[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Proposed Rules]
[Pages 71366-71369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28374]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AP18


Additional Compensation on Account of Children Adopted Out of 
Veteran's Family

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
adjudication regulations to clarify that a veteran will not receive the 
dependent rate of disability compensation for a child who is adopted 
out of the veteran's family. This action is necessary because 
applicable VA adjudication regulations are currently construed as 
permitting a veteran, whose former child was adopted out of the 
veteran's family, to receive the dependent rate of disability 
compensation for the adopted-out child, which constitutes an 
unwarranted award of benefits not supported by the applicable statute 
and legislative history.

DATES: Comments must be received on or before February 2, 2015.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and Management (02REG), Department of Veterans Affairs, 810 
Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AP18--Additional Compensation on Account of Children 
Adopted Out of Veteran's Family.'' Copies of comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1068, between the hours of 8:00 a.m. and 4:30 p.m., 
Monday through Friday (except holidays). Please call (202) 461-4902 for 
an appointment. (This is not a toll-free number.) In addition, during 
the comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Stephanie Li, Section Chief, 
Regulations Staff (211D), Compensation Service, Department of Veterans 
Affairs, 810 Vermont Avenue NW., Washington, DC 20420, (202) 461-9700. 
(This is not a toll-free telephone number.)

SUPPLEMENTARY INFORMATION: Pursuant to 38 U.S.C. 1115, a veteran 
entitled to compensation based on a service-connected disability rated 
not less than 30 percent is entitled to an additional rate of 
disability compensation for each of his or her children. Section 
101(4)(A) of title 38, United States Code, defines ``child'' to include 
an unmarried person under the age of 18 years who is a legitimate 
child, a legally adopted child, a stepchild who is a member of the 
veteran's household or was a member of the veteran's household at the 
time of the veteran's death, or an illegitimate child. See also 38 CFR 
3.57. The statute also provides some exceptions for individuals who are 
permanently incapable of self-support and individuals who are pursuing 
an education. See 38 U.S.C. 101(4)(A); see also 38 CFR 3.57. 
Additionally, 38 CFR 3.58 provides that ``[a] child of a veteran 
adopted out of the family of the veteran . . . is nevertheless a child 
within the meaning of that term as defined by Sec.  3.57 and is 
eligible for benefits payable under all laws administered by the 
Department of Veterans Affairs.'' See VA Op. Gen. Couns. Prec. 16-94 
(1994) (``pursuant to [Sec.  3.58] a child adopted out of a veteran's 
family may remain a child of the veteran for VA purposes''). Therefore, 
under current regulations, VA is required to pay a veteran additional 
disability compensation for a child who otherwise meets the 
requirements under Sec.  3.57 but has been adopted out of the veteran's 
family.
    However, VA believes its longstanding interpretation in Sec.  3.58 
as it applies to 38 U.S.C. 1115 is inconsistent with the statute's 
clear purpose to provide for payments to a

[[Page 71367]]

veteran that are based primarily upon the veteran's needs for purposes 
of supporting his or her dependent family members. This purpose is 
evident from the statute's language, structure, and legislative 
history. VA believes Congress did not intend for section 1115 to 
provide additional disability compensation to a veteran on account of a 
child who is adopted out of the veteran's family. In such cases, it is 
clear that any payment to the veteran on account of the adopted-out 
child would rarely, if ever, fulfill the clear purpose of section 1115 
to provide for the expense of supporting that child. As such, VA 
proposes to amend its regulations, particularly 38 CFR 3.57, 3.58, and 
3.458, to eliminate this additional compensation paid to veterans for 
such children.

