      Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
      Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
      303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
      corrections@akcourts.us.



               THE SUPREME COURT OF THE STATE OF ALASKA

ELISSA SHANIGAN,                               )
                                               )        Supreme Court No. S-15956
                      Appellant,               )
                                               )        Superior Court No. 3AN-11-05578 CI
              v.	 	                            )
                                               )        OPINION
TERRENCE SHANIGAN,                             )
                                               )        No. 7144 – January 6, 2017
                      Appellee.	 	             )


                                               )



              Appeal from the Superior Court of the State of Alaska, Third
              Judicial District, Anchorage, Patrick J. McKay, Judge.

              Appearances: Elissa Przywojski, pro se, Anchorage,
              Appellant. No appearance by Appellee Terrence Shanigan.

              Before: Stowers, Chief Justice, Winfree, Maassen, and
              Bolger, Justices.

              MAASSEN, Justice.

I.    INTRODUCTION
              A mother appeals from an order reducing the amount of child support the
father was required to pay. The mother argues that the superior court relied on incorrect
income calculations from the Child Support Services Division (CSSD) and that it erred
in finding a material change in circumstances sufficient to warrant a reduction in child
support. She also argues that the court should have required the father to submit an
income affidavit, and that its failure to do so improperly shifted to her the burden of
proving the father’s income. We conclude that CSSD’s income calculations were
incorrect, that it was error for the court to adopt them, and that the father should have
been required to submit an income affidavit. We therefore reverse the superior court’s
order modifying child support.
II.   FACTS AND PROCEEDINGS
             Elissa Przywojski (formerly Shanigan) and Terrence Shanigan divorced in
January 2012, and Elissa was granted sole legal and primary physical custody of their
two minor children. The 2012 child support order required Terrence to pay monthly
child support of $1,932.92.
             In June 2014 Terrence asked CSSD to review his support obligation. He
gave CSSD copies of his 2013 federal tax return and the six most recent pay stubs from
his employment with the State.        CSSD recalculated his support obligation and
determined that it could be reduced by $315.92 a month. Because this was a reduction
of 16.3%, Terrence was presumed to have had a material change in circumstances as
defined by Alaska Civil Rule 90.3(h), which would justify a modification of his
obligation.1 Accordingly, in January 2015 CSSD asked the superior court to modify the
existing child support order to reflect its new calculations.
             Elissa opposed the motion to modify, arguing that CSSD’s calculations
were wrong in several respects. According to Elissa, a correct calculation would result
in only a 10.7% decrease from the original child support order, too small a change to
justify a reduction in Terrence’s support obligation. Elissa also challenged Terrence’s
failure to submit a sworn income affidavit in support of CSSD’s request. Finally, she


      1
              Civil Rule 90.3(h)(1) provides that “[a] final child support award may be
modified upon a showing of a material change of circumstances[,] . . . [which] will be
presumed if support as calculated under this rule is more than 15 percent greater or less
than the outstanding support order.”

                                           -2-                                     7144

claimed that CSSD erred in assuming that Terrence had no income from a consulting
business he had recently launched.
              Along with her opposition Elissa filed an affidavit from her mother, a
certified public accountant, who had done her own calculations based on the income
information Terrence had given CSSD. This competing analysis showed that Terrence’s
monthly support obligation should be reduced to $1,725.24 per month, a reduction of
$207.68 instead of the $315.92 proposed by CSSD. Because her figures showed only
a 10.7% reduction in Terrence’s obligation, Elissa argued that a material change in
circumstances could not be presumed under Rule 90.3(h) and no modification was
justified.
              The superior court granted CSSD’s requested modification in February
2015, decreasing Terrence’s child support obligation to the CSSD-recommended amount
of $1,617 per month. The court issued no separate written findings, but it noted on its
order that it had reviewed Elissa’s opposition and found “no supporting evidence” for
her claims. Elissa filed successive motions for reconsideration, which the court denied.
              Elissa filed this appeal. Terrence did not participate.2
III.   STANDARD OF REVIEW
              “We use the clearly erroneous standard when reviewing factual findings,
including findings regarding a party’s income . . . .”3 “Factual findings ‘are clearly




       2
              Terrence did not file a brief, and we denied his later request to participate
in oral argument. See Alaska R. App. P. 212(c)(10) (“When the appellee’s brief is not
filed as required, appellee will not be heard at oral argument except on consent of the
appellant, or by request of the court.”).
       3
              Wilhour v. Wilhour, 308 P.3d 884, 887 (Alaska 2013).

