[Federal Register Volume 75, Number 119 (Tuesday, June 22, 2010)]
[Notices]
[Pages 35517-35518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15079]


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DEPARTMENT OF VETERANS AFFAIRS


Summary of Precedent Opinions of the General Counsel

AGENCY: Department of Veterans Affairs.

ACTION: Notice.

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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, (202) 461-7623.

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?

[[Page 35518]]

    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.
[FR Doc. 2010-15079 Filed 6-21-10; 8:45 am]
BILLING CODE 8320-01-P