Child Support and Imputed Income

It is not infrequent for the non-custodial parent to claim an annual income far less than he/she actually earns. In those situations, the courts can impute additional income to the party paying child support. As held by the Appellate Division, Second Department, in Strella v. Ferro, the court “need not rely upon the party’s own account of his or her finances, but may impute income based upon the party’s past income or demonstrated earning potential.” The imputed income can be established in several different ways.

One way to establish that a party’s actual income is higher than his/her reported income is to demonstrate how his/her reported lifestyle could not be supported by the reported income.

In Strella, the father claimed that he had been unemployed and only recently begun to earn $500 per week despite having recently earned as much as $101,000 per year. The Court imputed an income of $96,000 to the father. In doing so, the Appellate Court noted that:

Here, the father’s claimed annual household expenses were approximately double his claimed annual income in 2004 and 2005. Additionally, his financial data did not indicate that he used money from his savings or that he incurred greater debt to pay the remaining amount of his annual expenses not covered by his average annual income. During the relevant period, he did not liquidate any of his investments, he had no outstanding balance on his home equity line of credit, and his credit card statements showed no unpaid balances of a size and nature to correspond to his household expenses.

In Barnett v Ruotolo, the Appellate Division, Second Department, held that in exercising the discretion to impute income to a party, a Support Magistrate is required to provide a clear record of the source from which the income is imputed and the reasons for such imputation. In that case, the father did not testify and chose to rely on the financial documentation he had submitted. The father’s financial documentation indicated that his monthly income was only approximately one-third of his stated monthly expenses, and no evidence was submitted to show that these monthly expenses were not being paid in a timely manner. The Appellate Division held that lower court properly exercised its discretion in imputing income based upon the father’s self-reported financial affidavit for the purpose of calculating his child support obligation.

If the party’s expenses exceed his/her reported income, and there is no obvious diminution of the party’s assets, then the reported income is likely to be under-reported. Under those circumstances, the court should look beyond the filed tax return to calculate the appropriate child support amount.

The court can also impute income by averaging what was reported on most recent individual tax returns. In Y.W., v. T-T.J., the Appellate Division, First Department, reversed a child support order of $3,288 per month and remanded the case back for recalculation of the basic child support obligation. The Appellate Division held that since each party claimed that the income as reflected on the other’s tax return was not accurate, and the parties were unable to produce sufficient evidence to otherwise convince the support magistrate about their respective incomes, the magistrate properly decided to impute income to the parties by averaging what was reported on their most recent (2004 and 2005) individual tax returns.

New Child Support Surcharge

New York has recently made changes to its child support enforcement statutes to comply with the new federal requirements. Changes to the fee for child support enforcement services followed a new federal requirement. The states are required to charge an annual fee of $25 in every child support case in which $500 is collected during the federal fiscal year. The fee applies only to those for whom the support is being collected and who never received public assistance. For those who have received pubic assistance, the statute increases the pass-through charge from $50 to $100, as of Oct. 1, 2008, and to $200 as of Jan. 1, 2010, when two or more children are involved.

Parent’s Obligation to Pay College Expenses Does Not Always Terminate at the Age of 21

In New York State, a parent’s obligation to pay child support terminates when the child reaches the age of 21. However, in situations where a parent is charged with the financial responsibility of paying for the child’s college education, this support obligation may extend well beyond the age of 21. In the case of Lamb v. Amigone, 12 A.D.3d 1165 (4th Dept. 2004), the Appellate Division, Fourth Department, held that unless the parties’ Separation Agreement made a specific reference to parental contribution toward college expenses terminating at the age of majority, the parental college expense contribution continued beyond the age of 21.

That result was also reached by the Appellate Division, Fourth Department, in Schonour v. Johnson, 27 A.D.3d 1059 (4th Dept. 2006), where the Court held that where “[i]n their stipulation, the parties did not place any age limitation on their mutual promises to contribute to the costs of their daughters’ undergraduate college educations”, the appellant was obligated to pay for his daughters’ four years of college education regardless of their age.

Similarly, the court can order payment of college expenses even where the child reaches the age of majority if special circumstances exist. See Domestic Relations Law § 240 [1-b] [c] [7]; also, Krouner v. Urbach, 267 A.D.2d 575 (3rd Dept. 1999); Smith v Smith, 174 AD2d 818, 819 (3rd Dept. 1991).

Thus, both stipulations of settlement and settlement agreements must be carefully prepared and reviewed to make sure that they conform with the parties’ intent. Otherwise, the parties may find themselves in court, relitigating provisions of their settlement many years later.

Criminal Penalties Related to Child Support

New York has recently amended two sections of the Penal Law, §260.05 and §260.06, which make it a crime for a parent to voluntarily reduce his or her income, terminate employment or fail to seek employment to circumvent an order of child support. Specifically, §260.05, non-support of a child in the second degree, provides that:

A person is guilty of non-support of a child when:

1. being a parent, guardian or other person legally charged with the care or custody of a child less than sixteen years old, he or she fails or refuses without lawful excuse to provide support for such child when he or she is able to do so, or becomes unable to do so, when, though employable, he or she voluntarily terminates his or her employment, voluntarily reduces his or her earning capacity, or fails to diligently seek employment; or
2. being a parent, guardian or other person obligated to make child support payments by an order of child support entered by a court of competent jurisdiction for a child less than eighteen years old, he or she knowingly fails or refuses without lawful excuse to provide support for such child when he or she is able to do so, or becomes unable to do so, when, though employable, he or she voluntarily terminates his or her employment, voluntarily reduces his or her earning capacity, or fails to diligently seek employment.

Penal Law §260.06 makes such failure to support a felony if a person was convicted of violating Penal Law §260.05 within the last 5 years. Such charges are available in conjunction with other remedies available to the recipient of child support under the Family Court Act, the Domestic Relations Law and the Judiciary Law. Both sections take effect on November 1, 2008.

Out-of-State Orders and New York Child Support

In a recent decision, Spencer v. Spencer, the New York Court of Appeals has finally clarified issues related to application of the Uniform Interstate Family Support Act (“UIFSA”).

Prior to Spencer, in situations where a party had a child support order from a state where the age of emancipation was less than 21, the child support order expired due to the age of the child, and if New York courts had jurisdiction over the party, the custodial parent could bring a new child support petition in New York. Since the petition was treated as a new filing, and not a modification of the out-of-state order, the New York courts then could order child support to continue until the age of 21. This was highly inequitable to parties who had child support orders from the states where the age of emancipation was 18, such as Ohio, or 19, such as California.

Spencer was decided under the following facts. The parties in dispute were married and had several children while living in Connecticut. Following divorce, the mother moved to New York while the father continued to reside in Connecticut. When the eldest son turned 18, the Connecticut support order expired. In 2004, the alimony obligation also expired and the father, as the court noted, “began working three days a week as a consultant.” The mother brought a new child support petition in New York. The New York Family Court issued a new order in 2005 directing payment of child support lasting until age 21.

The Court of Appeals held that the New York order was a modification of the Connecticut support order under the one-order policy of the UIFSA. The Court of Appeals stated that the New York Family Court lacked subject matter jurisdiction to modify an out-of-state order, and child support terminated pursuant to the terms of the initial order. As a result of the decision, prior orders entered under similar circumstances should be vacated. Unfortunately, the Court of Appeals did not address whether recoupment of the child support paid under a new New York order is available to the parent who was paying child support.