Update and Clarify Regulatory Bars to Benefits Based on Character of Discharge, 41471-41477 [2020-14559]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 85, Number 133 (Friday, July 10, 2020)]
[Proposed Rules]
[Pages 41471-41477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14559]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AQ95


Update and Clarify Regulatory Bars to Benefits Based on Character 
of Discharge

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
regulations regarding character of discharge determinations. VA 
proposes to modify the regulatory framework for discharges considered 
``dishonorable'' for VA benefit eligibility purposes, such as 
discharges due to ``willful and persistent misconduct,'' ``an offense 
involving moral turpitude,'' and ``homosexual acts involving 
aggravating circumstances or other factors affecting the performance of 
duty.'' VA also proposes to extend a ``compelling circumstances'' 
exception to certain regulatory bars to benefits in order to ensure 
fair character of discharge determinations in light of all pertinent 
factors.

DATES: Comments must be received on or before September 8, 2020.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Office of 
Regulation Policy and Management (00REG), Department of Veterans 
Affairs, 810 Vermont Avenue NW, Room 1064, Washington, DC 20420; or by 
fax to (202) 273-9026. Comments should indicate that they are submitted 
in response to ``RIN 2900-AQ95--Update and Clarify Regulatory Bars to 
Benefits Based on Character of Discharge.'' Copies of comments received 
will be available for public inspection in the Office of Regulation 
Policy and Management, Room 1064, 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: Olumayowa Famakinwa, Policy Analyst, 
Regulations Staff (210), Compensation Service (21C), Department of 
Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 
461-9700. (This is not a toll-free telephone number.)

SUPPLEMENTARY INFORMATION:

I. Existing Character of Discharge Determination Process

    Eligibility for most VA benefits requires that a former service 
member be a ``veteran.'' ``Veteran'' status is bestowed to former 
service members ``who served in the active military, naval, or air 
service, and who [were] discharged or released therefrom under 
conditions other than dishonorable.'' 38 U.S.C. 101(2). Assuming the 
active service requirement is met, VA relies primarily on a former 
service member's character of service designated by the Armed Forces to 
determine whether a former service member was separated from service 
``under conditions other than dishonorable.'' See 38 U.S.C. 101(2), 
(18); see also 38 CFR 3.1(a), (d). The Armed Forces characterize 
discharge or release from service into one of five categories: 
Honorable, under honorable conditions (general), other than honorable 
(OTH), bad conduct (adjudicated by a general court or special court-
martial), or dishonorable (or dismissal in the case of commissioned 
officers). The Armed Forces also has three categories of 
uncharacterized administrative separations: entry-level separation, 
void enlistment, or dropped from the rolls.
    Section 3.12 of title 38, Code of Federal Regulations (CFR), 
provides the criteria used by VA adjudicators to determine character of 
discharge for purposes of benefit eligibility for former service 
members. First, regardless of the Armed Forces' characterization of 
service, there are six statutory bars to benefits noted in 38 U.S.C. 
5303(a) and reiterated in paragraph (c) of 38 CFR 3.12. The statutory 
bars pertain to former service members discharged or released (1) as a 
conscientious objector who refused to perform military duty, wear the 
uniform, or comply with lawful orders of competent military 
authorities; (2) by reason of the sentence of a general court-martial; 
(3) by resignation of an officer for the good of

[[Page 41472]]

