SIXTH DISTRICT COURT OF APPEAL STATE OF FLORIDA _____________________________
Case No. 6D2023-0839 Lower Tribunal No. 2021-DR-001089-FM01-XX _____________________________
J.E.J.,
Appellant,
v.
S.A.B.,
Appellee. _____________________________
Appeal from the Circuit Court for Collier County. Christine H. Greider, Judge.
July 11, 2025
GANNAM, J.
Jerome Johnson, the appellant father, appeals from a final paternity judgment
awarding child support to Stacy Bee, the appellee mother, and requiring Johnson’s
purchase of a life insurance policy to secure the child support award. 1 Because the
trial court erred in including all of Johnson’s pass-through income from his company
in calculating the child support award, we reverse the child support award and
1 This case was transferred from the Second District Court of Appeal to this Court on January 1, 2023. remand for recalculation. We also certify conflict with Bair v. Bair, 214 So. 3d 750
(Fla. 2d DCA 2017), and McHugh v. McHugh, 702 So. 2d 639 (Fla. 4th DCA 1997).
I. The Case
Johnson and Bee lived together for eight years and begat two sons. As their
relationship ended, they filed competing paternity petitions to establish child support
and parenting time. They did not dispute Johnson’s paternity of the boys, but did
dispute the amount of Johnson’s income for purposes of calculating his child support
obligation.
Pertinent to this appeal, the trial record shows Johnson is majority owner,
CEO, and board chairman of a Minnesota-based limited liability company (LLC)
called Energy Management Collaborative (EMC). EMC is a pass-through entity for
federal income tax purposes, meaning the company’s income is not taxed as
company income, but passes through to its members in proportion to their ownership
interests to be taxed as their income. Johnson filed two financial affidavits disclosing
his income—one shortly after filing his paternity petition and another shortly before
trial. In the first affidavit, Johnson included in his monthly income the total amount
of EMC pass-through income attributed to him for federal income tax purposes but
noted that he did not actually receive all the income. In his amended financial
affidavit, Johnson stated a lower monthly amount of EMC income actually paid to
him by distribution.
2 Johnson testified at trial that EMC income is distributed to members (whom
he calls shareholders) according to a formula established by the board of directors.
Under the formula, the first 50% of EMC income is used to pay shareholders’ income
taxes, the next 25% is retained for reinvestment in the company, and up to the
remaining 25% of income is distributed to members as determined by the board of
directors based on company cash flow needs. Johnson testified that the EMC income
actually distributed to him is correctly stated in the amended affidavit. Bee did not
introduce any evidence to refute Johnson’s testimony on either the accuracy of the
respective financial affidavits or EMC’s formula and purposes for retaining and
distributing its income.
Following three days of trial, the trial court entered a final paternity judgment
awarding child support to Bee, counting no income for Bee and counting all EMC
pass-through income attributable to Johnson instead of only the EMC income he
testified he actually received. The judgment also mistakenly included an agreement
by Johnson to keep in place a trust and life insurance policy securing his child
support obligations. Johnson moved for rehearing on both the calculation of his
income and on the security requirement. The trial court summarily denied rehearing
on the income calculation but granted rehearing on the security requirement. At the
rehearing, the trial court stated it would enter a new judgment resolving the security
issue with language allowing Johnson to purchase life insurance or provide another
3 statutorily permissible form of security. The amended final judgment, however,
ordered Johnson to obtain life insurance to secure his child support obligation
without offering Johnson any statutory alternatives.
II. Issues on Appeal and Standards of Review
Johnson challenges the trial court’s child support award as erroneously based
on his total EMC pass-through income instead of the amount actually distributed to
him, and he challenges the life insurance security requirement as inconsistent with
the court’s oral pronouncement. We review a trial court’s child support award for an
abuse of discretion, and we will find an abuse of discretion where there is not
competent, substantial evidence to support the award. See Parker v. Parker, 141 So.
3d 1291 (Fla. 1st DCA 2014). We review the trial court’s legal determinations de
novo. See Delosreyes v. Delosreyes, 392 So. 3d 128, 130 (Fla. 4th DCA 2024).
Where there is no authoritative interpretation of a text by the Florida Supreme
Court or our own district, we undertake our interpretive work according to first
principles. See CED Cap. Holdings 2000 EB, LLC v. CTCW-Berkshire Club, LLC,
363 So. 3d 192, 195 (Fla. 6th DCA 2023). We “follow the supremacy-of-text
principle—namely, the principle that the words of a governing text are of paramount
concern, and what they convey, in their context, is what the text means.” Ham v.
