Opinion ID: 1274461
Heading Depth: 1
Heading Rank: 7

Heading: Income Averaging

Text: In her petition to modify, Cynthia claimed that a material change of circumstances had occurred with respect to James' income which required an increase in James' child support obligation. Prior to the divorce, James worked as an administrator at the Nebraska Heart Institute, where he received a salary in excess of $90,000 in 1995, and over $100,000 in 1996. In 1997, he began working on commission as a stockbroker. According to James' evidence, his gross annual earnings from commissions were $36,492 in 1997, $30,814.31 in 1998, $62,098.64 in 1999, and $43,470.38 as of July 15, 2000. James' and Cynthia's 1997 earnings were used to calculate James' child support obligation in the decree of dissolution entered June 10, 1998. At the trial in August 2000, Cynthia contended that the district court should calculate child support based on the current earnings of the partieseither the 1999 actual earnings or the 2000 annualized earningsin determining whether a modification of child support was warranted and, if so, the amount of any increase. Utilizing these income figures, Cynthia claimed James' child support obligation would increase from $731 per month to either $1,027.09 (1999 earnings) or $1,101.48 per month (2000 annualized earnings). Either calculation would exceed the 10 percent or more standard at which a material change of circumstances is presumed under paragraph Q of the Nebraska Child Support Guidelines. James, however, argued that due to fluctuations in his annual and monthly income, income averaging should be used to calculate any modification in child support. He proposed averaging his annual income from 1997, 1998, and 1999 to determine his average annual salary. Under James' calculations, his child support obligation would increase from $731 per month to $760.27 per month. The district court adopted James' calculations. Paragraph Q of the Nebraska Child Support Guidelines states: Modification. Application of the child support guidelines which would result in a variation by 10 percent or more, upward or downward, of the current child support obligation, due to financial circumstances which have lasted 3 months and can reasonably be expected to last for an additional 6 months, establishes a rebuttable presumption of a material change of circumstances. Neither party disputes that the district court's use of income averaging led to the court's finding that a variation by 10 percent or more did not exist, and ultimately to the determination that there was not a material change of circumstances. Therefore, in order to determine whether the district court abused its discretion in this finding, it is necessary to determine whether income averaging was appropriate given the facts of this case. The Nebraska Child Support Guidelines specifically allow for income averaging in certain circumstances. Worksheet 1, the fifth footnote listed (footnote 5), states, In the event of substantial fluctuations of annual earnings of either party during the immediate past 3 years, the income may be averaged to determine the percent contribution of each parent as shown in item 6. The calculation of the average income shall be attached to this worksheet. This case presents the first opportunity for this court to apply the specific language of footnote 5. Under our de novo review, the question is whether James experienced substantial fluctuations of annual earnings ... during the immediate past 3 years. We first note that [a] party seeking to modify a child support order must show a material change of circumstances which occurred subsequent to the entry of the original decree or a previous modification which was not contemplated when the prior order was entered. (Emphasis supplied.) Noonan v. Noonan, 261 Neb. 552, 559, 624 N.W.2d 314, 321 (2001). Accord, Hartman v. Hartman, 261 Neb. 359, 622 N.W.2d 871 (2001); Rhoades v. Rhoades, 258 Neb. 721, 605 N.W.2d 454 (2000). Footnote 5 does not alter this longstanding principle. The Peters' decree of dissolution was entered in 1998. In determining whether a material change of circumstances occurred subsequent to the decree, the district court considered James' 1997 earnings which had previously been used to calculate child support in the 1998 decree. Since James' 1997 earnings were not subsequent to the entry of the decree, we find the district court abused its discretion in using those earnings to determine whether a material change of circumstances had occurred. Our determination that the district court abused its discretion in considering James' 1997 earnings requires reversal, so it is not essential that we reach the merits of Cynthia's argument that income averaging was inappropriate on the facts of this case. However, an appellate court may, at its discretion, discuss issues unnecessary to the disposition of an appeal where those issues are likely to recur during further proceedings. Schafersman v. Agland Coop, 262 Neb. 215, 631 N.W.2d 862, (2001). Because the issue of income averaging is likely to recur upon remand, we proceed to address the issue. According to the evidence provided by James, his income from 1998 to 2000 reveals this pattern: $30,814.31 in 1998; $62,098.64 in 1999; and approximately $80,000 in 2000 (projected estimate based on income as of July 15, 2000). There was no evidence in the record that suggested James' current rate of earnings would decrease in the remaining months of 2000 or thereafter. In fact, James testified that his current employer had told him that after 5 or 6 years, he might achieve his previous level of compensation at the Nebraska Heart Institute. We find that James' annual earnings show a clear pattern of consistently increasing income. Other courts have found that the use of income averaging is inappropriate when the obligor's income is consistently increasing. See, e.g., Schaeffer v. Schaeffer, 717 N.E.2d 915 (Ind.App.1999); Mahoney v. Mahoney, 538 N.W.2d 189 (N.D. 1995). In Schaeffer, the court found that income averaging in such a situation gives the spouse, in this case James, a windfall that deprives [his children] of `the same standard of living [they] would have enjoyed had the family remained intact.' See id. at 918 (quoting Perri v. Perri, 682 N.E.2d 579 (Ind.App.1997)). We agree, and determine that it is not in the best interests of the children to allow income averaging when James' income is consistently increasing. The paramount concern and question in determining child support, whether in the initial marital dissolution action or in the proceedings for modification of decree, is the best interests of the child. Noonan v. Noonan, 261 Neb. 552, 567, 624 N.W.2d 314, 327 (2001). Accord Riggs v. Riggs, 261 Neb. 344, 622 N.W.2d 861 (2001). Accordingly, we find that in this case it would be an abuse of discretion for a district court to use income averaging upon remand. In calculating child support, we have stated that as a general matter, the parties' current earnings are to be used. Shiers v. Shiers, 240 Neb. 856, 860, 485 N.W.2d 574, 577 (1992). We find no reason to deviate from this principle under our de novo review of this record and determine that on remand, the district court should use the parties' current earnings as found in this record in calculating James' child support obligation.