NO. 4-04-0987

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

_________________________________________________________________

JUSTICE MYERSCOUGH delivered the opinion of the court:

Petitioner, Teri Eileen Breitenfeldt, appeals the trialcourt's denial of her petition to modify respondent, RichardAllen Breitenfeldt's, child support obligations to the parties'two children. We vacate the trial court's order and remand withdirections to modify respondent's child support obligations.

I. BACKGROUND

The parties were married in May 1992 and have twochildren together, Cody (born November 18, 1992) and Kaitlyn(born March 11, 1995). On October 6, 1995, petitioner filed apetition for dissolution of marriage pursuant to the IllinoisMarriage and Dissolution of Marriage Act (Act) (750 ILCS 5/101through 802 (West 1994)). On December 15, 1995, the trial courtentered a judgment of dissolution of marriage and approved theparties' marital settlement agreement and joint-parenting agreement. The marital settlement agreement provided, inter alia,that the parties would have joint custody of Cody and Kaitlyn andrespondent would pay petitioner $350 per month for child support. The marital settlement agreement further provided:

"Husband, on or before April 15th ofeach year shall furnish Wife a copy of all W-2 forms or other evidence of his income forthe prior year. Should an increase in childsupport then being paid be authorized saidincrease shall be retroactive to January 1stof that year. Wife, if requested by Husband,shall promptly furnish him copies of her W-2forms for the prior year."

 On December 10, 1996, the parties agreed by stipulatedorder to void the joint-parenting agreement and give petitionersole custody of the children. On May 13, 1997, petitioner fileda petition to increase child support, alleging respondent hadreceived salary increases and that he should be required to payhalf of the children's schooling expenses. The record reflectsentry of an order for withholding on August 18, 1997, indicating$80.77 per week to be withheld immediately from respondent'semployer.

On August 19, 2002, the Illinois Department of PublicAid (IDPA) intervened as the provider of payments to the childrenand requested redirection to itself of any child support paymentsmade in the case. IDPA also filed a notice to withhold respondent's income in the amount of $350 per month and a petition formodification of child support. On June 12, 2003, the courtentered a uniform order for support, modifying the amount respondent was required to pay to $488.50 per month retroactive toJanuary 1, 2002.

On March 31, 2004, petitioner filed a petition formodification, alleging that, since entry of the last modification, a substantial change in circumstances had occurred in that(1) respondent's total income for 2003, computed in accordancewith section 505 of the Act (750 ILCS 5/505 (West 2004)), reflects an average monthly income of between $3,000 and $3,500 forthe year; (2) petitioner's costs to provide for the childrencontinue to increase as they grow older; (3) the children requireorthodontia at an estimated cost of $5,000 each; (4) petitioner'sfinancial resources had been reduced as a result of her January2004 divorce; (5) respondent had been relieved of most or all ofhis other debts as a result of filing bankruptcy; and (6) statutory standards for the minimum contributions toward the supportof two children have increased.

On July, 6, 2004, the trial court held a hearing on the petition. At the hearing, petitioner called Heather Keigher, apayroll processor for respondent's employer, to testify as toUniversity Auto Park's payroll system. Keigher testified salesassociates such as respondent are paid in three different ways: (1) "draw," (2) SPIFF (which the record does not define), and (3)commission. A draw, paid twice per month in the amount of$1,000, is essentially a salary but functions as an advance oncommissions, since sales representatives are paid on a 100%commission basis. Therefore, respondent repays his draw toUniversity Auto Park from his monthly commission.

Respondent's payroll records also show income fromsales SPIFFs, finance and insurance SPIFFs (F & I), and deductions for SPIFF advances. Keigher testified Sales SPIFFs areakin to bonuses to reward employees for selling a vehicle. AnF&I SPIFF is a similar reward from the dealership's finance andinsurance department. An employee who receives any kind of SPIFFcan present it for immediate payment or have it put on his or herpaycheck for that period. Either way, the SPIFF shows up on thepayroll for that pay period as income, and the employee is taxedfor the amount of the SPIFF. If the employee has already cashedthe SPIFF, it is then deducted from the gross income for thatperiod.

