Imputed Income

Author: LegalEase Solutions

QUESTIONS PRESENTED

Whether boyfriend can be imputed income based on his earnings?

Whether mother be allowed to reduce her imputed gross income on the ground that the parties’ agreement to enroll the child in a private school is an extraordinary expense?

 SHORT ANSWERS

The Michigan Child Support Guideline permits courts to impute potential income to a parent if the parent remains voluntarily unemployed or underemployed, or has an unexercised ability to earn.[1]In the instant case, it appears that the father has failed to make use of his prior experience and skills in law enforcement and training officers, and remains voluntarily underemployed. Therefore, it is possible he can be imputed income as set out in the formula.

The child support guideline permits a court to grant a deviation from the existing formula on certain grounds. Extra ordinary educational expenses are one such ground.[2] Though cases allowing a reduction in gross income to accommodate private schooling expenses are few, making effective analysis difficult, Michigan courts have approved such expenses in some cases.

RESEARCH FINDINGS

  1. Imputed income

“It is well settled that children have the right to receive financial support from their parents and that trial courts may enforce that right by ordering parents to pay child support.” Borowsky v Borowsky, 273 Mich App 666, 672-73; 733 NW2d 71, 76 (2007). “In determining child support, the trial court must generally follow the formula set forth in the MCSF Manual, which is published by the FOC pursuant to legislative mandate.” Peterson v Peterson, 272 Mich App 511, 516; 727 NW2d 393, 396 (2006) (citing MCL 552.519(3)(a)(vi ); MCL 552.605(2)). “According to the applicable statutes, the child support formula ‘shall be based upon the needs of the child and the actual resources of each parent.’” Ghidotti v Barber, 459 Mich 189, 198; 586 NW2d 883, 886 (1998) (quoting MCL 552.519(3)(a)(vi)). Further, “[i]n applying this mandate, cases have broadened the limits of ‘actual resources’ to include certain payers’ unexercised ability to pay.” Id. Therefore, the calculation of net income of the parents “not only includes a party’s actual income, but it can include imputed income.” Carlson v Carlson, 293 Mich App 203, 205; 809 NW2d 612, 614 (2011).

“With respect to imputation of income, one of the primary goals of the MCSF is to ensure that ‘[t]he amount of potential income imputed should be sufficient to bring that parent’s income up to the level it would have been if the parent had not voluntarily reduced or waived income.’” Clarke v Clarke, 297 Mich App 172, 179; 823 NW2d 318, 322 (2012) (quoting 2008 MCSF 2.01(G)(1)). Further, “[w]hen a party eliminates income and the court concludes that the party has the ability to earn an income and pay child support, it is not error to order support based on the unexercised ability to earn.” Id., 297 Mich App at 181.

The trial court will consider the following factors when deciding  whether to impute income to an individual –  “employment experience, educational level, physical and mental disabilities, whether the parties’ children reside in the individual’s home, availability of employment, wage rates, special skills and training, and whether the individual can actually earn the imputed income.” Stallworth v Stallworth, 275 Mich App 282, 286; 738 NW2d 264, 267-68 (2007). “These factors [set out in MCSF 2.01(G)(2)] generally ensure that adequate fact-finding supports the conclusion that the parent to  whom income is imputed has an actual ability and likelihood of earning the imputed income.” Berger v Berger, 277 Mich App 700, 725-26; 747 NW2d 336, 354 (2008). Michigan courts “impute income to a parent on the basis of the parent’s unexercised ability to pay when supported by adequate fact-finding that the parent has an actual ability and likelihood of earning the imputed income.” Stallworth, supra, 275 Mich App at 284-85.

In the instant case, the father of the child worked as a police officer for several years. Later, he worked abroad training police and security officers. On his return to US, he began selling supplemental insurance and earning $12,000, a year. Thus, the father has failed to make use of his prior experience in law enforcement and training security officers, thereby remaining voluntarily under employed. Therefore, he may have an ‘unexercised ability to earn’ which is ‘supported by adequate fact-finding that he has an actual ability and likelihood of earning the imputed income’ satisfying the requirement of imputed income for the purpose of child support.

  1. Reducing gross income on extraordinary educational expenses

Michigan allows a parent credit for the costs of providing for child care when determining child support amounts.  2013 MCSF 3.06(A) allows for an adjustment in calculating the support amount based on “expenses for the children in the case under consideration.” Id.  2013 MCSF 3.06(A)(1) specifically allows a parent to be credited the “actual costs” of child care when making the calculation. Id.

In the present case, the cost of daily private schooling may be comparable to the cost of providing child care.  Therefore, the mother arguably should be credited the cost of the private school when determining her base income.

Further, “MCL 552.605(2) allows the court to deviate when application of the child support formula would be unjust or inappropriate.” Peterson, supra, 272 Mich App at 519; 727 NW2d 393, 398 (2006). “Trial courts must presumptively follow the MCSF when determining parents’ child support obligations.” Ewald v Ewald, 292 Mich App 706, 715; 810 NW2d 396, 401 (2011). The Michigan Child Support Guideline considers child’s “extraordinary educational expenses” as a situation which may cause an “unjust or inappropriate” result in the formula. 2013 MCSF 1.04(E) Deviation Factors.

Michigan courts have allowed a deviation in child support on the grounds of private schooling. In Edwards v Edwards, 192 Mich App 559; 481 NW2d 769 (1992),  the minor child was enrolled in a private school and an after-school “latchkey” program, the cost of which was more than $100.00 per week. Id. at 563- 64; 481 NW2d at 771.

The court held that a deviation from the formulae was warranted. Id.  The court reasoned that, given the “disparity in the parties’ incomes, the trial court’s child support award was insufficient.” Id.  Therefore, where there is a disparity in the earning power of the parents, and one parent bears the entire cost of education, a deviation is warranted.

Moreover, “to continue the education and raising of the child in his or her religion or creed” is one among the best interest factors provided in MCL 722.23.

In the instant case, the mother finds it appropriate to send the child to the private school where the curriculum includes religious training. She pays the schooling expenses exclusively. The private school expenses are relatively high. Therefore, the mother may cite the “extraordinary educational expenses” resulting in “unjust or inappropriate” formula as a ground to seek deviation in child support.

CONCLUSION

The Michigan Child Support Guideline permits the court to impute income to a parent who voluntarily remains under employed despite prior experience and skills. In the instant case, the father has prior experience in law enforcement and training officers, yet he is engaged in selling supplemental insurance, thereby arguably remaining underemployed. Further, if the father has failed to provide any financial support to meet the private schooling expenses of the child, the mother may be able to seek a reduction in her gross income calculation to accommodate the extra ordinary educational expenses of the child.  Alternatively, the mother may be able to show that the cost of paying for schooling is an “extraordinary educational expenses” resulting in an “unjust or inappropriate” burden on her.

[1] 2013 MCSF 2.01(G) Potential Income

[2] 2013 MCSF 1.04(E) Deviation Factors (2) The child has extraordinary educational expenses.