the service; (4) as a deserter; (5) as an alien during a period of 
hostilities, where it is affirmatively shown that the former service 
member requested his or her release; and (6) under OTH conditions as a 
result of an absence without official leave (AWOL) for a continuous 
period of at least 180 days.
    In addition, there are five regulatory bars to benefits provided in 
paragraph (d) of 38 CFR 3.12, pertaining to former service members who 
were discharged or released based on (1) acceptance of an undesirable 
discharge to escape trial by general court-martial; (2) mutiny or 
spying; (3) an offense involving moral turpitude, to include generally 
conviction of a felony; (4) willful and persistent misconduct; and (5) 
homosexual acts involving aggravating circumstances or other factors 
affecting the performance of duty.
    To determine eligibility for benefits, VA must evaluate the 
character of service for each period of active duty service. See 38 CFR 
3.12(a). If the Armed Forces characterized the former service member's 
service as either ``honorable,'' ``under honorable conditions 
(general),'' or as an uncharacterized administrative separation 
categorized as ``an entry-level separation,'' VA considers a former 
service member to have met the character of discharge requirement, 
without further review of his or her service record, unless the 
discharge documents show a separation reason that is listed as a bar to 
benefits under 38 U.S.C. 5303(a) and 38 CFR 3.12(c). 38 CFR 3.12(a) and 
(k)(1).
    If the Armed Forces characterized the former service member's 
service as dishonorable, the former service member would generally be 
deemed ineligible for any VA benefits based on that period of service, 
unless the insanity exception applied. See 38 CFR 3.12(b). The insanity 
exception applies to situations where the former service member was 
found to be insane at the time of the offense leading to his or her 
court-martial, discharge or resignation. See 38 CFR 3.354(b).
    Generally, a discharge under dishonorable conditions will not bar a 
former service member from receiving VA benefits if that service member 
has another period of service which ended under honorable conditions 
for which the statutory bars would not apply--as VA benefits would be 
predicated on that honorable period of service. See 38 CFR 3.12(a); see 
also 38 U.S.C. 101(18); VAOPGCPREC 61-1991. In the case of commissioned 
or warrant officers who are discharged from an enlistment for the sole 
purposes of accepting a commission, VA considers the entire period of 
service (i.e., from enlistment through commission period) as one 
continuous period of service with entitlement of VA benefits determined 
by the character of final termination of such period of active service. 
See 38 CFR 3.13.
    If the character of service is denoted by the Armed Forces as under 
``other than honorable'' conditions, as ``bad conduct,'' or as an 
``uncharacterized'' separation (categorized as either ``void 
enlistment'' or ``dropped from the rolls''), then VA must 
administratively assess eligibility for VA benefits and services and 
make a VA character of discharge determination on whether or not the 
period of military service is ``under conditions other than 
dishonorable'' for VA benefits purposes. See 38 U.S.C. 101(2); see also 
38 CFR 3.12(a) and (k)(2) and (3). This VA character of discharge 
determination does not change the Armed Forces' characterization of 
service and has no effect on the former service member's military 
discharge status. Rather, VA's determination is for VA benefits and 
services eligibility purposes only.
    During VA's administrative review of the service member's character 
of discharge, VA examines the facts and circumstances that surround the 
Armed Forces' characterization of service and assesses the statutory 
and regulatory bars to VA benefits. VA will request all available 
records, including service treatment and personnel records from the 
relevant military service department. VA will also send advance notice 
to the former service member, with an applicable response time limit 
for him or her to submit any evidence, contention, or argument 
surrounding facts and circumstances that led to the Armed Forces' 
characterization of military service. When necessary, VA will resolve 
any reasonable doubt in favor of the former service member, including 
when the service department provides limited records to VA as to the 
nature of the discharge and no statutory or regulatory bar exists.

A. Statutory Bars to Benefits

    A former service member must be denied benefits, regardless of the 
Armed Forces' characterization of service, if the reason for separation 
from the period of service that benefits would be predicated upon falls 
within one of the six statutory bars. See 38 U.S.C. 5303(a). In 
situations where a former service member did not receive a discharge or 
release at the completion of an originally intended period of service 
because that individual agreed to an extension, VA looks to the 
satisfactory completion of that initial period to assess character of 
discharge for that period, even if the extension results in a 
dishonorable discharge. See 38 U.S.C. 101(18); see also 38 CFR 3.13(c). 
However, a statutory bar to benefits would apply as to a period of 
service to any former service member who was discharged or released 
under one of the six conditions enumerated in 38 CFR 3.12(c).
    The statutory bar involving prolonged unauthorized absence of 180 
consecutive days or more is the only conditional statutory bar to 
benefits. VA may consider whether ``compelling circumstances'' mitigate 
such a prolonged unauthorized absence. See 38 U.S.C. 5303(a). If 
compelling circumstances mitigate the absence, then the statutory bar 
to benefits would not apply. Congress left the issue of what 
constitutes compelling circumstances to VA's discretion. The statute 
does not define or give examples of what would rise to a compelling 
circumstance. To assist its adjudicators in reviewing compelling 
circumstances, VA, through regulation, has provided circumstances to 
consider when contemplating compelling circumstances. See 38 CFR 
3.12(c)(6)(i)-(iii).
    First, VA adjudicators must review the length and quality of the 
service exclusive of time spent AWOL. See 38 CFR 3.12(c)(6)(i). Second, 
VA adjudicators must consider the reason for going AWOL, including 
family emergencies or obligations, similar types of obligations or 
duties owed to third parties, a person's age, cultural background, 
educational level, judgmental maturity, and how the situation appeared 
to the former service member (not how the VA adjudicator might have 
reacted). See 38 CFR 3.12(c)(6)(ii). Third, VA adjudicators must 
consider any hardships or suffering incurred during overseas service, 
or as a result of combat wounds of other service-incurred or aggravated 
disability. Id. Finally, VA adjudicators must consider a legal defense 
which would have precluded a conviction or valid charge under the 
Uniform Code of Military Justice (UCMJ) if the legal defense directly 
addresses the substantive issue of absence rather than procedures, 
technicalities or formalities. See 38 CFR 3.12(c)(6)(iii).

