Family Law Section
What exactly is income? Most people think about a Friday paycheck, or profit from a business once the expenses are paid. The North Carolina Child Support Guidelines cast a much wider net. Gross income is defined by a long and non-exclusive list of financial benefits. Specifically included in the definition of gross income is “maintenance received from persons other than the parties to the instant action.”
What is maintenance and how is it calculated? There are many different perspectives in the family law bar, and probably the judiciary, on this issue. One common misperception is that including the value of living expenses reduced by the contributions of a third party is “imputing” income. There are other arguments as to whether the contributions count as gifts, but this may have limited relevance, as both “maintenance” and “gifts” are included in gross income. Many practitioners read inclusion of these benefits as discretionary.
There is not a large body of case law. But there are answers, beginning with Guilford County v. Easter, 344 N.C. 166, 473 S.E. 2d 6 (1996). In Easter, Plaintiff-father lived in the home of the children’s grandparents at no cost. Mother moved to deviate from the Guidelines. The trial court agreed to deviate. Father appealed. The Court of Appeals reversed, holding that a deviation was not warranted because the grandparents were not under an obligation to continue providing support. The Supreme Court affirmed the Appellate Court in its holding that the trial court failed to make sufficient findings of fact to support deviation. However, the Supreme Court reversed the Appellate Court with respect to the contributions, reasoning that should the contributions cease, Father could move for modification. The Easter case, in sum, provides that the court may consider the extent of contributions and use them to support deviation. However, the Easter case does not teach that contributions may only be used for deviation.
The Appellate Court has more directly addressed contributions to a party’s living expenses in the calculation of income. In doing so, it has been clear that this does not constitute “imputing income.” Spicer v. Spicer, 168 N.C. App. 283 (2005), noted that income is imputed due to underemployment; income is calculated based on the Guideline definition, which includes maintenance such as free housing. The Court in Williams v. Williams, 179 N.C. 838 (2006), held that housing and vehicle payments made on Plaintiff’s behalf by her father were “gift” income and that the lower court “erred by not including these payments in calculating income in the child support order.” The distinction between maintenance and gift may be how the bills are reduced. In Spicer, father lived with his parents rent free; in Williams, money was sent to someone to pay the mother’s rent. Cumberland County v. Cheeks, 786 S.E.2d 432 (2016), did not specifically classify whether a service member’s free housing is a gift or maintenance. However, the Cheeks court held that the trial court erred in failing to include housing allowance in the father’s income and held that payments received by military personnel toward their housing expenses must be counted as income.
Shortly before the Cheeks decision, the Appellate Court handed down another decision, again supporting the principle that reduction in a parent’s living expenses is “maintenance” income which must be calculated. The trial court in Adams v. Lewis, 785 S.E. 2d 185 (2016), failed to make any findings as to Defendant’s cost free housing or other expenses paid by her parents. There was some question as to whether the reduced living expenses were compensation for Defendant’s work in the family business. The Appellate court was “unable to determine why the trial court did not include at least some portion of the gifts or maintenance from Defendant’s parents” and remanded for further findings of fact as to Defendant’s income pursuant to the Guidelines.