Update and Clarify Regulatory Bars to Benefits Based on Character of Discharge, 32361-32373 [2024-09012]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 89, Number 82 (Friday, April 26, 2024)]
[Rules and Regulations]
[Pages 32361-32373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09012]



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Rules and Regulations
                                                Federal Register
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having general applicability and legal effect, most of which are keyed 
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under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 89 , No. 82 / Friday, April 26, 2024 / Rules 
and Regulations

[[Page 32361]]



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: Final rule.

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SUMMARY: In a document published in the Federal Register on July 10, 
2020, the Department of Veterans Affairs (VA) proposed to amend its 
regulation regarding character of discharge (COD) determinations. After 
considering public comments, VA has decided to finalize its proposal 
with some modifications to expand VA benefits eligibility, bring more 
consistency to adjudications of benefits eligibility, and ensure COD 
determinations consider all pertinent factors.

DATES: 
    Effective date: This final rule is effective June 25, 2024.
    Applicability date: The provisions of this final rule shall apply 
to all applications for benefits that are received by VA on or after 
June 25, 2024, or that are pending before VA, the United States Court 
of Appeals for Veterans Claims, or the United States Court of Appeals 
for the Federal Circuit (Federal Circuit) on June 25, 2024.

FOR FURTHER INFORMATION CONTACT: Robert Parks, Chief, Part 3 
Regulations Staff (211C), 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: 

I. COD Regulatory History

    Eligibility for most VA benefits requires that a former service 
member (SM) be a ``veteran.'' ``Veteran'' status is bestowed to former 
SMs ``who served in the active military, naval, air, or space service, 
and who [were] discharged or released therefrom under conditions other 
than dishonorable.'' 38 U.S.C. 101(2). The term ``conditions other than 
dishonorable'' is not a term of art in the military and was chosen by 
Congress in 1944 to provide VA some discretion with respect to setting 
the standard for Veteran status and benefits eligibility of former SMs. 
Garvey v. Wilkie, 972 F.3d 1333, 1337, 1339 (Fed. Cir. 2020). In 
October 1946, VA codified 38 CFR 2.1064, which reiterated that, for a 
former SM to obtain benefits, the SM must have been terminated under 
conditions ``other than dishonorable.'' VA provided that 
``dishonorable'' discharges included those due to (1) mutiny; (2) 
spying; or (3) an offense involving moral turpitude or willful and 
persistent misconduct (terms that originated in Public Law 68-242, 
section 23, 43 Stat. 613 (1924)). 38 CFR 2.1064(a). VA also considered 
dishonorable an undesirable discharge to escape trial by general court-
martial (GCM) and a discharge due to homosexual acts. 38 CFR 2.1064(c), 
(d). VA further codified the ``statutory bars'' found in the 
Servicemen's Readjustment Act of 1944, Public Law 78-346, section 300, 
58 Stat. 284, which precluded benefits for a person who was (1) 
discharged or dismissed by GCM; (2) discharged for being a 
conscientious objector who refused to perform military duties, wear the 
uniform or comply with lawful orders of competent military authorities; 
(3) a deserter; or (4) as an officer who resigned for the good of the 
service. 38 CFR 2.1064(b).
    Since 1946, 38 CFR 2.1064 and its successors (most notably, current 
38 CFR 3.12) have provided the criteria used by VA adjudicators for 
determining Veteran status and evaluating benefit eligibility for 
former SMs. Currently, there are six ``statutory bars'' to benefits for 
former SMs listed in 38 U.S.C. 5303(a) and reiterated in paragraph (c) 
of 38 CFR 3.12. In addition, currently, there are five ``regulatory 
bars'' to benefits listed in paragraph (d) of 38 CFR 3.12, which states 
that discharges based on the five listed offenses are ``considered to 
have been issued under dishonorable conditions.'' The last update to 
Sec.  3.12(d) occurred in 1980, more than 40 years ago. The 1980 update 
provided examples of aggravated homosexual acts. 45 FR 2318 (Jan. 11, 
1980).
    On July 10, 2020, VA published at 85 FR 41471 its proposal to amend 
its regulation governing COD determinations. Specifically, VA proposed 
to modify the regulatory standards for discharges considered 
``dishonorable'' for VA benefit eligibility purposes, such as 
discharges due to ``willful and persistent misconduct,'' and 
``homosexual acts involving aggravating circumstances or other factors 
affecting the performance of duty.'' VA also proposed to extend a 
``compelling circumstances'' exception to certain regulatory bars to 
benefits to ensure consideration of all pertinent factors. In response 
to the proposed rule, over 70 comments were received. Given the 
``various and differing'' comments received, VA issued a Request for 
Information (RFI) in September 2021. 86 FR 50513. Specifically, VA 
asked the public questions about the factors for consideration in a 
compelling circumstances analysis. Regarding willful and persistent 
misconduct, the RFI asked whether VA should define ``serious 
misconduct''; whether VA should require misconduct to actually cause 
harm to person or property; and how VA should define persistence. VA 
asked about the proposed rule's definition of moral turpitude. VA asked 
whether removing the regulatory bars would affect military order and 
discipline or denigrate others' honorable service; and what specific 
changes could be made to the proposed rule to fairly adjudicate the 
benefits eligibility of historically disadvantaged and vulnerable 
populations.
    In response to the RFI, over 45 comments were received. In addition 
to the proposed rule and the RFI, in October 2021, VA held a two-day 
listening session to receive oral comments from any member of the 
public on the RFI questions. Transcripts from the listening session can 
be found at https://www.regulations.gov/docket/VA-2020-VBA-0018.

II. VA's Decision To Finalize the Proposed Rule With Modifications

    After extensive consideration of this issue and all the comments 
received, VA has decided to finalize the proposed rule with some 
modifications. This will expand VA benefits eligibility, bring

[[Page 32362]]

more consistency to adjudications of benefits eligibility, and ensure 
character of discharge determinations consider all pertinent factors. 
This decision respects concerns of the Military Departments regarding 
the impact to their ability to maintain good order and discipline among 
their troops. Specifically, that the removal of the regulatory bars 
would undermine their ability to use the consequence of loss of VA 
benefits as a deterrent to misconduct. In addition, the Military 
Departments were concerned that removal of the ``in lieu of general 
court-martial'' bar would deprive the commander, or for covered 
offenses, Special Trial Counsel, of a tool to dispose of misconduct in 
an administrative forum while balancing the interests of justice and 
victim preferences. Finally, the Military Departments expressed concern 
that the proposed rule's definition of ``an offense involving moral 
turpitude'' as ``a willful act that gravely violates accepted moral 
standards and would be expected to cause harm or loss to person or 
property'' would exclude certain offenses that do not include a 
willfulness element.
    Thus, with this final rule, there will be only four regulatory 
bars: (1) acceptance of a discharge under other than honorable 
conditions or its equivalent in lieu of trial by GCM; (2) mutiny or 
spying; (3) moral turpitude; and (4) willful and persistent misconduct. 
The definition for willful and persistent misconduct has been refined 
for more objective application, and an expanded compelling 
circumstances exception now applies to both the moral turpitude (MT) 
and willful and persistent misconduct bars. Based upon interagency 
concerns, VA has decided not to alter the current regulatory bar for MT 
and does not adopt the language from the proposed rule. This will allow 
the military to retain a deterrent to misconduct that promotes good 
order and discipline, while also allowing VA to provide a case-by-case, 
more holistic analysis of whether a former SM who received a Bad-
Conduct Discharge (BCD) or Other Than Honorable (OTH) discharge 
nevertheless warrants ``veteran'' status and VA benefits eligibility.
    As indicated in its RFI, VA rigorously considered the possibility 
of making more sweeping liberalizing changes than finalized here. But 
as discussed throughout this notice, there is concern that more 
sweeping changes would reduce deterrents to misconduct in the military 
and undermine good order and discipline, as well as concerns that 
removal of the ``in lieu of general court-martial'' bar would deprive 
the commander, or for covered offenses, Special Trial Counsel, of a 
tool to dispose of misconduct in an administrative forum while 
balancing the interests of justice and victim preferences.
    Given those factors, with this rule, VA seeks to strike a balance 
between bestowing benefits to those who have earned them, even those 
whose service was not without blemish, and limiting benefits for those 
whose service involved serious misconduct. As the Federal Circuit in 
Garvey noted, there are SMs whose significant misconduct rendered their 
discharge dishonorable, even if the military did not explicitly 
characterize their discharges as Dishonorable for reasons unrelated to 
the seriousness of the misconduct itself. 972 F.3d at 1338-40. Military 
justice is designed to be flexible, allow exercise of discretion, and 
balance a number of concerns with regard to how SMs are prosecuted and 
discharged. Military officials may choose not to prosecute an offense 
for a variety of reasons, including: (1) to spare crime victims, 
including children, or their families from the trauma of testifying; 
(2) to avoid evidentiary issues involving classified documents or 
military operations; or (3) because the SM has already been convicted 
of the crime in another court. In these situations, the SM may be 
administratively separated to avoid the burden, expense, or resources 
involved in GCM litigation. That decision to avoid trial, however, does 
not necessarily mean that the SM did not commit an offense.
    On the other hand, there are some SMs whose service, while not 
without blemish, was generally of benefit to this Nation and therefore 
have earned the status of ``veteran'' and the benefits to which 
veterans are entitled. There are also SMs who service to our nation 
placed them in high-risk situations which could lead to injuries or 
other circumstances that increase risk for behaviors or conduct that 
Military Commanders deem inappropriate. For example, as consequence of 
repeated traumatic exposures during combat, SMs are at risk of 
posttraumatic stress disorder,\1\ traumatic brain injury,\2\ moral 
injury or other combat related emotional and cognitive consequences.\3\ 
Symptoms of these medical conditions include changes to decision making 
and behaviors. It is therefore important to institute a robust 
compelling circumstances exception that considers the individual facts 
and evidence in a particular case. The compelling circumstances 
language in this final rule includes consideration of the length and 
character of service exclusive of a period of misconduct and potential 
mitigating reasons for the misconduct such as mental impairment, 
physical health, hardship, sexual abuse/assault, duress, obligations to 
others, and age, education, cultural background and judgmental 
maturity. The compelling circumstances exception--along with more 
specific criteria instituted herein for the willful and persistent 
misconduct regulatory bar--will help enable SMs whose conduct was not 
dishonorable to receive the VA benefits they have earned.
---------------------------------------------------------------------------