Portfolio Recovery Assocs., LLC, 308 So. 3d 942, 946 (Fla. 2020) (cleaned up)
(quoting Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of
4 Legal Texts 56 (2012)). Thus, we interpret Florida’s constitution and statutes
according to the plain meaning of their text, looking to “all the textual and structural
clues that bear on the meaning of a disputed text” and using the traditional
interpretive canons for guidance where helpful. Conage v. United States, 346 So. 3d
594, 598 (Fla. 2022) (cleaned up).
III. Analysis
A. Calculating income for child support purposes.
The presumptive amount of child support payable in a paternity action is
determined by section 61.30, Florida Statutes. §§ 61.30(1)(a), 742.031(1), Fla. Stat.
(2022). The amount payable is based on the combined net incomes of the parents,
with each parent’s share determined by the parent’s percentage of the total net
income. § 61.30(5)–(10), Fla. Stat. (2022). A parent’s net income is determined by
subtracting allowed deductions from the parent’s gross income. § 61.30(4), Fla. Stat.
(2022).
For purposes of chapter 61, “‘[i]ncome’ means any form of payment to an
individual, regardless of source, including, but not limited to . . . dividends . . . and
any other payments . . . .” § 61.046(8), Fla. Stat. (2022) (emphasis added). A parent’s
gross income for child support purposes under section 61.30 includes “business
income,” meaning “gross receipts minus ordinary and necessary expenses required
to produce income,” paid to the parent “from sources such as self-employment,
5 partnership, close corporations, and independent contracts.” § 61.30(2)(a)3., Fla.
Stat. (2022). “[I]ncome tax liabilities” and “[f]ederal insurance contributions or self-
employment tax” are allowed deductions from gross income to determine net income
for the child support calculation. § 61.30(3)(a), (b), Fla. Stat. (2022).
B. Pass-through income.
Before determining the amount of EMC income that must be included in
Johnson’s gross income for child support purposes, a brief survey of the federal
income tax laws applicable to pass-through entities like EMC is helpful. Under the
federal Internal Revenue Code and Treasury Regulations, business entities with
more than one owner are taxed either as corporations or as partnerships. See 26
C.F.R. §§ 301.7701-2(a), 301.7701-3(a). Corporations are taxed on corporate
income, 26 U.S.C. § 11(a), and a corporation’s shareholders (owners) are taxed on
the distributions of money or property they receive from the corporation, see
generally 26 U.S.C. § 301. Partnerships, however, are not taxed on partnership
income. 26 U.S.C. § 701. Rather, partnership income passes through to the partners
(owners) in proportion to their partnership interests, and the partners are taxed on
this pass-through income whether or not they actually receive the income from the
partnership. See 26 U.S.C. §§ 702–704. But a corporation can be taxed like a
partnership, with its income passing through to its shareholders for income tax
purposes, if the corporation elects classification as an S corporation under the
6 Internal Revenue Code. See 26 U.S.C. §§ 1363(a), 1366; F. Hodge O’Neal et al.,
O’Neal & Thompson’s Close Corporations & LLCs § 2:6 (Rev. 3d ed. 2004) (“A
closely held enterprise with a simple capital structure can obtain the limited liability
for shareholders that comes with corporate status and the conduit or ‘pass through’
tax effect of a partnership by incorporating and electing to be taxed under Subchapter
S of the Internal Revenue Code.”).
In contrast to a corporation, an LLC is taxed as a partnership by default, but it
may elect to be taxed as a corporation. 26 C.F.R. § 301.7701-3(a), (b). With both
pass-through LLCs and S corporations, despite individual owners’ tax liability for
the pass-through income, the income remains the property of the corporation or LLC
until distribution to owners is authorized by the entity or by law. See generally J.
William Callison & Maureen A. Sullivan, Limited Liability Companies § 7:2 (2024)
(“The LLC statutes do not mandate distributions to members prior to their
withdrawal from the LLC or the LLC’s dissolution. When members desire that the
LLC make distributions on a regular basis, the operating agreement should mandate
interim profit distributions.”); 11 Fletcher Cyclopedia of the Law of Corporations
§ 5321 (“In other words, profits belong to the corporation and not its shareholders
until the declaration of a dividend.”).
7 C. Counting pass-through income for child support purposes.
Given that pass-through LLC income is attributed to an LLC member for
income tax purposes whether or not paid to the member, 26 U.S.C. §§ 702–704; 26
C.F.R. § 301.7701-3(a), the amount of EMC income attributable to Johnson for
income tax purposes will include both income paid to Johnson and income retained
by EMC. Thus, given that section 61.30 “business income” for child support
purposes is income paid to a parent, §§ 61.046(8), 61.30(2)(a)3., Fla. Stat. (2022),
we must decide how much, if any, of Johnson’s pass-through EMC income not paid
to Johnson—i.e., retained by EMC—is includable as gross income in calculating
Johnson’s child support obligation. We agree with the parties and the trial court that
the Florida Supreme Court’s decision in Zold v. Zold, 911 So. 2d 1222 (Fla. 2005),
controls our decision.
