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Bar News - November 15, 2013

Family Law: Defining ‘Gross Income’ for Child Support Calculations Presents Challenges


Type of Income Is it "gross income" under RSA 458-C:2? Citation
Proceeds from stock options Yes In re Dolan, 147 N.H. 218 (2001)
Non-recurring income Yes In re Fedderson, 149 N.H. 194 (2003)
Existing assets and cash reserves No In re Plaisted, 149 N.H. 522 (2003)
Personal injury settlement paid as annuity Yes In re Jerome, 150 N.H. 626 (2004)
Personal injury settlement paid as lump sum Yes In re State (Taylor), 153 N.H. 700 (2006)
Gifts No In re Fulton, 154 N.H. 264 (2006)
Non-monetary fringe benefits No In re Clark, 154 N.H. 420 (2006)
K-1 pass-through income Maybe In re Albert, 155 N.H. 259 (2007)
Forgiveness of employer-provided loans Yes In the Matter of Sullivan & Sullivan, 159 N.H. 251 (2009)
Life insurance proceeds Yes In re LaRoque & LaRoque, 164 N.H. 148 (2012)
For self-employed parties, the business's gross business receipts No In the Matter of Woolsey & Woolsey, 164 N.H. 301 (2012)
Calculating child support is an integral part of practicing family law, but it can be challenging, especially when it comes to determining what constitutes “gross income.”

The statutory definition of “gross income” in RSA 458-C:2 is complex, and this complexity is compounded by the numerous New Hampshire Supreme Court cases addressing the topic, which have further refined what is, what is not, and what could be “gross income.” Because properly identifying a parent’s “gross income” is the first step in calculating his or her presumed child support obligation, an understanding of the definition of “gross income” is vital.

“Gross income” is broadly defined under New Hampshire law as encompassing “all income from any source, whether earned or unearned” (RSA 458-C:2, IV). The statute provides an extensive, though non-exhaustive, laundry list of income types that constitute “gross income,” ranging from tips to gambling winnings to veteran’s benefits. A court may also impute income if a parent is voluntarily unemployed or underemployed, so long as such party is not physically or mentally incapacitated.

“Gross income” does not include overtime wages earned on an occasional or seasonal basis, where a parent is paid at an hourly rate “in a trade or industry which traditionally or commonly pays overtime wages.” See RSA 458-C:2, IV (“… excluding professionals, business owners, business partners, self-employed individuals and others who may exercise sufficient control over their income so as to re-characterize payment to themselves to include overtime wages in addition to a salary.”). It also does not include a parent’s spouse’s income, unless “the parent resigns from or refuses employment or is voluntarily unemployed or underemployed,” according to RSA 458-C:2, IV(b).

Though the list of “gross income” examples provided in RSA 458-C:2, IV is extensive, it does not account for every conceivable income source, and disputes about whether types of income not expressly identified in the statute should be included in “gross income” are thus inevitable. When asked to decide whether a specific income source not expressly named in the statute constitutes “gross income,” the New Hampshire Supreme Court compares the disputed income source with the examples provided in the statute - the more similar the challenged source to the statutorily provided examples, the more likely such source will be found to constitute gross income. See, e.g., In re LaRocque & LaRocque, 164 N.H. 148, 152-53 (2012).

To assist with its comparative analysis, the Court has observed two key characteristics of those gross income examples enumerated in RSA 458-C:2, IV: “First, all of the items listed involve payments in the form of money. RSA 458-C:2, IV does not include any items that, although they may carry value, are not monetary. For example, it does not include real or personal property, nor benefits such as health insurance or employer contributions to a retirement plan. Second, the items listed in RSA 458-C:2, IV are all things to which the recipient, generally speaking, has a legally enforceable right and which the provider has a legal obligation to give; in other words, items that, if withheld, may be obtained by resort to judicial compulsion. The wage earner, lottery winner, trust beneficiary and alimony recipient all have a legal right to the funds due them and the payers have an obligation to provide them.” In re Fulton, 154 N.H. 264, 267 (2006).

As the Court continues to rule on gross income cases, its holdings invariably affect what is, and is not gross income, resulting in a sort of de facto modification and/or expansion of the statutory definition. For this reason, a familiarity with the cases addressing gross income is essential. Pertinent examples of such cases include those listed in the chart on page 14.

In sum, the definition of “gross income” continues to be refined. While the trend is clearly towards inclusion, and the Court’s analytical approach has thus far been largely pragmatic, areas of ambiguity remain. One such example, which has been addressed in other jurisdictions, is that of K-1 passive income (known colloquially as “phantom income”), where an individual may receive “income” for tax liability purposes without receiving any actual monies to pay towards obligations. Does such “income” constitute “gross income”? Should it? The Court’s holding in In re Albert, while peripherally discussing K-1 passive income, declined to address the larger issue of whether “phantom income” should be included in “gross income” for calculating child support. This is but one example of the remaining uncertainty pertaining to our current definition of “gross income” as we understand it today - others will inevitably arise in the future.

Heather E. Krans and Petar M. Leonard are attorneys at The Stein Law Firm in Concord, NH, where they concentrate their practice on family law matters. Krans is a fellow of the American Academy of Matrimonial Lawyers (AAML). Leonard is a graduate of the UNH Law Daniel Webster Scholar Honors Program.

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