A. Sources of income
For purposes of these guidelines, income is defined as gross income from whatever source, regardless of whether that income is recognized by the Internal Revenue Code or reported to the Internal Revenue Service or state Department of Revenue or other taxing authority. However, income derived from a public assistance program or benefit that is based on the person’s financial circumstances (for example: TAFDC, SNAP, certain veterans’ benefits and supplemental security income (SSI) benefits) shall not be counted as income for either parent.
Sources of income include, but are not limited to, the following:
- salaries, wages, overtime and tips;
- income from self-employment;
- severance pay;
- interest and dividends;
- income derived from businesses/partnerships;
- social security retirement and social security disability insurance (SSDI), excluding any benefit due to a child’s own disability1;
- veterans’ benefits that are not based on a person’s financial circumstances;
- military pay and allowances, before allotments are deducted;
- insurance benefits, including those received for disability and personal injury, but excluding reimbursements for property losses;
- workers’ compensation;
- unemployment compensation;
- distributions and income from trusts;
- capital gains in real and personal property transactions to the extent that they represent a regular source of income;
- spousal support received from a person not a party to this order;
- contractual agreements;
- perquisites or in-kind compensation to the extent that they represent a regular source of income;
- unearned income of children, in the Court’s discretion;
- income from life insurance or endowment contracts;
- income from interest in an estate, either directly or through a trust;
- lottery or gambling winnings received either in a lump sum or in the form of an annuity;
- prizes or awards;
- net rental income;
- funds received from earned income credit;
- income derived from stock options and similar incentives, excluding any income from the coverture portion allocated at the time of the divorce of the parties subject to this child support order; and
- any other form of income or compensation not specifically itemized above, including, but not limited to, alimony consistent with Calvin C. v. Amelia A., 99 Mass. App. Ct. 714 (2021).
1 If a parent receives social security retirement or SSDI benefits and the children of the parties receive a dependency benefit derived from that parent’s benefit, the amount of the dependency benefit shall be added to the gross income of that parent. See Rosenberg v. Merida, 428 Mass. 182 (1998); Schmidt v. McCulloch-Schmidt, 86 Mass. App. Ct. 902 (2014). This combined amount is that parent’s gross income for purposes of the child support calculation. However, in cases where parents share or split parenting time according to Section II. D. 2. and the retired or disabled parent is also the child support recipient, only the dependency benefit sent directly to the retired or disabled parent by the Social Security Administration should be added the income of that parent. The guidelines worksheet automatically recognizes this situation and makes the appropriate adjustment.
If the retired or disabled parent is the payor and the amount of the dependency benefit that the Social Security Administration sends to the recipient exceeds the child support obligation calculated under the guidelines, then the payor shall not have responsibility for payment of current child support in excess of the dependency benefit. However, if the guidelines are higher than the dependency benefit that derives from the payor’s benefit, the payor must pay the difference between the dependency benefit and the weekly child support amount under the guidelines. See Rosenberg v. Merida, 428 Mass. 182 (1998).
For clarification purposes, the Task Force recommended eliminating the phrase “means-tested” in Section I and instead inserting phrases that define and explain what is meant by “means-tested”, i.e., based on a person’s financial circumstances. The agency or organization managing the program or benefit sets the financial criteria/circumstances for eligibility. Only those people who are determined to be eligible receive the benefits based on the person’s financial circumstances.
In Section I. A. 9., the Task Force recommended clarifying the types of social security payments that are considered income for child support purposes, as there is much confusion regarding the differences between SSI, SSDI, and social security retirement. The guidelines worksheet requires the input of information regarding social security dependency benefits received in Line 2b and Line 2c and, if applicable, the guidelines worksheet adjusts that amount in Line 7c when calculating the child support amount, consistent with Rosenberg v. Merida, 428 Mass. 182 (1998) and Schmidt v. McCulloch-Schmidt, 86 Mass. App. Ct. 902 (2014).
However, the Task Force identified that in some cases – those where parents share or split parenting time according to Section II. D. 2. (box 1 or box 3 on the guidelines worksheet), and the retired or disabled parent is also the child support recipient, and the Social Security Administration is directly sending a dependency benefit to the payor – including the dependency benefit as income to the retired or disabled parent was inconsistent with the legal underpinnings of Rosenberg v. Merida, 428 Mass. 182 (1998). Accordingly, the Task Force recommended that in these situations only a dependency benefit sent directly to the retired or disabled parent by the Social Security Administration should be added to the income of the retired or disabled parent.
In Section I. A. 11., the Task Force clarified that military allotments are debits from income, rather than income itself. Military base pay, other forms of military pay, and military allowances, such as the Basic Housing Allowance, are sources of income.
