Prepared by Michael R. Kohlhaas
Shane Wierks v. Heather (Corey) Mazellan, et al. (May 14, 2021) (Detailed Child Support Calculation)
HELD: It is potential error for a trial court calculating child support not to consider differences in the cost of living, where one parent lives in a location where the cost of living is significantly different than in Indiana. Here, Father was a high-earner working and living in New Jersey, and the trial court erred by not accounting for Father’s higher cost of living in rendering its child support calculation.
HELD: In a deep dive on a child support recalculation:
· The trial court erred when it failed to adjust for Father’s self-employment FICA rate. · The trial court did not err when it added back depreciation to Father’s adjusted gross income. · The Court of Appeals remanded the support calculation for consideration of the fact that Father’s effective tax rate was much higher than the 21.88% tax rate presumed by the Guidelines. · The trial court did not abuse its discretion when it included Father’s voluntary retirement contributions as part of Father’s income for support purposes. · The trial court’s decision not to adjust for cost-of-living differences related to Father living in New Jersey was reversed.
FACTS & PROCEDURAL HISTORY: Father and Mother had Child together in 2007. Father has lived in New Jersey most of his life, other than while attending Ball State, shortly after which Child was born. A 2010 child support order established that Father pay child support of $94 per week.
Father went on to become a successful commercial real estate broker in New Jersey. In 2020, the Grant County Prosecutor’s Office initiated a Title IV-D child support modification on Mother’s behalf. There was no dispute between the parties that Father’s support obligation should be increased, but the specifics of the modification were contested. After a hearing, the trial court increased Father’s child support to $672/wk based in part upon a finding that Father’s income for child support purposes was approximately $568,412/yr. Father appealed.
FICA Tax Payment
Father is self-employed. Mother conceded that the trial court erred when it did not deduct from Father’s income one-half of the 15.30% FICA tax that would usually be paid by an employer, as provided for by Indiana Child Support Guideline 3(A)(2). This issue was remanded for adjustment.
Depreciation
Father’s adjusted gross income on his recent tax returns included substantial depreciation deductions of about $49,000 and $89,000, respectively, related to commercial rental properties that Father owns. Mother successfully argued to the trial court that these amounts should be added back to Father’s income for support calculation purposes.
Concluding that Father did not develop his depreciation argument sufficiently at the trial court level, the trial court’s add-back of the deprecation was not clearly erroneous.
The Guidelines assume that a parent’s income is taxed at 21.88%, and where a parent’s actual tax rate varies considerably from that, the trial court has discretion to make an adjustment.
Father presented evidence that his tax rate was approximately 38%. Mother did not dispute this evidence, but stressed that the trial court had the discretion—not a mandate—to make an adjustment, even if the evidence clearly established a significant difference in actual tax rate.
The Court of Appeals elected to remand the issue for a closer review by the trial court to determine and then articulate what, if any, adjustment is appropriate.
Retirement Contributions
In calculating Father’s income for child support purposes, the trial court added back substantial, voluntary retirement contributions that Father made ($54,000 in 2017, and $55,000 in 2018). The Court of Appeals accepted at face value that Father did not make those contributions in any effort to reduce his income for child support purposes, and that Father’s retirement contributions were made in good faith.
Nevertheless, it is not clear error for a trial court to include voluntary retirement contributions as part of a parent’s income for support calculation purposes.
Cost of Living
Father presented evidence that his cost of living in New Jersey was about 20% higher than Indiana, and Father requested a deviation in the child support calculation to reflect that. The trial court rejected the argument, stating that the evidence was speculative, and that Father’s circumstances reflected a choice made by Father.
The Court of Appeals pointed out that New Jersey’s higher cost of living than Indiana’s was uncontroverted, and that Father was a lifelong resident of New Jersey. Relying on the Guidelines high-level language that trial courts should not adhere to its formulas blindly, and that it should consider each unique situation carefully, the Court of Appeals held that it was clearly erroneous to deny an adjustment here. The issue was remanded for the trial court to determine and apply an appropriate adjustment.
The trial court’s support modification was affirmed in part, reversed in part, and remanded.
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