B. Regulatory Bars to Benefits

    Independent of the statutory bars to benefits, VA must also 
consider whether a former service member's discharge was ``under 
conditions other than dishonorable.'' 38 U.S.C. 101(2); Public Law 78-
346, 1503 (1944). Congress gave VA broad authority to consider

[[Page 41473]]

discharges based on certain conduct as dishonorable. Camarena v. Brown, 
6 Vet. App. 565, 568 (1994), aff'd 60 F.3d 843 (1995); 90 Cong. Rec. at 
3077 (Mar. 24, 1944) (Sen. Clark) (for certain conduct, ``the Veterans' 
Administration will have some discretion with respect to regarding the 
discharge from the service as dishonorable''). Over 70 years ago, VA 
used this authority to adopt regulatory bars to benefits that are now 
enumerated in 38 CFR 3.12(d). See VA Regulations and Procedures (R&PR) 
1064(A) (1946). Those regulatory bars were noted above and are further 
discussed below.

II. VA's Proposed Regulatory Changes

    In January 2016, VA received a petition for rulemaking from Swords 
to Plowshares (STP) requesting that VA amend 38 CFR 3.12(a) and (d) 
(pertaining to character of discharge), as well as 38 CFR 17.34 and 
17.36 (pertaining to health care eligibility and enrollment). Swords to 
Plowshares, VA Rulemaking Petition to Amend Regulations Interpreting 38 
U.S.C. 101 (2) (December 19, 2015), available at https://www.swords-to-plowshares.org/wp-content/uploads/VA-Rulemaking-Petition-to-amend-regulations-interpreting-38-U.S.C.-10122.pdf. STP argued that VA's 
character of discharge determination process lacked consistency and 
that the regulatory bars concerning moral turpitude, willful and 
persistent misconduct, and aggravating homosexual acts were outdated or 
vague.
    VA is still considering appropriate changes for 38 CFR 17.34 and 
17.36, particularly in light of the 2018 enactment of 38 U.S.C. 1720I. 
But VA has reviewed 38 CFR 3.12 and, particularly given that paragraph 
(d) has not been updated since 1980, VA is proposing changes. The goal 
of VA's review is to ensure an updated as well as consistent approach 
in defining which former service members have been discharged ``under 
conditions other than dishonorable.'' See 38 U.S.C. 101(2); see also 38 
CFR 3.1(d). As a part of its review, VA has researched the evolution of 
its current character of discharge policies, current military manuals, 
and the legislative intent behind 38 U.S.C. 101(2). In updating its 
regulatory framework for bars to benefits, VA proposes the following 
regulatory changes.

A. Homosexual Acts Involving Aggravating Circumstances

    Though current Sec.  3.12(d)(5) bars benefits for former 
servicemembers discharged for homosexual acts involving aggravating 
circumstances or other factors affecting the performance of duty, VA 
believes that this bar should apply to all sexual acts involving 
aggravating circumstances or affecting the performance of duty, 
regardless of the former service member's sexual orientation. Thus, VA 
will replace the word ``homosexual'' with ``sexual'' throughout this 
provision (which will be relocated to Sec.  3.12(d)(2)(iii)).

