The Colorado legislature has provided that, in determining a parent’s income for purposes of calculating child support, the income to be counted is that from any source, with certain defined exceptions. The child support statute sets forth a non-exclusive list of what is included in the definition of “income.” The relevant portions of the statute are set forth below.
Excerpts from C.R.S. § 14-10-115:
(3) Definitions. As used in this section, unless the context otherwise requires:
(a) “Adjusted gross income” means gross income, as specified in subsection (5) of this section, less preexisting child support obligations and less alimony or maintenance actually paid by a parent.
(c) “Income” means the actual gross income of a parent, if employed to full capacity, or potential income, if unemployed or underemployed. Gross income of each parent shall be determined according to subsection (5) of this section.
(5) Determination of income. (a) For the purposes of the child support guidelines and schedule of basic child support obligations specified in this section, the gross income of each parent shall be determined according to the following guidelines:
(I) “Gross income” includes income from any source, except as otherwise provided in subparagraph (II) of this paragraph (a), and includes, but is not limited to:
(A) Income from salaries;
(B) Wages, including tips declared by the individual for purposes of reporting to the federal internal revenue service or tips imputed to bring the employee’s gross earnings to the minimum wage for the number of hours worked, whichever is greater;
(D) Payments received as an independent contractor for labor or services, which payments must be considered income from self-employment;
(G) Severance pay;
(H) Pensions and retirement benefits, including but not limited to those paid pursuant to articles 51, 54, 54.5, and 54.6 of title 24, C.R.S., and article 30 of title 31, C.R.S.;
(L) Trust income;
(N) Capital gains;
(O) Any moneys drawn by a self-employed individual for personal use that are deducted as a business expense, which moneys must be considered income from self-employment;
(P) Social security benefits, including social security benefits actually received by a parent as a result of the disability of that parent or as the result of the death of the minor child’s stepparent but not including social security benefits received by a minor child or on behalf of a minor child as a result of the death or disability of a stepparent of the child;
(Q) Workers’ compensation benefits;
(R) Unemployment insurance benefits;
(S) Disability insurance benefits;
(T) Funds held in or payable from any health, accident, disability, or casualty insurance to the extent that such insurance replaces wages or provides income in lieu of wages;
(U) Monetary gifts;
(V) Monetary prizes, excluding lottery winnings not required by the rules of the Colorado lottery commission to be paid only at the lottery office;
(W) Income from from general partnerships, limited partnerships, closely held corporations, or limited liability companies. However, if a parent is a passive investor, has a minority interest in the company, and does not have any managerial duties or input, then the income to be recognized may be limited to actual cash distributions received.
(X) Expense reimbursements or in-kind payments received by a parent in the course of employment, self-employment, or operation of a business if they are significant and reduce personal living expenses;
(Y) Alimony or maintenance received; and
(Z) Overtime pay, only if the overtime is required by the employer as a condition of employment.
The Colorado Court of Appeals has held that the child support statute defines income for child support purposes as income from “any source”, with limited and specified exclusions. Marriage of Campbell, 905 P.2d 19, 20 (Colo.App. 1995) (income from exercise of stock options to be included).
In short, “Gross Income” means income from any source except what is specifically excluded by the child support statute. Seems fairly simple….
Concerns that arise in the trial court: The judge or magistrate “forgets” that the definition of gross income is all income from any source and that the list of examples of what is included in the statute is prefaced with “but is not limited to”, and decides that if it is not on the list, then it is not included in calculating the parent’s income. This is opposite of what the court is supposed to do, but is the reality of what sometimes happens in the courtroom. Yes, the decision can be appealed – but, is the cost to appeal worth the possible gain in a corrected decision? Many times the benefit of a corrected decision is greatly outweighed by the cost of pursuing an appeal.
The specific exclusions from “gross income” are set forth in C.R.S. § 14-10-115(5)(II):
(II) “Gross income” does not include:
(A) Child support payments received;
(B) Benefits received from means-tested public assistance programs, including but not limited to assistance provided under the Colorado works program, as described in part 7 of article 2 of title 26, C.R.S., supplemental security income, food stamps, and general assistance;
(C) Income from additional jobs that result in the employment of the obligor more than forty hours per week or more than what would otherwise be considered to be full-time employment; and
(D) Social security benefits received by the minor children, or on behalf of the minor children, as a result of the death or disability of a stepparent are not to be included as income for the minor children for the determination of child support.
(E) Earnings or gains on a retirement account, including an IRA, which earnings or gains must not be included as income unless or until a parent takes a distribution from the account. If a distribution from a retirement account may be taken without being subject to an IRS penalty for early distribution and the parent decides not to take the distribution, the court may consider the distribution that could have been taken in determining the parent’s gross income if the parent is not otherwise employed full-time and the retirement account was not received pursuant to the division of marital property.
Questions and problems that may arise in the trial court:
- Child support payments received by a parent are excluded from the determination of that parent’s gross income for purposes of calculating child support for a different child. What is “child support”? Suppose the parent receives a regular amount from a former partner that greatly exceeds the child support order that was entered in the court case involving the former partner? Is the difference between the amount received and the support actually ordered also “child support” to be excluded from the income determination or is it maintenance or a monetary gift that should be included? C.R.S. § 14-10-115(6) provides for an adjustment to be made to the gross income of the parent paying child support for other children in the amount of what is actually being paid when there is a support order. The statute does not deal with a situation where the parent regularly receives more than what what the support order specifies is due.
- What is a “means-tested public assistance program” and are the monies being received from one of those programs? Are all of those income tax credits being received from the IRS excluded from the determination of gross income, even when the amount received is far, far more than what was withheld from wages and the result is an annual payment (refund) from the IRS? The child support statute directs that courts are to consider all relevant factors, including the financial resources of the child, the financial resource of the custodial parent and the financial resources and needs of the noncustodial parent. C.R.S. § 14-10-115(2)(b)(I), (II), (V). The Colorado appellate courts have yet to fully explore and answer these questions.
- Suppose a parent receives a regular and predictable childcare stipend from their employer? What if a parent receives the benefit of the employer paying a portion of their higher educational expenses or debt? Are these to be included in the calculation of income for that parent pursuant to (5)(I)(X) as an “Expense reimbursements or in-kind payments received by a parent in the course of employment, self-employment, or operation of a business if they are significant and reduce personal living expenses”?
The questions posed above have all been raised in recent trial court level cases. Stay tuned – perhaps we will have an answer, someday.
The information provided above is general in nature, is not intended as legal advice for your particular situation and should not be relied upon without first consulting with legal counsel. Martin Law Firm provides legal representation in child support, divorce and family law matters in the Denver Colorado metro area and will tailor its services to your particular needs and unique circumstances.