The third way respondent is paid is by commission. Oncross-examination, Keigher explained the relationship betweendraw and commission as follows:

"A. The draw amount--okay. The way Iunderstand it, um, you've got your--the 26weeks of draw money, but when it comes towhen you have your commissions that are oncea month, that draw money is even deductedfrom that. *** [I]f they had a commission of5000 and they had already gotten 1300 intheir draw, they've already gotten thatmoney, that's deducted off of that and thenthey get their commission amount. And then,of course, that's taxed.

Q. MR. BORICH [(respondent's attorney)]: But, again, that's all taxable?

A. Yes. Everything--

Q. Even though there's a deduction,that's all taxable?

A. Everything is taxable, yes.

Q. So, the draw amount and then thecommission amount, um, even though they'reall taxable, that's not an accurate reflection of actual income that the sales associate would receive? It's not an accurate --it's not accurate of what the sales associatewould pocket in terms of money because youboth have the draw that's taxable and thecommission that's taxable, but then there isa deduction because you subtract one from theother?

A. Exactly.

***

Q. So, on a W-2 form, if with regard tothe income that's listed as taxable income,that would include both draw money and commission money?

A. Everything. Yes."

To clarify the relationship between draw, SPIFFs, andcommission, the trial court engaged in the following colloquywith Keigher:

"THE COURT: *** Okay. I'm just tryingto figure out how this draw works in. So, weneed to give you a better example. He has$26,000 in draw, and $25,000 in SPIFF's--

THE WITNESS: Which is pretty high, butokay.

THE COURT: Okay. Just work with mehere.

THE WITNESS: I know.

THE COURT: And $25,000 in commissions.

THE WITNESS: Okay.

THE COURT: So I'm guessing, then, thathis taxable income is going to be 25 plus 25,which is 50, minus the 26; is that right?

THE WITNESS: Yes.

THE COURT: Because he's got to pay youback for the draw--

THE WITNESS: He's paying us back, yes. Exactly.

THE COURT: And if his SPIFF's and hiscommissions are 10,000 and 10,000 for a totalof 20, then his taxable income is still goingto be 26, he just owes you guys 6--

THE WITNESS: He actually--

THE COURT: --six grand.

THE WITNESS: Yes. Yes.

THE COURT: But he's gotten that 26,000in his pocket that he can spend, he just kindof owes you?

THE WITNESS: Yes."

Additionally, Keigher testified that if a salesclerkdrives one of O'Brien's vehicles, his pay stub reflects a $50-per-month "demo allowance," which is reported as taxable income;but there is also a $90 demo allowance deduction. Therefore, sheopined that employees still paid "something" for use of the car.Keigher also explained the accounts receivable deduction onrespondent's pay stub. She testified it is generally for carrepair and is deducted from the employee's paycheck. Keigheralso testified that all benefits at respondent's employer fallunder the "cafeteria plan," meaning that when reporting income tothe Internal Revenue Service, benefits are subtracted out and notincluded in gross income.

Petitioner testified that, as a result of her January2004 divorce, she incurred additional costs for her children of$100 per month for babysitters and $200 per month for daycare,even with the daycare costs partially subsidized by the government. Petitioner had been on her husband's insurance prior tothe divorce, and she now had to pay for her own medical care. She does not currently have medical coverage because she cannotafford it. On her income affidavit, petitioner claimed $200 permonth in medical care. On cross-examination, however, sheadmitted this figure was probably overstated. Additionally,petitioner had to pay all of the rent herself ($700 per month)and part of the food and utilities ($510 per month). Petitioneralso testified that both children were going to need braces inthe future, which will cost $5,000 each. Petitioner testifiedshe works at Montessori School, where she takes home around$1,200 per month when she works full time during the winter andhalf of that during the summer. Petitioner's expense affidavitshowed a net monthly income of $1,568.50 and monthly expenses of$3,191.66, meaning petitioner's monthly expenses exceeded hermonthly income by $1,623.16.

