Opinion ID: 2518798
Heading Depth: 3
Heading Rank: 1

Heading: Glenn's Appeal

Text: Glenn argues that the superior court erred in declining to consider the wealth of Marian's new spouse in calculating her child-support obligation. He relies chiefly on Rule 90.3(a)(4), which allows courts to impute potential income to an unemployed or underemployed parent: The court may calculate child support based on a determination of the potential income of a parent who voluntarily and unreasonably is unemployed or underemployed. A determination of potential income may not be made for a parent who is physically or mentally incapacitated, or who is caring for a child under two years of age to whom the parents owe a joint legal responsibility. Potential income will be based upon the parent's work history, qualifications, and job opportunities. The court also may impute potential income for non-income or low income producing assets.[ [6] ] As previously mentioned, the superior court keyed on the language in this provision that directs courts to base their calculation of potential income upon the parent's work history, qualifications, and job opportunities. [7] Glenn insists that the court interpreted this language too narrowly, contending that the court should have considered the totality of the circumstances in deciding how much potential income should be imputed to Marian. [8] Glenn points out that in 2002, before Marian remarried, the superior court determined that she was voluntarily underemployed and had the ability to earn a potential annual income of $52,700. Glenn further notes that by 2005, when Glenn moved to modify child support, Marian was married to John Clough and continued to be underemployed. In Glenn's view, Marian's situation had changed because her new spouse is a person of significant income and wealth, which, according to Glenn, enables Marian to enjoy an affluent lifestyle. Given these circumstances, Glenn reasons, Clough's wealth must be regarded as a factor enhancing Marian's potential income under Rule 90.3. Glenn bolsters this argument by citing our decision in Beaudoin v. Beaudoin , [9] as well as the commentary to Rule 90.3. [10] In Beaudoin, we noted that both Rule 90.3(a)(4) and our case law specifically require courts to consider the `totality of the circumstances' to decide whether income should be imputed. [11] In making this point, Beaudoin referred to the commentary to Rule 90.3(a)(4), which observes that [t]he court shall consider the totality of the circumstances in deciding whether to impute income. [12] Glenn further points to the commentary to Rule 90.3(c)(1)the unusual circumstances exceptionnoting that the commentary expressly recognizes that [a] parent who does not work because of the income of a new spouse (or other person in the household) may be assigned a potential income. [13] In addition, Glenn cites case law from other states. [14] Glenn claims that, because Marian Clough's imputed annual income of $52,700 is belied by her affluent lifestyle, the superior court abused its discretion in failing to examine how Marian actually lives and her actual expenditures since she remarried. In response, Marian rejects Glenn's claim that the superior court refused to consider her potential income under Rule 90.3(a)(4), insisting that the court properly applied this rule in the original child-support order by imputing annual income to her of $52,700. Marian describes Glenn's proposed totality of the circumstances approach to Rule 90.3(a)(4) as fundamentally inconsistent with Alaska law. Pointing to the plain language of Rule 90.3(a)(4) and case law applying the provision, Marian argues that Alaska courts have uniformly upheld the principle that the earning potential of the parent must be the basis for any child support award. We agree with Marian's understanding of Rule 90.3. The plain language of Rule 90.3(a)(4) unambiguously directs that [p]otential income will be based upon the parent's work history, qualifications, and job opportunities. [15] This language does not recognize any other permissible criteria to be used in calculating the amount of potential income to be imputed to an unemployed or underemployed parent under Rule 90.3(a)(4). Nor does the commentary to Rule 90.3 advance Glenn's totality of the circumstances theory. The commentary to Rule 90.3(a)(4) confirms the rule's express language declaring that work history and other related criteria will be the basis for calculating potential income. [16] The same commentary also observes that courts should consider the totality of the circumstances in deciding whether to impute income. [17] But this observation addresses only the manner in which they should make the threshold decision whether to impute potential income to an underemployed parent, not the manner in which they should determine the amount of potential income to impute once the initial decision to impute has been made. In effect, then, as Judge Collins correctly recognized, this commentary directs courts to the language of Rule 90.3(a)(4) for purposes of deciding how much potential income to impute. Beaudoin v. Beaudoin aligns with this view. There, we were required to decide whether potential income should be imputed to a parent who had previously been her children's primary caregiver and had never held a paying job. [18] We applied the totality of the circumstances approach to decide this threshold