    \1\ How Common is PTSD in Veterans?--PTSD: National Center for 
PTSD (va.gov), https://www.ptsd.va.gov/understand/common/common_veterans.asp.
    \2\ Traumatic Brain Injury and PTSD--PTSD: National Center for 
PTSD (va.gov), https://www.ptsd.va.gov/understand/related/tbi_ptsd.asp.
    \3\ War and Combat--PTSD: National Center for PTSD (va.gov), 
https://www.ptsd.va.gov/understand/types/types_war_combat.asp.
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    It is important to clarify here that the regulatory bars shall only 
be applied when they are clearly supported by the military record. The 
benefit of the doubt will be resolved in favor of the former SM. See 38 
U.S.C. 5107(b), 38 CFR 3.102. In other words, when there is 
insufficient evidence of the alleged misconduct, racial bias in the 
allegation, or an approximate balance of positive and negative evidence 
about the alleged misconduct, the bar shall not be applied.
    Further, as discussed below, VA agrees with the commenters who 
recommended limiting the conduct being considered for a COD 
determination to only that which formed the basis of the discharge from 
service. In short, if the military decided that a SM's misconduct did 
not preclude the SM from continuing to serve, then it also should not 
preclude benefits eligibility. This limitation will prevent conduct 
unrelated to the basis of the discharge from contributing to a bar from 
benefits.
    Overall, under this final rule, more SMs will be eligible for 
benefits than under the prior 38 CFR 3.12(d). That said, a favorable 
COD determination under this rule does not result in blanket 
eligibility for all VA benefits or a change in the Department of 
Defense's (DoD) discharge characterization. Rather, certain VA benefits 
have specific eligibility requirements as it pertains to COD. For 
example, education assistance under the Montgomery GI Bill program or 
Post-9/11 GI Bill program is available only for periods of service 
resulting in an ``honorable'' discharge. See 38 U.S.C. 3011(a)(3)(B) 
and 3311(c)(1). Therefore, former SMs who do not receive an

[[Page 32363]]

Honorable discharge from DoD are ineligible for the VA Education 
benefit.
    Moreover, while relaxing the bars to eligibility, this final rule 
does not extend VA benefits eligibility to all former SMs. Former SMs 
who do not meet the criteria for benefits eligibility may remain 
entitled to certain critical benefits to address the harms caused by 
their military service such as mental health and substance use care, 
emergent suicide care, and medical care in emergency situations, as 
discussed below.

III. Discussion of the Comments Received by Topic (From the Proposed 
Rule, Request for Information and the Listening Session)

    VA received 148 comments total in response to the proposed rule, 
RFI, and Listening Session. In this section, VA discusses in detail the 
public comments addressing issues raised in the proposed rule, RFI, and 
listening session.

Congressional Intent

    Multiple commenters stated that Congress authorized the exclusion 
from VA benefits of only those SMs who received or should have received 
a dishonorable discharge or those who were discharged for conduct 
falling within a statutory bar. They stated Congress never intended to 
give VA authority to create new standards to determine veteran status 
nor was it Congress's intent to have those standards be more 
exclusionary than the statutory bars. Other commenters stated that VA 
is subverting congressional intent by withholding healthcare through 
these regulatory bars. VA thanks the commenters for these comments but 
believes that this final rule accords with congressional intent.
    Congress has authorized VA to consider discharges based on certain 
conduct as dishonorable. 38 U.S.C. 101(2); see Garvey, 972 F.3d at 340; 
Camarena v. Brown, 6 Vet. App. 565, 568 (1994), aff'd 60 F.3d 843 (Fed. 
Cir. 1995) (per curiam); see also 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''). The bars in question have been in 
regulation since 1946 and the Federal Circuit has concluded that VA has 
the authority to institute such bars. Garvey, 972 F.3d at 1339-40. To 
the extent the current regulatory bars are viewed by some as overly 
restrictive, the modifications finalized in this rule should ensure 
that only SMs who committed serious, dishonorable misconduct in service 
are precluded from benefits. This approach generally accords with 
congressional intent. Id. at 1339.
    Furthermore, VA disagrees with the comment that VA's regulatory 
bars subvert congressional intent by withholding healthcare. Under 38 
CFR 3.360, VA determines a service member's eligibility for healthcare 
even if the SM is not eligible for other benefits. Thus, VA makes no 
changes in response to these comments.

Automatic Eligibility

    Some commenters urged VA to establish automatic eligibility for VA 
benefits for all SMs who received an OTH discharge based on their 
service to the Nation. One commenter urged VA to update its definition 
of ``veteran'' to include OTH discharges and to otherwise be more SM-
friendly. VA thanks these commenters for their comments, but VA cannot 
establish automatic eligibility, because some SMs who received an OTH 
discharge are statutorily barred from benefits by 38 U.S.C. 5303(a). 
Nevertheless, this final rule is more SM-friendly, as VA has removed 
one of the regulatory bars, refined another, and instituted a 
compelling circumstances exception to two bars, which will lead to an 
increase in benefits eligibility in the COD process.

Healthcare Eligibility

    One commenter stated that ``VA should also provide healthcare for 
those veterans who are waiting for a decision by VA'' and that 
``Veterans should be presumed eligible for VA health care unless proven 
otherwise.'' Another argued that VA should amend 38 CFR 17.34 and 17.36 
to provide tentative eligibility for healthcare and update enrollment 
procedures. VA thanks the commenters for their comments. Currently, 
some OTH-discharged SMs have access to certain VA health care services, 
such as health care for service-incurred disabilities, mental health 
and substance use care, emergent suicide care, and medical care in 
emergency situations (if it is determined that benefits eligibility 
will probably be established). 38 U.S.C. 1720I, 1720J; 38 CFR 3.360, 
17.34. Moreover, VA has initiated efforts to amend 38 CFR 17.34, but 
those amendments were not proposed in this rulemaking.

Removal of Homosexual Acts Bar

    Some commenters supported the proposed rule's replacement of the 
word ``homosexual'' with ``sexual.'' However, many commenters still 
felt that lesbian, gay, bisexual, transgender and queer (LGBTQ+) SMs 
were subject to discrimination that would manifest even with this 
amendment. VA agrees that any bar that explicitly relates to sex may 
still disproportionally affect LGBTQ+ SMs. Additionally, the commenters 
felt that most of the offenses listed in this section could also be 
barred under moral turpitude (MT) offenses (e.g., child molestation, 
sexual assault, etc.) or willful and persistent misconduct, further 
rendering this bar to benefits unnecessary. VA agrees that the 
homosexual acts bar is outdated and unnecessary and is entirely 
removing this regulatory bar. VA is also not adopting the sexual acts 
bar from the proposed rule, as this misconduct will be sufficiently 
excluded by either the statutory bars or the remaining regulatory bars.

