Tennessee child support law on income determination (bonuses and commissions) in Tennessee family law from the Tennessee Court of Appeals.
Burnett v. Burnett – Calculating Bonuses and Commissions for Tennessee Child Support Awards
The Father, David Mark Burnett, an account manager with Fedex, and the Mother, Analiza Palatones, were married in 1999. The couple had three children. In 2003, the Mother filed for divorce. At the time of the first trial, the Mother, 36 years old, had a high school degree and worked part-time as a waitress and part-time with Northwest Airlines, escorting unaccompanied minors. In these two jobs, over a two week period, the Mother earned approximately $200. The Father was 45 years old at the time of the trial and had been working for Fedex for sixteen years. His monthly net base salary was $4,829 plus quarterly bonuses, which changed significantly from year to year. In 2005, Husband earned a yearly salary plus bonuses totaling $120,213.38. In 2006, the Father’s FedEx earnings statement through October 14, 2006 showed gross earnings of $111,812.80, consisting of base salary plus bonuses. The Father’s affidavit showed his bonuses for 2003, 2004, 2005, and 2006 were $7,389, $20,810, $36,810, and $43,402, respectively.
The Trial Court
The Mother was designated as the primary residential parent and the Father was ordered to pay child support. The trial court calculated support using a monthly income of $10,649 for the Father and $0 for the Mother. The trial court ordered the Father to pay child support in accordance with the child support guidelines. It set Husband’s child support obligation at $1,769.00 per month. Tax exemptions for all three children (all under the age of eight years old) were awarded to the Mother. The Father additionally paid the mortgage on the home in which the Mother and children live. In its oral ruling, the trial court said the mortgage payments were an upward deviation in child support until the youngest child reaches age eighteen. The written order on child support, however, did not include this statement.
The Court of Appeals: How to Accurately Calculate Bonuses and Commissions
The appeals court reversed the trial court’s decision regarding the tax exemptions and gave these exemptions to the Father. The Internal Revenue Code automatically assigns tax exemptions for dependent children to the primary residential parent. However, the Tennessee Child Support Guidelines allow the residential parent to release this tax exemption and transfer it to the other parent. The court may also order the primary residential parent to do this. The appeals court found that the trial court had abused it’s discretion on this issue and should have awarded the exemptions to the Father, since he had asked for the exemptions, the Mother had conceded that he should have them and he was earning substantially more than the Mother.
The appeals court found that the Father’s income, for purposes of child support, was incorrectly calculated by the trial court. The trial court calculated the Father’s gross monthly income based solely on his 2006 income, including his bonuses and commissions. The Guidelines state that “Variable income such as commissions, bonuses, overtime pay, dividends, etc. shall be averaged over a reasonable period of time consistent with the circumstances of the case and added to a parent’s fixed salary or wages to determine gross income” (see TENN. COMP. R. & REGS. 1240-2-4-.04(3)(b)). While some hold that the salary should be averaged for at least over one year, Tennessee courts generally prefer to calculate a long-term average, over several years, in this way providing the most appropriate method for calculating income that is variable, such as bonuses and commissions.
The appeals court noted that the Father’s 2006 bonus of over $43,000 was the highest one in the four years he listed. His bonuses for 2003, 2004, and 2005, in contrast, were as low as $7,400 in 2003 and only as high as $37,000 in 2005. Yet the trial court only considered one year in calculating income for child support purposes. Additionally, the trial court calculated the Father’s 2006 income based only on his income in the first ten months of that year. The Appeals court ruled that the trial court failed to average the Father’s variable income over a reasonable time period. The Appeals court reversed the decision and sent it back to the trial court to recalculate the correct income and correspondent child support award.
Although the decision of the Court of Appeals did not raise this question, it might be noted that the Father’s bonuses and commissions over the four year period from 2003 to 2006 regularly increased. Perhaps the trial court made the (reasonable) assumption that these variable incomes would continue to rise and counted on future bonuses of at least the same amount as awarded in 2006.
The Appeals court rejected the Father’s claim that the Mother’s income should be listed as higher and ruled that upon remand to the trial court, the Mother’s income should still be zero.
Mortgage Payments and Child Support
The Father also appealed the trial court’s ruling on mortgage payments. The Father argued that in order to deviate upwards from the Guidelines, the court must state the reasons for the deviation, the amount of child support that would have been required in the absence of a deviation, why the regular application of the Guidelines (without a deviation) would be unjust or inappropriate, and why the best interests of the children are served by the deviation. The trial court did not provide any of these explanations. The appeals court held that the trial court must clarify whether the mortgage payments are child support and, if so, state the reasons and findings underlying any deviation from the Child Support Guidelines in its award of child support.
No. W2007-00038-COA-R3-CV, Court of Appeals of Tennessee, March 19, 2008.
See original opinion for exact language. Legal citations omitted.
Memphis divorce attorney, Miles Mason, Sr., JD, CPA, practices family law exclusively with the Miles Mason Family Law Group, PLC. To learn more about Tennessee child support laws and guidelines, read and view:
- Tennessee Child Support & Divorce Law Answers to FAQs
- How to Modify Child Support in Tennessee
- Tennessee Child Support Law Video Series
- Tennessee Child Support Resources
- Top 6 Tennessee Child Support Strategies
A Memphis child support attorney from the Miles Mason Family Law Group can help you with Tennessee child support issues including setting or modifying child support. See our Consultation and Fees page and call 901-683-1850.