Citation Nr: 21025159 Decision Date: 04/27/21 Archive Date: 04/27/21 DOCKET NO. 16-06 988 DATE: April 27, 2021 ORDER The overpayment of Department of Veterans Affairs (VA) benefits created based on a pension award adjustment from August 2014 was not properly created; the appeal is granted. FINDINGS OF FACT 1. A June 2014 VA notification letter requested that the Veteran submit a Form 21-051601 Improved Pension Eligibility Verification Report for February 1, 2005 to the present. 2. The Veteran notified VA in July 2014 that he began receiving benefits from the Social Security Administration (SSA) in June 2014; he requested that his VA improved pension benefits be terminated. 3. VA terminated the Veteran’s pension benefits effective February 1, 2005 rather than when he began receiving SSA benefits, which resulted in the creation of the debt at issue; this action was not proper. CONCLUSION OF LAW The overpayment based on a pension award adjustment from August 2014 was not properly created. 38 U.S.C. §§ 101, 1503, 1521, 1541, 5110, 5313; 38 C.F.R. §§ 3.21, 3.23, 3.271, 3.272. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from February 1970 to November 1971. He testified at a hearing before the undersigned Veterans Law Judge in August 2017. A copy of the transcript is associated with the record. The Board has remanded the matter for further development several times, most recently in April 2019. Whether the overpayment of Department of Veterans Affairs (VA) benefits created based on a pension award adjustment from August 2014 is valid Basic entitlement to pension exists if a veteran of a period or periods of war (as defined in 38 C.F.R. § 3.3 (a)) meets certain net worth requirements and does not have an annual income in excess of the applicable maximum annual pension rate (MAPR), and is either age 65 or older or is permanently and totally disabled from nonservice-connected disability not due to the veteran’s own willful misconduct. See 38 U.S.C. §§ 1521 (a) and (j), 5312; 38 C.F.R. §§ 3.3 (a), 3.23(a). Pension is not payable to a veteran whose annual income exceeds the rates set forth in 38 U.S.C. § 1521. Improved pension provides for maximum income levels under which eligibility is based and this amount is offset by annual income of the recipient minus any excepted unreimbursed medical expenses. For the purpose of determining initial entitlement, or for resuming payments on an award which was previously discontinued, the monthly rate of pension payable to a beneficiary shall be computed by reducing the beneficiary’s applicable maximum pension rate by the beneficiary’s annual rate of countable income on the effective date of entitlement and dividing the remainder by 12; whenever there is a change in a beneficiary’s annual rate of countable income, the monthly rate of pension payable shall be computed by reducing the beneficiary’s applicable MAPR by the beneficiary’s new annual rate of countable income on the effective date of the change in the annual rate of income, and dividing the remainder by 12. 38 C.F.R. § 3.273. For the purpose of computing income for improved pension, payments of any kind from any source shall be counted as income during the 12-month annualization period in which received unless specifically excluded under 38 C.F.R. § 3.272. 38 C.F.R. § 3.271 (a). The following is excluded from countable income for VA pension purposes: welfare benefits; maintenance benefits furnished by a relative, friend, or a charitable organization; VA pension benefits; casualty loss reimbursement; profit from the sale of property; joint accounts; unreimbursed medical expenses (to the extent that the medical expenses exceed 5 percent of the applicable MAPR); expenses of last illnesses, burials, and just debts; educational expenses; a portion of the beneficiary’s children’s income; Domestic Volunteer Service Act Programs payments; distributions of funds under 38 U.S.C. § 1718; survivor benefit annuities; Agent Orange settlement payments; restitution to individuals of Japanese ancestry; cash surrender value of life insurance policies; income received by American Indian beneficiaries from trust or restricted lands; Radiation Exposure Compensation Act payments; and Alaska Native Claims Settlement Act payments. 38 C.F.R. § 3.272. Income from the SSA is not excluded under 38 C.F.R. § 3.272. The amount of pension actually received is the difference between the recipient’s countable income and the MAPR permitted by VA given the recipient’s circumstances. Pension is not payable if the recipient’s countable annual income exceeds the maximum limitation given the recipient’s circumstances as set forth in the legislation. See generally 38 U.S.C. §§ 101, 1501. The Secretary shall deny or discontinue the payment of a veteran’s pension based upon consideration of the annual income of a veteran, his/her spouse, and children. 38 U.S.C. § 1522. An overpayment is created when VA determines that a beneficiary or payee has received benefit payments in excess of the amount due or to which such beneficiary or payee is entitled. 38 C.F.R. § 1.962. When VA has determined that a debt is owed based on such an overpayment, and once it has satisfied certain procedural requirements, it may collect the debt by offsetting current or future benefit payments until the debt has been repaid. 