Citation Nr: 1301735 Decision Date: 01/16/13 Archive Date: 01/23/13 DOCKET NO. 10-10 721 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Portland, Oregon THE ISSUE Whether the reduction of the payment of the Veteran's Department of Veterans Affairs (VA) disability compensation benefits for the period from February [redacted], 2000, to May [redacted], 2001, under the provisions of 38 U.S.C.A. § 5313 and 38 C.F.R. § 3.665 was proper. REPRESENTATION Veteran represented by: Jacques P. DePlois, Attorney ATTORNEY FOR THE BOARD J. T. Hutcheson, Counsel INTRODUCTION The Veteran had active service from August 1970 to February 1973. In January 2007, the Portland, Oregon, Regional Office (RO) granted service connection for posttraumatic stress disorder (PTSD); assigned a 70 percent evaluation for that disability; and effectuated the award as of February 26, 1998. This matter came before the Board of Veterans' Appeals (Board) on appeal from a June 2007 RO determination which reduced the Veteran's VA disability compensation benefits for the period from February [redacted], 2000, to May [redacted], 2001, based upon a period of incarceration. In March 2008, the RO granted a total rating for compensation purposes based on individual unemployability (TDIU) and effectuated the award as of February 26, 1998. In July 2008, the RO reduced the Veteran's VA disability compensation for the period from February [redacted], 2000, to May [redacted], 2001, based upon a period of incarceration. The Board has reviewed both the Veteran's physical claims files and his "Virtual VA" file so as to insure a total review of the evidence. FINDINGS OF FACT 1. The Veteran was incarcerated for a felony in a government facility from December [redacted], 1999 until May [redacted], 2001. 2. No request has been received to apportion any of the Veteran's benefits while he was incarcerated. CONCLUSION OF LAW The reduction of the payment of the Veteran's VA disability compensation benefits for the period from February [redacted], 2000, to May [redacted], 2001, was proper. 38 U.S.C.A. § 5313 (West 2002); 38 C.F.R. § 3.665 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSION Payment of VA Compensation Benefits On February 26, 1998, the Veteran's claim seeking service connection for posttraumatic stress disorder (PTSD) was received by the RO. The claim was initially denied and the Veteran appealed. In September 2000, while the appeal was pending, the Veteran's representative informed VA that the Veteran had been incarcerated at the Oregon Department of Corrections and was scheduled to be released in May 2001. The RO subsequently learned that the Veteran was convicted of a felony December [redacted], 1999 and incarcerated December [redacted], 1999 for a term of 22 months, with his scheduled release date in May 2001. The Veteran was released from incarceration on May [redacted], 2001. In October 2000, the RO sent the Veteran a letter informing him that his pension payments would be discontinued as of the 61st day of his incarceration (February [redacted], 2000) and would not be eligible to be reinstituted until the day after he was released. In January 2007, the RO granted service connection for PTSD (and deferred a decision on the Veteran's TDIU claim); assigned a 70 percent evaluation for that disability; and effectuated the award as of February 26, 1998 (the date the Veteran's claim had been received). In the June 2007 letter accompanying the rating decision, the RO provided a full and clear accounting of the Veteran's payment for each month of the back-due benefits. Specifically, it was noted that on February [redacted], 2000, his benefits were reduced from $839 to $98 on account of his compensation being reduced on account of the 61st day of incarceration. The Veteran promptly filed a notice of disagreement in June 2007 with the payment amounts from February [redacted], 2000 until May [redacted], 2001. He stated that he did not disagree with the statement that during the term of his incarceration the VA rules and regulations required VA to "withhold" any monthly amount in excess of 10 percent. However, the Veteran disagreed that this meant that the monies were lost forever. The Veteran requested that statutory authority be provided for not paying him the amount of his benefit at the time of his release. In a March 2008 rating decision, the RO granted TDIU, effective as of February 26, 1998. Again, a letter was sent to the Veteran detailing the accounting of his owed benefits. Again, the RO indicated that money was being withheld from the Veteran's payment during the time that he was incarcerated. In February 2009, the Veteran voiced the same disagreement that he had in 2007. These facts are not in dispute. Rather, the issue that must be decided here is whether the RO acted properly in paying the Veteran at a lower rate during his time of incarceration. Turning to the applicable regulations, generally, a veteran with a service-connected disability evaluated as 20 percent or more and who is incarcerated in a Federal, State, local, or other penal institution or correctional facility for a period in excess of sixty days for conviction of a felony shall not be paid such compensation for the period beginning on the 61st day of such incarceration and ending on the day such incarceration ends in an amount that exceeds 10 percent. 