B. Moral Turpitude and Willful and Persistent Misconduct

    VA's Office of General Counsel (OGC) issued an opinion that defines 
``moral turpitude'' as ``a willful act committed without justification 
or legal excuse which gravely violates accepted moral standards and . . 
. would be expected to cause harm or loss to person or property.'' 
VAOPGC 6-87 (July 27, 1987). OGC stated that a moral turpitude offense 
may include conduct that does not result in prosecution or conviction. 
Id. To the extent there has been any confusion or inconsistency in 
applying the definition of moral turpitude, we propose to incorporate 
OGC's explanation into the text of 38 CFR 3.12(d). However, we will 
omit the phrase ``without justification or legal excuse'' because any 
determination on this matter will have to consider ``compelling 
circumstances'' as further discussed below.
    As to willful and persistent misconduct, VA regulations already 
define ``willful misconduct'' as ``an act involving conscious 
wrongdoing or known prohibited action.'' 38 CFR 3.1(n). The act must 
involve deliberate or intentional wrongdoing with knowledge of or 
wanton and reckless disregard of its probable consequences. 38 CFR 
3.1(n)(1). A mere technical violation of police regulations or 
ordinances will not per se constitute willful misconduct. 38 CFR 
3.1(n)(2).
    ``Persistent misconduct'' is not defined by statute or regulation; 
however, the plain meaning of the term contemplates misconduct that is 
ongoing over a period of time, or conduct that recurs on more than one 
occasion. Merriam-Webster's Collegiate Dictionary 865 (10th ed. 2000). 
VA already recognizes that an isolated offense does not qualify and 
that multiple offenses are not automatically deemed ``persistent.'' See 
M21-1 Adjudication Procedures Manual, Part III, Subpart v. Chapter 1, 
Section B, Topic 3, Block d, ``Additional Information on Discharges for 
Willful and Persistent Misconduct, https://www.knowva.ebenefits.va.gov/.
    Nevetheless, to improve consistency in adjudications, VA proposes 
to provide a regulatory standard in determining ``persistent 
misconduct.'' VA would consider instances of minor misconduct occurring 
within two years of each other, an instance of minor misconduct 
occurring within two years of more serious misconduct, and instances of 
more serious misconduct occurring within five years of each other as 
``persistent.'' The misconduct would not have to be of a similar 
nature, type, or offense to be considered ``persistent.'' (For example, 
disrespect toward a sentinel followed four days later by leaving the 
scene of a vehicle accident would be considered ``persistent'' 
misconduct.)
    VA already makes a distinction in its regulation between minor and 
more serious offenses in Sec.  3.12(d)(4), and accepts that mere 
technical violations of police regulations or ordinances are not, by 
themselves, willful misconduct, Sec.  3.1(n)(2). But to bring 
consistency to the use of that term, ``minor misconduct'' would be 
defined as ``minor offense'' is in the Manual for Courts-Martial United 
States (MCM): ``[o]rdinarily . . . an offense for which the maximum 
sentence imposable would not include a dishonorable discharge or 
confinement for longer than 1 year if tried by general court-martial.'' 
MCM Part V, para.1.e (2019). Beyond that general rule, the MCM states 
that determining whether an offense is minor can depend on several 
factors (circumstances, age, etc.), but VA will account for those 
factors in Sec.  3.12(e), as discussed below. Thus, it would be 
consistent with military law for VA to adopt a definition of minor 
misconduct based on the MCM's general definition of minor offense 
(which, notably, examines the maximum sentence imposable--not the 
sentence actually given). We believe that reliance on the MCM will 
bring consistency to determinations in this realm and that use of the 
MCM is appropriate considering that the offenses and misconduct 
considered would have occurred when the former service member was under 
the jurisdiction of the military.
    The definition of ``persistent'' is derived from the statutes of 
limitations for punishment in the MCM and the UCMJ. For nonjudicial 
punishment, which is typically imposed for acts or omissions that are 
minor offenses, the statute of limitations is generally two years. Id. 
at Part V, para. 1.f(4); see also 10 U.S.C. 843(b)(3). For judicial 
punishments, the UCMJ generally provides a five year statute of 
limitations (though there is no limitation for murder, rape, sexual 
assault, AWOL or missing movement in time of war, or any other offense

[[Page 41474]]

punishable by death). See 10 U.S.C. 843(a)-(b). Just as the military 
will generally no longer prosecute a minor offense after two years or 
other more serious offenses after five years, VA will consider minor 
offenses occurring more than two years apart and other more serious 
offenses occurring more than five years apart as not meeting the 
persistence standard. That said, we note that some more serious 
offenses may also meet the standard of ``moral turpitude'' and 
therefore warrant a bar of benefits under that provision.
    It is important to address how AWOL would relate to this definition 
of ``willful and persistent misconduct.'' Again, VA would consider the 
MCM, which provides maximum punishments of dishonorable discharge for 
certain types of AWOL (e.g., absence from unit for more than 30 days, 
whether terminated by apprehension or not), and lesser punishment for 
other types of AWOL (e.g., absent from guard or watch, even with intent 
to abandon, or absent with intent to avoid maneuvers or field 
exercises). See MCM Part IV, para. 10.d (Article 86.d). The following 
chart demonstrates how VA will consider AWOL for the purposes of 
determining willful and persistent misconduct:

------------------------------------------------------------------------
                                             Minor           Serious
             Type of AWOL                  misconduct       misconduct
------------------------------------------------------------------------
Failing to go, going from appointed                  X
 place of duty........................
Absence from unit, organization, or
 other place of duty:
    For not more than 30 days.........               X
    For more than 30 days.............  ...............               X
    For more than 30 days and           ...............               X
     terminated by apprehension.......
Absence from guard or watch...........               X
Absence from guard or watch with                     X
 intent to abandon....................
Absence with intent to avoid maneuvers               X
 or field exercises...................
------------------------------------------------------------------------

    This approach would provide VA with more consistent outcomes in 
applying the willful and persistent misconduct bar to cases involving 
AWOL.