In Zold, the supreme court reviewed a final judgment of dissolution where the
father and former husband was the CEO and majority shareholder of an
S corporation. 911 So. 2d at 1225. The issue before the court was “whether and under
what circumstances undistributed ‘pass-through’ income that has been retained by a
corporation for corporate purposes constitutes income within the meaning of chapter
61.” Id. at 1227. The court analyzed the chapter 61 definitions of income,
considering first the language of section 61.046, applicable to both alimony and child
support, which defined income as “‘any form of payment to an individual, regardless
8 of source, including but not limited to: wages, salary, commissions and bonuses,
compensation as an independent contractor, worker’s compensation, disability
benefits, annuity and retirement benefits, pensions, dividends, interest, royalties,
trusts, and any other payments . . . .’” Id. at 1228 (quoting § 61.046(7), Fla. Stat.
(2004) 2). The court also considered the section 61.30 definition of “business
income” for child support purposes, meaning “‘gross receipts minus ordinary and
necessary expenses required to produce income,’” “‘from sources such as self-
employment, partnership, close corporations, and independent contracts.’” Id. at
1229 (quoting § 61.30(2)(a)3., Fla. Stat. (2004)). 3
Based on these chapter 61 definitions of “income” and “business income,” the
court observed, “Although sections 61.046(7)[4] and 61.30(2)(a)(3) utilize different
language to define income, both statutory provisions focus on income that is
available to a spouse.” 911 So. 2d at 1229. And based on this observation, the court
concluded that “undistributed ‘pass-through’ income that has been retained by a
corporation for corporate purposes does not constitute income within the meaning
of chapter 61. Specifically, undistributed ‘pass-through’ income that has been
retained for corporate purposes is not available ‘income’ under section
2 This definition was later renumbered § 61.046(8). See Pt. III.A, supra. 3 See Pt. III.A, supra. 4 See note 2, supra.
9 61.046(7)[5] or ‘business income’ under section 61.30(2)(a)(3).” Id. at 1231. “This is
because the undistributed ‘pass-through’ income will be used by the corporation to
maintain corporate operations and therefore cannot be used by a shareholder-spouse
to satisfy financial obligations imposed upon dissolution of marriage.” Id. But
“where undistributed ‘pass-through’ income has been retained for noncorporate
purposes, such as to shield this income from the reach of the other spouse during
dissolution, the improper motive for its retention makes it available ‘income’
under section 61.046(7)[6] or ‘business income’ under section 61.30(2)(a)(3).” Id. at
1231–32.
The Zold court then explained how to apply its “corporate purpose” test:
“when the issue of whether undistributed ‘pass-through’ income was retained for
corporate purposes is contested, the shareholder-spouse should have the burden of
proving that the undistributed ‘pass-through’ income was properly retained for
corporate purposes rather than impermissibly retained to avoid alimony, child
support, or attorney’s fees obligations . . . .” Id. at 1233. The court explained the
burden of proof further:
In determining whether the shareholder-spouse has met his or her burden of proving that the undistributed “pass- through” income was retained for corporate purposes, the trial court should consider (1) the extent to which a shareholder-spouse has access to or control over “pass-
5 Id. 6 Id.
10 through” income retained by the corporation, (2) the limitations set forth in section 607.06401(3) governing corporate distributions to shareholders, and (3) the purpose(s) for which the “pass-through” income has been retained by the corporation.
Id. The court clarified that the first consideration is not dispositive because, even
where a spouse can control distributions, the spouse should not be expected to harm
the corporation by distributing its income against the wishes of other shareholders
or when economically imprudent. Id. “Thus, more important than the shareholder-
spouse’s ownership interest is the purpose for which the undistributed ‘pass-through’
income has been retained by the corporation.” Id.
D. Counting Johnson’s pass-through income for child support purposes.
The Zold corporate purpose test applies to Johnson’s undistributed EMC pass-
through income because, like the S corporation in Zold, EMC is a pass-through entity
for federal income tax purposes. (See Pt. III.B, supra.) So, “the same analysis
applies.” Zold, 911 So. 2d at 1230 n.12. Applying the corporate purpose test to the
trial evidence below shows that the trial court erred in counting Johnson’s
undistributed EMC pass-through income as Johnson’s business income for purposes
of calculating child support under section 61.30.