issue. [19] We did not suggest that the totality of the circumstances approach could be applied in determining the amount of an underemployed parent's potential income once the decision to impute had been made. Here, the superior court properly determined that Glenn had failed to establish grounds for imputing more potential income to Marian than the court had already found appropriate in 2001. On this point, Glenn essentially claimed that Marian's remarriage to a wealthy person amounted to a prima facie showing that Marian's potential income had increased. But in our judgment, the superior court properly concluded that the language of Rule 90.3(a)(4) bars direct reliance on a new spouse's wealth as evidence of increased earning potential. The court also correctly recognized that Glenn could have  but had not  moved to modify his support on the ground that Clough's wealth resulted in unusual circumstances justifying a variance under Rule 90.3(c)(1). While Glenn's discovery motion belatedly mentioned this theory, it inaccurately claimed that the theory had been raised in his earlier motion for modification. Actually, Glenn had previously disclaimed reliance on the unusual circumstances exception. Indeed, during the March 17, 2005, proceeding in which Judge Collins issued her on-record denial of Glenn's motion for modification, Glenn expressly stated that his motion was based exclusively on the potential income language of Rule 90.3(a)(4). Because the superior court correctly interpreted Rule 90.3(a)(4) to bar direct consideration of a new spouse's wealth as a basis for determining the amount of potential income to impute to a remarried parent and also correctly recognized that Glenn's earlier motion sought modification solely on this basis, we conclude that the court did not err in denying Glenn's motion to modify support in light of Marian's remarriage to Clough.
Glenn separately argues that the superior court erred in denying his discovery motion. He claims that he was entitled to discovery both under Civil Rule 26(b)(1), which generally allows discovery of any relevant information, [20] and under Rule 90.3(e), which specifically requires parties to a child-support proceeding to produce statements of income with verifying documentation. [21] Glenn asserts that he was entitled to this discovery in order to pursue an argument under Rule 90.3(c)(1) that unusual circumstances justified varying Marian's imputed income as originally determined under Rule 90.3(a)(4). [22] As we have seen, however, Glenn did not move to modify his support on this basis, and, indeed, before moving for discovery on this theory, he had disavowed reliance on Rule 90.3(c)(1)'s unusual circumstances exception. Given these circumstances, the superior court did not abuse its discretion in declining to allow Glenn to raise this new theory in the proceedings involving Glenn's pending motion for modification after the court had already ruled on and correctly denied that motion under the theory that Glenn had originally pled. As the superior court observed in refusing to order discovery, Glenn's motion for discovery on this unpled theory was at best, premature. [23] We thus uphold the superior court's discovery ruling.
Although the superior court denied Glenn's motion to modify child support on the basis of Marian's new spouse's wealth, it granted his separate motion to modify support because of Gwenn's decision to live in Glenn's home. The court directed the parties to submit proposed child-support calculations reflecting this change. In May 2005, after both parties filed DR-305 child-support worksheets and affidavits, the court issued a modified support order adopting Marian's figures. Glenn challenges three items in the superior court's calculations of the parties' adjusted annual income, all of which the court derived from Marian's worksheets. [24]
Glenn first contends that the superior court underestimated his annual federal tax liability by adopting Marian's figures. Marian's child-support worksheet projected Glenn's 2005 federal income tax liability from the estimated taxes withheld from his January 2005 earnings. This method yielded an annual tax liability of $3,311. By contrast, Glenn's child-support worksheet used the taxes Glenn had actually paid on the similar wages in 2004; this resulted in a projected tax liability of $4,780. Glenn asserts that his withheld taxes underestimated his actual tax liability because he was under-withholding and that the taxes he actually paid in 2004 provide the most accurate basis for estimating his 2005 taxes. Because the record provides no indication that his tax liability would substantially decline in 2005, Glenn reasons that the court should have used his proposed calculations. In support of his argument, Glenn cites Bergstrom v. Lindback. [25] In Bergstrom the superior court used withholding figures instead of actual income tax liability to calculate Bergstrom's adjusted annual income for purposes of determining his child-support obligation. [26] We reversed, ruling that the court should have relied on Bergstrom's history of actual tax payments: The amount of taxes withheld by an employer may or may not reflect a taxpayer's actual tax liability. Although Civil Rule 90.3(a)(1)(A) refers to mandatory deductions for federal income tax, we believe that Bergstrom's actual tax liability under existing Internal Revenue Service regulations, rather than the amount withheld, is the proper basis for determining the amount to be deducted from his income. Therefore, the trial court erred in reducing [Bergstrom's] adjusted annual income by the amount withheld rather than his actual tax liability.