                                           -3-                                       7144

erroneous when, “after reviewing the record as a whole, [we are] left with a definite and
firm conviction that a mistake has been made.” ’ ”4
IV.	 	 DISCUSSION
       A.	 	 It Was Error To Grant The Requested Modification Of Terrence’s
             Child Support Obligation Because He Failed To Show A Material
             Change In His Income.
              1.	 	   Child support is calculated under Rule 90.3.
              Rule 90.3 prescribes how child support is calculated. The starting point is
the non-custodial parent’s “total income from all sources.”5 Subtracted from this income
figure are five “mandatory deductions” set out in Rule 90.3(a)(1)(A):
              (i)	 	 federal, state, and local income tax,
              (ii)	 	 Social Security tax or the equivalent contribution to an
                      alternate plan established by a public employer, and
                      self-employment tax,
              (iii)	 	 Medicare tax,
              (iv)	 	 mandatory union dues, [and]
              (v)	 	 mandatory contributions to a retirement or pension
                     plan.
Rule 90.3(a)(1)(B) also allows a deduction for “voluntary contributions to a retirement
or pension plan or account . . . except that the total amount of these voluntary
contributions plus any mandatory contributions . . . may not exceed 7.5% of the parent’s
gross wages.” After the court has made these deductions (and several others not relevant
here), what remains is the non-custodial parent’s “adjusted annual income.”



       4
              Sharpe v. Sharpe, 366 P.3d 66, 68-69 (Alaska 2016) (modification in
original) (quoting Bennett v. Bennett, 6 P.3d 724, 726 (Alaska 2000)).
       5
              Alaska R. Civ. P. 90.3(a)(1).

                                            -4-	                                   7144

             Once this amount has been determined, Rule 90.3(a)(2) gives the formula
for calculating the child support obligation of the non-custodial parent. Because Terrence
and Elissa have two minor children, the amount of the obligation is the adjusted annual
income multiplied by .27.6
             To trigger a modification in child support under Rule 90.3(h)(1), the party
petitioning for modification must demonstrate that there has been “a material change of
circumstances,” which is presumed “if support as calculated under [the] rule is more than
15 percent greater or less than the outstanding support order.”
             2.     Terrence’s gross income for 2014 was $108,729.72.
              Because Terrence submitted his request for modification before the end of
2014, CSSD extrapolated his gross annual income through the end of the year using his
most recent income information. As of his latest pay stub, dated October 28, 2014,
Terrence’s “total gross” income from his State employment was $88,295.60. Elissa
correctly extrapolates that amount to an annual income of $105,954.72.7 In 2014
Terrence also received a $1,884 Permanent Fund Dividend (PFD) and $891 in native
corporation dividends. These three amounts added together equal $108,729.72 in gross
income. As Elissa notes, CSSD’s calculation of Terrence’s gross income, $109,269.72,
was $540 too high because it again added Terrence’s non-taxable cell phone allowance,
already included as income on his pay stub.8


       6
              Alaska R. Civ. P. 90.3(a)(2)(B).
       7
             $88,295.60 (total gross as of October 2014) divided by 20 (total number of
pay periods to date) then multiplied by 24 (total number of pay periods in 2014) equals
$105,954.72.
       8
           See ALASKA DEP’T OF ADMIN., How to Read Your Payroll Stub and Yearly
W2 Earnings Statement 1 http://doa.alaska.gov/dof/payroll/resource/prstubref.pdf (last
                                                                        (continued...)

                                           -5-                                      7144

             3.	 	   CSSD incorrectly calculated Terrence’s Rule 90.3 adjusted
                     annual income by overstating his federal income and Medicare
                     tax obligations.
             The following mandatory deductions should have been subtracted from
Terrence’s gross income to determine his adjusted annual income under
Rule 90.3(a)(1)(A):      federal income tax, mandatory contributions to Alaska’s
Supplemental Benefits System (SBS) Annuity Plan (the State’s Social Security
equivalent), Medicare tax, mandatory union dues, and mandatory contributions to
Terrence’s retirement plan. While CSSD did take those deductions into account, Elissa
argues that it erred in calculating two of them — federal income tax and Medicare tax —
resulting in an incorrect figure for Terrence’s annual adjusted income. We agree.
                     a.	 	   Federal income tax
              Based on the documentation Terrence provided, CSSD determined that his
2014 income tax obligation was $1,731.51 per month, or $20,778.12 per year. Elissa
argues that this calculation overstated Terrence’s tax obligation because it was based on
his gross, rather than taxable, income. The child support guidelines worksheet that
CSSD submitted to the court listed Terrence’s “total taxable gross income” as
$108,729.72. According to the worksheet, this number was derived, as discussed above,
by extrapolating Terrence’s State income to an annual figure and adding his PFD and
native corporation dividend income. But as Elissa argues, Terrence’s total taxable
income was significantly lower, because not all of his gross income from his State
employment was subject to federal taxation.