The first Zold consideration favors Johnson. Although Johnson is the majority
shareholder, CEO, and board chairman of EMC, he is but one of six shareholders,
and he testified that he has influence, but not control over board decisions to retain
11 or distribute EMC income in accordance with its distribution policy. The trial court
did not expressly state or implicitly suggest that it found Johnson’s testimony to be
inaccurate or incredible, and Bee put on no evidence to the contrary. Thus, there is
no competent substantial evidence in the record to support the trial court’s finding
that, “[a]s the majority shareholder, CEO and Chairman of EMC, LLC, he has
significant control over distributions and what income is retained.”
The second Zold consideration favors Bee, but only to the extent that Johnson
has not claimed EMC is legally prohibited from distributing more of its income to
shareholders. The Zold court looked specifically to section 607.06401(3), Florida
Statutes, which prohibits distributions that would make a corporation insolvent, but
EMC is not a Florida corporation subject to the statute. Assuming, however, a
cognate provision of the state LLC act governing EMC prohibits distributions that
would make EMC insolvent, no such statute was before the trial court. 7
The third Zold consideration—the corporate purpose for retaining income—
is the most important here, as it was in Zold. See 911 So. 2d at 1233. Johnson’s
unrefuted testimony was that, after the first 50% of EMC income is used to cover
the shareholders’ taxes, the next 25% of EMC income is retained for the corporate
purposes of paying employees and investing in EMC programs and other companies.
7 Though EMC is based in Minnesota, the trial record does not establish its state of organization.
12 Additionally, some or all of the remaining 25% of EMC income may be retained
instead of distributed to satisfy EMC’s operational cash flow needs. These are
quintessential corporate purposes for retaining income. See, e.g., Zold, 911 So. 2d at
1231 (maintaining corporate operations); Adams v. Adams, 340 So. 3d 551, 557 (Fla.
2d DCA 2022) (investing in additional properties); Bair v. Bair, 214 So. 3d 750, 762
(Fla. 2d DCA 2017) (“purchase of inventory and the expansion of the business”);
Brown v. Brown, 180 So. 3d 1070, 1073 (Fla. 1st DCA 2015) (payment of salaries);
McHugh v. McHugh, 702 So. 2d 639, 641 (Fla. 4th DCA 1997) (“building the
business and keeping it going”). Again, the trial court did not express or imply any
inaccuracy or incredibility of Johnson’s testimony, and Bee put on no evidence to
show any purpose for EMC’s income retention other than Johnson’s stated corporate
purposes under EMC’s established 50%–25%–25% distribution policy. Thus, no
competent substantial evidence supports the trial court’s finding that Johnson “did
not testify about or otherwise explain any reason why the Company retained
earnings.”
All things considered, Johnson carried his burden of proving that the income
retained by EMC satisfies the Zold corporate purpose test. Therefore, EMC’s
retained income should be excluded from Johnson’s gross income under section
61.30.
13 E. Counting tax distributions as income for child support purposes.
Although Johnson met his corporate purpose burden as to EMC’s retained
income, we cannot fully endorse Johnson’s accounting for the EMC income he
received in distributions. Johnson testified that the first 50% of EMC’s income is
distributed to shareholders for the payment of their income taxes, but he did not
count this “tax distribution” as income received from EMC. 8 According to his
testimony, he only received as income the EMC distributions from the last 25% of
EMC income—the amount he called “shareholder distributions” on his financial
affidavit. Johnson’s theory at trial was that all EMC income not paid out as
shareholder distributions is income retained by EMC for corporate purposes—i.e.,
paying members’ taxes, paying employees, reinvesting in the company, and
preserving cash flow for operations. On this theory, his unrefuted testimony was
sufficient to establish a corporate purpose for EMC’s “retention” of all its income
except for the shareholder distributions, and to quantify the shareholder distributions
he received.
But Johnson’s exclusion of the EMC tax distribution from his income in the
same manner he excluded EMC’s retained income was incorrect under a plain
reading of sections 61.046(8) and 61.30(2)(a)3. because the tax distribution was a
8 Johnson did not say whether the tax distribution was paid to shareholders once per year or in multiple payments during the year.
14 business income “payment to” Johnson. As shown above, pass-through LLCs do not
have income tax liability because the tax liability is passed through to its members.
(See Pt. III.B, supra.) Thus, the income used by EMC for payment of the
shareholders’ taxes must be distributed—i.e., paid—to the shareholders for that
purpose, not retained for that purpose. So, even if Johnson paid his taxes using all
of the tax distribution he received from EMC, he still received that income from
EMC before he paid taxes with it. To be sure, the amount of Johnson’s income tax
liability is properly deducted from Johnson’s gross income in determining his net
income for child support purposes under section 61.30. See § 61.30(3)(a), Fla. Stat.