The Task Force recommended adding Section I. A. 29. to highlight a type of income that is becoming a more common method of compensating employees. This recommendation does not change substantive law, but emphasizes that, under existing law, a person cannot avoid a child support obligation by choosing to be compensated with stock options or by otherwise reclassifying his or her income. See Ludwig v. Lamee-Ludwig, 91 Mass. App. Ct. 36 (2017); Wooters v. Wooters, 74 Mass. App. Ct. 839 (2009).
On June 10, 2021, the Appeals Court issued a decision that addressed whether certain alimony amounts should be included as income by the recipient and deducted by the payor when calculating child support. The Appeals Court noted that where one spouse is the sole payor of both alimony and child support, and alimony is calculated first, it is usually necessary to “us[e] the parties’ adjusted, postalimony incomes when calculating child support to avoid running afoul of G. L. c. 208, § 53 (c) (2) . . . .” Calvin C. v. Amelia A., 99 Mass. App. Ct. 714, 721 (2021). This approach would not be utilized where the parties are “subject to reciprocal orders, i.e., each party is both a payor and a recipient of support” or where alimony is not calculated first. Id. Reference to this income is included in Section I. A. 30.
Although the Task Force did not recommend any substantive changes to Section I. A., Sources of Income, it considered whether to do so in light of emerging areas of income-producing activities such as transportation networking companies, crowd funding, domain site flipping, and inconsistent, short-term home rentals. The Task Force determined that these income-producing activities were encompassed by the existing list of sources of income. The Task Force received public comment regarding means-tested and non means-tested veterans’ benefits and, in response, clarified that means-tested veterans’ benefits are a type of income that is not included as income for child support calculation purposes. Due to the complexity of determining whether a veteran’s benefit is means-tested, the Task Force strongly recommended that the Court should inquire regarding the benefit. If the Court determines that there has been misrepresentation of income to a taxing authority or on a court-filed financial statement and/or guidelines worksheet, the Court may be required to report the information to the appropriate authority. See Rule 2.15(B) of SJC Rule 3:09: Code of Judicial Conduct.
B. Overtime and secondary jobs
- The Court may consider none, some, or all overtime income or income from a secondary job. In determining whether to disregard none, some or all income from overtime or a secondary job, due consideration must be given to the history of the income, the expectation that the income will continue to be available, the economic needs of the parties and the children, the impact of the overtime or secondary job on the parenting plan, and whether the overtime work is a requirement of the job.
- If after a child support order is entered, a payor or recipient begins to work overtime or obtains a secondary job, neither of which was worked prior to the entry of the order, there shall be a presumption that the overtime or secondary job income should not be considered in a future child support order.
The Task Force recommended striking the word “first” as it appeared in prior guidelines to clarify that all of the factors must be considered.
The Task Force considered and discussed Section I. C., D., E., and F, and did not recommend any changes.
The Task Force recommended continuation of the presumptive exclusion of certain overtime and secondary job income from the calculation of gross income for child support purposes. The Task Force rewrote and moved for clarification the sentence that previously read, “The Court may consider none, some, or all overtime income even if overtime was earned prior to the entry of the order.” The Task Force also determined that the language in this section applies to payors and recipients since the income of both parents is considered in setting a child support order.
C. Self-employment and other business income
Income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely-held corporation is defined as gross receipts minus ordinary and necessary expenses required to produce income. In general, income and expenses from self- employment or operation of a business should be carefully reviewed to determine the appropriate level of gross income available to the parent to satisfy a child support obligation. In many cases, this amount will differ from a determination of business income for tax purposes.
The Task Force renamed, reorganized and refined this section to focus on issues related to self-employment and the operation of a business. The Task Force moved the language regarding imputing income to the newly created Section I. D. entitled, “Imputation of Income”. Because the Task Force felt it was redundant, it deleted from the guidelines the sentence, “The calculation of income for purposes of this section may increase gross income by certain deductions or other adjustments taken for income tax purposes.”. The Appeals Court noted in Whelan v. Whelan, 74 Mass. App. Ct. 616, 626-27 (2009), “in determining income from self-employment, a judge must determine whether claimed business deductions are reasonable and necessary to the production of income, without regard to whether those deductions may be claimed for Federal or State income tax purposes.” As further direction, the Appeals Court noted in an unpublished decision, Zoffreo v. Zoffreo, 76 Mass. App. Ct. 1105 (2010), “[t]he fact that [a parent] is permitted under the tax laws to deduct an amount for depreciation does not mean that those funds, which are not out of pocket expenses, are not available to pay child support.”
For additional decisional guidance regarding calculating gross income, the Supreme Judicial Court held “that a determination whether and to what extent the undistributed earnings of an S corporation should be deemed available income to meet a child support obligation must be made based on the particular circumstances presented in each case.” J.S. v. C.C., 454 Mass. 652, 662-63 (2009). The Supreme Judicial Court included a non-exhaustive list of relevant factors to consider when making this determination, such as “a shareholder’s level of control over corporate distributions”, “the legitimate business interests justifying corporate earnings”, the “affirmative evidence of an attempt to shield income by means of retained earnings”, and “the allocation of burden of proof in relation to the Page 8 of 21 treatment of an S corporation’s undistributed earnings for purposes of determining income available for child support[.]” J.S. v. C.C., 454 Mass. 652, 662-65 (2009).
