                 IN THE COURT OF APPEALS OF TENNESSEE
                            AT KNOXVILLE
                          Assigned on Briefs September 21, 2006


      ADAM CHARLES PARTIN v. DELORES LOURRAINE WALLIS


                       Appeal from the Circuit Court for Knox County
                               No. 79914   Bill Swann, Judge



                 No. E2006-418-COA-R3-CV - FILED DECEMBER 18, 2006



Adam Charles Partin (“Father”) filed a petition to modify his child support obligation claiming that
a significant variance existed between his income at the time his child support obligation was
originally calculated and his current income. The case was tried and the Trial Court entered an order
finding and holding, inter alia, that a significant variance did exist making the child support order
eligible for modification. The Trial Court then reduced Father’s child support. Delores Lourraine
Wallis (“Mother”) appeals claiming that the Trial Court erred in calculating Father’s income and that
a significant variance does not exist. We affirm.


      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
                                      Case Remanded


D. MICHAEL SWINEY , J., delivered the opinion of the court, in which CHARLES D. SUSANO , JR., and
SHARON G. LEE, J.J., joined.


Wayne Decatur Wykoff, Knoxville, Tennessee for the Appellant, Delores Lourraine Wallis.

W. Andrew Fox, Knoxville, Tennessee for the Appellee, Adam Charles Partin.
                                                      OPINION

                                                     Background


               The facts in this case are not in dispute. When the parties divorced, Mother’s annual
income was $18,200 and Father’s annual income was $39,000. Mother and Father have co-equal
parenting time with the minor children. Mother was designated as the primary residential parent
(“PRP”) and Father was designated as the alternate residential parent (“ARP”).1 Under the Child
Support Guidelines in place at the time of the divorce, Father was ordered to pay $287.00 per month
in child support.

               Currently, Mother has an income of approximately $24,000 and Father has an income
of $48,276. Father currently is self-employed. He was not self-employed when the original child
support order was entered.

               Father filed a petition to modify his child support claiming his income had increased
such that a 15% or greater variance exists between his income at the time of the original order and
his current income making the child support order eligible for modification. Father sought a
downward modification in his child support.

             The case was heard before a Referee and the Referee entered Recommendations and
Findings on March 29, 2005, finding and recommending, inter alia:

         because Father was not self-employed at the time of the divorce, but was paid a
         salary, that the proper way to calculate Father’s current gross income, for comparison
         purposes to his gross income at the time of the divorce, would be to deduct self
         employment tax in the amount of 7.65%, after deducting reasonable expenses from
         gross receipts.

                                                          ***

         Father’s income at the time of divorce, $3,250.00 per month, should be compared
         with Father’s current gross income minus self employment taxes, which calculates
         to be $3,715.00 per month. $3,715.00 is only 14.3% greater than Father’s monthly
         gross income at the time the last child support obligation was ordered, which was at
         the time of divorce. Consequently, Father does not meet the threshold of a 15%
         change in his gross income. Pursuant to Tenn. R. & Reg. 1240-2-4-.05(2)(a), the



         1
           “If each parent spends exactly fifty percent (50%) of the time with the child, then the tribunal shall designate
the parent with the lesser child support obligation as the PRP and the other parent as the ARP.” Tenn. Comp. R. & Regs.
1240-2-4-.02(19)(c) (2004).

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       previous child support order is not eligible for modification and Father’s petition
       must be dismissed.

               Father requested a rehearing before the Trial Court and the Trial Court entered an
order January 24, 2006, finding and holding, inter alia:

       [Father] sought a rehearing not because of a dispute of any factual findings made by
       the Referee, but regarding application of the new child support guidelines found in
       Tenn. R. & Reg. 1240-2-4-.01 et seq. Neither party takes issue with the factual
       finding that Father’s 2004 calendar-year gross receipts minus reasonable expenses
       were $48,276. Neither party takes issue with the factual representations made in the
       child support worksheet … assuming Father’s legal argument prevails. Father seeks
       a downward modification of child support from $287.00 to $115.00 per month.

