Citation Nr: 21075025 Decision Date: 12/17/21 Archive Date: 12/17/21 DOCKET NO. 20-27 375 DATE: December 17, 2021 REMANDED Whether the overpayment of Department of Veterans Affair (VA) compensation benefits for the time period during the Veteran's incarceration was properly created is remanded. REASONS FOR REMAND The Veteran served on active duty from November 1979 to December 1999. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a March 2017 administrative decision issued by the Department of Veterans Affairs (VA) Regional Office (RO). In August 2021, the Veteran testified before the undersigned Veterans Law Judge at a hearing. A copy of the transcript is associated with the Veteran's claims file. (A separate decision under a separate docket number will be issued under the legacy review system with respect to the issues of entitlement to service connection for left ear hearing loss, an acquired psychiatric disorder, a left arm disability, a traumatic brain injury, and a sleep disorder; entitlement to higher evaluations for left lower extremity (LLE) lumbar spine radiculopathy, right ear hearing loss, right knee scar, cervical spine strain, degenerative lumbar spine, and mini incision right knee total knee replacement; and entitlement to an earlier effective date for the award of service connection for LLE lumbar spine radiculopathy.) Evidence was added to the claims file by VA after the issuance of the April 2020 statement of the case. As the Board is remanding this matter for further development, this additional evidence will be considered by the RO in the adjudication of those claims. Whether the overpayment of VA compensation benefits for the time period during the Veteran's incarceration was properly created is remanded. The Veteran has been receiving VA compensation for service-connected benefits, at a combined rating of 40 percent, effective January 1, 2000, and then at 50 percent, effective August 11, 2000, with additional changes during the period on appeal. During the period on appeal, VA adjusted his compensation benefits based on his current number of valid dependents. A February 2010 letter informed him that he was receiving VA compensation benefits at a rate for a veteran with two dependents (his spouse and one minor child). Thereafter, the Veteran was incarcerated beginning July 3, 2013 until March 27, 2015, for a felony conviction, which is an undisputed fact. See October 2019 VA Form 27-0820, Report of General Information. These points are relevant since under 38 C.F.R. § 3.665, the law states, in pertinent part, that any person entitled to compensation who is incarcerated in a Federal penal institution for a period in excess of 60 days for the conviction of a felony committed after October 7, 1980, 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. See 38 U.S.C. § 5313;38 C.F.R. § 3.665(a), (c). In the case of a veteran with service-connected disability rated at 20 percent or more, such as this one, he shall not be paid an amount in excess of the rate under 38 U.S.C. § 1114(a), which is at the rate of 10 percent. 38 U.S.C. § 5313; 38 C.F.R. § 3.665. Moreover, VA regulation states that all or part of the compensation not paid to an incarcerated Veteran may be apportioned to the Veteran's spouse, child, or children on the basis of individual need. An apportionment shall be effective the date of reduction of payments made to the incarcerated person. 38 C.F.R. § 3.665(e)-(f). Here, in April 2013, the Veteran and his spouse, K.C., informed VA that he would be incarcerated. In July 2013, the Veteran again wrote in to notify VA that he would begin a federal sentence and provided the address to the Federal Correctional Institution (FCI) in which he would be detained. They requested a part of his benefits be apportioned to her during his incarceration. In March 2014, a VA note acknowledged K.C.'s statement and indicated appropriate action would be taken to adjust the Veteran's benefits; however, the claims file does not reflect any further action by the RO. In May 2016, the RO associated a Bureau of Prisons computer match report to his claims file, which indicated the Veteran was convicted for a felony and began his sentence on July 3, 2013. In May 2016, VA requested additional information from K.C. and provided forms relevant to an apportionment claim in an enclosure. In August 2016, VA notified the Veteran the proposal that his VA compensation benefits would be reduced to $130.94, effective March 9, 2014, and $133.17, effective December 1, 2014. In that same letter, VA requested information regarding the official notification that showed his date of release, as well as inform him that