Respondent testified as an adverse witness (see 735ILCS 5/2-1102 (West 2004)). He acknowledged petitioner's exhibitNo. 8 to be his and his wife's tax return for 2003. The threeminor dependents listed on the return include one child, CodyBreitenfeldt, from his marriage to petitioner. He identified anincome item of $1,000, listed as "Other Income from Form1099-Miscellaneous," as a SPIFF he had earned from a source otherthan University Auto Park. Respondent acknowledged that he filedbankruptcy in October or November 2003. Respondent's employerprovides him a car to take home at night "for dealership use, togo home and back and within limited range of the dealership or ondealership business."

Following arguments by the parties, the trial courtfirst reviewed its calculations in previously setting support at$488.50 per month and noted that that figure looked reasonable. The court continued:

"I then have to address the primaryissue before the court: Has there been asubstantial change in circumstances? Um,looking at the figures that I have here, it'spretty clear that his income is pretty similar to what it was a year ago [when the courtfound respondent's net monthly income to be$1,954]. So, I'm going to deny the Petitionto Modify finding--there is--there is somewhat of a change in circumstances. I'veheard testimony today that the [petitioner]has been divorced, and that affects heravailable resources primarily, I think, because of the impact on childcare costs andobviously there's only one income availablefor fixed costs. But, on the other hand,there's one less adult who must be supported,as well. That's really the only notablechange in circumstances that I find that thistime."

The court further ordered respondent to be responsible for halfof any of the children's orthodontic expenses. Following ahearing, the court denied petitioner's motion to reconsider, andthis appeal followed.

II. ANALYSIS

A. Petitioner's Income

On appeal, petitioner argues the trial court erred indenying her petition for modification of child support. Section510(a) of the Act provides that a child support judgment can onlybe modified upon a showing of a substantial change in circumstances. 750 ILCS 5/510(a) (West 2004). When determiningwhether sufficient cause to modify has been shown, courts consider both the circumstances of the parents and the children. Fedun v. Kuczek, 155 Ill. App. 3d 798, 801, 508 N.E.2d 531, 533(1987). The increase in the child's needs must be balancedagainst the relative ability of the parents to provide for them,and where a change has occurred that creates a substantialimbalance between the child's needs and the parent's supportcapabilities, modification is required. Fedun, 155 Ill. App. 3dat 801, 508 N.E.2d at 533. Trial courts have wide latitude inconsidering whether a substantial change has occurred warrantingmodification and should consider not only the needs of thechildren and the financial status of the noncustodial parent, butalso the needs and financial status of the custodial parent, thefinancial resources of the children, the standard of living thechildren would have enjoyed had the marriage continued, and thephysical, emotional, and educational needs of the children. Inre Marriage of Riegel, 242 Ill. App. 3d 496, 498-99, 611 N.E.2d21, 23 (1993). The trial court's determination of whether asubstantial change in circumstances has occurred is one of factand will not be disturbed unless against the manifest weight ofthe evidence. In re Marriage of Armstrong, 346 Ill. App. 3d 818,821, 805 N.E.2d 743, 745 (2004).

We find the trial court abused its discretion infinding no substantial change of circumstances in light ofchanges in petitioner's income. Petitioner's testimony was thatshe had been recently divorced and, as a result, her expenses hadincreased. Importantly, she now has only one income with whichto support the children. Moreover, petitioner now has additionalcosts of $300 per month in childcare she did not have before thedivorce, and she now has no medical insurance and has to pay forher own medical care. The court noted the change in petitioner'savailable resources resulting from her divorce but apparentlyfound it to be balanced out by the fact there was also one lessadult to feed. Specifically, in denying the petition for modification, the court stated:

"I've heard testimony today that the [petitioner] has been divorced, and that affectsher available resources primarily, I think,because of the impact on childcare costs andobviously there's only one income availablefor fixed costs. But, on the other hand,there's one less adult who must be supported,as well. That's really the only notablechange in circumstances that I find that thistime."

