Military BAH and BAS Included for Child Support Purposes - No Federal Pre-emption

Military BAH and BAS included for child support purposes - no Federal pre-emption

(reproduced by permission from "David S. Goldberg" marylandmediator@gmail.com)

All active duty members of the military receive “basic pay” corresponding to their rank and years of seniority. In addition, there are a host of “special pays,” because of the particularities or facts of that member’s current service, such as “submarine pay” or “hazardous duty pay.” There can also be substantial bonuses for various purposes, such as to retain trained pilots.

And then there are “allowances” – categories of extra money handed to military members on which there is no tax. Essentially every member gets nontaxable basic allowances for housing (BAH) and subsistence (BAS), and there are many kinds of situational allowances, as well. Some of these allowances – including BAH – are even greater when the member has “dependents” (a spouse or children).

The total paid in nontaxable allowances can come close to matching the amount of taxable pay received by a military member, and because allowances are received tax-free, they are significantly more valuable than the regular taxable income of civilians receiving comparable perks.

In fact, there is an adjusted civilian equivalency, known as “Regular Military Compensation” (RMC), which the military itself uses for determining the actual value of the “salary” paid to members at each grade, combining basic pay, basic allowance for subsistence and the basic allowance for housing, along with the tax advantage from untaxed allowances. The chart, published annually by the Department of Defense Office of the Actuary, provides a more realistic and correct basis for an award of child support, spousal support, and attorney’s fees, because it gives the Court an “apples to apples” basis on which to compare the incomes of a military member and a non-military spouse. See http://www.militaryconnection.com/2011-pay-charts/regular-military-compensation.asp

But before rushing out to gross up these untaxed amounts, see Lemley v. Lemley, 102 Md. App. 266 (1994), holding that tax free income from a disability pension could not be "grossed up" for child support purposes to a pre-tax amount.

In In re Marriage of Stanton, 190 Cal. App. 4th 547, 118 Cal. Rptr. 3d 249 (Ct. App. 2010), an intermediate appellate court in California considered the case of a litigant who argued that setting child support based on allowances violated the federal preemption doctrine since federal law exempts military allowances from the definition of income for federal tax purposes, and such allowances are not subject to wage garnishment for support arrears.

The trial court’s analysis was the pretty straightforward one that if money “looks like income, it is income no matter how it’s paid.” [Smell test and duck test and weather test.]

On appeal, the court affirmed, finding the law of federal pre-emption “inapplicable to California support law,” given that “[e]ach parent should pay for the support of the children according to his or her ability,” that gross income “means income from whatever source derived,” and that “employment benefits” include “taking into consideration the benefit to the employee, [and] any corresponding reduction in living expenses. . . .”

The court explained well the place – and limits – of federal pre-emption in a family law analysis:

In [Rose v. Rose, 481 U.S. 619, 625, 107 S. Ct. 2029, 95 L. Ed.2d 599 (1987)], the United States Supreme Court explained: “We have consistently recognized that ‘the whole subject of the domestic relations of husband and wife, parent and child, belongs to the laws of the States and not to the laws of the United States.’ [Citations.] ‘On the rare occasion when state family law has come into conflict with a federal statute, this Court has limited review under the Supremacy Clause to a determination whether Congress has ‘positively required by direct enactment’ that state law be pre-empted.” [Citations.] Before a state law governing domestic relations will be overridden, it must do ‘major damage’ to ‘clear and substantial’ federal interests.’” Express preemption arises when Congress has explicitly stated its intent in statutory language.

Exhaustively reviewing cases from around the country, the court found that the nontaxable status of military allowances did not suggest that Congress had any preemptive intent with regard to either child or spousal support. Nor was the court impressed by the fact that such allowances could not be garnished, noting that in Rose, the United States Supreme Court found that the State of Tennessee could hold a military veteran in contempt for nonpayment of child support when the support was based on disability payments not subject to garnishment, and such payments were his only means for satisfying his support obligation.

Explaining that conclusion, the Supreme Court rejected the idea that disability benefits not be subject to any legal process aimed at diverting funds for child support, including a State-court contempt proceeding, and held that the statutes merely applied to State proceedings against agencies of the United States government. As the California court noted, the purpose of those laws is “to avoid sovereign immunity problems, not to shield income from valid support orders,” citing In re Marriage of McGowan, 638 N.E.2d 695, 698 (Ill. App. 1994).

The California court therefore joined courts across the nation in holding that “federal preemption is inapplicable to military allowances such as BAH and BAS, and that such allowances are included in a party’s gross income for purposes of support when State law encompasses them.” The court held that not only did including such allowances in gross income “not do major damage to a clear and substantial federal interest,” but “to the contrary, the Department of Defense by regulation and otherwise encourages members of the armed forces to fulfill their family commitments,” again citing In re Marriage of McGowan, supra.