C. Acceptance of an Undesirable Discharge to Escape Trial by General 
Court-Martial

    VA proposes to replace the term ``undesirable discharge'' in 
current Sec.  3.12(d)(1) with ``a discharge under other than honorable 
conditions or its equivalent'' to conform to the terminology that has 
been used since 1977. See Public Law 95-126 (1977). VA also proposes to 
replace the phrase ``to escape'' in current Sec.  3.12(d)(1) with ``in 
lieu of'' to conform to the teminology that service departments 
currently use and to avoid ascribing motivation or stigma to a former 
service member's decision to accept a discharge rather than to proceed 
to trial by a general court-martial.

D. Compelling Circumstances

    As noted above, the statutory bar involving prolonged unauthorized 
absence of 180 consecutive days or more is the only conditional 
statutory bar to benefits. If ``compelling circumstances'' mitigate the 
AWOL, then the statutory bar to benefits would not apply.
    VA proposes to extend this ``compelling circumstances'' exception 
to three current regulatory bars to benefits: Sexual acts involving 
aggravating factors, willful and persistent misconduct, and offenses 
involving moral turpitude. Thus, VA will move the list of factors for 
consideration in a ``compelling circumstances'' analysis (currently 
located at Sec.  3.12(c)(6)(i)-(iii)) to Sec.  3.12(e). This list is 
not exhaustive, so VA adjudicators will have the necessary flexibility 
to deal with unique situations that may arise in reviewing character of 
discharge determinations--but many of these factors may not be 
pertinent in a given case, depending on the conduct at issue. (For 
example, it is difficult to imagine family obligations being used as a 
compelling circumstance excusing murder or aggravating sexual acts.) 
Compelling circumstances, as applied, will be decided on a case-by-case 
basis.
    VA will continue to exclude application of the ``compelling 
circumstances'' exception to those discharged for mutiny or spying 
because of the seriousness of these offenses, which require forfeiture 
of all accrued or future gratuitous benefits per 38 U.S.C. 6104. 
Likewise, VA will not consider this exception for those who accept an 
OTH (or equivalent) discharge in lieu of trial by general court-
martial. Armed Forces procedures ensure that the service member has 
full knowledge of the consequences of such a separation, including the 
``[l]oss of veterans' benefits.'' See Army Regulation (AR) 635-200, 
Chapter 10-2.a(9); Air Force Instruction (AFI) 36-3208, Chapter 4, 
Figure 4.1, ] 3; MILPERSMAN 1910-106, 2.a, ] 4; MARCORSEPMAN 1900.16, ] 
6419.3.d(3); and COMDTINST M1000.4, 1.A.5.d(1). Armed Forces procedures 
ensure that the service member is not coerced into accepting this type 
of separation and that the individual is offered an opportunity to 
consult legal counsel prior to agreeing to such a separation. See, 
e.g., AR 635-200, Chapter 10-2; AFI 36-3208, Chapter 4.3.3; MILPERSMAN 
1910-106, 2.a, ] 1-2. In addition, certain military branches provide 
medical examinations while processing these applications for discharge, 
to ensure that the service member is capable of providing informed 
consent to this type of separation. See, e.g., AR 635-200, Chapter 10-
6; AFI 36-3208, Chapter 4.7; MILPERSMAN 1910-106, 2.d; and COMDTINST 
M1000.4, 1.A.5.d(3). Moreover, accepting a discharge in lieu of trial 
by general court-martial does not always result in an OTH discharge; a 
former service member can receive a general discharge, an entry-level 
separation, or even an honorable discharge. See, e.g., AR 635-200, 
Chapter 10-8; AFI 36-3208, Chapter 4.2; MILPERSMAN 1910-106, 3.a. In 
such cases, the regulatory bars to benefits would not even apply. 38 
CFR 3.12(a), (k)(1). Finally, this regulatory bar applies only to 
former service members who could have been tried by a general court-
martial, not a special court-martial; and since the sentence of a 
general court-martial is a statutory bar to benefits, we do not believe 
that accepting a discharge in lieu of such a trial should result in the 
possibility of a different outcome.

III. Proposed Regulatory Amendments

    Pursuant to the above discussion, VA proposes the following 
amendments to Sec.  3.12. VA would amend the title to ``Benefit 
eligibility based on character of discharge.'' This change would 
reflect the fact that VA does not have the authority to alter a 
characterization of service issued by the Armed Forces and that VA 
utilizes the designation to determine basic VA benefit eligibility.