We find no evidence in the record supporting this conclusion. Petitioner still has the same expenses: food, clothing, andtransportation costs. Rent and utilities costs no doubt doubled. When child support is $488.50 per month, the $300 increase inchildcare alone reflects a huge drain on petitioner's assets. Clearly, petitioner's divorce constituted a substantial change incircumstances warranting modification.

     B. Respondent's Income

Petitioner also argues the court incorrectly determinedrespondent's net income consistent with section 505 of the Act. We agree. The starting point for determining a child supportaward is to determine the noncustodial parent's net income. 750ILCS 5/505 (West 2004); In re Marriage of Baylor, 324 Ill. App.3d 213, 216, 753 N.E.2d 1264, 1266 (2001). The findings of thetrial court as to net income and the award of child support arewithin its sound discretion and will not be disturbed on appealabsent an abuse of discretion. In re Marriage of Freesen, 275Ill. App. 3d 97, 103, 655 N.E.2d 1144, 1148 (1995).

The confusion in this case centers on the interplaybetween respondent's draw, SPIFFs, and commissions. This confusion was exacerbated by respondent's attorney and Keigher'sconfusing and, at times, seemingly inaccurate testimony. Wesympathize with the trial court given our difficulty understanding the evidence in this case.

Petitioner argues that respondent's draw is included inhis taxable income, while respondent claims that his W-2 forms,payroll stubs, and tax return misrepresent his actual incomebecause these documents fail to reflect repayment of his drawfrom his commission proceeds. Respondent claims and the trialcourt apparently agreed that his W-2, payroll documents, and taxreturn overstate his income by failing to account for repaymentof his draw from his commission proceeds. We disagree.

According to the testimony, respondent is paid in threeways: (1) draw, (2) SPIFFs, and (3) commission. He receives acheck every two weeks that includes his draw of $1,000 andreflects SPIFFs he received during the pay period. The SPIFFsmay be cashed when received, in which case they are added torespondent's gross income for the pay period for tax purposes andthen deducted because they have already been paid; otherwise theyare simply added to the draw. Additionally, respondent iscompensated each month for the commission he earned during thepreceding month.

For example, University Auto Park's payroll records forMay 2004 show he was paid $1,000 in draw twice during thatperiod. He also received SPIFFs of $730 during the first half ofMay and $550 during the second half. Including these SPIFFs anddemo allowance (which is income from respondent's use of one ofUniversity Auto Park's cars), respondent's gross income for thetwo checks was $1,680 for the first half of May and $1,600 forthe second half. One reason respondent's income appears low asreflected on his bimonthly checks is because he cashed the SPIFFswhen he received them as opposed to having them added to hischeck. When an employee cashes a SPIFF instead of having it puton his paycheck, the amount of the SPIFF is added to the grossincome for the pay period to ensure it is taxed as income but isthen deducted before issuance of the check. Accordingly, whilethe checks actually issued total only $528.76 for the month,respondent actually earned an additional $1,280 gross in SPIFFs.

Moreover, during April 2004, respondent had a grossincome from his sales commissions of $4,273.54. Respondent wouldclaim $2,000 less than this amount actually went into his pocketbecause his monthly draw is subtracted from his commission. According to respondent, while University Auto Park issued him acheck for $2,750.01 for his commission (after taxes), he onlymade $750.01 after subtraction of his draw. In fact, if thiswere true, every commission check should be $2,000 less than itwas. This makes no sense. We instead find that respondent'scommission checks reflect that which respondent earned in commission over and above his $2,000 draw for the previous month. Inother words, respondent actually earned $6,273.54 in commission,and University Auto Park only issues him a check when his commission exceeds his draw for the previous month. The months inwhich respondent was not issued a commission check do not necessarily represent months in which he earned no commission butrather months where his commission was less than his draw.

According to petitioner's exhibit No. 1-A, whichrespondent admitted to the accuracy of, in 2003, respondentearned $26,000 in draw, $17,986.22 in commission, $6,575 inSPIFFs, and $1,200 in demo allowance, resulting in a gross incomefrom these sources of $51,761.22. This figure is similar to thegross income of $50,964.30 reported on respondent's W-2 and taxreturn. Additionally, respondent's earnings for the first partof 2004 are similar to 2003. In the first four months of 2004,respondent earned $8,000 in draw, SPIFFs of $2,090, and commission of $4,956.66. Averaged out over the rest of 2004, thiswould put respondent's gross income again around $50,000.