38 U.S.C.A. §§ 1114, 5313. The provisions of 38 C.F.R. § 3.655 direct, in pertinent part, that: a) General. Any person specified in paragraph (c) of this section who is incarcerated in a Federal, State or local penal institution in excess of 60 days for conviction of a felony will not be paid compensation or dependency and indemnity compensation (DIC) in excess of the amount specified in paragraph (d) of this section beginning on the 61st day of incarceration. VA will inform a person whose benefits are subject to this reduction of the rights of the person's dependents to an apportionment while the person is incarcerated, and the conditions under which payments to the person may be resumed upon release from incarceration. In addition, VA will also notify the person's dependents of their right to an apportionment if the VA is aware of their existence and can obtain their addresses. However, no apportionment will be made if the veteran or the dependent is a fugitive felon as defined in paragraph (n) of this section. (b) Definitions. For the purposes of this section the term compensation includes disability compensation under 38 U.S.C. 1151. The term dependency and indemnity compensation (DIC) includes death compensation payable under 38 U.S.C. 1121 or 1141, death compensation and DIC payable under 38 U.S.C. 1151, and any benefit payable under chapter 13 of title 38, United States Code. The term release from incarceration includes participation in a work release or halfway house program, parole, and completion of sentence. For purposes of this section, a felony is any offense punishable by death or imprisonment for a term exceeding 1 year, unless specifically categorized as a misdemeanor under the law of the prosecuting jurisdiction. (c) Applicability. The provisions of paragraph (a) of this section are applicable to the following persons: (1) A person serving a period of incarceration for conviction of a felony committed after October 7, 1980. In a precedent opinion dated May 24, 2000, the General Counsel of VA clarified that the above cited law and regulation "direct that compensation and pension benefits shall not be paid to any person who is incarcerated in a Federal, State, or local penal institution for a period in excess of sixty days for conviction of a felony." In order for the statutory limitation to take effect and invoke withholding of compensation and pension benefits, "four prerequisites must be established: (1) incarceration (2) in a Federal, State, or local penal institution (3) in excess of 60 days, and (4) for conviction of a felony." The first requirement of the statute that must be established is whether the veteran is incarcerated. VAOPGPREC 10-2001 (May 24, 2001). Here, it is not disputed that the Veteran was incarcerated, that it was in a Federal, State, or local penal institution, that it was in excess of 60 days and that it was based on the conviction for a felony. As such, on its face, the Veteran meets the criteria established by 38 C.F.R. § 3.665. Moreover, there is no allegation that any request has been made to apportion any of his benefits while he was incarcerated, pursuant to 38 C.F.R. § 3.665(e). It is noted that while the Veteran's representative asked for statutory authority for not returning the money withheld during the Veteran's incarceration, the representative did not actually make any argument for why the withheld money should be paid. The Board's conclusion is further strengthened by a review of the legislative history of 38 U.S.C.A. § 5313, which indicated that that the primary purpose of the statute was to prevent duplication of governmental expenditures benefiting persons incarcerated in the United States who receive veterans' benefits while being maintained by prisons that are publicly funded. Congressman G.V. (Sonny) Montgomery, who was at the time Chairman of the House Committee on Veterans' Affairs, stated, "I do not see the wisdom of providing hundreds and thousands of dollars of tax free benefits to [incarcerated veterans] when at the same time the taxpayers of this country are spending additional thousands of dollars to maintain these same individuals in penal institutions." 126 Cong. Rec. 26,118 (1980). Congressman Chalmers P. Wylie, a co-sponsor of the legislation, further commented that "[i]n the case of imprisonment, when a prisoner is being fully supported by tax dollars that fund the penal institution, it becomes ludicrous to continue payment of benefits designed to help the [incarcerated veteran] maintain a standard of living." 