I. History of 38 U.S.C. 1115 and Bases for Rulemaking

    The definition of ``child'' in 38 U.S.C. 101(4)(A), which refers to 
legitimate, illegitimate, adopted, and certain stepchildren, is 
ambiguous as to whether it encompasses a biological child who has been 
legally adopted out of the veteran's family. As noted above, VA 
historically has concluded that an adopted-out child will be considered 
the veteran's child for purposes of all benefits administered by VA. 
However, providing payments to a veteran under 38 U.S.C. 1115 on the 
basis of an adopted-out child creates an anomaly that undermines the 
clear purpose of that statute.
    Section 1115 provides that certain veterans entitled to disability 
compensation ``shall be entitled to additional compensation for 
dependents in the following monthly amounts.'' (Emphasis added.) The 
term ``dependent'' is not defined for purposes of title 38 generally or 
section 1115 specifically, but is commonly understood to refer to a 
person who is legally or factually reliant upon the veteran for 
support. Although a veteran ordinarily will have a legal and moral 
obligation to support his or her biological child, that is not the case 
when the child has been adopted out of the veteran's family. A child-
parent relationship typically ``does not exist between an [adopted-out 
child] and the [adopted-out child's] genetic parents.'' See Astrue v. 
Capato ex rel. B.N.C., 132 S. Ct. 2021, 2030 (2012) (quoting Unif. 
Probate Code Sec.  2-119(a), 8 U.L.A. 55 (Supp. 2011)). Accordingly, we 
believe an adopted-out child generally would not be a ``dependent'' 
within the meaning of 38 U.S.C. 1115.
    Further, section 1115(1) provides that the dependents' allowance 
will be paid, in monthly amounts, ``[i]f and while [the veteran] . . . 
has . . . one or more children.'' The statute thus clearly refers to 
the present existence of a parent-child relationship. Even if the 
child's biological relationship or pre-adoption legal relationship to 
the veteran may provide a basis for certain types of VA benefits, it 
would not provide a basis for payment under section 1115 if the parent-
child relationship has been severed at the time relevant to current 
payments.
    The payments authorized by 38 U.S.C. 1115 are paid in addition to 
payments authorized by 38 U.S.C. 1114 as payment for the level of 
impairment caused by the veteran's service-connected disability. 
Because payments under section 1115 are in addition to payments for 
impairment due to disability and because they are paid ``for 
dependents,'' the clear purpose of section 1115 is to provide payments 
to the disabled veteran because of the economic burden associated with 
providing for dependents. See Rose v. Rose, 481 U.S. 619, 630-31 (1987) 
(citing 38 U.S.C. 315 (now codified as 38 U.S.C. 1115) and concluding 
that ``Congress clearly intended veterans' disability benefits to be 
used, in part, for the support of veterans' dependents''). We do not 
believe that Congress intended to authorize payment to the veteran of a 
dependents' allowance in cases where the veteran does not have a 
present parent-child relationship with the adopted-out child and thus 
would not incur the economic burdens the statute is designed to 
address.
    The legislative history of the statute further supports this 
interpretation. The current version of 38 U.S.C. 1115 originated in 
1958 under Public Law 85-857, 72 Stat. 1121. However, ``[t]he 
additional compensation for dependents was first authorized by Public 
Law 877, 80th Congress, approved July 2, 1948.'' Letter from Bradford 
Morse, Dep. Adm. U.S. Vet. Adm., to Rep. Olin E. Teague, Chair, H. 
Comm. on Veterans Affairs, contained in H.R. Rep. No. 86-1541, at 3 
(1960). By enacting this statute, Congress intended that a veteran 
entitled to compensation based on a service-connected disability rated 
not less than a designated level would receive additional compensation 
on account of his or her children.
    Additionally, ``the legislative history [of Public Law 80-877] 
indicates that one of the reasons for limiting the benefits provided by 
the act to persons 60 percent or more disabled was based on the fact 
that this group of veterans because of the serious nature of their 
disabilities are not generally in a position to supplement their 
compensation payments by income from steady employment'' and ``veterans 
with disabilities rated less than 50 percent are generally able to 
supplement their compensation payments with other income.'' See H.R. 
Rep. No. 86-1541, at 3-4. In view of section 1115's legislative 
history, VA believes Congress intended the section 1115 allowance to 
only supplement a veteran's income, that is, to provide additional 
budgetary support within the veteran's household expense framework. 
Section 101(13) of title 38, U.S.C., in part, defines the term 
``compensation'' as a ``monthly payment made by the Secretary to a 
veteran because of service-connected disability'' (emphasis added), 
which may be supplemented by ``other income'' to support the veteran's 
family, see H.R. Rep. No. 1541, at 4. Compare with 38 U.S.C. 101(14) 
(defining the term ``dependency and indemnity compensation'' as ``a 
monthly payment made by the Secretary to a . . . child'') (emphasis 
added). Thus, the section 1115 allowance was provided for those 
veterans who likely were unable to supplement their compensation 
payments to support their family with ``other income'' due to their 
service-connected disabilities.
    The Secretary, however, does not interpret the legislative history 
to support, nor intend this rulemaking, to restrict to any degree a 
child's right to receive VA benefits in the child's own right, such as 
dependency and indemnity compensation (DIC), which is not necessarily 
dependent upon a continuing, legally based parent-child relationship. 
See 38 CFR 3.5 (referring to a child's entitlement to DIC); 38 U.S.C. 
101(14) (defining DIC as ``a monthly payment made by the Secretary to a 
. . . child'') (emphasis added). The U.S. Court of Appeals for the 
Federal Circuit has held that the dependent's allowance, or child's 
allowance under section 1115, is provided to the veteran, not to the 
veteran's children (or other dependents). See Sharp v. Nicholson, 403 
F.3d 1324, 1327 (Fed. Cir. 2005) (``[T]he reference [in 38 U.S.C. 1115] 
to `additional compensation' . . . indicates that the veteran, who is 
already entitled to some degree of compensation for his service-
connected disability, is also entitled to a supplementary amount 
because he or she has dependents.''). See also H.R. Rep. No. 1541, at 
3-4. We find it significant that payments under section 1115 are 
payments to the veteran based on the veteran's relationship to the 
purported child, whereas DIC and certain other benefits are paid to the 
child in his or her own right.