COD Process/Eligibility

    Many commenters asserted that VA presumes that former SMs with OTH 
discharges are ineligible for VA benefits and must be proven otherwise 
through the COD determination process. They also stated that VA 
presumes that former SMs with honorable or under honorable conditions 
discharges are eligible for VA benefits. Based on this, the commenters 
asked that VA presume former SMs with OTH discharges as eligible for 
benefits unless proven otherwise. One commenter stated that VA should 
not review OTH discharges unless they are issued in lieu of court 
marital (CM). Further, one commenter stated that the proposed rule did 
not include changes to Sec.  3.12(a), the provision governing ``which 
former [SMs] . . . are presumptively excluded from VA access until 
successful completion of [a COD] review.''
    VA thanks these commenters for their comments. VA is not persuaded 
that modification of Sec.  3.12(a) is necessary here, insofar as it 
merely reiterates the statutory requirement that discharge must be 
``under conditions other than dishonorable.'' There is no need to 
revise that provision to carry out the goals of this rulemaking. 
Moreover, there is no regulation that presumes the outcome of a COD 
determination for a SM with an OTH discharge. Rather, each OTH 
discharge is assessed to determine VA benefits eligibility.
    Another commenter asked VA to presume eligibility for all SMs with 
administrative discharges except discharge in lieu of CM and stated 
that ``VA annually deems about 80 to 90 percent of veterans who 
received OTH have served `dishonorably'.'' VA thanks the commenter for 
the comment, but that statistic is inaccurate. Between October 1, 2019, 
and September 30, 2022, VA deemed SMs with OTH

[[Page 32364]]

discharges eligible for healthcare or benefits or both more than 75% of 
the time. VA is providing the documentation for this data in the 
rulemaking record.\4\ VA makes no changes based on these comments.
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    \4\ See https://www.regulations.gov/docket/VA-2020-VBA-0018.
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    Still another commenter stated that VA should presume eligibility 
for SMs with OTH discharges and terminate benefits ``in exactly the 
same process as is currently used for statutory bars. This would save 
VA the expense of processing countless, costly denials of benefits 
appeals, while providing veterans benefits, they have rightfully earned 
in service to this country, as Congress intended.'' VA thanks the 
commenter for their comment. VA believes that, through the 
modifications of this final rule, including the compelling 
circumstances exception, it will be able to expand VA benefits 
eligibility for former SMs with OTH discharges. The reasons that VA has 
determined more extensive liberalization is not being advanced are 
discussed in greater detail below.
    Another commenter stated ``[t]he majority of veterans do not 
undergo COD determinations for numerous reasons and those that do are 
overwhelmingly unsuccessful in establishing eligibility.'' VA thanks 
the commenter for their comment, but, again, the data above reflects 
otherwise. In any event, VA anticipates that the amendments in this 
final rule--including refining the willful and persistent misconduct 
bar and implementing the compelling circumstances exception for moral 
turpitude and willful and persistent misconduct--will increase the 
number of former SMs eligible for benefits.
    One commenter stated that ``VA must assert independence from other 
federal entities'' and that ``VA has a vastly different mission 
statement from DoD.'' The commenter further noted that VA was proposing 
to use the Uniform Code of Military Justice (UCMJ) from DoD, but the 
basis for why DoD wants to remove a SM, such as drug use or minor 
infractions, does not mean that VA should deny that SM health care, 
mental health treatment and benefits for service-related injuries. VA 
recognizes that there is a relationship between dishonorable service 
and VA benefits eligibility, as reflected in Congress's enactment of 38 
U.S.C. 101(2). This final rule precludes benefits eligibility for only 
those SMs who committed misconduct that renders their service 
effectively dishonorable.
    Another commenter asserted that ``[c]onduct reviewed for COD 
determinations must be clearly defined. The review must be limited to 
the misconduct that led to the discharge.'' The comment includes the 
story of someone discharged due to absent without leave (AWOL) and 
disrespecting a superior officer, but the COD determination included a 
discussion of some AWOL that occurred in a separate enlistment. Other 
commenters expressed similar sentiments. VA thanks the commenters for 
their comments and recognizes the concern that COD determinations might 
consider unrelated conduct. But the introductory language of Sec.  
3.12(d) states that the regulatory bars apply to the conditions under 
which ``the former service member was discharged or released'' and VA 
affirms that this language means that only misconduct that led to the 
discharge may be considered in the COD determination. This is implicit 
in the regulations. Meaning in its COD review, VA will only consider 
misconduct or AWOL that according to military department records 
explicitly indicate led to the discharge. VA notes, however, that there 
remains a statutory bar of a period of AWOL of more than 180 days that 
only Congress can amend.
    Another commenter stated that many VA employees are without the 
necessary information or training to fully serve SMs and that has led 
to employees wrongfully turning away eligible SMs. Other commenters 
also mentioned that many SMs who did not receive an honorable discharge 
attempt to apply to VA for health care and are simply turned away. VA 
is aware of these concerns and will continue to provide training to its 
employees and messaging to the public that VA encourages all SMs to 
apply for healthcare and benefits regardless of their COD. VA expects 
that the changes made by this final rule will lead to some increased 
benefits eligibility for former SMs without Honorable discharges.

Compelling Circumstances

A. Generally Apply Compelling Circumstances Exception
    Multiple commenters requested that the compelling circumstances 
exception should be applied generally and used to counterbalance the 
negative aspects of the SM's service. Three commenters requested that 
VA lower the standard necessary to apply the ``benefit to the Nation'' 
exception found in proposed Sec.  3.12(e)(1). Specifically, commenters 
stated that requiring the character of service, exclusive of the period 
of AWOL or misconduct, ``be of such quality and length that it can be 
characterized as honest, faithful and meritorious and of benefit to the 
Nation'' is nebulous. One commenter stated that the term 
``meritorious'' has a special meaning in military law. This commenter 
noted ``meritorious sets a higher standard than some former SMs would 
be able to achieve, as many were willing to, but were never, deployed; 
never received an award; and otherwise fulfilled their duties, but for 
the conduct leading to the OTH discharge. Accordingly, VA should create 
a standard that honors the sacrifice of all SMs, particularly 
considering how few Americans serve in the military.'' Another 
commenter recommended that VA only require the service to be 
``substantially favorable. A determination of favorable service will 
consider (a) the overall duration and quality of service; (b) combat, 
overseas, or hardship service; (c) medals, awards, decorations, and 
other achievements or acts of merit; and (d) other facts or 
circumstances relevant to the inquiry.'' That commenter also stated 
that all service should be considered to the Nation's benefit unless 
proven otherwise (based on the commenter's belief that DoD is better at 
documenting bad behavior than good behavior). Similarly, one commenter 
felt that compelling circumstances should be assessed on a holistic 
basis considering the totality of the circumstances.
    Additionally, some commenters stated that some military branches 
use OTH at higher rates than others, resulting in disparate discharges 
for similar misconduct. Some commenters noted that military discharges 
may vary based on the era of war in which the SM served. One commenter 
noted the difference between discharges for commissioned officers and 
enlisted personnel and a ``lack of insight'' into how the regulatory 
change affected officers. VA thanks these commenters for their 
comments. VA's intent with the compelling circumstances exception to 
the moral turpitude and willful and persistent misconduct bars is to 
provide claims processors a holistic means to evaluate the misconduct 
underlying a SM's discharge and to determine if that misconduct is 
outweighed by otherwise honorable service or can be excused due to 
circumstances influencing the former SM's decision-making around the 
time of the offense or otherwise providing context for the offense. 
Consistent with that intent, assessment of the length and quality of 
service exclusive of the misconduct necessarily must be a case-by-case 
determination. If VA revised the

[[Page 32365]]

