Determination of Child Support Obligation-Fam. Law § 12-204

• Jurisdiction: Maryland

IV. DETERMINATION OF CHILD SUPPORT OBLIGATION-FAM. LAW § 12-204

A. Actual Income

As noted above in Section III, Maryland Code Ann., Fam. Law § 12-201(b) defines "income" for purposes of the child support Guidelines as "actual income from any source. . . ." Fam. Law § 12-201(i) states "income" means (1) actual income of a parent if the parent is employed to full capacity or (2) potential income of a parent if the parent is voluntarily impoverished. Accordingly, the court must first determine the actual income of both parties. In Ley v. Forman,⁷¹ a case in which the appellant sought modification of an existing award of child support, the trial court failed to make specific findings of fact on the incomes of the parties and the child's expenses and instead, relied on approximations and estimations. The Appellate Court of Maryland reversed for failure to determine the actual income of both parents.

The clear intention of the legislature requires the trial court to consider actual income and expenses based on the evidence. The court must rely on the verifiable incomes of the parties, and failure to do so results in an inaccurate financial picture.⁷²

"Actual income" means income available to the parent for the payment of support. Walker v. Grow,⁷³ an above-Guidelines case, is the first Maryland case that addresses the extent to which pass through income and distributions from a Subchapter S corporation, dividend and interest income, should be included in the actual income of a parent for child support purposes. The Appellate Court of Maryland, in Walker, found that all income for tax purposes may not be includable as "actual" income. In this case, the father received substantial taxable income as the minority shareholder in a Subchapter S corporation, but he never received any of the money. Some was retained by the corporation as working capital and some was paid to cover taxes of the individual resulting from the retained funds. Father's annual taxable income was $212,000, but the court found his actual income for child support purposes was $149,000. Walker distinguishes a situation where the parent has no control of whether or not he actually receives the money on the one hand, compared with the situation where the parent attempts to defer the receipt of income until the child support case has been decided. The Walker court made clear that expense reimbursements or in-kind payments that reduce personal living expenses must be included as actual income. The court also noted that certain cases may not be equitably decided by a simple extrapolation from the Guidelines. Although Walker predates the overhaul of the Guidelines, it is still good law.

B. Voluntarily Impoverished

Family Law § 12-204(b) Voluntarily impoverished parent.

Effective October 1, 2021, the statute provides that:

(1) Except as provided in paragraph (3) of this subsection, if a parent is voluntarily impoverished, child support may be calculated based on a determination of potential income.

(2) If there is a dispute as to whether a parent is voluntarily impoverished, the court shall:

(i) make a finding as to whether, based on the totality of the circumstances, the parent is voluntarily impoverished; and

(ii) if the court finds that the parent is voluntarily impoverished, consider the factors specified in §12-201(m) of this subtitle in determining the amount of potential income shat should be imputed to the parent.

(3) A determination of potential income may not be made for a parent who:

(i) is unable to work because of a physical or mental disability; or

(ii) is caring for a child under the age of 2 years for whom the parents are jointly and severally responsible.

Not until the overhaul of the child support statute in 2020 did the legislature undertake to define the term "voluntary impoverishment." Fam. Law § 12-201(q), which was added effective October 1, 2021, defines "voluntarily impoverished" to mean that a parent has made the free and conscious choice, not compelled by factors beyond the parent's control, to render the parent without adequate resources. In so doing, the legislature adopted the holdings in Wills v. Jones, 340 Md. 480, 489, 667 A.2d 331, 335 (1995) (quoting Goldberger v. Goldberger, 96 Md. App. 313, 327, 624 A.2d 1328, 1335, cert. denied, 332 Md. 453, 632 A.2d 150 (1993))."