his dependents may be entitled to an apportioned share of his compensation benefits while he was incarcerated. About one week later, the RO informed the Veteran that the apportionment claim was denied because a reply was not received. Around that time, VA confirmed the Veteran's Federal prison release date was on March 27, 2015. In accordance with VA law and regulation, in March 2017, the RO retroactively reduced the Veteran's compensation benefits to the 10 percent rate, effective March 9, 2014, and this action resulted in an overpayment. The Veteran subsequently appealed the validity of this debt and submitted financial information in the form of a VA Form 21-5655, Financial Status Report. In a June 2017 letter, the Debt Management Center (DMC) informed him that his request for waiver had been forwarded to the Committee on Waivers and Compromises (COWC) for consideration (the appeal regarding a waiver of an overpayment is not currently before this Veterans Law Judge, as discussed at the hearing). In this letter, the DMC noted he had a debt of $13,622.09. Thereafter, in October 2019, VA communicated with the FCI and confirmed the Veteran was incarcerated from July 3, 2013 to March 27, 2015. Subsequently, in April 2020, VA awarded K.C. an apportionment of benefits during the Veteran's incarceration from July 3, 2013 through March 27, 2015, based on a revision due to clear and unmistakable error on VA's part. Of relevance, a VA note indicated that the Veteran's incarceration adjustments did not begin until March 9, 2014, but as noted earlier, his incarceration began on July 3, 2013. VA's apportionment grant was applied retroactively, beginning on the 61st day, and K.C. was notified in May 2020. In July 2020, the Veteran contacted VA and asked for an audit of the retroactive payment amount of $25,959.60, as allotted from the apportionment grant. At the hearing before the undersigned, the Veteran testified that he notified VA at the time of the incarceration and VA did not act on it. The debt was not valid because VA had notice but they still kept sending compensation benefits. See August 2021 Hearing, page 33; see also June 2020 VA Form 9. A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. 38 C.F.R. § 1.911(c)(1). Resolution of the creation issue must precede consideration of any waiver issue, if appealed. Given the complex history above, the Board finds that a remand is warranted for the RO to resolve whether the reduction of benefits for incarceration was proper, and in turn, whether the overpayment was validly created. The Board acknowledges that additional audits have been requested by the Veteran, but the audit statements provided have not been considered by the agency of original jurisdiction (AOJ) with regards to this appeal. As noted earlier, the March 2017 letter began reduction of payments effective March 9, 2014, but the Veteran was incarcerated as of July 3, 2013. Additionally, a demand letter for any overpayment of the reduction in benefits due to the Veteran's incarceration after applying the retroactive apportionment payments has not been provided to the Veteran. As such, a remand is necessary for the RO to provide accurate accounting as part of the validity of this debt. Finally, on the June 2017 letter issued by the DMC, the debt amount was noted to be $13,622.09, and the Veteran's representative alluded to this amount via an April 2017 DMC demand letter, which is not associated with the claims file. On remand, the RO is asked to locate and associate it to the Veteran's claims file. The matter is REMANDED for the following actions: 1. Take all actions necessary to obtain the April 2017 DMC demand letter for the overpayment debt of the amount of $13,622.09, created by a reduction of the Veteran's compensation benefits due to his incarceration and associate it with the claims file. (Continued on the next page) 2. Adjudicate the issue of whether the overpayment debt in this case was properly created, to include providing the Veteran with a detailed paid and due audit related to his VA benefits due his incarceration for the period beginning July 3, 2013. The audit should reflect the amounts paid to the Veteran's dependents as part of the retroactive apportionment payment and include any retroactive payments and any payments made to the Veteran resulting from the adjustment of the 61st day of incarceration from July 3, 2013 to March 27, 2015. The Veteran and his representative should be provided with a copy of the audit. LESLEY A. REIN Veterans Law Judge Board of Veterans' Appeals Attorney for the Board M. Tang, Counsel The Board's decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.