standard to suggest that the service of all former SMs who make the 
sacrifice inherent in all military service is sufficient to establish 
compelling circumstances, however, this exception would become the 
rule, not the exception. Regarding the comment that all service is to 
the Nation's benefit unless proven otherwise, it is important to note 
that the only cases at issue in a compelling circumstances analysis are 
those which involved a discharge due to some level of misconduct. The 
goal of the compelling circumstances analysis is to determine whether 
the misconduct is mitigated by the circumstances, is outweighed by 
otherwise honorable service, or actually renders the service 
dishonorable, not to ignore the fact that misconduct may have taken 
place.
    Moreover, the compelling circumstances exception is designed to 
counter the possibility that certain military branches may have favored 
particular types of discharges during particular periods of time, 
including different periods of war. It allows VA to determine whether 
the misconduct leading to an OTH discharge actually rendered the 
service dishonorable, or alternatively was outweighed by otherwise 
honorable service or mitigated by the circumstances. Each COD 
determination will be made based on each SM's facts and circumstances.
B. Apply Compelling Circumstances To Discharge in Lieu of General 
Court-Martial
    Several commenters urged VA to apply the compelling circumstances 
exception to the regulatory bar of discharge in lieu of GCM, because VA 
proposed to apply compelling circumstances to MT offenses, which (they 
asserted) are arguably more serious. Other commenters stated that the 
GCM process is filled with misinformation and procedural gaps. One 
commenter stated SMs were forced into OTH discharges without being 
informed of their rights or because they faced retaliation. Another 
commenter stated innocent civilians routinely accept plea bargains to 
avoid trial, and some innocent SMs accept discharge in lieu of GCM. 
Another stated some commanding officers use the SM's acceptance of a 
discharge in lieu of trial by GCM as a means to force certain SMs out 
of the military. VA thanks the commenters for their comments. Due to 
interagency concerns associated with good order and discipline, VA has 
decided not to extend the compelling circumstances exception beyond the 
scope laid out in the proposed rule.
    One commenter recommended that VA remove ``or its equivalent'' from 
the text as the commenter was unaware of any equivalent to an OTH 
discharge. VA thanks the commenter for this comment; however, VA 
included ``or its equivalent'' to account for historic discharges, such 
as undesirable discharges. Additionally, DoD may establish new 
discharge characterizations. Using this terminology allows VA's 
regulations to remain applicable to both past and future character of 
discharge determinations.
C. List of Mental and Cognitive Impairments
    Several commenters expressed concern that claims adjudicators would 
fail to recognize the list of mental impairments in proposed Sec.  
3.12(e)(2)(i) was non-exhaustive and that claims adjudicators would 
consider only the listed mental impairments. One commenter stated that 
the mental impairments contained diagnoses (e.g., bipolar disorder and 
posttraumatic stress disorder), symptoms (e.g., depression and 
impulsive behavior), and a neurodevelopmental condition (attention 
deficit hyperactivity disorder (ADHD)) but stated that the latter is 
not subject to service connection under 38 CFR 3.303(c), 4.9, and 
4.127. That commenter was further concerned that the rule referenced 
redundant co-morbid conditions when mental impairment alone is enough 
to trigger consideration. One commenter urged VA to have SMs who suffer 
from posttraumatic stress disorder, traumatic brain injury, military 
sexual trauma (MST), or other mental illness examined by specialists 
prior to being denied benefits.
    VA confirms the list of mental and cognitive impairments is non-
exhaustive and the included list was intended only as a guide. 
Additionally, VA confirms the mental or cognitive impairment need not 
be service connected or subject to service connection to be considered 
as a compelling circumstance to excuse the prolonged AWOL or 
misconduct. Hence, neurodevelopmental conditions, such as ADHD or 
personality disorders, may excuse prolonged AWOL or misconduct even if 
no VA benefits can be awarded for the same condition. Further, VA 
agrees that including co-morbid conditions is redundant because a 
single mental impairment is enough to trigger consideration for 
compelling circumstances and, if the comorbidity was both mental and 
physical impairments, Sec.  3.12(e)(2)(ii) will now allow consideration 
of physical health in any event.
D. Abuses of a Sexual Nature, Discrimination, Disparity Between 
Branches, and Military Sexual Trauma
    Several commenters requested that VA include additional factors to 
consider when evaluating the reason(s) for prolonged AWOL or misconduct 
found in proposed Sec.  3.12(e)(2), including sexual harassment and 
intimate partner violence (IPV); bereavement; discrimination due to 
protected class; disparate discharge outcomes based on military branch; 
and ``mistreatment, misdiagnosis, or other intentional or unintentional 
injustice.'' One commenter stated VA should include whether the SM 
experienced discrimination in service or the discharge was due to a 
discriminatory pretextual reason instead of the stated reason(s). Other 
commenters requested VA add the terms MST and sexual harassment as a 
compelling circumstance. One was concerned application of a regulatory 
bar would retraumatize a SM by causing isolation from the military 
community.
    Multiple commenters commented on the proposed rule's impact on SMs, 
who are homeless women and victims of sexual assault and MST. Other 
commenters noted disparate racial treatment in the military, including 
infractions for certain hairstyles or facial hair. VA thanks these 
commenters for their comments.
    VA is committed to protecting SMs who are homeless, MST victims, 
and victims of harassment, all forms of discrimination and IPV. VA 
believes that a compelling circumstances exception--that includes 
factors such as mental and cognitive impairment; physical trauma; 
sexual abuse/assault; duress, coercion, or desperation; hardships; 
abuses of a sexual nature; and the former SM's age, education, cultural 
background, and judgmental maturity--when combined with refined 
criteria for defining ``willful and persistent misconduct'' will 
sufficiently allow victims of MST, discrimination, and misdiagnosis to 
receive fairer COD evaluations. VA will consider any records or 
attestations from SMs about experiencing these circumstances to be 
relevant in their consideration of COD.
    Although VA acknowledges that many forms of discrimination exist 
and may contribute to or result in former SMs receiving OTH discharges, 
VA evaluates each particular SM's COD based on the record before it. 
When VA conducts a COD determination, VA reviews the SM's service 
personnel and medical treatment records and any other pertinent 
records. VA reviews that SM's military units' duty locations and

[[Page 32366]]

combat engagements. Should any given record establish discrimination as 
the basis for the OTH discharge, including but not limited to 
discrimination based on race or sex, the compelling circumstances 
exception would allow VA to adjudicate a favorable COD determination. 
And, even if no such record exists, the reforms of this final rule will 
ensure a fair COD adjudication, considering all pertinent factors on a 
case-by-case basis, for all SMs, including those who are homeless or 
victims of MST, IPV or potential discrimination.
E. Compelling Circumstance Unknown to Service Members
    One commenter noted that the compelling circumstances factors are 
complicated for SMs to understand on their own. This commenter notes 
the standard is not helpful to many SMs who apply without assistance. 
VA thanks this commenter for these comments. VA encourages all former 
SMs and claimants to seek the assistance of qualified Veterans Service 
Organizations (VSOs) or other accredited representatives to assist with 
the claims process, including COD determinations. Further, assistance 
with the claims process, COD determinations, and governing regulations 
is available at www.va.gov and at Regional Offices. VA makes every 
effort to provide training to its employees to assist former SMs in the 
non-adversarial COD process. VA has a duty to assist and will work with 
former SMs to ensure appropriate records, including self-attestations, 
are well documented in the record being reviewed in the COD process. 
Whenever possible, VA aims to review records sympathetically and give 
the benefit of the doubt, particularly when records are missing or 
incomplete.
F. Include Due Process Errors to Legal Defense Exception
    Finally, one commenter requested VA add to its compelling 
circumstances exception an additional legal defense for cases when the 
prosecution committed due process errors or violations. VA thanks the 
commenter for this comment. However, VA believes that due process 
errors would be included as a valid legal defense under Sec.  
3.12(e)(3). Therefore, no changes are necessary in response to this 
comment.

Acceptance of an Undesirable Discharge To Escape General Court-Martial

    One commenter opined that the regulatory bar associated with 
discharge in lieu of GCM should be clarified. The commenter went on to 
state that even though ``undesirable'' is not used anymore as a 
discharge characterization, there are still some living veterans with 
``undesirable'' discharges that should not be excluded. The commenter 
also noted that the proposed rule's phrase ``or its equivalent'' is 
vague and that some claims processors may think a ``general'' discharge 
is equivalent. The same commenter stated that VA should explicitly 
state that this bar does not apply to special CM discharges. Another 
commenter stated that the bar for discharge in lieu of GCM should be 
limited to cases where charges were referred to a GCM. Another 
commenter similarly stated that the regulations should clearly identify 
the need for documentation of a GCM charge before applying regulatory 
bar. Another commenter stated, ``there should be evidence of a [GCM] 
convening.''
    VA thanks the commenters for their comments. Per the plain language 
of revised Sec.  3.12(d)(1)(i), this regulatory bar requires accepting 
an OTH discharge in lieu of trial by GCM; the former SM will receive 
the benefit of the doubt in the determination of whether the OTH 
discharge was accepted in lieu of trial, and whether that trial would 
have been by GCM. Accordingly, VA sees no need to further amend the 
regulatory language.
    One commenter agreed with the decision to eliminate stigma from a 
SM's actions by removing the language of ``undesirable'' and ``escape'' 
from the regulation. However, the commenter stressed the need for an 
in-depth and personalized evaluation of a SM's file, to determine 
whether a discharge was received because of coercive pressure from a 
commanding officer to ``get rid'' of the SM. A different commenter 
stated that VA should require a more thorough analysis of the 
conditions and circumstances surrounding a former SM's acceptance of 
discharge in lieu of CM, because former SMs may accept this result 
without committing an offense, much like civilian plea deals. Another 
commenter suggested that excluding former SMs discharged in lieu of 
trial misunderstands the nature of the administrative separation and 
that systematic misinformation and gaps in those procedures are well 
documented. The commenter also stated some SMs are unable to respond 
rationally when they are still engaging in misconduct (substance abuse, 
AWOL) that is leading to discharge. The commenter continued that it is 
difficult for claims processors to determine whether the discharge was 
in lieu of GCM or another CM. VA thanks the commenters for the comments 
but is not modifying this regulatory bar (beyond what was proposed) due 
to concerns raised by the Military Departments that further changes to 
this bar would undermine their ability to maintain good order and 
discipline within their ranks. That said, again, if there is a question 
about whether the discharge was in lieu of GCM or special CM, VA will 
consider all appropriate records and the former SM will receive the 
benefit of the doubt.