In Fehrm-Cappuccino v. Cappuccino, 90 Mass. App. Ct. 525 (2016), the Appeals Court addressed the appropriateness of including rental income when determining income for child support purposes. The decision notes that “there is no risk of double counting, where ‘neither the value of [the father’s interest in [the asset]] nor the [father’s] ability to earn income is diminished by treating the [father’s interest in [the asset]] as a marital asset as well as a source of income by which [the father] can meet his support obligations.’” Fehrm-Cappuccino v. Cappuccino, 90 Mass. App. Ct. 525, 528 (2016) (quoting Champion v. Champion, 54 Mass. App. Ct. 215, 221 (2002)).
D. Imputation of income
- When the Court finds that a parent has, in whole or in part, undocumented or unreported income, the Court may reasonably impute income to the parent based on all the evidence submitted, including, but not limited to, evidence of the parent’s ownership and maintenance of assets, and the parent’s lifestyle, expenses and spending patterns.
- Expense reimbursements, in-kind payments or benefits received by a parent, personal use of business property, and payment of personal expenses by a business in the course of employment, self-employment, or operation of a business may be included as income if such payments are significant and reduce personal living expenses.
- In circumstances where the Court finds that a parent has unreported income, the Court may adjust the amount of income upward by a reasonable percentage to take into account the absence of income taxes that normally would be due and payable on the unreported income.
The Task Force renamed, reorganized and refined the section previously entitled, “Unreported Income” to focus on issues related to the imputation of income. Income may be imputed when there are actual resources available to the parent that are not reported for tax purposes.
In general terms, undocumented income is income that does not result in the issuance of a tax reporting form. Unreported income is any income that is received and required to be reported that the taxpayer does not report on his or her taxes.
The Appeals Court decision in Crowe v. Fong, 45 Mass. App. Ct. 673 (1988) is instructional regarding Section I. D. 2. In Crowe, the payor earned $275 per week working at a business owned by his mother, lived rent-free in a home owned by his father, and had use of a vehicle. The Appeals Court upheld the trial judge’s “characterization of [the payor’s] free use of the home as ‘perquisite or in-kind income’ for purposes of calculating his support obligation under the guidelines[.]” Crowe v. Fong, 45 Mass. App. Ct. 673, 680-81 (1988).
E. Attribution of income
- Income may be attributed where a finding has been made that either parent is capable of working and is unemployed or underemployed.
- If the Court makes a determination that either parent is earning less than he or she could earn through reasonable effort, the Court should consider potential earning capacity rather than actual earnings in making its child support order.
- The Court shall consider the age, number, needs and care of the children covered by the child support order. The Court shall also consider the specific circumstances of the parent, to the extent known and presented to the Court, including, but not limited to, the assets, residence, education, training, job skills, literacy, criminal record and other employment barriers, age, health, past employment and earnings history, as well as the parent’s record of seeking work, and the availability of employment at the attributed income level, the availability of employers willing to hire the parent, and the relevant prevailing earnings level in the local community.
The Task Force reorganized and refined this section for clarification and to distinguish attributed income from imputed income. Income is attributed to a parent when the Court determines a parent is capable of earning more than is currently being earned and assigns a hypothetical amount of income to the parent. The Task Force, in consideration of the January 2017 changes to 45 C.F.R. § 302.56 (c) (2017), revised the factors to be considered when attributing income to a parent.
In P.F. v. Department of Revenue, 90 Mass. App. Ct. 707 (2016), the Appeals Court addressed attribution of income where the payor is incarcerated. “‘Income may be attributed where a finding has been made that [the payor] is capable of working and is unemployed or underemployed,’ . . . or where the payor owns ‘substantial assets.’” P.F. v. Department of Revenue, 90 Mass. App. Ct. 707, 710 (2016) (quoting Wasson v. Wasson, 81 Mass. App. Ct. 574, 581 (2012), quoting from Flaherty v. Flaherty, 40 Mass. App. Ct. 289, 291 (1996)). However, where there is “no income or assets from which to pay child support”, the Court may not attribute income to the payor based on the payor’s prior earning capacity, even if the payor is incarcerated due to committing a crime against the child for whom child support is being paid. P.F. v. Department of Revenue, 90 Mass. App. Ct. 707, 710-11 (2016).
F. Non-parent guardian
The income of a non-parent guardian shall not be considered for purposes of calculating a child support obligation.
The Task Force did not recommend any changes to this section.
|Date published:||August 4, 2021|