Government agencies have several restrictions on promulgating regulations. First, the regulation must be clarifying a statute that is ambiguous. To the extent the statute is clear, it forecloses the governmental agency’s Authority to promulgate gap-filling regulations. Second, the regulation cannot stretch the plain meaning of ordinary words used in the statute. Third, the regulations cannot exceed the expressed intent of Congress, which is discoverable by researching legislative history. If a regulation violates any one of those 3 standards, it will be disregarded by the courts.
With that in mind, we will now discuss why it is our firm’s legal position that two portions of the new October 2018 VA regulations are invalid as a matter of law.[1]
Regulation Definition for Net Worth is Legally Invalid
Congress enacted 38 U.S.C § 1522(a), titled “Net Worth Limitation,” which reads “The Secretary shall deny… payment of pension to a veteran under section 1513 or 1521… when the corpus of the estate of the veteran or… veteran’s spouse is such that under all the circumstances, including consideration of the annual income of the veteran, the veteran’s spouse, and the veteran’s children, it is reasonable that some part of the corpus of such estates [of the veteran and spouse] be consumed for the veteran’s maintenance.” A mirror provision was enacted at 38 U.S. § 1543(a).
Congress made clear in the title of the statutory provision that the emphasis was on net worth. The United States Supreme Court ruled in U.S. v. Home Concrete & Supply that, in order for a government agency to be afforded deference with regard to its interpretation of a statute which it administers, the regulation cannot conflict with the plain meaning of the statute.[2] Furthermore, in another case dealing with judicial deference to government agency regulations, the U.S. Court of Appeal for the Federal Circuit held that regulations will be declared legally invalid as a matter of law to the extent they exceed the unambiguously expressed intent of Congress.[3]
Therefore, it must be read in the context of focusing on net worth. The term “net worth” is plain and simple: total assets minus total liabilities. The VA chose to set the net worth limit at $123,600, which is perfectly fine.
However, despite the plain meaning of the statute, the VA chose to arbitrarily define the term “net worth” to mean all real or personal property minus only those liabilities attributable to a specific property. In other words, accounts payable, credit card debt, student loans, unpaid taxes, money owed to others, and any other unsecured debt are entirely disregarded, which irrefutably contravenes the plain meaning of the term “net worth.”[4]
Therefore, in accordance with the U.S. Supreme Court’s ruling in Home Concrete Supply, it is our firm’s position that this regulatory definition of “net worth” is invalid as a matter of law. We are recommending that veterans submit what we refer to as “hostile claims” to the VA clearly stating with full disclosure that you are reporting your net worth in accordance with the plain meaning of the term, attach a net worth calculation spreadsheet, and provide the VA with the opportunity to reject the claim so that the matter can be litigated in federal court.
Denial of Accounting for Business Losses is Legally Invalid
Similarly, VA regulations also declare that a “loss sustained in operating a business, profession, or farm or from investments may not be deducted from income derived from any other source,” which basically denies the true reflection of income by only accounting for gains but not losses.[5] It would certainly be appropriate to deny passive losses just as the IRS has Passive Activity Loss Limitation rules that effectively prevent the netting of active income with passive income, but this VA regulation takes it further to serve as an Active Loss Limitation Rule that nonsensically prevents active income from netting with active losses. This does not prevent abuse; it only creates unjust results. This serves no legitimate governmental interest. There is no logical or rational purpose for this. And more importantly, it goes against the unambiguously expressed intent of Congress to consider “all the circumstances.”[6]
It is our firm’s position that the regulation prohibiting the netting of active gains with active losses is arbitrary, capricious, and, more importantly, in contradiction with the plain meaning of the statute in violation of the U.S. Supreme Court’s ruling in Home Concrete Supply.
Therefore, in accordance with the U.S. Supreme Court’s ruling in Home Concrete Supply, it is our firm’s position that this regulatory definition of “income” is invalid as a matter of law. Moreover, in accordance with the U.S. Court of Appeals for the Federal Circuit’s decision in Dominion Resources, the regulation is also invalid for exceeding the intent of Congress.[7]
Again, we are recommending that veterans submit Hostile Claims to the VA clearly stating with full disclosure that you are reporting your net worth and annual income in accordance with our firm’s interpretation, attach a net worth calculation spreadsheet, net active gains with active losses, and provide the VA with the opportunity to reject the claim so that the matter can be litigated in federal court by our firm.
Conclusion
If you are interested in being the courageous veteran to take this matter to federal court, [8] are a age 65 or older, the surviving spouse of such a veteran, served during eligible periods of wartime as explained above, and may now or in the future require assistance with daily living activities, but you are not qualified due to your net worth or annual income, contact our firm today to schedule a free consultation.
[1] 38 U.S.C. § 5904(b)(4), (6). It is critical to emphasize that our firm is not baselessly refusing to comply with regulations. We are presenting an intellectual and scholarly legal argument as to why the new VA regulations are not entitled to judicial deference and invalid as a matter of law. The citations in this article will clearly establish that this legal position is supported by substantial and compelling legal authorities from the U.S. Supreme Court, U.S. Court of Appeals for the DC Circuit, and U.S. Court of Appeals for the Federal Circuit.
[2] See 132 S. Ct. 1836 (2012).
[3] Dominion Resources, Inc. v. U.S., 681 F.3d 1313 (Fed. Cir. 2012). The U.S. Supreme Court has also held that “even the most basic general principles of statutory construction must yield to clear contrary evidence of legislative intent.” National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 458 (1974).
[4] 38 C.F.R. § 3.274(b)(1), (f) (citing to 38 C.F.R. § 3.275(a)(1)).
[5] 38 C.F.R. § 3.262(a)(3).
[6] 38 U.S.C § 1522(a)
[7] The U.S. Court of Appeals for the DC Circuit has held that courts should not follow the “literal meaning” of a statute when “to do so would, in view of the purpose of the statute, lead to an absurd or unjust result.” Organized Migrants in Cmty. Action, Inc. v. Brennan, 520 F.2d 1161, 1167 (D.C. Cir. 1975).
[8] It is firms like ours that help our legal system develop by eliminating “grey areas” of law by taking them to federal court, which provides the legal system and the entire American public with clarity as to the scope and effect of the law.