior Court (1994) 22 CA4th 423, 426–431, 27 CR2d 470 (high earner is not required to provide detailed information and documentation of his or her income, expenses, and assets when high earner stipulates that he or she will pay any reasonable amount of support ordered, and other party does not dispute amount of support but only manner of its disbursement). If the parents dispute the amount of the high earner’s income and cannot agree on the amount of support, the court must make the least beneficial income assumptions against the high earner. Marriage of Hubner, supra, 94 CA4th at 186; Johnson v Superior Court (1998) 66 CA4th 68, 74–75, 77 CR2d 624. The court can make these assumptions only after it obtains adequate information about the high earner’s actual income. Marriage of Hubner, supra, 94 CA4th at 186–187 (court cannot base support order on fictional gross income assumptions); McGinley v Herman (1996) 50 CA4th 936, 946, 57 CR2d 921 (at a minimum, an approximation of high earner’s net disposable monthly income is required). In permitting discovery directed at obtaining reliable information to enable the court to determine the appropriate amount of support, the court may take appropriate measures to protect the high earner’s legitimate privacy concerns regarding his or her finances. Marriage of Hubner, supra, 94 CA4th at 187.
F. Considering Parent’s “Earning Capacity” Instead of Actual Income 1. [§201.18] Statutory Rule In determining child support, the court has discretion to consider a parent’s earning capacity instead of the parent’s actual income, consistent with the best interests of the supported children. Fam C §4058(b). The strong public policy in favor of providing adequate child support has led to an expansive use of earning capacity in setting the level of support when consistent with the needs of the child. Marriage of Destein (2001) 91 CA4th 1385, 1391, 111 CR2d 487. Courts have the discretion to impute income to both the payor and the payee parent based on earning capacity.
Marriage of Cheriton (2001) 92 CA4th 269, 301, 111 CR2d 755. See also Mendoza v Ramos (2010) 182 CA4th 680, 105 CR3d 853 (court properly declined to attribute income to mother who was recipient of CalWORKS and in compliance with terms of that program).
When the court considers earning capacity instead of actual income, it is only the actual earned income that is replaced by earning capacity.
The court may consider both earning capacity and actual unearned income (e.g., disability benefits, royalties, or a trust), and add the two items.
Stewart v Gomez (1996) 47 CA4th 1748, 1752–1754, 55 CR2d 531.
§201.19 California Judges Benchguide 201–20
2. Ability and Opportunity To Work a. [§201.19] Bad Faith Not Required; Regnery Rule A court is not limited to considering earning capacity only on a showing of bad faith or that the parent is deliberately avoiding his or her financial responsibilities to the family by refusing to accept or seek gainful employment. Marriage of Smith (2001) 90 CA4th 74, 81, 108 CR2d 537;
Marriage of Hinman (1997) 55 CA4th 988, 994–995, 998–999, 64 CR2d
383. Rather, as set out in Marriage of Regnery (1989) 214 CA3d 1367, 1372–1373, 263 CR 243, the court should consider the “earning capacity” of an unemployed or allegedly underemployed parent when it is shown
that the parent has:
• The ability to work, considering factors such as the parent’s age, occupation, skills, education, health, background, work experience, and qualifications; and
• An opportunity to work. Marriage of Regnery (1989) 214 CA3d 1367, 1372–1373, 263 CR 243. A parent has an opportunity to work if there is a reasonable likelihood that the party could, with reasonable effort, apply his or her education, skills, and training to produce income. Marriage of Smith, supra, 90 CA4th at 82.
“Opportunity” is not limited to working for someone else; the court may also consider the parent’s “opportunity” for self-employment.
Marriage of Cohn (1998) 65 CA4th 923, 930, 76 CR2d 866 (this is particularly a relevant consideration in case of professionals or tradespeople who are self-employable).
If either the ability or opportunity to work is absent, a parent’s earning capacity may not be considered. But if a parent is unwilling to work, despite having the ability and opportunity to do so, earning capacity may be imputed. Marriage of Regnery, supra, 214 CA3d at 1373;
Marriage of LaBass & Munsee (1997) 56 CA4th 1331, 1338, 66 CR2d
393. See also Marriage of Mosley (2008) 165 CA4th 1375, 1386–1387, 82 CR3d 497 (earning capacity imputed to parent who had attorney position at large law firm but quit to raise her children, when her returning to work was in best interests of children).
b. [§201.20] Issue of Motivation A parent’s motivation for reducing available income is not per se irrelevant when the ability and opportunity to adequately and reasonably provide for the child are present; the court may consider it in exercising its discretion in considering a parent’s earning capacity. Marriage of Bardzik (2008) 165 CA4th 1291, 83 CR3d 72. Furthermore, sometimes the children’s best interests may be promoted when a parent leaves a stressful, high-paying job to spend more time with the children. See Marriage of 201–21 Child Support and Spousal Support §201.21 Bardzik, supra. However, earning capacity may be imputed when a parent gives up full-time employment for part-time employment in order to pursue an advanced degree. Marriage of LaBass & Munsee (1997) 56 CA4th 1331, 1338, 66 CR2d 393. See also Marriage of Ilas (1993) 12 CA4th 1630, 1639, 16 CR2d 345 (earning capacity imputed to parent who quit job as pharmacist to attend medical school).
When a parent loses a job because of misconduct, the court may not impliedly find that the termination was voluntary for purposes of determining a parent’s earning capacity. Marriage of Eggers (2005) 131 CA4th 695, 699–701, 32 CR3d 292. In Eggers, a parent was fired for using extremely poor judgment in sending multiple e-mails that were sexual in nature to a co-worker. The trial court erred in construing the termination as voluntary and wrongly imputed income to the parent without addressing the parent’s ability and opportunity to work.
c. [§201.21] Burden of Proof and Evidence of Earning Capacity The party urging the court to consider earning capacity has the burden of showing the other party’s ability and opportunity to be employed. Once this burden is met, the other party must prove that, despite reasonable efforts, he or she could not secure employment.
Marriage of LaBass & Munsee (1997) 56 CA4th 1331, 1338–1339, 66 CR2d 393 (help-wanted ads from newspaper are admissible for purpose of showing employment opportunities). See Marriage of Regnery (1989) 214 CA3d 1367, 1373–1376, 263 CR 243 (court may consider party’s employment history and failure to comply with support orders in evaluating credibility of party’s claim to be unable to find gainful employment).
The figures for earning capacity cannot be drawn from thin air; they must have some tangible evidentiary foundation. Marriage of Cohn (1998) 65 CA4th 923, 931, 76 CR2d 866. See Marriage of Graham (2003) 109 CA4th 1321, 1327–1328, 135 CR2d 685 (evidence did not support hourly rate court used to impute income). A court may not calculate support based on a party’s hypothetical procurement of a job that the evidence shows was not available to the party. For example, the court may not impute income to a party based on the salary offered for a job for which the party applied, but was not hired. Marriage of Cohn, supra, 65 CA4th at 930–931. See also Mendoza v Ramos (2010) 182 CA4th 680, 685–686, 105 CR3d 853 (income was not imputed to mother who applied for public assistance after being laid off from her previous job and who was unable to find employment thereafter).
When the evidence demonstrates that a reduction in a party’s income is attributable to circumstances beyond the party’s control, the court should look solely to the party’s actual income, rather than to the party’s §201.22 California Judges Benchguide 201–22 earning capacity. Marriage of Simpson (1992) 4 C4th 225, 232, 14 CR2d 411; Marriage of Serna (2000) 85 CA4th 482, 486, 102 CR2d 188 (court must consider economic realities of job market).