Moral Turpitude

    One commenter stated the proposed definition of MT is too broad and 
does not adequately put former SMs on notice as to what constitutes an 
offense involving MT. The commenter also stated that it is contrary to 
fundamental fairness to bar a former SM from their benefits for life 
based on commission of an MT crime without a guilty finding in a formal 
proceeding with adequate procedural and due process protections. The 
commenter noted that the definition also does not contain any reference 
to deception, fraud, or depravity by the SM; therefore, a simple 
assault or loss of property that does not involve fraud or deceit could 
meet this definition.
    In addition, many commenters opined that MT is unclearly defined 
and vague. One commenter stated that VA should simplify such a 
standard. Another commenter asserted that the MT standard is imprecise 
and legalistic, lacking definition in civilian and military 
jurisprudence. VA thanks the commenters for their comments.
    Based on interagency concerns regarding the proposed definition of 
MT, VA has decided not to implement the language from the proposed rule 
and will maintain the current regulatory language. VAOPGC 6-87 (July 
27, 1987), a VA General Counsel Opinion, states ``an offense will, for 
veterans' benefit purposes, be considered to involve moral turpitude if 
it is willful, gravely violates accepted moral standards, is committed 
without justification or legal excuse, and, by reasonable calculation, 
would be expected to cause harm or loss to person or property.'' \5\ 
This precedential opinion continues to govern VA's application of this 
bar in COD determinations.
---------------------------------------------------------------------------

    \5\ https://www.va.gov/OGC/docs/1987/06-87.pdf.
---------------------------------------------------------------------------

    Given that the definition of moral turpitude under VAOPGC 6-87 
requires a willful act that gravely violates accepted moral standards, 
it is difficult to imagine that minor misconduct--misconduct for which 
the maximum punishment is not longer than one year confinement--could 
ever meet that definition. This accords with common Federal appellate 
court decisions interpreting the term in other contexts.

[[Page 32367]]

Garcia-Martinez v. Barr, 921 F.3d 674, 676 (7th Cir. 2019) (MT ``shocks 
the public conscience as being inherently base, vile, or depraved, and 
contrary to the accepted rules of morality and the duties owed between 
persons or to society in general''); Escobar v. Lynch, 846 F.3d 1019, 
1023 (9th Cir. 2017) (MT ``is generally a crime that (1) is vile, base, 
or depraved and (2) violates accepted moral standards'').
    Moreover, VA declines to require a felony conviction for MT, 
because the military's choice not to prosecute could be premised on a 
desire to protect victims or other reasons, rather than any view that 
the conduct was not felonious or dishonorable. Moreover, while 
obtaining a final conviction may be necessary for the military to 
confine an SM, it is not necessary for VA's purposes of evaluating the 
character of a SM's discharge. So long as the offense is clearly 
established by the record (after applying the benefit of the doubt to 
the advantage of the SM), VA may conclude that offense was committed. 
This is also supported by VAOPGC 6-87 which states ``while the 
conviction of a felony creates a rebuttable presumption that an offense 
involved moral turpitude, the absence of such conviction does not 
absolve an offense from the taint of moral turpitude.'' In sum, due to 
concerns about changes to this bar that could impact the Military 
Departments' ability to maintain good order and discipline, VA makes no 
changes to the current regulatory text based on these comments.

Willful and Persistent Misconduct

A. VA's Proposed Definition
    Some commenters stated that the definition of willful and 
persistent misconduct should be redefined to be more favorable to 
former SMs. Others conveyed that minor misconduct should not be a 
disqualification. Multiple commenters were concerned that the proposed 
rule continued to punish offenders removed from the military for minor 
offenses with a maximum sentence of one year. Other commenters 
commented on those who received an OTH discharge due to drug possession 
or use, including those who became addicted to painkillers after 
surgery in the military, and noted such members should not be deprived 
of VA benefits for the same. Another was concerned that VA's definition 
would result in ``lengthy, complex investigations for rating 
officers.'' One commenter stated this regulatory bar allows VA to 
exclude former SMs for misconduct that would not lead to a dishonorable 
discharge. Other commenters stated that using the maximum punishment 
for the offense ignores instances where the offense is adjudicated as 
minor by the prosecuting authority. One commenter stated that the only 
conduct considered should be that causing harm to a person or property. 
VA thanks these commenters for their comments.
    VA noted in the preamble to the proposed rule that ``willful 
misconduct'' is already defined in 38 CFR 3.1(n) as ``an act involving 
conscious wrongdoing or known prohibited action'' that must involve 
``deliberate or intentional wrongdoing with knowledge of or wanton and 
reckless disregard of its probable consequences.'' Additionally, VA 
noted that 38 CFR 3.1(n)(2) states that ``[m]ere technical violations 
of police regulations or ordinances will not per se constitute willful 
misconduct.'' But the term ``persistent,'' VA explained, was undefined. 
Thus, VA proposed a framework for determining ``persistence'' derived 
from the statutes of limitations for punishment in the Manual for 
Court-Martial United States (MCM) \6\ and UCMJ. This makes sense, 
because--if the military will no longer prosecute an offense after a 
certain period of time--there is no reason for VA to link that offense 
to other misconduct in order to find persistence.
---------------------------------------------------------------------------

    \6\ See https://jsc.defense.gov/Portals/99/2024%20MCM%20files/MCM%20(2024%20ed)%20-
%20TOC%20no%20index.pdf?ver=b7JVpxV5rbIHg0ENlCRVKQ%3D%3D.
---------------------------------------------------------------------------

    Overall, the proposed rule (and this final rule) brings both 
objectivity and liberalization to the ``willful and persistent 
misconduct'' standard. The bar only applies if there are (1) instances 
of minor misconduct (as defined in reference to the MCM) occurring 
within two years of each other; (2) an instance of minor misconduct 
occurring within two years of more serious misconduct; or (3) instances 
of more serious misconduct occurring within five years of each other. 
Moreover, the compelling circumstances exception applies to this bar, 
such that even SMs whose misconduct meets the definition of ``willful 
and persistent'' will receive an individualized review that considers 
whether the misconduct should be considered mitigated or outweighed by 
otherwise meritorious service or other factors. To the extent this is 
still unsatisfactory to certain commenters, VA declines to make further 
amendments due to interagency concerns regarding the Military 
Departments' ability to use the loss of VA benefits as a deterrent to 
misconduct in order to promote good order and discipline.
B. Minor Misconduct
    Several commenters stated that minor misconduct should not be used 
as a bar because Congress never intended for former SMs to be barred 
from VA benefits due to minor misconduct. One commenter asserted that 
almost every UCMJ punitive article is punishable by either one-year 
confinement or a dishonorable discharge, rendering almost any SM 
subject to a bar to benefits. Instead, the commenter stated, VA should 
only bar people for serious misconduct. Others noted that adjudicators 
must determine COD on only that which led to discharge, and not prior 
misconduct. VA thanks these commenters for these comments.
    VA clarifies that, even though it uses the term ``minor'' to 
distinguish one type of misconduct from another, this regulatory bar 
applies only to former SMs who have not received an Honorable or 
General (under honorable conditions) discharge. If a SM has an 
Honorable or General discharge, VA does not conduct a COD determination 
and this bar is irrelevant. See 38 CFR 3.12(a). Therefore, VA does not 
bar former SMs simply because they have minor offenses in their record. 
And even for SMs with a BCD or OTH discharge, VA will not bar benefits 
for sporadic, minor misconduct, given the definition of ``persistent'' 
in this final rule. Finally, any misconduct that meets the definition 
of ``persistent'' can also be outweighed by otherwise meritorious 
service or mitigated by the circumstances in a compelling circumstances 
analysis. Accordingly, as a practical matter, VA commits that the only 
former SMs who will be barred under the willful and persistent 
misconduct standard of this final rule are those that committed 
willful, frequent misconduct, which according to documentation in their 
military discharge records led to their discharge, outweighed the merit 
of their service, and was not mitigated by any relevant factors. To the 
extent this is still unsatisfactory to certain commenters, VA declines 
to make further amendments due to interagency interest in maintaining 
deterrents to misconduct that promote good order and discipline.
C. Definition of Persistent
    Several commenters believed VA's use of the term ``persistent'' did 
not comport with the dictionary definition of ``persistent.'' 
Specifically, the commenters felt that the dictionary definition of 
persistent would either require three instances of misconduct or be 
habitual misconduct. Additionally, some commenters thought that VA

