2010-15079. Summary of Precedent Opinions of the General Counsel

AGENCY:

Department of Veterans Affairs.

ACTION:

Notice.

SUMMARY:

The Department of Veterans Affairs (VA) is publishing a summary of legal interpretations issued by the Office of General Counsel involving Veterans' benefits under laws administered by VA. This interpretation is considered precedential by VA and will be followed by VA officials and employees in future claim matters involving the same legal issues. The summary is published to provide the public, and, in particular, Veterans' benefits claimants and their representatives, with notice of VA's interpretations regarding the legal matters at issue.

FOR FURTHER INFORMATION CONTACT:

Susan P. Sokoll, Law Librarian, Department of Veterans Affairs, 810 Vermont Avenue, NW., (026H), Washington, DC 20420, [phone].

SUPPLEMENTARY INFORMATION:

A VA regulation at 38 CFR 2.6(e)(8) delegates to the General Counsel the power to designate an opinion as precedential and 38 CFR 14.507(b) specifies that precedential opinions involving Veterans' benefits are binding on VA officials and employees in subsequent matters involving the legal issue decided in the precedent opinion. The interpretation of the General Counsel on legal matters, contained in such opinions, is conclusive as to all VA officials and employees, not only in the matter at issue, but also in future adjudications and appeals involving the same legal issues, in the absence of a change in controlling statute or regulation or a superseding written legal opinion of the General Counsel.

VA publishes summaries of such opinions in order to provide the public with notice of those interpretations of the General Counsel that must be followed in future benefit matters and to assist Veterans' benefits claimants and their representatives in the prosecution of benefit claims. The full text of such opinions, with personal identifiers deleted, may be obtained by contacting the VA official named above or by accessing the opinions on the Internet at http://www.va.gov/​ogc/​precedentopinions.asp.

VAOPGCPREC 2-2010

Questions Presented:

1. Does the decision of the United States Court of Appeals for Veterans Claims (Veterans Court) in Osborn v. Nicholson, 21 Vet. App. 223 (2007), that interest received from the redemption of a Series EE U.S. Savings Bond is excludable from income in determining annual income for improved pension purposes, invalidate or change VAOPGCPREC 4-89 (O.G.C. Prec. 4-89), VAOPGCPREC 23-90 (O.G.C. Prec. 23-90), VAOPGCPREC 1-93 (O.G.C. Prec. 1-93), VAOPGCPREC 1-97, VAOPGCPREC 10-97, or VAOPGCPREC 15-97?

2. Does the holding of Osborn apply to annual income determinations for purposes of parents' dependency and indemnity compensation (DIC), section 306 pension, or old-law pension?

3. Does the holding of Osborn apply to interest received from Series HH U.S. Savings Bonds, on which interest payments are made semi-annually rather than upon redemption?

4. Does the holding of Osborn extend to state, municipal, or other political subdivision investment bonds?

Held:

1. The holding of Osborn v. Nicholson, 21 Vet. App. 223 (2007), that interest received from the redemption of a Series EE U.S. Savings Bond is excludable from annual income computations under 38 U.S.C. 1503(a)(6) (excluding from income “profit realized from the disposition of real or personal property other than in the course of a business”) for improved pension purposes, does not invalidate or change VAOPGCPREC 4-89, VAOPGCPREC 23-90, VAOPGCPREC 1-97, VAOPGCPREC 10-97, or VAOPGCPREC 15-97. However, the Osborn holding conflicts with VAOPGCPREC 1-93, in which we held that: (1) Proceeds of a life insurance policy that is surrendered for cash should not be considered income for purposes of determining entitlement to improved pension under title 38, United States Code, to the extent that such proceeds consist of return of sums paid as part of the insurance premiums; but (2) interest on the policy holder's monetary contribution should be considered income. Applying the reasoning of Osborn, the interest received from the surrender of a life insurance policy is excluded from income as profit realized from the disposition of personal property other than in the course of a business.

2. Osborn's exclusion of interest received from the redemption of Series EE U.S. Savings Bonds from annual income calculations applies also to parents' dependency and indemnity compensation and section 306 pension, but not to annual income calculations for old-law pension.

