Opinion
W.C. No. 4-176-931
December 23, 1998
FINAL ORDER
The respondents seek review of a final order of Administrative Law Judge Wells (ALJ). The respondents contend the ALJ erred in calculating the average weekly wage by failing to deduct depreciation and "maintenance and repair" costs from the claimant's gross receipts in self-employment. We affirm.
The claimant was injured on June 23, 1993, while employed by respondent Schubert Ranches, Inc. (Schubert). However, because the injury occurred on the claimant's first day at work the ALJ determined that use of the Schubert earnings does not afford an equitable basis for calculating the claimant's average weekly wage. Instead, exercising his discretion under § 8-42-102(3), C.R.S. 1998, the ALJ concluded that the average weekly wage should be based on the claimant's earnings as a self-employed truck driver from May 1992 through early June 1993.
In so doing, the ALJ relied on the claimant's 1992 and 1993 income tax returns to find that the claimant's gross earnings from the trucking business were $24,311 in 1992 and $14,126 in 1993. Significantly, the 1992 Schedule C shows a depreciation deduction of $6,899, and "repairs and maintenance" of $10,575. The 1993 Schedule C reflects depreciation deduction of $4,666, and "repairs and maintenance" of $6,077. The depreciation deduction applied to the claimant's truck, as did the maintenance and repair expenses.
However, at the hearing, the claimant produced an exhibit indicating that his "service and repair" expenses for May 1992 through June 1993 were only $2,918. The claimant explained that the difference between the amounts claimed for maintenance and repair on the tax returns and the amount contained on the exhibit represent the costs of "fixing up" and repairing the truck. The claimant also testified that he sold the truck at a profit and had to pay income tax on the increased value. (Tr. pp. 13-14).
Under these circumstances, the ALJ declined to reduce the claimant's gross receipts based on depreciation claimed on the tax returns. He also concluded that the gross receipts should be reduced by $2,918 attributed to service and repair, and not by the amounts claimed on the income tax returns.
On review, the respondents contend that when calculating the average weekly wage, the ALJ erred in failing to reduce the claimant's gross receipts based on the depreciation and repair and maintenance deductions claimed on the 1992 and 1993 income tax forms. The respondents assert that the Supreme Court's holding in Elliott v. El Paso County, 860 P.2d 1363 (Colo. 1993), required the ALJ to make these reductions. The respondents further assert that the ALJ's findings of fact are insufficient to permit appellate review. We disagree with these arguments.
Generally, the ALJ has wide discretion to determine a fair average weekly wage under § 8-42-102(3). We may not interfere with the ALJ's determination unless an abuse of discretion is shown. An abuse does not exist unless the ALJ's order is beyond the bounds of reason, as where it is contrary to the evidence or unsupported by law. Coates, Reid Waldron v. Vigil, 856 P.2d 850 (Colo. 1993).
The ALJ's findings must be upheld if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 1998. This standard of review requires us to defer to the ALJ's resolution of conflicts in the evidence, his credibility determinations, and the plausible inferences he drew from the evidence. Metro Moving Storage Co. v. Gussert, 914 P.2d 411 (Colo.App. 1995).
It is true, as the respondents point out, that our Supreme Court held in Elliott v. El Paso County, supra, that depreciation claimed by a self-employed worker must generally be deducted from gross receipts when determining the average weekly wage. The court reasoned that depreciation represents a method of recovering, over a period of time, the expense of purchasing capital equipment. Consequently, "reasonable depreciation deductions are necessary to accurately determine the appropriate amount of income of those who are self-employed," and must be taken into account when calculating average weekly wage. Elliott v. El Paso County, 860 P.2d at 1365-1366.
However, the Elliott court also stated that it was not establishing a "per se rule of depreciation deduction for the simple reason that it would be manifestly unjust to require, in all circumstances, that any depreciation deduction taken on a claimant's income tax return be considered in computing post-injury average weekly wage." (Emphasis in original). Instead, the depreciation deduction must bear "some logical relationship to a self-employed claimant's actual diminution in earnings as a result of capital expenditures." Id. at 1366.
Here, as the claimant argues, the record supports the ALJ's conclusion that the amounts claimed for depreciation do not bear a logical relationship to the claimant's expenditures for capital equipment. Although the claimant admits to spending substantial amounts to improve his truck, the record reflects that these expenditures caused the value of the claimant's truck to appreciate, not depreciate. Therefore, we cannot say that the ALJ erred in declining to reduce the claimant's gross receipts based on of depreciation claimed on the income tax returns.
Neither can we say the ALJ erred in failing to reduce the claimant's gross receipts based on the deductions for repairs and maintenance. The ALJ could plausibly interpret the claimant's testimony to mean that some of the truck expenditures constituted "repairs and maintenance" necessary to operate the business. However, some of the expenditures on the truck were discretionary spending decisions which were not essential to earning income. Therefore, we cannot say the ALJ erred as a matter of law in refusing to deduct from gross receipts the total amounts claimed for maintenance and repair.
We have considered the respondents' assertion that the ALJ's findings of fact are insufficient to support appellate review. However, the ALJ's written findings, considered together with his oral remarks at the conclusion of the hearing, are sufficient to indicate the basis of the order. Specifically, the ALJ stated that he was going to "accept the Claimant's testimony of why he had so much of that, and that only this $2,900 of repairs and maintenance from exhibit A is related to doing business." (Tr. p. 25). See CAN-USA Construction, Inc. v. Gerber, 767 P.2d 765 (Colo.App. 1988), rev'd. on other grounds, 789 P.2d 269 (Colo. 1989) (proper to consider ALJ's oral remarks in interpreting written order).
IT IS THEREFORE ORDERED that the ALJ's order dated January 9, 1998, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Bill Whitacre
NOTICE
This Order is final unless an action to modify or vacate the Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a petition to review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date the Order was mailed, pursuant to §§ 8-43-301(10) and 307, C.R.S. 1998.
Copies of this decision were mailed December 23, 1998 to the following parties:
Major B. Anderson, 1909 Wakita Drive, Colorado Springs, CO 80915
George H. Schubert, Schubert Ranches, Inc., 1555 S. Baggett Road, Calhan, CO 80808
William A. Alexander, Jr., Esq., 3608 Galley Road, Colorado Springs, CO 80909
(For Claimant)
Laurie A. Schoder, Esq., Legal Department, Colorado Compensation Insurance Authority
(Interagency Mail)
Raymond F. Callahan, Esq., 3464 South Willow Street, Denver, CO 80231-4566 (For Respondents)
BY: ____________