                                                ***

               This Court holds that the finding of the Referee that a significant variance did
       not exist is in error. As a matter of logic, mother’s argument is irrefutable. But, the
       regulations are very precise about the manner in which self-employment is
       calculated, “.…(sic) income from, but not limited to, business operations … less
       ordinary and reasonable expenses necessary to produce such income”. Tenn. R. &
       Reg. 1240-2-4-.04(3)(a)(3). Self-employment income is considered gross income
       and the regulations are equally precise about this definition. Tenn. R. & Reg. 1240-
       2-4-.04(3)(a)(1). Consequently the proper measure of gross income, for comparison
       to father’s gross income at the time the last child support order issued, would be to
       take father’s gross receipts and subtract his reasonable expenses. The hearing before
       the Referee was in March of 2005, thus the parties relied upon Father’s 2004 figure,
       which was $48,276.00. Father’s current gross income is $48,276.00 per year or
       $4023 per month. Compared to his gross income at the time of the last child support
       order, $39,000 per year or $3250.00 per month, Father’s income is 23.8% greater,
       therefore a significant variance exists as provided by the child support regulations.
       The child support order is eligible for modification. Inputting the various income
       figures, parenting time adjustment, and additional expenses into the child support
       worksheet; the father’s new child support obligation is $115.00 per month. It is
       therefore:
               ORDERED that for the reasons herein stated, father’s child support
       obligation is modified downward from $287.00 to $115.00 per month.

Mother appeals to this Court.

                                            Discussion

               Although not stated exactly as such, Mother raises one issue on appeal: whether the
Trial Court erred in calculating the change in Father’s income which resulted in the finding that a

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significant variance existed. If there was no significant variance, then there would have been no
further action by the Trial Court and, therefore, no reduction in the child support.

                Our review is de novo upon the record, accompanied by a presumption of correctness
of the findings of fact of the trial court, unless the preponderance of the evidence is otherwise. Tenn.
R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). A trial court's conclusions of
law are subject to a de novo review with no presumption of correctness. S. Constructors, Inc. v.
Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn. 2001).

               As pertinent to this appeal, Tenn. Comp. R. & Regs. 1240-2-4-.05 provides:

       1240-2-4-.05 Modification of Child Support Orders.

               (1)     Beginning on the effective date of these rules, all modifications shall
                       be calculated under the Income Shares Guidelines.

               (2)     Significant Variance Required for Modification of Order.

                       (a)     Unless a significant variance exists, as defined in this section,
                               a child support order is not eligible for modification;
                               provided, however, the necessity of providing for the child’s
                               health care needs shall be a basis for modification regardless
                               of whether a modification in the amount of child support is
                               warranted by other criteria.

                       (b)     A significant variance is defined as:

                               1.      At least a fifteen percent (15%) change in the gross
                                       income of the ARP; and/or …

Tenn. Comp. R. & Regs. 1240-2-4-.05 (2004).

               As pertinent to this appeal, gross income is defined as:

       (3)     Gross income.

               (a)     Determination of Gross Income.

                       1.      Gross income of each parent shall be determined in the
                               process of setting the presumptive child support order and
                               shall include all income from any source (before deductions
                               for taxes and other deductions such as pre-existing child
                               support orders and credits for other qualified children),


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                              whether earned or unearned, and includes, but is not limited
                              to, the following:

                              (i)     Wages;

                              (ii)    Salaries;

                              (iii)   Commissions, fees, and tips;

                              (iv)    Income from self-employment;

                                                  ***

                      3.      Self-Employment Income.

                              (i)     Income from self employment includes income from,
                                      but not limited to, business operations, work as an
                                      independent contractor or consultant, sales of goods
                                      or services, and rental properties, etc., less ordinary
                                      and reasonable expenses necessary to produce such
                                      income.

                              (ii)    Ordinary and Reasonable Expenses of               Self
                                      Employment Necessary to Produce Income.

                                      (I)      Excessive promotional, excessive travel,
                                               excessive car expenses or excessive personal
                                               expenses, or depreciation on equipment, the
                                               cost of operation of home offices, etc., shall
                                               not be considered reasonable expenses.

                                      (II)     Amounts allowed by the Internal Revenue
                                               Service for accelerated depreciation or
                                               investment tax credits shall not be considered
                                               reasonable expenses.

Tenn. Comp. R. & Regs. 1240-2-4-.04(3) (2004).

              Mother argues on appeal that the Trial Court incorrectly calculated Father’s current
income for purposes of determining if a significant variance exists by failing to subtract self-
employment taxes from Father’s current income prior to comparing Father’s current and previous
income figures. Mother argues:



                                                  -5-
               In order to have an “apples to apples” comparison, the correct measure of the
       father’s current gross income would be to deduct self-employment tax in the amount
       of 7.65% after deducting reasonable expenses from gross receipts. The result of this
       calculation would then be the equivalent of the measure of the Father’s income at the
       time of the divorce when he was employed and did not pay a self-employment tax.

               Mother cites to two sections of the guidelines in support of her argument.
Specifically, Mother cites to Tenn. Comp. R. & Regs. 1240-2-4-.02, which provides, in pertinent
part:

       1240-2-4-.02 Definitions

                  (1)    “Adjusted Gross Income” – The adjusted gross income (AGI) is the
                         net determination of a parent’s income, calculated by deducting from
                         that parent’s gross income the following amounts:

                         (a)    Any applicable self-employment taxes being paid by the
                                parent; …

Tenn. Comp. R. & Regs. 1240-2-4-.02(1)(a) (2004).