       8
         (...continued)
updated Dec. 14, 2015) (explaining that “non-taxed” income, including “such things as
. . . non-taxable cell phone allowances,” are “included in Total Gross amount”).

                                           -6-	                                     7144

              The United States tax code allows certain deductions from gross income
before federal income tax is calculated.9 As an Alaska State employee, Terrence was
allowed deductions for the following: “non-taxed” items including a cell phone
allowance ($540); employee-paid premiums, including voluntary SBS and employee
health insurance premiums ($4,684.32); deferred compensation ($1,080); mandatory
SBS, which is excluded from federal taxation until the employee withdraws it upon
termination of employment ($6,461.94); and mandatory retirement contributions
($7,291.81).10 Taking those deductions into account, Terrence’s total taxable income for
2014, extrapolated annually and then adding the PFD and other dividends, was
$88,671.65, not $108,729.72 as calculated by CSSD. This result comports with the
“taxable compensation” shown on Terrence’s October 2014 paycheck when extrapolated
annually.11
              The next step in the analysis is to determine the actual tax obligation. In
order to do so, CSSD assumes a standard deduction for a single person. In 2014 that




      9
              26 U.S.C. § 211 (2012).
      10
             See ALASKA DEP’T OF ADMIN., supra note 8, at 1-2 (detailing income and
contributions not subject to taxation). The amount of each of these deductions is derived
by the same formula used to determine Terrence’s 2014 gross income: the amount on
his October 2014 paycheck divided by 20, then multiplied by 24.
      11
              Terrence’s taxable compensation was listed on his October pay stub as
$71,580.54. Extrapolating that amount over the entire year and adding the PFD and
other dividends yields $88,671.65. Terrence’s W2 and other income documentation are
also consistent with this result. In 2013 his total gross income as of his last paycheck
was $107,123.76, while his taxable compensation was listed as $87,876.31. According
to his W2, his wages for the year were the latter number, which was used as the starting
point for calculating his federal income tax. His gross income does not factor into that
calculation.

                                           -7-                                     7144

standard deduction was $6,200, and the applicable personal exemption was $3,950.12
After application of the standard deduction and the personal exemption, Terrence’s
taxable income was $78,521.65. The federal income tax calculated on that amount in
2014 was $15,488.13
             CSSD did not explain to the superior court how it derived Terrence’s
federal income tax obligation, but whatever method it used, it arrived at a tax obligation
of $20,778.12, approximately $5,290 higher than it should have been. In fact, CSSD’s
federal income tax determination is almost precisely what it would have been had CSSD
neglected to deduct Terrence’s pre-tax income, as Elissa claims occurred. Subtracting
the standard deduction and personal exemption from CSSD’s total taxable income figure
of $108,729.72 leaves $98,579.72 in taxable income. In 2014, the tax obligation for that
income was $20,77714 — almost exactly the amount CSSD calculated. We can only
conclude that CSSD failed to deduct those portions of Terrence’s income that are not
subject to taxation before it calculated his federal income tax.15 This led it to deduct


      12
             INTERNAL REVENUE SERV., Form 1040, U.S. INDIVIDUAL INCOME TAX
RETURN at 2 (2014), https://www.irs.gov/pub/irs-prior/f1040--2014.pdf.
      13
             INTERNAL REVENUE SERV., 1040 TAX TABLES at 85 (2014),
https://www.irs.gov/pub/irs-prior/i1040tt--2014.pdf. Elissa calculated Terrence’s income
tax obligation at $15,398, apparently assuming that he would have selected a slightly
lower alternative capital gains tax in lieu of the regular scheduled tax of $15,488.
Because this minor discrepancy does not affect the analysis, we do not consider which
amount more accurately reflected Terrence’s actual obligation.
      14
             Id. at 87.
      15
             CSSD does not dispute that it is required to deduct the non-taxable elements
of Terrence’s income before calculating his income tax; it simply failed to do so. In an
affidavit CSSD submitted to the superior court it stated that “SBS and Retirement
deductions are pre-tax deductions for the purpose of calculating an individual income tax
                                                                            (continued...)