[[Page 71368]]

    VA's current regulation at 38 CFR 3.58 derives from a line of VA 
legal opinions consistently holding that a child's adoption out of a 
veteran's family does not affect the child's right to receive DIC or 
similar benefits payable to the child in his or her own right. One of 
the earliest of these opinions, which was relied upon in part to 
support VA's current policy in Sec.  3.58, was issued by the Bureau of 
War Risk Insurance, a predecessor agency to VA, in 1919 and prior to 
enactment of section 1115. This opinion stated, ``An adopted child, is 
in a legal sense, the child both of its natural and of its adopting 
parents, and is not, because of the adoption, deprived of its rights of 
inheritance from its natural parents, unless the statute of the state 
of its domicile expressly so provides.'' See Memorandum, Bureau of War 
Risk Insurance, General Counsel (Apr. 5, 1919). The Secretary notes 
that, similar to DIC and unlike additional compensation under section 
1115, inheritance rights of a child who is adopted from the biological 
parents are not contingent on an existing child-parent relationship or 
financial dependency on the biological parents and may survive a legal 
adoption, depending upon the laws of individual states. See Child 
Welfare Information Gateway, U.S. Dept. of Health & Human Services, 
Interstate Inheritance Rights for Adopted Persons 2 (2012), available 
at https://www.childwelfare.gov/systemwide/laws_policies/statutes/inheritance.pdf. Because the additional compensation payable to a 
veteran for a child under 38 U.S.C. 1115 is the benefit of the veteran, 
not the child, the logic of the prior VA opinions and the analogy to 
the child's right to inherit from the veteran who is the child's 
biological parent are not relevant to section 1115.
    We recognize that this interpretation may be viewed as treating an 
adopted-out child's status as the veteran's ``child'' differently for 
purposes of section 1115 in comparison to other benefits. However, we 
believe our interpretation is warranted by the specific requirements 
and clear purpose of section 1115, which distinguish that statute from 
statutes governing DIC and other benefits, and by the rationale in 
prior VA opinions for finding that adoption out of the veteran's family 
does not terminate the child's right to receive benefits in his or her 
own right. We believe our interpretation is reasonable and logically 
comports with the intent of Congress.

II. Proposed Regulatory Amendments

    For the reasons discussed above, VA proposes to implement this 
interpretation of section 1115 by modifying 38 CFR 3.57, 3.58, and 
3.458.
    The proposed amendment to Sec.  3.57 would add a third exception to 
the definition of child in Sec.  3.57(a) to provide that the definition 
of child does not include a child who is adopted out of a veteran's 
family in connection with any benefits that are provided to a veteran 
pursuant to 38 U.S.C. 1115. The amended regulation would state that 
this limitation would not apply to any VA benefit payable directly to a 
child in the child's own right, such as DIC under 38 CFR 3.5. The same 
limitation would be added to Sec.  3.58, the regulation governing a 
child adopted out of a family. Both proposed amendments would be 
consistent with the legislative intent of section 1115 to provide 
supplemental income to a veteran to enhance the veteran's efforts to 
provide financial support to the veteran's then constituted family. 
Congress recognized that this supplemental income was necessary because 
the veteran's service-connected disability or disabilities would hinder 
the veteran's ability to generate earned income. Once a child is no 
longer a member of the veteran's family, the veteran's corresponding 
family-related expenses would presumably and proportionately decrease, 
so the veteran should no longer receive increased compensation due to 
the child, who would no longer be financially dependent on the veteran.
    Consistent with the intent of Congress, specifically that the 
additional benefits that are provided under section 1115 are intended 
to supplement the veteran's income, VA also proposes to amend 38 CFR 
3.458, which sets forth limitations on the apportionment of a veteran's 
benefits. VA proposes to amend Sec.  3.458 to exclude the apportionment 
of section 1115 benefits in the case of an adopted-out child because 
section 1115 benefits would no longer be payable in the case of an 
adopted-out child.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action'' requiring review by the Office of 
Management and Budget (OMB), unless OMB waives such review as, ``any 
regulatory action that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) 
Create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) Materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) Raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866.
    VA's impact analysis can be found as a supporting document at 
http://www.regulations.gov, usually within 48 hours after the 
rulemaking document is published. Additionally, a copy of the 
rulemaking and its impact analysis are available on VA's Web site at 
http://www.va.gov/orpm/, by following the link for ``VA Regulations 
Published From FY 2004 Through Fiscal Year to Date.''