(2022). But there is no support in the text of section 61.30 for disregarding the EMC
tax distribution as gross income and Johnson’s income tax liability as an allowed
deduction in the statutory net income calculation. Nor does Zold apply to the tax
distribution because the corporate purpose test only applies to retained income, not
income distributed for a specific purpose.
At the time of trial, case precedent binding on the trial court supported
Johnson’s exclusion of the tax distribution from his income. In Bair v. Bair, the
Second District considered “evidence that [the Husband’s company] made
additional distributions to . . . shareholders in amounts sufficient to cover the income
taxes payable on the amount of the pass-through income attributable to them,” and
concluded, “These distributions, while nominally made to the Husband, are not
15 available to him as income as they are committed to the IRS.” 214 So. 3d 750, 761
n.3 (Fla. 2d DCA 2017). Similarly, in McHugh v. McHugh, the Fourth District
affirmed excluding from a husband’s income his company’s retained earnings that
were “not available to him” and, “[f]or the same reason, [rejected] the wife’s
contention that [the company’s] payment of the husband’s tax liability on the [pass-
through] income should have been included in the husband’s income for child
support purposes.” 702 So. 2d 639, 641–42 (Fla. 4th DCA 1997). 9 But we are not
bound by our sister districts’ opinions. See CED Cap. Holdings 2000 EB, LLC, 363
So. 3d at 195; Pardo v. State, 596 So. 2d 665, 667 (Fla. 1992). And under a plain
reading of sections 61.046 and 61.30, Johnson should have counted the EMC tax
distribution as part of his gross (business) income and then deducted the amount of
his tax liability in determining his net income for child support purposes. We certify
conflict with Bair and McHugh on this point.
9 The trial and amended judgment preceded the creation of the Sixth District Court of Appeal on January 1, 2023. Ch. 2022-163, § 8, Laws of Fla. Thus, the trial court was in the Second District when it entered the amended judgment. To the extent that the quoted material from Bair, which appeared in a footnote, was not sufficiently part of the Bair holding to bind the trial court as district precedent, the trial court would still have been bound by McHugh. See Pardo v. State, 596 So. 2d 665, 666 (Fla. 1992) (“[I]n the absence of interdistrict conflict, district court decisions bind all Florida trial courts.”).
16 F. Security for child support.
Because we reverse the child support award for recalculation, we also reverse
the requirement for Johnson to purchase life insurance to secure the amount of the
child support award. But we do not decide whether the trial court erred in ordering
Johnson to obtain life insurance as security instead of giving Johnson statutory
security alternatives as it orally decreed at the rehearing. On remand, the trial court
may determine anew whether to order Johnson to secure the recalculated child
support award in accordance with section 60.13(c), giving the parties the opportunity
to put on evidence and argue for or against such security.
IV. Conclusion
We reverse the guidelines child support award and life insurance security
requirement in the amended final judgment and remand for further proceedings. On
remand, the trial court must recalculate Johnson’s net income in accordance with
section 61.30 and this opinion. Specifically, all EMC distributions to Johnson—i.e.,
the tax distributions from the first 50% of EMC income and the shareholder
distributions from the last 25%—are includable in Johnson’s gross income. None of
EMC’s retained income—i.e., the second 25% of EMC’s income plus so much of
the last 25% that is not distributed to shareholders—is includable in Johnson’s gross
income. All of Johnson’s income tax liability on the share of EMC pass-through
income attributable to him—i.e., on his tax distributions, his shareholder
17 distributions, and his share of EMC retained income—is deductible from his gross
income to determine his net income. To the extent the trial record does not provide
enough information to determine these amounts, the trial court must take additional
evidence as necessary to make the relevant determinations. 10 Finally, we certify
conflict with Bair v. Bair, 214 So. 3d 750 (Fla. 2d DCA 2017), and McHugh v.
McHugh, 702 So. 2d 639 (Fla. 4th DCA 1997).
REVERSED in part and REMANDED with instructions. CONFLICT
CERTIFIED.
WHITE and MIZE, JJ., concur.
Christopher D. Donovan, of Donovan Appellate Law, PLLC, Estero, for Appellant.
Cynthia B. Hall, of Silverio & Hall, P.A., Naples, for Appellee.
NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF TIMELY FILED
10 This opinion should not be read to exclude from the net income calculation any other income and deductions properly attributable to Johnson (e.g., salary, bonuses, director fees, investment income, and taxes thereon).