38 U.S.C. § 5314; 38 C.F.R. §§ 1.911, 1.912a(a). A March 2005 rating decision granted entitlement to pension benefits. Along with an April 2005 notification letter informing him of his benefits, the Veteran was provided VA Form 21-8768 which stated, in pertinent part, that the Veteran was obligated to provide prompt notice of any change in family income or net worth and that a failure to provide such would result in the creation of an overpayment which would be subject to recovery. It further stated that when reporting income, the total amount and source of all income received should be reported. The pertinent question in this case is whether the overpayment from a pension award adjustment from August 2014 was properly created. The debt at issue in this case was created when VA retroactively terminated the Veteran’s pension. In June 2014, a VA notification letter requested that the Veteran submit a Form 21-051601 Improved Pension Eligibility Verification Report and a VA Form 21P-8416 Medical Expense Report showing his income, net worth, and unreimbursed medical expenses from February 1, 2005 to the present. He was specifically asked to provide information regarding the market value of his shares in Darby Homes, Inc. Later that month, the Veteran called and informed VA that he had just been approved for SSA benefits and would submit his approval letter upon receipt. In July 2014, the Veteran submitted a statement requesting that his pension be terminated, as he stated he began receiving SSA benefits in June 2014. He submitted an additional July 2014 statement indicating his only source of income from 2005 to the present was his VA pension. He stated he had not received compensation, dividends, or shares of Darby Homes, Inc. since 2008. In July 2014, he also submitted a completed VA Form 21-051601 Improved Pension Eligibility Verification Report for January 2007 to December 2014, where he listed minimal income from interest and dividends for 2007 and 2008 only. In August 2014, VA notified the Veteran that because he did not submit his Eligibility Verification Reports with income and net worth information from February 1, 2005, his pension was terminated effective February 1, 2005. Thereafter, the Veteran provided additional information regarding his income and net worth, including his ownership in Darby Homes, Inc. Specifically, he provided additional VA Forms 21-051601 Improved Pension Eligibility Verification Reports, indicating he had minimal income in 2005 and 2006, as well as 2009 and 2010, and no income in the other years. His reported income was in the form of total interest and dividends. He also submitted a letter in January 2015 from the Chief Executive Officer (CEO) of Darby Homes, Inc., who is also his son, stating he had not received compensation, dividends, or shares since 2008. A Financial Status Report from March 2015 indicated his only income was from Social Security benefits. In March 2016, the Veteran submitted income and tax statements related to his shares in Darby Homes, Inc. The Schedule K-1 tax forms indicate he is a 10 percent shareholder and received minimal income from 2009 to 2013. These forms support the Veteran’s August 2017 testimony that he is essentially a shareholder in Darby Homes, Inc. in name only, and is not deriving much in the form of income or dividends. In April 2017, the Board remanded the matter so the Veteran and his son could provide additional information regarding the Veteran’s involvement in Darby Homes, Inc. The Veteran submitted letters from his son reiterating that the Veteran was not employed by Darby Homes, Inc., nor did he receive compensation or dividends since 2005. In April 2019, the Board again remanded the matter so that the AOJ could consider the evidence the Veteran had submitted following the April 2017 remand. In May 2020, VA notified the Veteran that he needed to submit his federal income tax returns from 2005 to the present. The Veteran responded in June 2020, stating he had not filed federal income taxes since 2003 due to no income. In August 2020, VA informed the Veteran he had an additional 60 days to submit an official statement from the Internal Revenue Service (IRS) indicating he was not required to file a federal tax return since 2003. The Veteran submitted documentation from the IRS in September 2020 verifying that he had not filed federal tax returns for the periods from 2016 to 2019. He also submitted a statement in September 2020 that an IRS employee’s records showed the Veteran was receiving a government disability payment each month and therefore not required to file. Having reviewed the record evidence, the Board concludes that official documentation from the IRS stating the Veteran has not been required to file taxes does not exist, and further efforts to attempt to obtain such a letter would be futile. Based on a review of the available evidence of record, including the Veteran and his son’s hearing testimony, financial disclosures, and personal statements, the Board finds that the debt was not properly created. The August 2014 notification letter on appeal stated the Veteran’s pension was terminated effective February 1, 2005, as he did not submit Eligibility Verification Reports with income and net worth information from February 1, 2005. He subsequently submitted this information. The Board finds that the evidence reflects the Veteran made minimal income since 2005, and that his annual income did not exceed the rates set forth in 38 U.S.C. § 1521 to make him ineligible for pension. To reiterate, the Veteran submitted income and tax statements for several years indicating he did receive some ordinary business income as a 10-percent shareholder in Darby Homes, Inc. However, the income was minimal and not at a level that would have required him to submit federal tax returns. Although the Board notes that pension benefits are an income-based benefit, any income the Veteran received from Darby Homes should have been deducted from the Veteran’s applicable MAPR, rather than terminating the pension entirely. The date of termination of the Veteran’s pension was properly when he began receiving SSA benefits, as this was income which affected his right to pension benefits. Affording the Veteran the benefit of the doubt, termination of pension prior to that date was not proper. 38 U.S.C. § 5107; see also Gilbert v. Derwinski, 1 Vet. App. 49, 53 (1990). The appeal is granted. H.M. WALKER Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board A. Dean, 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.