It defies logic that University Auto Park, on its W-2,and respondent, on his tax return, would list as income moneyrespondent never received or from which he never derived anybenefit. If respondent never actually received a benefit, it isnot income. See In re Marriage of Rogers, 213 Ill. 2d 129, 136-37, 820 N.E.2d 386, 390 (2004), quoting Webster's Third NewInternational Dictionary 1143 (1986) ("'income' is simply 'something that comes in as an increment or addition ***: a gain orrecurrent benefit that is us[ually] measured in money ***: thevalue of goods and services received by an individual in a givenperiod of time'"). Neither does the record reflect any amendedincome-tax returns correcting this alleged overpayment.

Moreover, Keigher's testimony, while admittedly confusing, does not contradict the view that respondent's incomeincludes draw and commission paid, as evidenced by the followingcolloquy:

"A. The draw amount--okay. The way Iunderstand it, um, you've got your--the 26weeks of draw money, but when it comes towhen you have your commissions that are oncea month, that draw money is even deductedfrom that. *** [I]f they had a commission of5000 and they had already gotten 1300 intheir draw, they've already gotten thatmoney, that's deducted off of that and thenthey get their commission amount. And then,of course, that's taxed.

Q. MR. BORICH [(respondent's attorney)]: But, again, that's all taxable?

A. Yes. Everything--

Q. Even though there's a deduction,that's all taxable?

A. Everything is taxable, yes.

Q. So, the draw amount and then thecommission amount, um, even though they'reall taxable, that's not an accurate reflection of actual income that the sales associate would receive? It's not an accurate--it's not accurate of what the sales associatewould pocket it terms of money because haveboth the draw that's taxable and the commission that's taxable, but then there is adeduction because you subtract one from theother?

A. Exactly.

***

Q. So, on a W-2 form, if with regard tothe income that's listed as taxable income,that would include both draw money and commission money?

A. Everything. Yes."

C. Section 505(a) Income

 While the trial court did not make any calculations onthe record, it stated that it found respondent's current incometo be similar to what it had found in May 2003. We disagree. Section 505 of the Act requires the court to set the minimumamount of child support for two children at 28% of thenoncustodial parent's net income, unless the court finds reasonto deviate from this figure. 750 ILCS 5/505(a)(1), (a)(2) (West2004). Section 505(a)(3) defines "net income" asthe total ofall income from all sources minus the following deductions: (1)federal income tax, (2) state income tax, (3) social securitywithholdings, (4) mandatory retirement contributions, (5) uniondues, (6) dependent and individual health insurance premiums, (7)prior obligations of support or maintenance, and (8) expendituresfor repayment of debts that represent reasonable and necessaryexpenses for the production of income. 750 ILCS 5/505(a)(3)(West 2004).

Respondent's tax return and W-2 for 2003 show a totalincome of $50,964.30, which after adding $4,633.73 in benefitsfrom the cafeteria plan, puts respondent's total income for 2003at $55,598.03. Section 505(a)(3) of the Act allows the followingdeductions to arrive at respondent's net income:

Federal income tax: $4,781.24

State income tax: $1,529.06

Social Security Payments: $3,159.79

Medicare Withholding: $738.98

Health insurance premiums: $295.50

Family Health Insurance Premiums: $3,712.50

Dental Insurance Premiums: $625.73

O'Brien Uniforms: $80.63

Total$14,923.43

Additionally, as petitioner points out, in 2003, respondentoverwithheld federal and state taxes, resulting in a refund of$3,545 from federal taxes and $312 from state taxes, and thisamount is added back into respondent's net income. In re Marriage of Pylawka, 277 Ill. App. 3d 728, 733, 661 N.E.2d 505, 509(1996) (if the noncustodial parent overwithholds on his W-2, theamount should be added back to his net income when determininghis child support under section 505(a) of the Act). We furthernote that the record reflects no amended tax return to accountfor any overpayment. Therefore, according to our calculations,respondent's net income under section 505 of the Act is$55,598.03 - $14,923.43 + $3,857 = $44,531.60. Dividing thisfigure by 12 results in a monthly net income of $3,710.97. Wenote that the minimum amount of support for two children wasincreased from 25% to 28% subsequent to the 2003 order. See Pub.Act 93-148, §5, eff. July 10, 2003 (2003 Ill. Laws 1628, 1628). Therefore, 28% of $3,763.71 results in a monthly child supportobligation of $1,039.07.

Respondent's total income for the first four months of2004 is $17,470.18. After adding in $1,544.38, representing one-third of respondent's yearly benefits from the cafeteria plan,this total is $19,014.56. For the first four months of 2004,respondent's deductions are as follows:

Federal income tax:$1,261.00

State income tax: $466.15

Social Security Payments: $963.30

Medicare Withholding: $225.29

Family Health Insurance Premiums:$1,685.00

Dental Insurance Premiums: $218.44

Total$4,819.18

While we are unsure of respondent's tax status for 2004, his netincome under section 505 of the Act for January through April2004 is $19,014.56 - $4,819.18 = $14,195.38. Multiplying thisnumber by three results in a net income for the year of$42,586.14. Dividing this figure by 12 yields a monthly netincome of $3,548.85. Therefore, 28% of $3,548.85 results in amonthly child support obligation of $993.68. We note that hisfigure does not include any tax refund, while the 2003 figuredoes.

In May 2003, the trial court found respondent's netincome pursuant to the Act to be $1,954 per month for the first130 days of 2003 and set child support at $488.50 per month,representing 25% of the monthly income. Such a finding putsrespondent's yearly net income for 2003 in the neighborhood of$23,500. With respect to the instant petition, in findingrespondent's income was similar to what the court had previouslyfound it to be, the court did not explain how it arrived at thefigure. Keigher's testimony as well as respondent's W-2 and taxreturn indicate that respondent's net income is now substantiallyhigher. We find this increase in respondent's income alsoconstitutes a substantial change in circumstances.

Therefore, we vacate the trial court's order denyingthe petition for modification and remand for the court to modifyrespondent's child support obligations in light of our findings. We are mindful that respondent's income is not static from monthto month since he works on commission, and the court may considerthis or any other relevant factors warranting deviation from theguidelines in setting the modified amount. See 750 ILCS5/505(a)(2) (West 2004).

III. CONCLUSIONFor the reasons stated, we vacate the trial court'sjudgment and remand for further proceedings consistent with thisorder.

Vacated and remanded with directions.

COOK, P.J., concurs.

McCULLOUGH, J., dissents.

JUSTICE McCULLOUGH, dissenting:

I respectfully dissent and would affirm the trialcourt's order.

I disagree with the majority's mathematics and conclusions as to respondent's income. The testimony and exhibitsconcerning his income had to be a nightmare for the trial court. Heather Keigher, payroll processor for respondent's employer, wascalled as a witness by the petitioner. The cross-examination ofKeigher and the trial court's colloquy with Keigher furtherjustifies the trial court's decision.

The respondent's brief is correct in stating:

"Ms. Keigher, as a witness for Petitioner, made clear why Respondent's W-2 formsand pay stubs were not accurate reflectionsof Respondent's net income. Although all ofRespondent's draw, SPIFFs, and commissionsappear on his W-2 forms and as income on hispay stubs, these documents fail to reflectthe 'repayment' of Respondent's draw from hiscommission proceeds. Accordingly, that Respondent's W-2 forms reflect so-called taxable income of more than Fifty Thousand Dollars ($50,000.00) misrepresents Respondent'sactual taxable income. In view of the TrialCourt's grasp of the actual net income Respondent receives from his employer's convoluted payroll system, the Trial Court justifiably did not increase Respondent's childsupport obligation."

Our decision remands for a new hearing and a secondbite at the apple by petitioner.