                  Mother also cites to Tenn. Comp. R. & Regs. 1240-2-4-.04(4), which, in pertinent
part, provides:

                  (4)    Adjustments to Gross Income for Self-Employed Parents.

                         (a)    The Child Support Schedule includes deductions from a
                                parent’s gross income for the employee’s share of the
                                contributions for the first six and two-tenths percent (6.2%)
                                in Federal Insurance Contributions Act (FICA) and one and
                                forty-five hundredths (1.45%) in Medicare taxes.

                         (b)    An additional deduction of FICA – six and two-tenths percent
                                (6.2%) Social Security + one and forty-five hundredths
                                (1.45%) Medicare – as of 1991, or any amount subsequently
                                set by federal law as FICA tax, shall be deducted from a
                                parent’s gross income earned from self-employment, up to the
                                amounts allowed under federal law.

                                                ***

                         (d)    Self-employed persons are required by law to pay the full
                                FICA tax of twelve and four tenths percent (12.4%) up to the
                                eighty-seven thousand dollars ($87,000) gross earnings limit

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                                     and the full Medicare tax rate of two and nine tenths percent
                                     (2.9%) on all earned income.

                           (e)       Any self-employment tax paid shall be deducted from gross
                                     income as part of the calculation of a parent’s adjusted gross
                                     income, as indicated in Part II of the CS Worksheet.…

Tenn. Comp. R. & Regs. 1240-2-4-.04(4) (2004).

                  In its January 24, 2006 order, the Trial Court noted: “As a matter of logic, mother’s
argument is irrefutable.” However, because Father currently is self-employed but was not self-
employed at the time the original child support order was entered, changes in the Child Support
Guidelines work in Father’s favor. The Child Support Guidelines are clear that “[b]eginning on the
effective date of these rules, all modifications shall be calculated under the Income Shares
Guidelines.” Tenn. Comp. R. & Regs. 1240-2-4-.05(1) (2004). The Child Support Guidelines are
equally as clear in providing that the existence of a significant variance in income for purposes of
determining if a modification is proper is calculated as: “At least a fifteen percent (15%) change in
the gross income of the ARP…,”2 not the adjusted gross income of the ARP. Tenn. Comp. R. &
Regs. 1240-2-4-.05(2)(b)(1) (2004). As Tenn. Comp. R. & Regs. 1240-2-4-.05 clearly and
unambiguously provides that a significant variance will be calculated using gross income, we must
apply the plain language of this section. See Kesser v. Kesser, 201 S.W.3d 636, 646 (Tenn. 2006)
(discussing plain language found within the Child Support Guidelines and citing City of Cookeville
v. Humphrey, 126 S.W.3d 897, 902 (Tenn. 2004) for the proposition that “where the language of a
statute is clear and unambiguous, we must apply the statute in accordance with its plain language.”).
The Child Support Guidelines also clearly provide that gross income “shall include all income from
any source (before deductions for taxes ….” Tenn. Comp. R. & Regs. 1240-2-4-.04(3)(a)(1) (2004).
Thus, the Trial Court correctly refused to subtract self-employment taxes from Father’s current
income prior to comparing Father’s current income to his previous income. Given this, a significant
variance as found by the Trial Court exists making the child support order eligible for modification.

                We recognize that the facts in this case compel an unpalatable result. We agree with
the Trial Court that “[a]s a matter of logic, mother’s argument is irrefutable.” Unfortunately, we are,
as was the Trial Court, required to follow not logic but the regulations. Father, who admittedly is
making more money than he was at the time the original child support order was entered and who
is spending the exact same amount of time with the minor children, has sought and been granted a
more than fifty percent reduction in his child support obligation even though both his gross income
and adjusted gross income have increased. Unfortunately, we are bound by law to apply the plain
and unambiguous language contained in Tenn. Comp. R. & Regs. 1240-2-4-.05. The parties do not
dispute the calculation of child support as made by the Trial Court if the Trial Court correctly found



         2
           Beginning January 1, 2006, this factor for finding a significant variance, a fifteen percent or greater change
in the gross income of the ARP, was eliminated. Tenn. Comp. R. & Regs. 1240-2-4-.05(7) (2004).

                                                          -7-
a significant variance. We affirm the Trial Court’s finding of a significant variance in Father’s
income and, therefore, affirm the Trial Court’s January 24, 2006 order.

                                           Conclusion

               The judgment of the Trial Court is affirmed, and this cause is remanded to the Trial
Court for collection of the costs below. The costs on appeal are assessed against the Appellant,
Delores Lourraine Wallis, and her surety.




                                                      ___________________________________
                                                      D. MICHAEL SWINEY, JUDGE




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