North Carolina Court of Appeals Reverses Child Support Modification Over Depreciation Findings

We will discuss the Mecklenburg County, o/b/o Herron v. Pressley case, and how the North Carolina Court of Appeals reversed a trial court order and modified the father’s child support obligation.

To begin, we highlight the importance of the court making sufficient findings of fact regarding depreciation expenses when calculating income. Courts should follow and properly apply the North Carolina Child Support Guidelines, as well as the law itself, for their decisions to stand.

Background of the Child Support Dispute

In this case, the parties never married, but they had two minor children, both born in 2011. The defendant was the father, while the mother was the plaintiff. The father worked as a self-employed dump truck owner-operator.

In 2019, the trial court ordered the father to pay $50 per month in child support. But the mother filed a motion to modify in 2022, also requesting attorney fees. The modification request was based on the mother’s claim that the circumstances had changed since the court gave the initial child support order.

Then, in 2023, the trial court reviewed the father’s federal income tax returns for the previous two years. The returns showed that business income was reported on Schedule C and that significant depreciation deductions were also reflected for the father’s dump truck business.

Trial Court’s Child Support Modification

The court found the tax returns were valid evidence but rejected the father’s depreciation deductions. The opposite happened – the court added those depreciation amounts back into the business income, and calculated the father’s gross monthly income based on that amount.

The tax returns showed that the father had depreciation expenses that were around $40,000 per year. When they calculated the new gross income based on that, it showed that the father had more than $4,700 per month, far more than the amount determined in 2019 when the initial child support order was issued.

As a result, the trial court increased the father’s child support obligation to $905 per month.

The father appealed, claiming the court had, without justification, rejected the depreciation deductions and failed to make sufficient findings to explain the decision.

Court of Appeals Analysis of Depreciation Findings

The appellate court emphasized that the child support amount must be based on the parent’s actual gross income. In cases where an individual is self-employed, gross income is calculated by subtracting ordinary and necessary business expenses from gross receipts. But certain deductions are excluded, such as accelerated depreciation.

However, in the second instance, the court explained that while trial courts have the power to evaluate business expenses, the findings must be sufficiently detailed to allow meaningful appellate review.

The appellate court referenced prior cases to support their stance:

Coble v. Coble: even though it dates back to 1980, this case is still cited when trial courts fail to make specific findings supporting their decisions.
Lawrence v. Tise: this 1992 N.C. case addressed how depreciation should be considered in child support calculations.
Head v. Mosier: this 2009 precedent explains that appellate courts give substantial deference to trial court decisions but may reverse them when they are abused.

In the o/b/o Herron v. Pressley case, the court did not explain why the father’s depreciation deductions were not taken into account or how they were treated under the child support guidelines. In the second instance, the court concluded that it could not properly review the first instance decision.

Furthermore, the appellate court held that the trial court abused its discretion because it failed to make sufficient findings of fact regarding reparation. As a result, the modified child support order was reversed, and the case was remanded for additional findings.

Bottom line

The Mecklenburg County o/b/o Herron v. Pressley case shows why the courts must clearly justify any rejection or adjustment of business deductions when applying the North Carolina Child Support Guidelines. It also shows the importance of sufficient findings, as the lack of them will impede appellate review, leading to reversal and remand for further proceedings.

If you are facing a child support dispute or seeking a modification, experienced legal guidance will help you correctly evaluate the financial circumstances. Woodruff Family Law Group is an experienced team of North Carolina family law professionals that will offer practical advice and strong representation.