[ [27] ] Marian does not dispute the accuracy of Glenn's 2004 tax liability as a predictor of his future liability; instead, she contends that it was not clearly erroneous for the superior court to find that Glenn's paycheck tax withholdings were an acceptable measure of his 2005 tax liability. Marian points to a footnote in Bergstrom in which we described evidence presented at trial indicating that Bergstrom's employer had made an error in calculating the amount of taxes withheld from his wages. [28] Marian suggests that our ruling in Bergstrom hinged on this evidence, and did not establish a general rule disfavoring use of withheld taxes as an acceptable measure of future tax liability. We disagree with Marian's narrow reading of Bergstrom. Our decision in Bergstrom recognized that [t]he amount of taxes withheld by an employer may or may not reflect a taxpayer's actual tax liability. [29] Given the general unreliability of withholding, we declared that actual tax liability under existing Internal Revenue Service regulations, rather than the amount withheld, is the proper basis for determining the amount to be deducted from [Bergstrom's] income. [30] Here, Glenn provided the superior court with his actual tax liability on comparable wages for 2004, along with rate schedules for his income level and taxpayer status. Marian provided no information indicating that Glenn's actual 2004 tax liability would not accurately approximate his current and future tax liabilities. Given these circumstances, we conclude that Bergstrom required Glenn's actual tax liability for 2004 to be used because it was the most accurate available indicator of his actual liability in the future.
Glenn argues next that the superior court undercounted his retirement deduction by disallowing his claimed deductions for contributions to a voluntary retirement plan. In his child-support worksheet, Glenn listed mandatory and voluntary annual contributions totaling $3,927. Marian's worksheets credited Glenn only for a $519 mandatory retirement deduction. Glenn insists that Rule 90.3(a)(1)(B) entitled him to a combination mandatory/voluntary retirement deduction of 7.5% of his gross income. Marian acknowledges that she credited Glenn only for his mandatory contribution. But she insists that this credit was correct under the version of Rule 90.3 in effect when she filed her proposed child-support calculations in April 2005. Marian's argument is accurate in a technical sense but lacks substantive merit. It is true that on April 7, 2005, when Marian filed her proposed child-support worksheets, Rule 90.3(a)(1)(A) provided that voluntary tax-deferred contributions to a qualified retirement or pension plan or account up to 7.5% of the parent's gross income could be deducted if the parent is not a participant in a mandatory retirement plan. [31] This phrasing implied that a parent could not claim credits for both voluntary and mandatory contributions. But in February 2005, this court had issued an order amending the rule to resolve this ambiguity in favor of allowing combined credits. Our order provided that the amended version would take effect on April 15, 2005  eight days after Marian filed her worksheets. [32] Because the amended rule was in effect when the superior court issued its May 1, 2005, order modifying the parties' support, the amended rule allowing a combined deduction applied to this case.
Glenn last contends that the superior court overestimated Marian's income-tax liabilities. In her worksheets, Marian assigned herself a tax liability of $6,260 on her imputed income of $52,700. This $6,260 hypothetical liability was identical to the figure agreed upon by the parties and approved by the court in 2002 when it issued the original child-support order. Glenn's 2005 child-support worksheets proposed to assign Marian a lower tax liability, $4,556, a figure Glenn calculated using 2005 IRS tax tables. Glenn argues that this updated calculation is more accurate and thus should have been used instead of the original hypothetical figure, which, in his view, had no factual basis. In response, Marian points out that all of the original figures used in connection with her imputed potential income were necessarily hypothetical; because Glenn agreed with this hypothetical tax liability in 2001 and urged the court to adopt it, she contends, it is too late for him to change the figure now. But Marian's argument places form over substance. In effect, it proposes to establish a rule that would lock all future tax consequences of imputed potential income to consequences existing at the time of original imputation. Such a rule would conflict with basic principles of fairness requiring tax-support calculations to be as accurate as reasonably possible. Marian does not dispute that calculating her tax liabilities using the tax provisions applicable in 2002 produces an outdated result. Yet she identifies no sound reason why the outdated information should be acceptable in the modified order if it would not have been in the original order. We thus conclude that Marian's ongoing tax liability must be calculated using currently applicable tax tables.