[[Page 41475]]

    VA would amend paragraph (a) by adding the descriptive header 
``General rule'' and rewording the section to read in the affirmative.
    VA would amend paragraph (b) to add the descriptive header 
``Insanity exception,'' add a sentence cross-referencing 38 CFR 3.354's 
definition of insanity, and make non-substantive amendments for 
clarity.
    VA would amend paragraph (c) to add the descriptive header 
``Statutory bars to benefits.'' In paragraph (c)(1), VA will make a 
minor edit to make ``lawful order'' plural so that it accurately 
reflects the text of 38 U.S.C. 5303(a). In paragraph (c)(6), VA will 
add a reference to 38 U.S.C. 5303(a) in the first sentence. VA would 
also divide the language of current paragraph (c)(6) into two 
subparagraphs, with descriptive headers and other non-substantive 
changes. VA would move current (c)(6)(i)-(iii) regarding ``compelling 
circumstances'' to new paragraph (e).
    VA would amend paragraph (d) to add the descriptive header 
``Regulatory bars to benefits.'' In addition, VA would add a new format 
based on whether the ``compelling circumstances'' exception is or is 
not applicable. As noted above, the phrase ``Acceptance of an 
undesirable discharge to escape trial'' in current paragraph (d)(1) 
will be replaced with ``Acceptance of a discharge under other than 
honorable conditions or its equivalent in lieu of trial'' in new 
paragraph (d)(1)(i).
    New paragraph (d)(2) would contain the updated and clarified 
regulatory bars for moral turpitude, willful and persistent misconduct, 
and sexual acts involving aggravating circumstances or other factors 
affecting performance of duty.
    New paragraph (e) would provide guidance concerning the 
``compelling circumstances'' exception. The circumstances listed in 
(e)(1) and (2) are expansions upon current paragraphs (c)(6)(i) and 
(ii), while the circumstances listed in (e)(3) will substantively 
replicate current paragraph (c)(6)(iii), with minor wording changes to 
reflect the fact that this language can now be applied to misconduct 
outside the AWOL context.
    The remaining paragraphs of Sec.  3.12 are provided descriptive 
headers and updated cross-references after the addition of new 
paragraph (e).
Executive Orders 12866, 13563, and 13771
    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. 
The Office of Information and Regulatory Affairs has determined that 
this rule is a significant regulatory action under Executive Order 
12866.
    VA's impact analysis can be found as a supporting document at 
https://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 website at 
https://www.va.gov/orpm/, by following the link for ``VA Regulations 
Published From FY 2004 Through Fiscal Year to Date.''
    This proposed rule is expected to be an Executive Order 13771 
regulatory action. Details on the estimated costs of this proposed rule 
can be found in the rule's economic analysis.
Regulatory Flexibility Act
    The Secretary hereby certifies that this proposed rule will 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. 601-612). The anticipated costs of this regulatory action are 
directly and only attributed to VA's internal processing and budgetary 
appropriations. There are no small entities involved or impacted by 
this regulatory action. Therefore, pursuant to 5 U.S.C. 605(b), the 
initial and final regulatory flexibility analysis requirements of 5 
U.S.C. 603 and 604 do not apply.
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 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 will have no such effect 
on State, local, and tribal governments, or on the private sector.
Paperwork Reduction Act
    This action contains provisions affecting a collection of 
information, at 38 CFR 3.151, under the provisions of the Paperwork 
Reduction Act (44 U.S.C. 3501-3521). There are no new collections of 
information associated with this rule, but there will be an increase in 
the number of respondents associated with an already approved Office of 
Management and Budget (OMB) control number. The information requirement 
for 38 CFR 3.12 is currently approved by the Office of Management and 
Budget (OMB) and has been assigned control numbers 2900-0747 and 2900-
0004. This rulemaking would increase the number of respondents from the 
existing information collection requirements associated with 38 CFR 
3.12 by increasing the number of claims for benefits submitted under 38 
CFR 3.151. Under the provisions of the Paperwork Reduction Act (44 
U.S.C. 3501-3521), while the actual OMB control number will remain in 
existence due to other information collections on the same OMB control 
number that are approved and active, it increases the number of 
respondents for the approved OMB control number, 2900-0747. This would 
result in an increase of 11,682 estimated annual burden hours and an 
annual cost of $121,590.15. As required by the Paperwork Reduction Act 
of 1995 (at 44 U.S.C. 3507(d)), VA will submit this information 
collection amendment to OMB for its review. Notice of OMB approval for 
this information collection will be published in a future Federal 
Register document.
Catalog of Federal Domestic Assistance
    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.101, Burial Expenses 
Allowance for Veterans; 64.104, Pension for Non-Service-Connected 
Disability for Veterans; 64.105, Pension to Veterans Surviving Spouses, 
and Children; 64.109, Veterans Compensation for Service-Connected 
Disability; 64.110, Veterans Dependency and Indemnity Compensation for 
Service-Connected Death.

