Lawyers Journal

Attributing income in Massachusetts domestic relations cases

The practice of income attribution to a party in determining the amount of income imputed to him or her for purposes of child and/or spousal support has long been recognized in the commonwealth. Such attribution is appropriate when a support obligor is found to be capable of working but is "unemployed or underemployed" (Child Support Guidelines, § IIH and G.L. c. 208, § 53(f)) or when a party has "made vague, misleading, or untruthful entries on a financial statement" M.C. v. T.K., 463 Mass. 226, 241 (2012). In such instances the income attributed to a party is not based on actual income but on the ability to produce income.

ROLE OF THE JUDGE

Where the appropriate circumstances exist, "a judge is not limited to a party's actual earnings but may . . . consider potential earning capacity' when attributing income."  Kelley v. Kelley, 64 Mass.App.Ct. 733, 741 (2005) (quoting Heins v. Ledis, 422 Mass. 477, 485 (1996). There are several sources of law that allow for the practice of income attribution in domestic relations cases that deal with alimony and child support. Both the Child Support Guidelines and the new alimony statute (specifically M.G.L. c. 208 § 53) explicitly allow for income attribution in calculating awards of support. Moreover, there exists a significant body of case law that employs income attribution. However, it is the judge that ultimately has the discretion to attribute income within the confines of statutory and case law. Moreover, the appropriate circumstances and amount of income that is imputed varies widely on a case-by-case basis as judges see fit, as "[t]he guidelines and our case law leave the definition of income flexible, and the judge's discretion in its determination broad." Casey v. Casey, 79 Mass.App.Ct. 623, 634 (2011).

FACTORS CONSIDERED

The Child Support Guidelines, effective 2009, discuss income attribution in a few different contexts. Generally, "[a]ttribution of income is intended to be applied where a finding has been made that either party is capable of working and is unemployed or underemployed. The court shall1 consider all relevant factors including without limitation the education, training, health and past employment of history of the party, and the age, number, needs and care of the children covered by this order. If the court determines that either party is earning less than he or she could through reasonable effort, the court should consider potential earning capacity rather than actual earning in making this order." Child Support Guidelines (2009), section II H.

The Child Support Guidelines further allow for what amounts to income attribution in the contexts of self-employment and unreported income. Specifically, the guidelines provide that " . . . income and expenses from self-employment or operation of a business should be carefully reviewed to determine the appropriate level of gross income available . . . [i]n many cases this amount will differ from a determination of business income for tax purposes." Id. at Section C. Accordingly, where a court finds that a party is underreporting income, " . . . the court may reasonably impute income to the parent based on all the evidence submitted, including . . . evidence of the parent's ownership and maintenance of assets, and the parent's lifestyle, expenses and spending patterns." Id. at Section I, D.

Pursuant to M.G.L. c. 208 § 53 (f), "[i]n determining the incomes of parties with respect to the issue of alimony, the court may attribute income to a party who is unemployed or underemployed." While the statutory language of M.G.L. c. 208 § 53 explicitly contemplates income attribution in those cases dealing with a parties' unemployment and/or underemployment, case law provides a wider variety of circumstances warranting income attribution.

In a case dealing with a husband's complaint for modification of his alimony and support obligations, the Supreme Judicial Court looked to other states for guidance on the issue of income attribution. Schuler v. Schuler, 382 Mass. 366 (1981). The husband in this case was unemployed, although admittedly employable with positions reasonably available to him. The husband chose to remain unemployed as he sought a specific position of limited availability. In addition to the his admitted employability, the SJC found that although unemployed, the husband possessed substantial assets and had not lowered his standard of living as a result of his unemployment.

In Schuler, the SJC held that there was no abuse of discretion on the part of the lower court judge in considering the husband's potential income and ultimately deciding against a modification of the original divorce judgment. Id. at 374. The SJC reasoned that is was unreasonable for the husband to wait indefinitely while seeking a specific position, when other positions were available to him. Id. Thus, the SJC explicitly provided that judges are not restricted to the reported income of the parties in making orders for support, and that attendant circumstances should be considered.

AMOUNT OF INCOME ATTRIBUTED

The circumstances surrounding a party's unemployment, including his or her intent in the case of voluntary unemployment and the availability of employment with reasonable effort, are driving factor in a court's decision to potentially impute income. In addition, a party's ownership of substantial assets may also be weighed in determining whether attribution is proper. Conversely, where " . . . there is no evidence that a change in job status was voluntary, the party is making a reasonable effort to secure additional income, and he or she has no additional assets with which to pay the increased support order, child support orders must be based upon present income." Flaherty v. Flaherty, 40 Mass.App.Ct. 289, 291 (1996).