[[Page 32368]]

should consider service members' patterns of offenses instead of the 
offenses in succession. Commenters also suggested VA consider multiple 
offenses that are committed within a short time period and/or have a 
similar origin, such as mental distress, as a single instance of 
misconduct. Others were concerned VA adjudicators would consider 
actions beyond those considered by the service branch for discharge. VA 
thanks these commenters for their comments and clarifies here that VA 
will consider multiple offenses that originate from a single event or 
circumstance (e.g., attempted robbery leading to fleeing and then 
leading to resisting arrest) as one ``instance'' of misconduct. 
Moreover, VA cited a dictionary definition in the preamble to its 
proposed rule and maintains that it is appropriate to align its 
definition of ``persistent'' with military statutes of limitations in 
order to exclude earlier misconduct that would not have been considered 
in a discharge. To the extent this is unsatisfactory to certain 
commenters, VA declines to make further amendments due to interagency 
interest in maintaining deterrents to misconduct that promote good 
order and discipline within the military.
D. Department of Defense and Congress
    One commenter stated the willful and persistent misconduct bar 
should apply only if the commanding officer discharges or releases a SM 
for such misconduct. The commenter felt that VA should rely on DoD or 
the commanding officers to determine the conduct's nature rather than 
making its own assessment. Another commenter stated the willful and 
persistent misconduct bar was ``unlawful'' and should be removed as 
contravening congressional intent. This commenter states any exclusion 
should be based on only severe misconduct. VA thanks the commenters for 
their comments.
    VA agrees that the willful and persistent misconduct bar should be 
reserved only for misconduct that is willful and persists and 
ultimately renders the service dishonorable. To the extent this bar has 
been susceptible to subjectivity, this final rule provides (1) the time 
frame in which the misconduct must occur, and (2) a compelling 
circumstances analysis, which combine to ensure that this regulatory 
bar will be applied only against SMs who willfully and persistently 
committed misconduct in service that explicitly led to their discharge, 
is not mitigated by any circumstances, and was not outweighed by 
otherwise meritorious service. VA believes this is consistent with 
congressional intent. Finally, as stated above, VA assures that 
misconduct that did not lead to discharge will not be considered--
because conduct that did not concern DoD or the commanding officer in a 
dispositive way should similarly not concern VA.

Concerns Over the COD Adjudicatory Process

    Multiple commenters expressed concern that the proposed rules will 
create an onerous and time-consuming adjudicatory process for VA and 
SMs. Some of these commenters also noted that the process left too much 
discretion to individual adjudicators. VA thanks these commenters for 
these comments. However, VA notes no additional burden is placed on 
VA's adjudicators than currently exists. Indeed, the objective criteria 
for willful and persistent misconduct should accelerate the COD 
process. Moreover, VA has robust training procedures and subregulatory 
guidance to ensure consistency among decisionmakers and accordingly 
makes no changes based on these comments.

Enforcement of Military Discipline and the Message to Honorable 
Veterans

    Many commenters stated that they supported this rule but urged VA 
to not further liberalize current COD rules. One commenter noted that 
additional liberalization of the COD rules would send ``a message to 
those [SMs] committing misconduct, that there are few if any 
repercussions for doing so.'' Another commenter asserted VA should not 
liberalize benefits for OTH SMs unless such discharge is upgraded to at 
least a general discharge because the basis for OTH discharges is at 
least the violation of a lawful order. The commenter continued that 
allowing benefits for such SMs communicated that there were no 
``adverse repercussions'' for wrongful actions, and such behavior would 
``severely undermine good order and discipline in units. Problem [SMs] 
get the message that committing misconduct will have little to no 
adverse [e]ffect on their subsequent civilian lives and therefore are 
not deterred from continuing misconduct.'' The commenter was concerned 
about the demoralization of law-abiding SMs, who would be ``in no 
better steed [sic] than the derelicts, malingerers, rule breakers, 
malfeasant and criminal amongst them in the ranks.'' This commenter 
further asked whether VA wished to send the message that one could be 
``a crook in the Army and get VA benefits notwithstanding.''
    Another commenter, a former master sergeant, stated ``[t]he VA 
should not denigrate our honorable service by changing the rules to 
provide care to people who could not, or would not, serve in the same 
manner. There are, and must remain to be, consequences for people who 
fail to live up to the ideals expected of military service. Treating 
those who failed in the same manner as those who succeeded detracts 
from the status of all of us who served honorably and will be looked at 
as a slap in the face to most of us.'' Another commenter stated that 
this rule means ``get discharged with an OTH and get benefits anyway. 
This is bad for moral [sic] and dangerous, military people need to have 
a form of trust, without this, it will create more poor serving 
members.'' That commenter noted that ``[h]onor and honesty saves 
lives.''
    In contrast, however, other commenters (further discussed below) 
requested VA remove all regulatory bars because they are not necessary 
to enforce military discipline. As one commenter noted, ``[w]ith such a 
robust system in place within the military itself, we doubt that any 
commander in the U.S. Military relies on VA's eligibility rules to 
maintain good order and discipline within her command.''
    VA recognizes the challenging nature of this subject and included 
it in the RFI for this very reason. VA thanks all the commenters for 
their comments on the issues of military discipline and denigration of 
honorable service. After extensive interagency discussion, VA was 
advised that Commanders within the Military Departments use the 
prospect of VA benefits bars as one tool to enforce good order and 
discipline, and that the Military Departments were concerned that any 
expansion of VA benefits to former SMs who committed serious misconduct 
would have the effect of removing disincentives to misconduct. Thus, VA 
is retaining four of the regulatory bars, with modifications. Those 
modifications will help distinguish those who committed serious 
misconduct that renders their service dishonorable from those whose 
misconduct comes with a mitigating circumstance or is outweighed by 
otherwise meritorious service. This strikes an appropriate balance: it 
expands VA benefits eligibility, but also avoids sending a message that 
misconduct has no repercussions. It aligns with the necessary Military 
Department incentives for military discipline, while also guaranteeing 
a more holistic and equitable COD review for former SMs.
    One commenter requested that VA not extend benefits to those with 
BCD or OTH discharges. The commenter stated that ``determination of 
character of service should reside solely with the

[[Page 32369]]

service department'' and not VA employees. The commenter continued: 
``There is already a legal mechanism in place to allow the individual 
to appeal the character of discharge with the service department.'' 
Another commenter stated: ``Getting a BCD, OTH, or dishonorable 
discharge is extremely difficult, and the process has numerous layers 
to ensure the integrity of the process. Those individuals who receive 
these discharges are not worthy of the military and totally undeserving 
of veteran benefits . . . Providing hard earned benefits to those who 
could not and did not serve honorable [sic] is a slap in the face to 
the millions of veterans who did the right things during their 
service.'' A commenter stated that ``VA should be prohibited from 
deciding why a character of discharge is issued. Allowing this change 
disrupts the military process and weakens the authority of the 
Secretary of each military branch and within due process. VA employees 
do not follow the same regulatory requirements as those who service on 
military boards.''
    VA thanks the commenters for their comments. It is true that 
character of service determinations remain DoD's responsibility, and 
upgrades are available from the Military Departments. But VA has both 
the authority and responsibility to determine eligibility for veterans' 
benefits. It has been performing this function for decades via 38 CFR 
3.12 and its predecessors. Even if DoD has a different approach to or 
framework for characterizing the service of its former members, VA 
maintains its authority to determine COD for purposes of VA benefits 
eligibility.
    One commenter stated ``I do not believe that anyone who receives a 
bad conduct or dishonorable discharge deserves to be treated by VA. 
Veterans wait forever for appointments and it's not right to add 
another million people to the rolls. We, honorable veterans, will never 
be seen. The VA needs to improve its track record before starting to 
reclassify people. The VA needs a lot more doctors and a lot more 
hospitals already.'' Another added that ``the added patient workload 
will also adversely impact the availability and timeliness of care 
received by all veterans at VA health care facilities.'' VA thanks the 
commenters for their comments and assures the commenters that those who 
received a Dishonorable discharge from the military are excluded from 
benefits eligibility. That said, VA has determined (after several 
rounds of public input) that the current regulatory approach to SMs 
with BCD and OTH discharges needs a restructuring to strike the 
appropriate balance between bestowing benefits to those who have earned 
them, while also limiting benefits for those whose service involved 
serious misconduct. This final rule's revision of Sec.  3.12(d) 
attempts to strike that balance.
    Similarly, a few commenters stated that former SMs with ``Bad 
Paper,'' OTH or dishonorable discharges should not be eligible for VA 
benefits, do not deserve any VA assistance and that their eligibility 
may delay the receipt of care for former SMs with honorable service. VA 
thanks these commenters for their comments. As noted above, VA aims to 
strike an appropriate balance between bestowing benefits to those who 
have earned them and limiting benefits for those whose service involved 
serious misconduct. VA believes this final rule does so by eliminating 
one of the regulatory bars, refining another, and applying a compelling 
circumstances exception to two of the regulatory bars, which provides a 
more holistic assessment of all appropriate factors in determining 
whether a former SM, despite a BCD or OTH discharge, has nevertheless 
earned ``veteran'' status.
    Another commenter opined that ``[u]nless a discharge is upgraded, 
every OTH, BC[D], and D[ishonorable] D[ischarge] should be barred from 
getting any VA benefit. Doing otherwise would teach servicemembers that 
misconduct does not have repercussions which undermines good order and 
discipline.'' The commenter stated that ``I have experience processing 
CODs for VA and every case, the misconduct was severe, not simple 
things like eating too much or being late. If we allow these people to 
receive benefits, the message to the public will be deleterious. If 
there has been a miscarriage of justice in the discharge by the 
military, the military has upgrade boards to fix that.'' Still another 
commenter cautioned against changes that give people license to behave 
badly knowing they can still get benefits. ``The military relies on 
trust, and this undermines that. Personal experience of having two 
soldiers, under his/her command, get court-martialed out due to drugs 
and team remained understaffed. OTH are given to non-conforming or 
repeat offenders, or just criminals.''
    VA thanks the commenter for this comment. VA has refined the 
willful and persistent misconduct bar, as well as implemented a 
compelling circumstances exception, to distinguish between serious 
misconduct worthy of a ``dishonorable'' determination and misconduct 
that is mitigated by the circumstances or outweighed by otherwise 
meritorious service. The aim is to provide benefits in the latter 
situation, but not the former.
    One commenter stated that ``[c]hanges to VA shouldn't be 
bureaucratic, they should be legislative. In addition, Veterans should 
serve honorably throughout their contract otherwise they shouldn't be 
entitled to VA benefits.'' VA thanks the commenter for their comment. 
As discussed above, Congress delegated to VA the ability to set 
criteria for what constitutes ``other than dishonorable'' service for 
purposes of VA benefits eligibility. This rulemaking is necessary to 
refine those criteria. VA makes no changes to the regulatory text based 
on this comment.

Support Expanding Benefits Eligibility

    Some commenters requested that all regulatory bars be removed. They 
stated that removing the regulatory bars would not affect military 
order and discipline. One commenter stated that, ``having served as a 
lower enlisted soldier, I can tell you I had no idea what the 
regulatory or statutory bars to VA benefits were. What was most 
important to me was . . . the people to my right and my left . . ., and 
the idea that [the bars] would have any impact on my behavior [i]s 
frankly absurd to me.'' Another commenter, former military defense 
counsel, stated ``I've done hundreds of cases. I can tell you very 
confidently that when people [commit repeated but minor misconduct], 
the last thing on their minds is VA benefits.'' Another commenter, a 
former SM, stated that most SMs ``have little or no knowledge of VA 
regulations or practice.'' Another commenter noted that misconduct 
during service can result in a criminal conviction and concluded that 
``it is difficult to believe that the loss of disability compensation 
is not dwarfed by the incentive to avoid a criminal conviction.'' 
Another commenter asserted that ``[a]ny concerns regarding military 
order and discipline should be reflected in [DoD's] policies and 
regulations,'' and that removal of the regulatory bars would have 
``minimal if any affect [sic] on military order and discipline as there 
are other remedies readily available to the chain of command.''
    Relatedly, some commenters stated that expanding benefits 
eligibility would not denigrate other veterans' honorable service. One 
commenter in particular, a former SM, stated that ``any argument that 
providing a disabled former [SM] with life-saving healthcare, an 
ability to eat or an ability to be sheltered somehow denigrates 
honorable service is [ ] patently [ ] inhumane.'' Another commenter, a 
former SM, stated: ``What would truly

[[Page 32370]]

denigrate my honorable service would be to leave those comrades behind, 
to suffer from poverty, homelessness, and the lack of access to 
healthcare while I enjoy the benefits of my discharge'' (emphasis 
added). Similarly, another commenter, a former SM, stated: ``I'm not 
honored by seeing other [SMs] left homeless, by seeing them without 
medical care . . . That does not honor me or my service.'' Another 
commenter stated that the provision of VA benefits is not about 
bestowing or withholding ``honor''; it is about delivering lifesaving 
and life-changing benefits to those who served this country. Another 
commenter similarly stated that VA should ``leave to the DoD the matter 
of conferring or withholding honor'' and focus on its ``top clinical 
priority [of] preventing suicide among all Veterans,'' regardless of 
discharge status.
    VA thanks the commenters for these comments. As noted above, VA 
recognizes the challenging nature of this subject and included it in 
the RFI for this very reason. Ultimately, after considering the 
comments for and against further limitation or removal of the 
regulatory bars to benefits, VA has determined that the provisions of 
this final rule strike a balance that will better ensure consistency in 
VA character of discharge determinations while also respecting the 
Military Departments' interest in disincentivizing significant 
misconduct prejudicial to good order and discipline. VA recognizes that 
the Military Departments use the prospect of VA benefits bars as one 
tool to enforce good order and discipline, and, for that reason, VA has 
decided not to remove all the regulatory bars, but to remove one and 
modify one. In that way, the changes in this final rule expand VA 
benefits to more SMs than ever before, but still align with the 
necessary incentives for military discipline.
    One commenter stated VA should look into the circumstances 
underlying a ``bad paper discharge.'' The commenter continued that ``VA 
should clear up the definition of willful and persistent misconduct.'' 
VA thanks the commenter for their comment. In this final rule, VA has 
crafted objective criteria to limit willful and persistent misconduct 
to specific parameters, and implemented a compelling circumstances 
exception that examines potential reasons why the misconduct underlying 
an OTH discharge may be mitigated or outweighed by otherwise 
meritorious service.
    One commenter asked VA to ``[p]lease revise the rules to allow all 
who have served our country to receive VA Benefits and Healthcare but 
have been denied based on their character of discharge. Cold War 
Veterans, and particularly those who served during Vietnam and post-
Vietnam were hit hard with many poor leaders. Many [v]eterans suffered 
significantly from mental health issues during a time in which mental 
health programs were not readily available, and to those who took 
advantage where they were available, were given bad paper.'' VA thanks 
the commenter for their comment. Instances of injustice or inequity in 
the military about discharges should be addressed to the Boards for 
Correction of Military Records and/or the Discharge Review Board. That 
said, the compelling circumstances exception is designed to consider 
factors like mental impairment and overseas-related hardship, and to 
consider whether (notwithstanding misconduct) the service was honest, 
faithful, and meritorious.

Other Comments (General)

    One commenter noted concerns over the effect of OTH discharges on 
homeless former SMs. VA thanks this commenter for this comment, and 
notes that VA currently provides certain healthcare and homeless 
support benefits to former SMs with OTH, and in some cases, BCD, 
discharges. As the commenter offered no regulatory change, VA makes no 
changes based on this comment.
    One commenter suggested that VA should not use the term 
``insanity'' in 38 CFR 3.12(b). VA thanks the commenter for their 
comment; however, VA proposed no changes to the definition of insanity, 
and solicited no comments on that definition, in the proposed rule. 
Further, the regulatory language originates in statute, so VA has a 
legal basis for using it. 38 U.S.C. 5303(b). Thus, VA is not changing 
the definition in this final rule.
    Numerous commenters stated their general opposition to VA-related 
matters outside of the scope of COD determinations, such as opposition 
to the privatization of VA services and the Choice Act. VA thanks the 
commenters for their comments, though they are outside the scope of 
this rulemaking and will not be addressed here.
    Some commenters requested assistance with VA benefits unrelated to 
the rulemaking package. VA thanks these commenters for their comments. 
However, as they are not related to the rulemaking, and offer no change 
to the regulatory text, VA makes no changes in response to these 
comments. These commenters are encouraged to seek out VSOs, other 
accredited representatives, or employees at VA Regional Offices to 
assist with VA benefits questions.
    One commenter noted that the new rule would help that commenter's 
case personally. VA thanks the commenter for the comment, but as the 
commenter offered no regulatory change, VA makes no changes based on 
this comment.

IV. Uncharacterized Discharges and Coast Guard Discharges

    VA wishes to clarify the applicability of this rule to 
uncharacterized discharges and Coast Guard discharges. Per 38 CFR 
3.12(k) (redesignated in this rule to Sec.  3.12(l)), there are three 
types of uncharacterized separations: (1) entry level separation; (2) 
void enlistment or induction; and (3) dropped from the rolls. An entry 
level separation is considered under conditions other than 
dishonorable; accordingly, this rulemaking does not apply to this type 
of uncharacterized separation. See 38 CFR 3.12(a). Void enlistments are 
reviewed under the factors listed in 38 CFR 3.14, and thus are also not 
impacted by this rulemaking.
    However, when a former SM was dropped from the rolls, the facts and 
circumstances surrounding the separation must be reviewed to determine 
whether the separation was under conditions other than dishonorable. 
These determinations are conducted in the same manner as if such former 
SM received an OTH discharge. Accordingly, these former SMs will be 
favorably impacted by this rulemaking for the reasons discussed above.
    The Coast Guard serves a unique place in the armed Forces. The term 
``armed forces'' means the Army, Navy, Air Force, Marine Corps, Space 
Force, and Coast Guard. 10 U.S.C. 101(a)(4). The military departments 
are the Departments of the Army, Navy, and Air Force. 10 U.S.C. 
101(a)(8). The Secretary of the Air Force has authority over the Air 
Force and the Space Force, and the Secretary of the Navy has authority 
over the Navy and Marine Corps. 10 U.S.C. 101(a)(9)(B), (C). The Coast 
Guard serves under the Department of Homeland Security, except upon 
Presidential direction to transfer it to the Department of the Navy or 
a declaration of war including a direction for its transfer to the 
Department of the Navy. 14 U.S.C. 101; 14 U.S.C. 103(a), (b); 10 U.S.C. 
101(a)(9)(B). The Coast Guard issues the following discharges for 
officers: honorable, general/under honorable conditions, OTH, dismissal 
pursuant to GCM or administrative separation. For an enlisted SM, the 
discharges are the same as any other SM--honorable, general/under 
honorable conditions, OTH, bad conduct or dishonorable. SMs may also 
receive uncharacterized

[[Page 32371]]

discharges. As these discharges are identical to any other SM, this 
rulemaking will have the same effect on the SMs or officers who receive 
a BCD or OTH discharge and apply for VA benefits or health care or seek 
a COD determination.

V. Past Denials and Effective Date

    In view of the complexity of the law VA administers, a brief 
discussion of the effect of prior COD adjudications and how to re-
adjudicate the same is likely to reduce confusion, both by claimants 
and by VA adjudicators, and may facilitate timely access to benefits.
    When this rule becomes effective, any claimant with a prior 
unfavorable COD determination, to include the no longer used 
undesirable discharge, may request a new COD determination under new 
Sec.  3.12. Cf. Routen v. West, 142 F.3d 1434, 1441 (Fed. Cir. 1998). 
For those claimants found eligible for benefits under new Sec.  3.12, 
the effective date of such benefits would be governed by 38 U.S.C. 
5110(g) and 38 CFR 3.114. In short, if the claim is submitted within 
one year of the effective date of this final rule, the effective date 
of benefits could be as early as the effective date of this final rule. 
38 CFR 3.114(a)(1).
    However, VA makes clear this regulatory change is not a ground for 
clear and unmistakable error (CUE) in prior COD determinations. 
Although this final rule departs from VA's prior approach to COD, that 
does not render VA's prior regulation unlawful, Garvey, 972 F.3d at 
1339, and, even if it were, a change in law cannot support a claim of 
CUE, George v. McDonough, 142 S. Ct. 1953, 1957 (2022). Accordingly, 
prior final decisions would not be subject to revision for CUE based on 
the new rulemaking. Claims for CUE on bases other than a change in 
regulation shall be considered on a case-by-case basis.

VI. Severability

    The purpose of this section is to clarify VA's intent with respect 
to the severability of provisions of this rule. Each provision of this 
rulemaking is capable of operating independently, and VA intends them 
to operate independently. If any provision of this rule is determined 
by judicial review or operation of law to be invalid, that partial 
invalidation will not render the remainder of this rule invalid. For 
example, amendments to any given regulatory bar are intended to operate 
independently, and are capable of operating independently, from 
amendments to other regulatory bars. Likewise, if the application of 
any portion of this rule to a particular circumstance is determined to 
be invalid, VA intends that the rule remain applicable to all other 
circumstances.

VII. Amendment Summary

    As noted above, 38 U.S.C. 101(2) defines a ``veteran'' as an 
individual ``who served in the active military, naval, air, or space 
service, and who was discharged or released therefrom under conditions 
other than dishonorable.'' Pursuant to binding judicial precedent, VA 
has the discretion to determine who satisfies the ``under conditions 
other than dishonorable'' requirement. Moreover, 38 U.S.C. 501(a) 
provides that ``[t]he Secretary has authority to prescribe all rules 
and regulations which are necessary or appropriate to carry out the 
laws administered by [VA] and are consistent with those laws, 
including--(1) regulations with respect to the nature and extent of 
proof and evidence and the method of taking and furnishing them in 
order to establish the right to benefits under such laws.'' These 
authorities permitted VA to establish a COD regulation, 38 CFR 3.12, 
and to amend that regulation herein.
    In this final rule, VA amends the section heading to read ``Benefit 
eligibility based on character of discharge'' to reflect the fact that 
VA does not have the authority to alter character of service 
determinations made by the Armed Forces. Rather, VA utilizes the 
characterization to determine basic VA benefit eligibility.
    Consistent with the proposed rule, VA amends paragraphs (a) and (b) 
by adding descriptive headers and implementing non-substantive changes 
for clarity.
    VA adds a descriptive header to paragraph (c) and amends paragraph 
(c)(1) to make ``lawful order'' plural so that it accurately reflects 
the text of 38 U.S.C. 5303(a). VA also amends paragraph (c)(6) by 
dividing the language of current paragraph (c)(6) into two subordinate 
paragraphs and making edits to that language, as well as moving current 
paragraphs (c)(6)(i) through (iii) to new paragraphs (e)(1) through (3) 
and making edits to that language.
    VA amends paragraph (d) to add a descriptive header ``Regulatory 
bars to benefits''; to revise the regulatory bars as discussed above, 
and to remove the homosexual acts bar.
    New paragraph (e) addresses the ``compelling circumstances'' 
exception. As noted above, new paragraphs (e)(1) through (3) expand 
upon current paragraphs (c)(6)(i) through (iii), with minor wording 
changes to reflect the fact that this language will now be applied to 
not just prolonged AWOL but also certain misconduct.
    Current paragraphs (e) through (k) are redesignated as paragraphs 
(f) through (l). Several of these paragraphs are provided descriptive 
headers and updated cross-references after the addition of new 
paragraph (e). Moreover, the authority citation for redesignated 
paragraph (i) has been embedded into that paragraph's text. Finally, VA 
is amending the authority citation for the section to clarify the 
statutory authorities through which 38 CFR 3.12 is promulgated.

Executive Orders 12866, 13563 and 14094

    Executive Order 12866 (Regulatory Planning and Review) directs 
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 14094 (Executive Order on 
Modernizing Regulatory Review) supplements and reaffirms the 
principles, structures, and definitions governing contemporary 
regulatory review established in Executive Order 12866 of September 30, 
1993 (Regulatory Planning and Review), and Executive Order 13563 of 
January 18, 2011 (Improving Regulation and Regulatory Review). The 
Office of Information and Regulatory Affairs has determined that this 
rule is a significant regulatory action under Executive Order 12866, 
section 3(f)(1), as amended by Executive Order 14094. The Regulatory 
Impact Analysis associated with this rulemaking can be found as a 
supporting document at www.regulations.gov.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final 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.

[[Page 32372]]

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 final rule will have no such effect on 
State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act (PRA)

    Although this final rule contains a collection of information under 
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521), there are no provisions associated with this rulemaking 
constituting any new collection of information or any revisions to the 
current collection of information. The collection of information for 38 
CFR 3.12 is currently approved by the Office of Management and Budget 
(OMB) and has valid OMB control numbers of 2900-0747, 2900-0886, 2900-
0002 and 2900-0004.

Congressional Review Act

    Under the Congressional Review Act, this regulatory action may 
result in an annual effect on the economy of $100 million or more, 5 
U.S.C. 804(2), and so is subject to the 60-day delay in effective date 
under 5 U.S.C. 801(a)(3). In accordance with 5 U.S.C. 801(a)(1), VA 
will submit to the Comptroller General and to Congress a copy of this 
regulation and the Regulatory Impact Analysis (RIA) associated with the 
regulation.

List of Subjects in 38 CFR Part 3

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

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved and signed 
this document on April 23, 2024, 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.

Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of 
General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs amends 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 and paragraphs (a), (b), (c) introductory 
text, (c)(1) and (6), and (d).
0
b. Redesignate paragraphs (e) through (k) as paragraphs (f) through 
(l).
0
c. Add new paragraph (e).
0
d. Add a heading at the beginning of newly redesignated paragraph (f).
0
e. Revise newly redesignated paragraphs (g), (h) introductory text, and 
(i) introductory text.
0
f. Remove the authority citation after newly redesignated paragraph 
(i).
0
g. Revise newly redesignated paragraph (j).
0
h. Add a heading at the beginning of newly redesignated paragraph (k).
0
i. Revise the authority citation at the end of the section.
    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 a period of service that 
was 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 paragraph (c)(6) 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 paragraph (c)(6) 
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 (c)(6)(ii) 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 
conditions listed in paragraph (d)(1) or (2) of this section.
    (1) Compelling circumstances exception is not applicable for:
    (i) Discharge 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. This paragraph (d)(2)(i) 
includes, generally, conviction of a felony.
    (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

[[Page 32373]]

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.
    (e) Compelling circumstances exception. The bar to benefits for 
prolonged AWOL under paragraph (c)(6) of this section and the two 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 or cognitive impairment at the time of the prolonged 
AWOL or misconduct, to include but not limited to 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, or cognitive 
disabilities.
    (ii) Physical health, to include physical trauma and any side 
effects of medication.
    (iii) Combat-related or overseas-related hardship.
    (iv) Sexual abuse/assault.
    (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 (e)(3), 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. * * *
    (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) through (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) of this section, but not 
under paragraph (c) of this section, provided that:
* * * * *
    (i) Special review board upgrades. Under 38 U.S.C. 5303(e), 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. * * *

(Authority: 38 U.S.C. 101, 501, and 5303)
* * * * *
[FR Doc. 2024-09012 Filed 4-25-24; 8:45 am]
BILLING CODE 8320-01-P