List of Subjects in 38 CFR Part 3

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

Signing Authority

    The Secretary of Veterans Affairs 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. Brooks D. 
Tucker, Acting Chief of Staff, Department of Veterans Affairs, approved 
this

[[Page 41476]]

document on May 21, 2020, for publication.

Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of 
the Secretary, Department of Veterans Affairs.
    For the reasons stated in the preamble, the Department of Veterans 
Affairs proposes to amend 38 CFR part 3 as set forth below:

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.  3.12 as follows:
0
a. Revise the section heading.
0
b. Revise paragraphs (a), (b), (c) introductory text, (c)(6), and 
paragraph (d).
0
c. Redesignate paragraphs (e) through (k) as paragraphs (f) through 
(l).
0
d. Revise redesignated paragraphs (f), (g), (h) introductory text, (i) 
introductory text, and (j).
0
e. Add new paragraph (e).
0
f. Add a paragraph heading at the beginning of newly redesignated 
paragraph (k).
    The revisions and additions read as follows:


Sec.  3.12   Benefit eligibility based on character of discharge.

    (a) General rule. If the former service member did not die in 
service, then pension, compensation, or dependency and indemnity 
compensation is payable for claims based on periods of service that 
were terminated by discharge or release under conditions other than 
dishonorable. (38 U.S.C. 101(2)). A discharge under honorable 
conditions is binding on the Department of Veterans Affairs as to 
character of discharge.
    (b) Insanity exception. No bar to benefits under this section shall 
be applied if VA determines that the former service member was insane 
at the time he or she committed the offense(s) leading to the discharge 
or release under dishonorable conditions. (38 U.S.C. 5303(b)). Insanity 
is defined in Sec.  3.354.
    (c) Statutory bars to benefits. Benefits are not payable where the 
former service member was discharged or released under one of the 
following conditions:
    (1) As a conscientious objector who refused to perform military 
duty, wear the uniform, or comply with lawful orders of competent 
military authorities.
* * * * *
    (6) By reason of a discharge under other than honorable conditions 
issued as a result of an absence without official leave (AWOL) for a 
continuous period of at least 180 days (38 U.S.C. 5303(a)).
    (i) Compelling circumstances exception. This bar to benefit 
entitlement does not apply if compelling circumstances mitigate the 
prolonged unauthorized absence, as discussed in paragraph (e) of this 
section.
    (ii) Applicability prior to October 8, 1977. This statutory bar 
applies to any person awarded an honorable or general discharge prior 
to October 8, 1977, under one of the programs listed in paragraph (i) 
of this section, and to any person who prior to October 8, 1977, had 
not otherwise established basic eligibility to receive Department of 
Veterans Affairs benefits. ``Basic eligibility'' for purposes of this 
paragraph means either a Department of Veterans Affairs determination 
that an other than honorable discharge was issued under conditions 
other than dishonorable, or an upgraded honorable or general discharge 
issued prior to October 8, 1977, under criteria other than those 
prescribed by one of the programs listed in paragraph (i) of this 
section. However, if a person was discharged or released by reason of 
the sentence of a general court-martial, only a finding of insanity 
(paragraph (b) of this section) or a decision of a board of correction 
of records established under 10 U.S.C. 1552 can establish basic 
eligibility to receive Department of Veterans Affairs benefits.
    (d) Regulatory bars to benefits. Benefits are not payable where the 
former service member was discharged or released under one of the 
following conditions listed in (d)(1) or (2) of this section.
    (1) Compelling circumstances exception is not applicable for:
    (i) Dischage in lieu of trial. Acceptance of a discharge under 
other than honorable conditions or its equivalent in lieu of trial by 
general court-martial.
    (ii) Mutiny or espionage. Mutiny or spying.
    (2) Compelling circumstances exception is applicable for:
    (i) An offense involving moral turpitude. For purposes of this 
section, ``an offense involving moral turpitude'' means a willful act 
that gravely violates accepted moral standards and would be expected to 
cause harm or loss to person or property. Minor misconduct, as defined 
in paragraph (d)(2)(ii) of this section, will not be considered an 
offense involving moral turpitude.
    (ii) Willful and persistent misconduct. For purposes of this 
section, instances of minor misconduct occurring within two years of 
each other are persistent; an instance of minor misconduct occurring 
within two years of more serious misconduct is persistent; and 
instances of more serious misconduct occurring within five years of 
each other are persistent. For purposes of this section, minor 
misconduct is misconduct for which the maximum sentence imposable 
pursuant to the Manual for Courts-Martial United States would not 
include a dishonorable discharge or confinement for longer than one 
year if tried by general court-martial.
    (iii) Sexual acts involving aggravating circumstances or other 
factors affecting the performance of duty. Examples include child 
molestation; prostitution or solicitation of prostitution; sexual acts 
or conduct accompanied by assault or coercion; and sexual acts or 
conduct taking place between service members of disparate rank, grade, 
or status when a service member has taken advantage of his or her 
superior rank, grade, or status.
    (e) Compelling circumstances exception. The bar to benefits for 
prolonged AWOL under paragraph (c)(6) of this section and the three 
types of misconduct described in paragraph (d)(2) of this section will 
not be applied if compelling circumstances mitigate the AWOL or 
misconduct at issue. The following factors will be considered in a 
determination on this matter:
    (1) Length and character of service exclusive of the period of 
prolonged AWOL or misconduct. Service exclusive of the period of 
prolonged AWOL or misconduct should generally be of such quality and 
length that it can be characterized as honest, faithful and meritorious 
and of benefit to the Nation.
    (2) Reasons for prolonged AWOL or misconduct. Factors considered 
are as follows:
    (i) Mental impairment at the time of the prolonged AWOL or 
misconduct, to include a clinical diagnosis of, or evidence that could 
later be medically determined to demonstrate existence of, 
posttraumatic stress disorder (PTSD), depression, bipolar disorder, 
schizophrenia, substance use disorder, attention deficit hyperactivity 
disorder (ADHD), impulsive behavior, cognitive disabilities, and co-
morbid conditions (i.e., substance use disorder and other mental 
disorders).
    (ii) Physical health, to include physical trauma and any side 
effects of medication.
    (iii) Combat-related or overseas-related hardship.
    (iv) Sexual abuse/assault.