John O. v. Jane O.⁷⁴ was the Appellate Court of Maryland's first attempt to define "voluntary impoverishment" under Fam. Law § 12-201(b).⁷⁵ In this case, which involved an unemployed schoolteacher who had been barred from future employment as a teacher in Maryland as a condition of the "stetting" of a criminal charge of child sexual abuse, the Court noted:

The term "voluntarily impoverished" was added by the House Judiciary Committee just prior to the final passage of the Child Support Guidelines. Prior to the insertion of the term "voluntarily impoverished," Fam. Law § 12-201(b)(2) read "potential income of the parent, if the parent is unemployed or underemployed." By substituting the term "voluntarily impoverished" for "unemployed" or "underemployed," the legislature intended that the courts be able to consider whether a person had purposely taken a reduction in salary to avoid his or her support obligations. (Emphasis added.)⁷⁶

The Court in John O. also established a list of non-exclusive factors to be considered in determining whether a party is voluntarily impoverished. Despite the definition of voluntary impoverishment added in Fam. Law § 12-201(q), these factors likely remain useful in fleshing out whether the parent's plight is one of choice, or compelled by factors beyond their control:

(a) his or her current physical condition;

(b) his or her respective level of education;
(c) the timing of any change in employment or other financial circumstances relative to the divorce proceeding;

(d) the relationship between the parties prior to the initiation of divorce proceedings;

(e) his or her efforts to find and retain employment;

(f) his or her efforts to secure retraining if that is needed;

(g) whether he or she has ever withheld support;

(h) his or her past work history;

(i) the area in which the parties live and the status of the job market there; and

(j) any other considerations presented by either party.⁷⁷

The Appellate Court of Maryland remanded John O. because the trial court had projected Mr. O.'s potential earning capacity in computing his child support obligation but failed to make the necessary predicate finding that Mr. O. was voluntarily impoverished.⁷⁸

The Appellate Court of Maryland in In re Joshua W.⁷⁹ upheld the trial court's finding that a father had voluntarily impoverished himself, after reviewing the father's work history and the factors set forth in John O. The father had previously earned $25,000 to $30,000 per annum as a pastor and had also previously worked as a technical writer and car salesman, but had foregone full-time employment in any of those professions in favor of part-time self-employment in the remodeling business in order to continue graduate work in counseling psychology, leading to a degree that would yield him earnings potential of $25,000 to $30,000 per annum. He said he was unable to work full time in 1991 because of health concerns; however, evidence also showed that the father had recently purchased a car and a computer, while claiming to have no money for child support.

The case was remanded because the trial judge had not made the specific additional findings necessary to justify departure from the Guidelines, i.e. to explain why the father was ordered to pay $300 a week child support to the Anne Arundel County Department of Social Services when the Guidelines amount was $675.50 per month.

In Goldberger v. Goldberger,⁸⁰ the Appellate Court of Maryland expanded the definition of "voluntary impoverishment" beyond that stated in John O. v. Jane O. by stating that a finding of "intent" to avoid child support obligations is not a prerequisite to a determination of "voluntarily impoverishment." The husband in Goldberger was 32 years old, healthy, and highly educated. He had never earned an income and planned his life to be a permanent Torah-Talmudic student. He was a student before he was married and before any of his children were born. It was his intention to continue his life of study forever. Throughout his life, he had been supported by others: first, his parents; thereafter, his father-in-law; and most recently, friends in the Orthodox community. Husband challenged both the finding of voluntary impoverishment and the calculation of potential income.

The Appellate Court of Maryland in Goldberger upheld the finding that the husband had voluntarily impoverished himself, notwithstanding the fact that the husband had been impoverished even before his children were born:

In defining the term "voluntarily impoverished" in John O. v. Jane O., we never intended to limit the obligation of a spouse who is voluntarily impoverished, for any reason, to pay child support. A parent who chooses a life of poverty before having children and makes a deliberate choice not to alter that status after having children is also "voluntarily impoverished." Whether the voluntary impoverishment is for the purpose of avoiding child support, or because the parent simply has chosen a frugal lifestyle for another reason, doesn't affect that parent's obligation to the child. Although the parent can choose to live in poverty, that parent can not obligate the child to go without the necessities of life. . . . The law requires that parent to alter his or her previously chosen lifestyle if necessary to enable the parent to meet his or her support obligation.

Accordingly, we hold, for purposes of the child support Guidelines, a parent shall be considered "voluntarily impoverished" whenever the parent has made the free and conscious choice, not compelled by factors beyond his or her control, to render himself or herself without

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