3. Because a holder of a Series HH U.S. Savings Bond is paid interest semiannually without the redemption of the bond, any profit realized is not from the disposition of real or personal property necessary for the exclusion in 38 U.S.C. 1503(a)(6) to apply. Therefore, the interest is appropriately counted as income for purposes of improved pension, section 306 pension, old-law pension, and parents' dependency and indemnity compensation.

4. Because debt obligations issued by states, municipalities, or other political entities can vary, it is not possible to provide a single definitive answer as to whether Osborn applies to all municipal bonds. However, as a general rule, if a bond requires redemption for the payment of accrued interest, as with a Series EE U.S. Savings Bond, then the statutory exclusion for profit realized from the disposition of real or personal property applies. If accrued interest is payable on the bond without redemption, then it does not qualify for the exclusion.

Effective Date: May 10, 2010.

VAOPGCPREC 4-2010

Questions Presented:

a. Does a veteran's return to active duty status terminate the individual's status as a veteran under 38 U.S.C. 101(2) for purposes of Department of Veterans Affairs (VA) benefits?

b. If the answer to Question a. is no, does the clothing allowance benefit provided by 38 U.S.C. 1162 qualify as prohibited “compensation” under 38 U.S.C. 5304(c) to a person receiving active service pay?

c. If the answer to Question b. is no, if a person meets the statutory definition of “veteran” and is eligible for the clothing allowance, may that person receive the clothing allowance in addition to active service pay upon return to active duty?

d. May an individual on active duty who has not yet been discharged receive a clothing allowance?

Held:

a. Section 101(2) of title 38, United States Code, defines the term “veteran” to mean “a person who served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable.” This term includes individuals who have returned to active duty after previously meeting the definition of “veteran.”

b. Section 1162 of title 38, United States Code, provides a clothing allowance for each veteran who, “because of a service-connected disability, wears or uses a prosthetic or orthopedic appliance (including a wheelchair) which the Secretary determines tends to wear out or tear the clothing of the veteran,” or who “uses medication which (A) a physician has prescribed for a skin condition which is due to a service-connected disability, and (B) the Secretary determines causes irreparable damage to the veteran's outergarments.” This clothing allowance is not “compensation” within the meaning of that term as it is used in 38 U.S.C. 5304(c), which prohibits payment of “[p]ension, compensation, or retirement pay on account of any person's own service * * * for any period for which such person receives active service pay.” Section 101(13) of title 38, United States Code, defines “compensation” as “a monthly payment made by the Secretary to a veteran because of service-connected disability, or to a surviving spouse, child, or parent of a veteran because of the service-connected death of the veteran occurring before January 1, 1957.” The clothing allowance is an annual benefit that does not constitute compensation within this statutory definition of “compensation,” which specifies that “compensation” is a “monthly payment.”

c. Because the clothing allowance is not “compensation” (and is not “[p]ension” or “retirement pay”) within the meaning of section 5304(c), section 5304(c) does not prohibit the payment of the clothing allowance to a veteran who is eligible for the allowance while the veteran is receiving active service pay.

d. A non-veteran serving on active duty cannot receive a clothing allowance prior to discharge because that person is not yet a veteran and therefore does not meet the eligibility criteria for a clothing allowance under section 1162.

Effective Date: May 25, 2010.

VAOPGCPREC 1-1993 Superseded in Part

VAOPGCPREC 1-1993 is superseded in part by VAOPGCPREC 2-2010 The holding in Osborn v. Nicholson, 21 Vet. App. 223 (2007), conflicts with VAOPGCPREC 1-93, in which we held that: (1) Proceeds of a life insurance policy that is surrendered for cash should not be considered income for purposes of determining entitlement to improved pension under title 38, United States Code, to the extent that such proceeds consist of return of sums paid as part of the insurance premiums; but (2) interest on the policy holder's monetary contribution should be considered income. Applying the reasoning of Osborn, the interest received from the surrender of a life insurance policy is excluded from income as profit realized from the disposition of personal property other than in the course of a business.

Effective Date: May 10, 2010.

Dated: June 16, 2010.

By direction of the Secretary.

Will A. Gunn,

General Counsel.