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (5 
U.S.C. 601-12). This proposed rule would not directly affect small 
entities. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is 
exempt from the initial and final regulatory flexibility analysis 
requirements of sections 603 and 604.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal

[[Page 71369]]

governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year. This 
proposed rule would have no such effect on State, local, and tribal 
governments, or on the private sector.

Paperwork Reduction Act

    This proposed rule contains no provisions constituting a collection 
of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-21).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.102, Compensation for 
Service-Connected Deaths for Veterans' Dependents; 64.105, Pension to 
Veterans, Surviving Spouses, and Children; 64.109, Veterans 
Compensation for Service-Connected Disability; and 64.110, Veterans 
Dependency and Indemnity Compensation for Service-Connected Death.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Jose D. 
Riojas, Chief of Staff, Department of Veterans Affairs, approved this 
document on November 21, 2014, for publication.

List of Subjects in 38 CFR Part 3

    Administrative practice and procedure, Claims, Disability benefits, 
Health care, Pensions, Radioactive materials, Veterans, Vietnam.

    Dated: November 26, 2014.
William F. Russo,
Acting Director, Office of Regulation Policy & Management, Office of 
the General Counsel, U.S. Department of Veterans Affairs.

    For the reasons set out in the preamble, the Department of Veterans 
Affairs proposes to amend 38 CFR part 3 as follows:

PART 3--ADJUDICATION

Subpart A--Pension, Compensation, and Dependency and Indemnity 
Compensation

0
1. The authority citation for part 3, subpart A continues to read as 
follows:


    Authority: 38 U.S.C. 501(a), unless otherwise noted.

0
2. Amend Sec.  3.57 by:
0
a. In paragraph (a)(1) introductory text, removing the phrase 
``paragraphs (a)(2) and (3)'' and adding in its place ``paragraphs 
(a)(2) through (4)'';
0
b. Adding paragraph (a)(4).
0
c. Adding an authority citation immediately following paragraph (a)(4).
0
d. Revising the Cross References at the end of the section.
    The revisions and additions read as follows:


Sec.  3.57  Child.

    (a) * * *
    (4) For purposes of any benefits provided under 38 U.S.C. 1115, 
Additional compensation for dependents, the term child does not include 
a child of a veteran who is adopted out of the family of the veteran. 
This limitation does not apply to any benefit administered by the 
Secretary that is payable directly to a child in the child's own right, 
such as dependency and indemnity compensation under 38 CFR 3.5.

(Authority: 38 U.S.C. 101(4), 501, 1115)

* * * * *
    Cross References: Improved pension rates. See Sec.  3.23. Improved 
pension rates; surviving children. See Sec.  3.24. Child adopted out of 
family. See Sec.  3.58. Child's relationship. See Sec.  3.210. 
Helplessness. See Sec.  3.403(a)(1). Helplessness. See Sec.  
3.503(a)(3). Veteran's benefits not apportionable. See Sec.  3.458. 
School attendance. See Sec.  3.667. Helpless children--Spanish-American 
and prior wars. See Sec.  3.950.
0
3. Revise Sec.  3.58 to read as follows:


Sec.  3.58  Child adopted out of family.

    (a) Except as provided in paragraph (b) of this section, a child of 
a veteran adopted out of the family of the veteran either prior or 
subsequent to the veteran's death is nevertheless a child within the 
meaning of that term as defined by Sec.  3.57 and is eligible for 
benefits payable under all laws administered by the Department of 
Veterans Affairs.
    (b) A child of a veteran adopted out of the family of the veteran 
is not a child within the meaning of Sec.  3.57 for purposes of any 
benefits provided under 38 U.S.C. 1115, Additional compensation for 
dependents.

(Authority: 38 U.S.C. 101(4)(A), 1115)

    Cross References: Child. See Sec.  3.57. Veteran's benefits not 
apportionable. See Sec.  3.458.
0
4. Amend Sec.  3.458 by:
0
(a) In paragraph (d) removing the phrase ``, except the additional 
compensation payable for the child''.
0
(b) Adding Cross References at the end of the section.
    The addition reads as follows:


Sec.  3.458  Veterans benefits not apportionable.

* * * * *
    Cross References: Child. See Sec.  3.57. Child adopted out of 
family. See Sec.  3.58.

[FR Doc. 2014-28374 Filed 12-1-14; 8:45 am]
BILLING CODE 8320-01-P