                                           -8-                                      7144

$5,290 too much from Terrence’s total income, resulting in an artificially low annual
adjusted income for the purpose of calculating child support.
                      b.   Medicare tax
              Elissa also addresses Terrence’s Medicare tax obligation, arguing that he
would have owed only $1,460.57 rather than $1,536.36 as calculated by CSSD.16 The
minor difference between these two numbers would not alone affect the outcome of this
case, but Elissa is correct. The Medicare tax rate for employees is 1.45% of Medicare
wages (gross wages minus non-taxed items, voluntary SBS contributions, and employee
health insurance premiums).17 CSSD’s number, $1,536.36, is 1.45% of $105,954.72 —
Terrence’s gross income from his State employment. It appears that CSSD based
Terrence’s Medicare tax obligation on his gross income without deducting income not
subject to the tax.
              Had CSSD calculated Terrence’s Medicare tax correctly, it would have first
deducted from his pay the non-taxed amounts (the $540 cell phone allowance) and pre­
tax deductions such as voluntary SBS and employee health insurance ($4,684.32),
yielding $100,730.40 in income subject to the Medicare tax.18 1.45% of that amount is
$1,460.59, almost exactly what Elissa suggests — and this is the amount the State




       15
        (...continued)
obligation and determining the adjusted annual income from which income for child
support purposes is calculated.”
       16
           Terrence’s yearly obligation would have been $1,536.36 based on CSSD’s
monthly Medicare tax calculation of $128.03.
       17
              26 U.S.C. § 3101(b)(1) (2012); § 3121(a), (b).
       18
              ALASKA DEP’T OF ADMIN., supra note 8.

                                          -9­                                     7144

actually withheld.19    CSSD overstated Terrence’s Medicare tax obligation by
approximately $75 per year and as a result, again, deducted too much money from his
gross income when calculating his annual adjusted income for child support purposes.
             4.	 	   Reliance on CSSD’s erroneous income calculations
                     resulted in an unwarranted modification of child support.
             Relying on its incorrect calculations of federal income and Medicare taxes,
CSSD determined that Terrence’s 2014 adjusted income was $71,868.24.20 CSSD
applied to this figure the appropriate multiplier of .27 under Rule 90.3, concluding that
Terrence’s monthly child support obligation was $1,617. The change from Terrence’s
original child support obligation of $1,932.92 was 16.3%. Because that change was
greater than 15%, CSSD presumed there had been a material change in circumstances
justifying a modification to his obligation.
             But Terrence’s adjusted annual income for Rule 90.3 purposes should have
been $76,694.15,21 assuming the accuracy of CSSD’s other deductions (which Elissa




      19
             Elissa appears to have derived this number through an annual extrapolation
of Terrence’s Medicare withholdings as of his October 2014 paycheck. Terrence’s
mandatory Medicare tax withholding as of that time was $1,217.14, which extrapolated
annually yields an obligation of $1,460.57.
      20
             CSSD derived this number by deducting the following from Terrence’s
gross income ($109,269.72, according to CSSD): mandatory SBS ($6,495); Medicare
tax ($1,536.36); union dues ($1,440); mandatory retirement ($7,152); and federal income
tax ($20,778.12).
      21
             Gross income of $108,729.72 (corrected so as not to double-count the
phone allowance) is reduced by union dues ($1,440), CSSD’s calculations of mandatory
SBS ($6,495) and retirement ($7,152), along with the corrected deductions for federal
income tax ($15,488) and Medicare tax ($1,460.57).

