Citation Nr: 21014925 Decision Date: 03/16/21 Archive Date: 03/16/21 DOCKET NO. 15-40 197 DATE: March 16, 2021 ORDER The overpayment debt of Department of Veterans Affairs (VA) compensation benefits in the amount of $31,216.87 was properly created for the period of June 6, 2012 to September 30, 2013 due to a retroactive reduction in the compensation rate to the 10 percent rate as of the 61st date of the Veteran’s felony conviction; the appeal is denied. REFERRED The Veteran was notified of his $31,216.87 debt by the VA Debt Management Center (DMC) in March 2014. He was notified of his right to request a waiver at that time. An October 2015 memorandum from the Regional Office (RO) in the claims file suggests the Veteran faxed in a waiver request in March 2015, although the Financial Status Report (FSR) was signed by the Veteran and his spouse on March 31, 2014. A fax cover sheet is also with these documents and it is dated March 31, 2014. Moreover, a July 2020 decision related to apportionment benefits includes a statement indicating the “Financial Status Report…submitted 04/04/2014 provided income.” Thus, it appears the Veteran may have submitted a timely request for waiver, although the Board is making no formal finding as to that question at this time as it is not within the Board’s jurisdiction. Nonetheless, questions related to waiver must wait until after the matter of the validity of the debt is adjudicated. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991) (“when a Veteran raises the validity of the debt as part of a waiver application... it is arbitrary and capricious and an abuse of discretion to adjudicate the waiver application without first deciding a veteran’s challenge to the lawfulness of the debt asserted against him or her”); VAOPGCPREC 6-98 (July 24, 1998) (holding that when a veteran challenges the validity of the debt and seeks waiver of the debt, the [Regional Office] must first fully review the debt’s validity and, if the office believes the debt to be valid, prepare a written decision fully justifying the validity of the debt before referring the waiver request to the Committee on Waivers and Compromises (COWC)). As the decision herein is an adjudication of the validity of the debt question, the RO should now refer the matter to the COWC for action on the waiver question. FINDINGS OF FACT 1. The Veteran was incarcerated due to a felony on April 6, 2012; the 61st day of incarceration was June 6, 2012. 2. The Veteran was released from his period of incarceration on September 30, 2013. 3. The RO retroactively reduced the Veteran’s compensation benefits which were being paid at the 60 percent rate to the 10 percent rate and this action resulted in an overpayment of $31,216.87. 4. The Veteran’s wife’s claim for apportionment during the time of his incarceration was denied. CONCLUSION OF LAW The $31,216.87 overpayment of VA compensation benefits was properly created for the period June 6, 2012 to September 30, 2013 due to a retroactive reduction in the compensation rate to the 10 percent rate as of the 61st date of the Veteran’s felony conviction. 38 U.S.C. § 5313; 38 C.F.R. § 3.665. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served in the United States Air Force from May 1986 to September 1986, and in the United States Army from February 1987 to March 2007. In May 2007, the Veteran was initially awarded service-connected benefits. He was provided VA Form 21-8764 at that time. VA Form 21-8764 states, in pertinent part, that compensation is subject to future adjustment, and that “benefits will be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony.” The Veteran, therefore, knew of his need to notify VA of any period of incarceration and knew his benefits would be impacted. Under pertinent VA laws and regulations, any individual who is entitled to compensation or to dependency and indemnity compensation 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 committed after October 7, 1980 shall not be paid such compensation or dependency and indemnity compensation, for the period beginning on the sixty-first day of such incarceration and ending on the day such incarceration ends, in an amount that exceeds (A) in the case of a veteran with a service-connected disability rated at 20 percent or more, the rate of compensation payable under section 1114(a) of this title; or (B) in the case of a veteran with a service-connected disability not rated at 20 percent or more or in the case of a surviving spouse, parent, or child, one-half of the rate of compensation payable under section 1114(a) of this title. 38 U.S.C. § 5313(a); 38 C.F.R. § 3.665(a). The Veteran was arrested and convicted of a felony. The date of incarceration was determined to be April 6, 2012 and he was released on September 30, 2013. In March 2014, VA took action to reduce the Veteran’s VA benefits based on his incarceration. The Veteran was advised that his benefits would be retroactively reduced on the 61st day of incarceration, which was April 6, 2012, and restored to his full rate as of the date of release from prison on September 30, 2013. In March 2014, the VA DMC notified the Veteran of the $31,216.87 debt that resulted from the retroactive reduction in benefits. The Veteran has appealed and has suggested that the debt is not valid because there was an outstanding apportionment request that should have been awarded, which would lessen the amount of debt. A review of the claims file reveals the Veteran’s wife did indeed contact VA in April 2012 and request an apportionment. She indicated her husband had been incarcerated and provided her financial information in order to be considered for an apportionment of benefits during his incarceration. The Veteran’s claims file also includes a subsequent communication in May 2013 from a representative of Texas Veterans Commission (TVC). This statement included the following, “Apportionment is not needed at this time.” No action was taken at this time on the apportionment request. After the Veteran appealed the debt, the RO reviewed the file. An October 2015 deferred rating decision shows the RO determined that the decision to treat the April 2012 apportionment request as withdrawn after the TVC communication was an error. The RO determined that the May 2013 communication was an invalid withdrawal of the apportionment claim, because TVC was not an authorized representative of the Veteran’s wife, or the Veteran. The RO then appeared to move toward issuing a decision denying the apportionment claim, but the decision in the claims file was not signed. However, it appears it was finalized and mailed to the Veteran’s wife, as she submitted a Notice of Disagreement (NOD) in November 2015. The Veteran also signed an NOD with regard to the apportionment denial in November 2015. A statement of the case (SOC) was mailed to both the Veteran and his wife related to the apportionment claim in April 2018. Both were notified of the time limits for perfecting the appeal, but neither did so. Then, in December 2018, the Board remanded the matter of whether the incarceration debt is valid in order for the RO to adjudicate whether an administrative error occurred. The RO, following the Board’s remand, again considered whether the prior apportionment claim should have been awarded, but found an apportionment was not warranted. There is no appeal of the apportionment decision before the Board. VA has found an apportionment was not warranted. Based upon the foregoing, the Board finds that, in accordance with the VA law and regulation noted above, the RO retroactively reduced the Veteran’s compensation benefits which were being paid at the 60 percent rate to the 10 percent rate. The action was effective on the 61st day of his incarceration and ended on the day of his release. This action resulted in the overpayment at issue. No apportionment was awarded for this period to reduce the debt owed. The creation of the debt in this case was proper. The appeal is denied. MICHAEL E. KILCOYNE Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board A. Adamson, 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.