Colorado’s alimony statute has an expansive view of income – pretty much everything a person receives, including gifts, counts as income unless they are excluded under a provision of that statute – salary, commissions, bonuses, you name it: “‘Gross income’ means income from any source and includes, but is not limited to… (C) Commissions”. C.R.S. 14-10-114(c)(I).
The problem is how to prove commissions, when they are likely not guaranteed, and almost certainly vary from year-to-year? There is plenty of case law where courts have approved of averaging the commissions or bonuses from past years to project into the future.
But while averaging of commissions works when a spouse has an employment history with the same company, it does not help when he just started there.
Commissions for Expected Work
A recent unpublished decision from the Colorado Court of Appeals considered the issue of a husband who was in a new position with base salary, plus anticipated commissions.
In Kjerstad, at the time of divorce the husband was earning $45,000/mo, and the wife was apparently not working (her income and employment status is unclear from the decision). Based upon that, they agreed the husband would pay modifiable alimony of $15,000/mo.
Fast forward several years, and the husband filed a motion to modify maintenance, alleging that he was earning just $13,416/mo, comprised of $12,500 salary, $416/mo future commissions, and $500/mo of dividend income.
The wife’s expert testified that, relying upon the husband’s offer letter, the husband would receive commissions of over $18K/mo, resulting in a gross monthly income of $31,750.
Why include potentially speculative commissions in the husband’s income? The expert’s reasoning was that the $18K of commissions was based upon the employer’s expected level of work. So if the husband worked for that employer, he would have to meet standards, and necessarily earn $18K of commissions. In other words, there was no way the husband could be employed there only earning $416/mo of commissions.
The trial court denied the husband a maintenance modification, and he appealed. But the Colorado Court of Appeals affirmed the ruling, based upon including his future commissions as income.
Income Includes Future Commissions
While courts typically will look at historic averages when it comes to bonuses or commissions, and if none, will not typically speculate on future payments which are not contractually guaranteed. But the wife’s expert’s reasoning as to why the $18K of commissions should be added to the husband’s income was solid enough for the court to add it.
While the trial court failed to make a specific finding as to the husband’s income, “it may be fairly inferred from the order that the magistrate accepted wife’s expert’s testimony on this issue” Kjerstad, ¶ 17, and therefore found that the husband’s gross monthly income had decreased from $45,000 to $31,750.
It probably did not help the husband’s case that the court found him not credible on the issue of his income.
Standard to Modify Alimony
The standard to modify spousal maintenance in Colorado is not whether the court now would have ordered a different amount, but whether changes in circumstances make the original maintenance amount unfair:
“After determining whether there has been a change in the parties’ circumstances, the district court turns to whether, as a result of this change, the maintenance award has become unfair. § 14-10-122(1). At this stage, however, the inquiry is not governed by the same standard as an original award, for to do so would give no real meaning to § 14-10-122 and would result in the filing of motions to modify each time there is any change in the earning ability or needs of a party. Thus, the question in such a case is not whether, based on the current financial circumstances of the parties, the court would have ordered the same amount of support. Instead, the question is different: Have the terms of the original award become unfair, i.e., unconscionable.”Kjerstad, ¶ 11 (Cleaned Up).
The husband’s $15,000/mo alimony represented 47% of the husband’s new gross monthly income as found by the court, and since this was a pre-2018 decree, the maintenance would remain tax-deductible. Probably not much comfort to the husband – that’s a pretty hefty percentage of his income to be paying out in maintenance.
But apparently the maintenance obligation increasing from a 33% share of his income (when it was $45K/mo) to a 47% share was not significant enough to modify maintenance. The trial court found that the existing $15,000/mo alimony obligation remained fair, and the court of appeals found this was supported by the evidence, so granted the husband no relief.
The husband had also argued that the wife was voluntarily unemployed, so once her imputed income were included, his maintenance should decrease, but as we discuss in this blog post, the court rejected that argument as well.
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