I am not sure if I posted this query to this list before. My apologies if I did, but I don't recall getting an answer, so I am trying again.
Client works for UPS. In addition to base salary, he receives Restricted Performance Units which become Class A common stock after vesting and lapsing after five years. At the time of lapsing, UPS takes the value on the lapse date x the number of shares and treats this as income. It then nets out a number of shares equivalent to what would be the amount of tax to pay, and issues the resulting difference of shares to the employee. The gross value is shown as part of year to date income and the "tax" is shown as taxes paid. Client has not sold the stock or realized any cash, right now the vested-lapsed shares are simply his assets.
This is a non-dissolution matter. So there is pre- or post-judgment ED issue and no PSA. The issue is simply whether the "income" UPS shows in client's ytd income is includable as income for child support purposes. The child's mother sought upward modification of child support, client opposed it on the ground that he did not realize any income since he still had the asset, had not sold it. The trial court disagreed and included it as income for child support, doubling his child support payment by 2.5 times. There was no hearing, this was on the papers. I was retained to do the appeal.
My research indicates surprisingly little on the issue of whether these shares are includable as income for child support. Heller-Loren deals with stock options, stating that the ability to exercise the options does not by itself give rise to income for purposes of child support, but the actual exercise may give rise to income if there is a demonstrated fair market value of the stock above the option price. Thus, exercise of the option may constitute "income" in NJ, but in any event, profitable sale of stock after exercise certainly is income. Here, plaintiff receives actual shares of stock, after vesting and lapse of restrictions. These shares do have a fair market value after lapse, but employee realizes nothing until sale. But it is not helpful that UPS treats it as taxable income. Heller also discusses regularity of these awards and, here, they are regular, although not guaranteed.
Case law in other states seems more defined, however, suporting treating it as income, especially when recurring.
Have any of you faced this issue in the non-dissolution, non-ED context? Are you aware of any NJ law supporting the proposition that it is not included as income for child support purposes? (I have not found much except Heller-Loren and dicta in an unpublished case, Milne v. Goldenberg). Have you faced the issue in the alimony context?
Thanks,
Clara
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