[[Page 41477]]

    (v) Duress, coercion, or desperation.
    (vi) Family obligations or comparable obligations to third-parties.
    (vii) Age, education, cultural background, and judgmental maturity.
    (3) Whether a valid legal defense would have precluded a conviction 
for AWOL or misconduct under the Uniform Code of Military Justice. For 
purposes of this paragraph, the defense must go directly to the 
substantive issue of absence or misconduct rather than to procedures, 
technicalities, or formalities.
    (f) Board of corrections upgrade. An honorable discharge or 
discharge under honorable conditions issued through a board for 
correction of records established under authority of 10 U.S.C. 1552 is 
final and conclusive on the Department of Veterans Affairs. The action 
of the board sets aside any prior bar to benefits imposed under 
paragraph (c) or (d) of this section.
    (g) Discharge review board upgrades prior to October 8, 1977. An 
honorable or general discharge issued prior to October 8, 1977, under 
authority other than that listed in paragraphs (i)(1), (2), and (3) of 
this section by a discharge review board established under 10 U.S.C. 
1553, sets aside any bar to benefits imposed under paragraph (c) or (d) 
of this section except the bar contained in paragraph (c)(2) of this 
section.
    (h) Discharge review board upgrades on or after October 8, 1977. An 
honorable or general discharge issued on or after October 8, 1977, by a 
discharge review board established under 10 U.S.C. 1553, sets aside a 
bar to benefits imposed under paragraph (d), but not under paragraph 
(c) of this section provided that:
* * * * *
    (i) Special review board upgrades. Unless a discharge review board 
established under 10 U.S.C. 1553 determines on an individual case basis 
that the discharge would be upgraded under uniform standards meeting 
the requirements set forth in paragraph (h) of this section, an 
honorable or general discharge awarded under one of the following 
programs does not remove any bar to benefits imposed under this 
section:
* * * * *
    (j) Overpayments after October 8, 1977, due to discharge review 
board upgrades. No overpayments shall be created as a result of 
payments made after October 8, 1977, based on an upgraded honorable or 
general discharge issued under one of the programs listed in paragraph 
(i) of this section which would not be awarded under the standards set 
forth in paragraph (h) of this section. Accounts in payment status on 
or after October 8, 1977, shall be terminated the end of the month in 
which it is determined that the original other than honorable discharge 
was not issued under conditions other than dishonorable following 
notice from the appropriate discharge review board that the discharge 
would not have been upgraded under the standards set forth in paragraph 
(h) of this section, or April 7, 1978, whichever is the earliest. 
Accounts in suspense (either before or after October 8, 1977) shall be 
terminated on the date of last payment or April 7, 1978, whichever is 
the earliest.
    (k) Overpayments after October 8, 1977, based on application of 
AWOL statutory bar.
* * * * *

[FR Doc. 2020-14559 Filed 7-9-20; 8:45 am]
BILLING CODE 8320-01-P