126 Cong. Rec. 26,122 (1980); VAOPGPREC 10-2001 (May 24, 2001). Thus, this legislation clearly shows Congress' desire to limit the payment of disability compensation, which is intended to help a veteran in part to obtain food and shelter, when the government is being forced to pay for that veteran's food and shelter by virtue of that veteran having been incarcerated for the commission of a felony. The Board acknowledges that there are exceptions to this general rule, such as when a veteran is housed in a half-way house. Likewise, the limitation imposed in 38 C.F.R. § 3.665 is generally not applicable when a veteran is incarcerated in a foreign country. However, none of the exceptions to the rule appear to be present in this case. Here, the Veteran was clearly incarcerated in a government run facility for a felony conviction. This is not in dispute. As such, the plain language of 38 C.F.R. § 3.665 clearly directs that the Veteran be paid pursuant to 38 C.F.R. § 3.665(d), which for the Veteran who was rated 20 percent would receive the rate of compensation payable under 38 U.S.C. 1114(a). Looking to the representative's arguments it appears that he is focused on the terminology used in the two accounting letters to the Veteran in 2007 and 2008, which contain columns for "amount withheld" and "monthly entitlement amount." What is important to note here is that to the extent the representative considers "withheld" to mean eventually due and payable, the controlling statute does not actually contain the word withheld. Rather, the statute states that a person who is incarcerated in a Federal, State or local penal institution in excess of 60 days for conviction of a felony shall not be paid compensation, beyond the allotted amount. This language is strong and leaves no doubt that the money is not being held in escrow, but rather is not due at time of release from incarceration. The implementing regulations are equally as strong, providing that compensation "will not be paid." 38 C.F.R. § 3.655. While not raised specifically by the Veteran, the Board has considered whether the specific language of the statute would exclude him from the withholding of disability compensation during his incarceration. As noted, the Veteran was not actually in prison when the his claims for service connection for PTSD and for TDIU were granted, and the language of the controlling statute does use the present tense; that is, it states any person who is incarcerated. However, to accept this argument would require the Board to fully ignore the legislative history of the statute, and its natural intent. Moreover, it would be inconsistent with other holdings regarding payments to incarcerated veterans. For example, when a Veteran fails to notify VA that he is incarcerated, an overpayment might be created. In fact, an overpayment would still be created even if the Veteran had already been released from the incarceration at the time the overpayment was discovered. Having reviewed the evidence of record, the Board finds that 38 C.F.R. § 3.655 clearly speaks to the Veteran's situation, and the RO properly rendered payment based on the facts of this case. Therefore, the Veteran's claim is denied. Duty to Notify and to Assist The Veterans Claims Assistance Act of 2000 (VCAA) and implementing regulations impose obligations on VA to provide claimants with notice and assistance. 38 U.S.C.A. §§ 5102, 5103, 5103A, 5107; 38 C.F.R §§ 3.102, 3.156(a), 3.159, 3.326(a). Here, however, because the law, and not the evidence, is dispositive of this issue, the Veteran's claim must be denied due to the lack of legal merit or the lack of entitlement under the law. See Sabonis v. Brown, 6 Vet. App. 426, 430 (1994). As such, any failure to provide notice is considered to be at most harmless error. See Shinseki v. Sanders, 129 U.S. 1696 (2009) (reversing prior case law imposing a presumption of prejudice on any notice deficiency, and clarifying that the burden of showing that an error is harmful, or prejudicial, normally falls upon the party attacking the agency's determination). Neither the Veteran, nor his representative, has argued otherwise. The Board does note that the statute directs VA to inform a person whose benefits are subject to reduction of the rights of the person's dependents to an apportionment while the person is incarcerated. In this case, because the Veteran was already released at the time his benefits were awarded, it is not clear that he was ever informed of his dependent's rights to apportionment. However, any failure to provide such notice is considered harmless, as there is no indication that the Veteran had any dependents during his incarceration. First, the Veteran did not have any dependents listed for his non-service connected pension which he was receiving (per the February 1996 letter) prior to being incarcerated, and which was actually reduced during his incarceration. Second, following the grant of service connection, the Veteran filed a declaration of dependents, indicating that he had gotten married in 2004 (that is, several years after he was released from prison). As such, because the Veteran did not have any dependents during his incarceration, any failure to inform him of rights of dependents to apportionment is a harmless error. ORDER The reduction of the payment of the VA disability compensation benefits for the period from February [redacted], 2000 to May [redacted], 2001, under the provisions of 38 U.S.C.A. § 5313 and 38 C.F.R. § 3.665 was proper. ____________________________________________ MATTHEW W. BLACKWELDER Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs