War veteran holding an American flag.

VA Disability Payments are Income

The Colorado Court of Appeals just issued a new decision in what it characterized:

“As a matter of first impression in Colorado, whether a provision of the Uniformed Services Former Spouses’ Protection Act (USFSFPS)… prohibits a trial court from including a parent’s veteran’s disability benefits in that parent’s gross income when calculating a child support obligation.”

M.E.R.-L.1In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 2.

It came as somewhat of a surprise to me that this issue was even in doubt – as we discuss in our VA Disability article in the Military Divorce Guide, Colorado Courts have long approved of treating VA disability payments as income for the purposes of family support. And the reality in court is that judges have included disability benefits as income in every case we’ve seen at Graham.Law.

However, the primary case where VA disability payments were found to be properly included as income for purposes of alimony had very little analysis or discussion. Nevil.2In re: Marriage of Nevil, 809 P.2d 1122 (Colo.App. 1991). The Colorado Court of Appeals has now fully addressed the issue of whether VA disability should count as income for purposes of child support, with a full analysis of the objections raised.

In M.E.R.-L.,3In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 2. the family law judge included as income to the father both his salary, plus the $3433/mo Veterans Administration disability payments he was receiving. The father appealed on several grounds, each of which was discussed, and rejected, by the Court of Appeals.

Colorado Income Definition Includes VA Disability Payments

VA Disability as Income for Child Support

The father first argued that disability payments are not expressly included in the “laundry list” of income under Colorado’s child support statute, C.R.S. 14-10-115, they do not count as income for purposes of calculating child support. While it is technically true that the statute does not mention “disability”, that’s not the end of the inquiry.

The Court noted that prior Colorado cases have treated disability benefits as income. Moreover, the Colorado statute is expansive, and includes income “from any source.” “Thus, we conclude that veteran’s disability benefits fall within the broad definition of gross income.” M.E.R.-L.4In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 21.

Fact that VA Disability is Non-Taxable is Irrelevant

The father tried to argue that since the VA disability benefits were non-taxable, they should not count as income. After all, if the IRS doesn’t treat the payments as income, why should Colorado?

The court was not impressed, quoting from a prior Colorado Supreme Court decision that “the [child support] statute makes no distinction between sources of income based on the federal or state tax codes.” M.E.R.-L.5In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 22.

Federal Law Not Preclude States Treating VA Disability as Income

The Uniformed Services Former Spouses Protection Act (USFSPA) prohibits, upon divorce, state courts from dividing Veterans Administration disability payments as marital property. See our VA Disability article in the Military Divorce Guide.

The father in M.E.R.-L. argued that the same federal statute precludes state courts from considering VA disability payments at all, including as income for purposes of child support or maintenance. The Court of Appeals was not persuaded:

“But father misses a very important distinction. Howell discusses only the treatment of disability benefits as community property.[3] Nothing in Howell, or in the USFSPA itself for that matter, addresses whether a state – through statute or judicial decision – may treat disability benefits as income for calculating a child support obligation.”

M.E.R.-L.6In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 28.

Father’s position was not helped by the fact that every reported decision on this point actually went against him, with states routinely including VA disability payments as income:

“Father cites to no case that holds that the USFSPA prohibits states from including veteran’s disability benefits in a veteran-parent’s income when calculating a child support obligation. Nor are we aware of any such case. To the contrary, every court we have found that faced this issue rejected the preemption argument.”

M.E.R.-L.7In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 29.

The court also analyzed the U.S. Supreme Court decision in Rose,8Rose v. Rose, 481 U.S. 619, 626 (1987). where the Court noted “a state court may consider disability benefits as part of the veteran’s income in setting the amount of child support to be paid.”

Because in Rose neither party had appealed the state court’s decision to include VA disability payments as income, this quote is more dicta than an actual holding. However, not only did SCOTUS have the opportunity to express its disapproval of doing so, but the Court went the other way, and implicitly approved of disability counting as income in the child support calculation.

And as the M.E.R.-L. court found:

“Notably, several courts have read Rose as explicitly authorizing the treatment of veteran’s disability benefits as income for purposes of calculating a veteran-parent’s support obligation.”

M.E.R.-L.9In re: Parental Responsibilities of M.E.R-L and D.L.R-L, 2020 COA 173, ¶ 25.

Congratulations to El Paso County’s own Dan West for prevailing in the M.E.R.-L. case.

VA Disability Not Divisible as Marital Property

Finally, note the limitation on M.E.R.-L. While the case supports VA disability payments being included as income when determining child support or maintenance, those payments are still not divisible as property upon dissolution of marriage, and, as we addressed in a blog post last year, courts do not consider VA disability payments when dividing a marital estate at divorce.