Are Employee Reimbursements Considered “Income” for Child Support Purposes in Illinois?

Under Illinois law, are expenses reimbursed by an employer considered “income” for purposes of calculating child support?

 

For starters, Illinois requires a noncustodial parent to pay guideline child support based upon a percentage of his “net income.” Under the statute, “net income” means “the total of all income from all sources,” minus certain deductions defined by law. But, is money received as a reimbursement really income? From an employee’s perspective, it would seem odd to think so; because he is only being reimbursed for money he actually spent out of his own pocket. Thus, he isn’t really getting ahead financially on the deal. Rather, he is simply breaking even.

 

The Second District Appellate Court recently addressed this issue in the case of Marriage of Shores. In that case, the noncustodial father appealed the trial court’s award of an increase in child support order based upon his earned two reimbursement payments received through his employer, among other issues. In short, the appellate court held that the reimbursements that he received were considered income for child support calculation purposes. But why?

 

In Shores, the father received two fairly large relocation reimbursements from his employer, because his office was 60 mile from home. He obtained a second residence closer to the office. The employer paid his “duplicate housing expenses,” such as the mortgage, interest, and taxes for the home which was closer to the office.

 

First, he received $20,355.21 received prior to his child’s emancipation. Second, he received an additional $14,487.62 for relocation reimbursements which after the child was emancipated, but related to expenses incurred prior to emancipation. Thus, the mother sought to include an additional $34,842.83 worth of expense reimbursements into her ex-husband’s income for purposes of calculating his child support obligation.

 

One of the quirks of the Shores case was that, after the child was emancipated, the father left his job at the company. Under the terms of his employment agreement, he was required to repay the company the relocation expense reimbursements to his employer. Accordingly, he didn’t actually keep the $34,842.83 that he initially received.

 

At trial, the father claimed the relocation reimbursements, all of which he repaid to the company after he left his job, should not be included as “income” in child support calculations. He also argued that even if he had not repaid them, the reimbursements should not be considered income “because they did not increase his wealth–they were repayments for out-of-pocket business expenses.”

 

Initially, the trial court held that the relocation expenses that the father paid back after voluntarily leaving his job should not be included in his income for purposes of child support. Subsequently, the trial court reconsidered and found that because the previously excluded relocation reimbursements had “effectively increased [the father’s] income,” and found that it erred in not including those amounts in the determination of child support and granted respondent’s motion in that respect.” In making its ruling, the trial court said that the father’s relocation reimbursements “positively affected [his] ability to provide for himself and for his children.” The father appealed.

 

On appeal, the father cited the case of Marriage of Worrall, in which the court held that per diem allowances received by a truck driver were income for purposes of calculating child support, but that such income could be reduced by showing that the money was actually spent on actual travel expenses and not for economic gain.

 

In rejecting that argument, the appellate court followed the initial analysis of Worrall, and included the reimbursements in the father’s income. However, the court refused to reduce his income based upon the fact that he repaid them, because he didn’t repay anything until after the child had been emancipated. Thus, the appellate court found that the father received an economic benefit while the child was a minor, and as a result owed additional child support.

 

Interestingly, the court said nothing about the fact that the father actually incurred an extra mortgage payment on the second house. Rather, its analysis centered entirely upon the question of whether the reimbursements were “income,” and deemed all other arguments waived. Accordingly, it is not clear what effect the Shores decision has on the precedential value of the Worrall case.

 

In sum, when it comes to child support, an employee’s reimbursements for expenses are income under Illinois law. It remains an open question as to whether that income can be offset by evidence that expenses were actually incurred.

 

For more information, contact the experienced family law attorneys at Kollias & Giese, P.C.