                                          -10-	                                    7144

does not challenge).22 Based on that adjusted annual income, the annual child support
obligation for two children is $20,707.42, with a monthly obligation of $1,725.62 —
again, almost exactly the amount Elissa proposes. The change from the existing
obligation is only 10.7%, insufficient to presume that a modification of child support is
warranted under Rule 90.3(h).
             In granting the requested modification, the superior court appears to have
relied solely on CSSD’s calculations. We have held in the past that “CSSD has no
decision-making role to play [in child support determinations], and the court has no
obligation to accept CSSD’s initial calculation.”23 In Monette v. Hoff we considered the
superior court’s adoption of a child support calculation and subsequent administrative
decision of CSSD (then referred to as CSED).24 A non-custodial parent claimed that
CSED had erroneously calculated her child support obligation by overstating her
income.25 The parent provided the court with her tax return to demonstrate that her
income was far less than what CSED attributed to her, but the superior court nevertheless
denied her motion to modify the child support order.26 We observed that the superior
court did not show how it had determined child support and that “[t]he superior court
may have applied a deferential standard of review of CSED’s prior calculation of child


      22
               CSSD’s calculations of Terrence’s mandatory SBS and retirement are
slightly different than Elissa’s. But because the differences are minor and because Elissa
does not challenge them on this appeal, we do not consider them further.
      23
              Reilly v. Northrop, 314 P.3d 1206, 1213 (Alaska 2013) (citing Alaska R.
Civ. P. 90.3; McDonald v. Trihub, 173 P.3d 416, 422-23 (Alaska 2007)).
      24
             958 P.2d 434, 437 (Alaska 1998).
      25
             Id.
      26
             Id.

                                          -11­                                      7144

support and adopted the support amount as calculated by CSED.”27 We noted that such
an approach “would have been error, because the superior court could not simply adopt
or deferentially review an administrative decision by CSED.”28
              Here Elissa provided the court with extensive documentation and her own
calculations, supported by the affidavit of her accountant witness, in an attempt to
demonstrate that CSSD erred. As “the party attacking the child support determination,”
she “bore the burden of proving, by the preponderance of the evidence, that [CSSD’s]
income calculations were incorrect.”29 We conclude that she met that burden.
       B.	 	 It Was Error To Grant The Requested Child Support Modification In
             The Absence Of A Child Support Guidelines Affidavit From Terrence
             As Required By Rule 90.3.
              Elissa makes two additional arguments. First, she argues that CSSD, and
therefore the superior court, erred not only in its calculation of Terrence’s child support
obligation but also by performing that calculation without the income documentation that
Rule 90.3 requires. Second, she argues that it was error for the superior court to shift the
burden to her to demonstrate that Terrence did not receive income from his new
consulting business in 2014 rather than requiring him to submit an affidavit stating
whether he did.
              We agree that Terrence should have been required to submit an income
affidavit. In its Notice of Petition for Modification, CSSD requested income information
from both Elissa and Terrence, including notarized income affidavits, W-2s and tax
returns, and recent pay stubs. Terrence apparently submitted only his recent pay stubs

       27
              Id.
       28
              Id.
       29
            Nunley v. State, Dep’t of Revenue, Child Support Enf’t Div., 99 P.3d 7, 9
(Alaska 2004).

                                           -12-	                                      7144

and an unsigned, self-prepared 2013 tax return. Elissa argues that because Terrence
failed to submit requested documentation, “especially the sworn income affidavits,”
CSSD should not have considered his request for modification.                She cites to
Rule 90.3(e)(1), which requires that “each parent in a court proceeding at which child
support is involved must file a statement under oath which states the parent’s adjusted
annual income . . . . This statement must be filed with a party’s . . . motion to modify.”
The commentary to Rule 90.3 also states that “each parent . . . must provide the court
with an income statement under oath” and “documentation of current and past income.”30
              Our case law supports Elissa’s argument that submission of an income
affidavit was mandatory. In Harris v. Westfall an appellant argued that the trial court had
erred by failing to require her former husband to file a child support guidelines affidavit,
and we agreed that “the [trial] court had to know [his] earning capacity and should have
required him to submit a child support guidelines affidavit.”31 We also noted that the
calculation of child support on remand would “require [both parents] to file current child
support guidelines affidavits.”32
              An affidavit was particularly critical in this case because of Terrence’s
nascent consulting business, begun in 2013. Whether it generated any income in 2014
is an unresolved question of fact, though presumably Terrence has access to that
information. As Elissa argues, the failure to require Terrence to file an income affidavit
improperly shifted the burden to her to show what income he may have received from
the consulting business or other sources not reflected in his pay stubs. It was error to
grant a modification in Terrence’s favor in the absence of his supporting affidavit.

       30
              Alaska R. Civ. P. cmt. VIII(A).
       31
              90 P.3d 167, 175 (Alaska 2004).
       32
              Id.

                                           -13­                                       7144

V.   CONCLUSION
        The order modifying the 2012 child support obligation is REVERSED.