Although "[i]t is by far the better practice for a judge . . . to specify an amount, or define a reasonably finite range, of the income to be so attributed," judges are not wholly restricted in determining the amount of income that may be attributed to a party. C.D.L. v. M.M.L., 72 Mass.App.Ct. 146, 155 (2008). Rather, the amount of income attributed is often estimated because estimation is considered inherent to the process of attributing future earnings. Id. For example, a finding of potential earning capacity is often fashioned after, or the equivalent of prior earnings. Likewise, in the event that a judge finds that a party has inaccurately disclosed income, assets and/or benefits, he or she may attribute a reasonable amount estimated to represent the inaccurately disclosed income. See Canning v. Juskalian, 33 Mass.App.Ct. 202, 211 (1992) (holding that the judge's augmentation of a support award with an estimated amount based on income derived from a party's inaccurately disclosed real estate holdings was reasonable).

Where a court finds that a self-employed party is commingling business and personal expenditures, courts may disregard and substitute reasonable figures in place of reported figures. Smith-Clarke v. Clarke, 44 Mass.App.Ct. 404, 406 (1998). Similarly, courts have attributed the fair rental value of the home as income, where a party is residing rent-free. The reasoning is that " . . . although [it is not] actual income in the sense that it is 'cash in hand,' the ability to live rent-free undoubtedly reduced [the husband's] out-of-pocket expenditures significantly and, accordingly, should be valued." Crowe v. Fong, 45 Mass.App.Ct. 673, 680 (1998).

In a recent case, the SJC upheld a significant award of attorney's fees after identifying and considering the circumstances surrounding an obligor's unemployment at the time of the fee assessment. Hunter v. Rose, 463 Mass. 488 (2012). The obligor was adjudicated the legal mother of her former same-sex partner's biological child, and she chose to forgo a medical residency after the lower court ordered the minor child's relocation to Massachusetts with the birth mother. Id. The SJC found that the lower court permissibly characterized the obligor's decision to forgo an employment position in order to relocate as "voluntary and avoidable" unemployment, also considering that she had the financial support of her family and was under less financial strain than the birth mother. Id. at 503.

THE PUNITIVE NATURE OF INCOME ATTRIBUTION

A judge may give significant weight to a party's attempts to hide income in making a determination to attribute income to that party. In Fong, the Appeals Court found that the obligors " . . . testimony was 'fraught with deception in an attempt to hide from the court his net worth and his ability to pay for the support of his child.'" Id. at 682 (quoting Mancuso v. Mancuso, 12 Mass.App.Ct. 973, 974 (1981)). Based on the obligor's actions, the court reasoned that it would not only be unconscionable to ignore his behavior, but ignoring his behavior would actually serve to award his deceptive behavior. Id. Accordingly, attribution of income may also be construed as punitive in nature.

Recent case law has reinforced the practice of income attribution as effectively punitive in nature. In M.C., the SJC found that the lower court did not err in imputing income to a father with respect to child support. The father in M.C. argued that the lower court erred by failing to make "specific and detailed findings" in support of its decision to attribute income to him. However, the SJC stated that it " . . . reject[s] the father's argument, unsupported by citation to any authority, that in order to attribute income to him, the judge was required to make specific findings . . . " M.C. at 241. Rather, the SJC held that the lower court appropriately attributed income where it found that the father lacked credibility and made "vague, misleading, or untruthful entries" on his financial statement.

CONCLUSION

When one party in a divorce is demonstratively refusing to be forthcoming about his or her income, or potential income that can be produced from assets, attribution is appropriate. In a case where the difference between the reported income and that party's ability to produce higher income is in dispute, counsel should put together evidence from which an adverse inference can be drawn showing that attribution of income is appropriate.

For example, when the potential support obligor operates a business in which he or she has a controlling interest, and thereafter reports a dramatic decline in income around the time of the divorce or separation, attributing income is appropriate unless the party can produce evidence explaining why income has declined due to independent market factors.

Finally, when a party has failed to produce satisfactory responses to discovery requests or documentation related to income, attribution of income is also appropriate. The test is not actual income reported, but the capacity to produce higher amounts.

CHARLES P. KINDREGAN teaches Family Law at Suffolk University Law School and is the co-author (with Maureen McBrien) of the Family Law books in the Mass. Practice Series and other books.
CHRISTINA M. KNOPF is a graduate of Suffolk University Law School. She is an associate with the law firm of Micheal I. Flores LLC, where she devotes her skills to the representation of clients involved in domestic relations litigation.

1It should be noted that the Child Support Guidelines Task Force, in their October 2008 report, discussed their choice of the words "shall" and "should," as opposed to "may," which was deliberate. In other words, the guidelines set forth that if either party is earning less than he or she could be earning through reasonable effort, then that parties' potential earning capacity should be used, rather than their actual earnings, in calculating a support order. Moreover, the task force eliminated the language in past versions of the guidelines that automatically precluded attribution of income for custodial parents with children under the age of six.

©2014 Massachusetts Bar Association