PUBLIC ASSISTANCE, income - Can you exclude veteran disability benefits as income when applying for public assistance?

Brighan started this conversation

Sep 23, 2008

Elaine of TSA at Aidpage brought up a good question for debate, in which case I am searching for the answer whether “trying to find the written statute which states that Veterans Disability Benefits can be excluded as declared income for purposes of applying for public program benefits”.

Under Constititutional law, each State has its own laws--Non-taxable but counted in some programs. Each State sets up their own rules for which disability payments are counted as income, especially the Veterans Administration. Check the Social Security Web link for more information about your benefits.

Contact a lawyer in your State to determine if you can exclude veterans disability payments as income when applying for public assistance, or e-mail the Office of Veterans Services.

Public assistance paid to a claimant by a state may be deducted from retroactive SSI payments by the secretary and paid directly to the state. 42 U.S.C.S. §§ 407, 1383(g). No such provision is applicable to retroactive disability payments.

The Veterans' Administration provides compensation for service-connected disability. See 38 U.S.C. sec. 1110 (2000) (providing compensation for disability resulting from personal injury suffered or disease contracted in line of duty, or for aggravation of a preexisting injury suffered or disease contracted in line of duty, in the active military, naval, or air service, during a period of war); id. sec. 1131 (providing compensation for disability resulting from personal injury suffered or disease contracted in line of duty, or for aggravation of a preexisting injury suffered or disease contracted in line of duty, in the active military, naval, or air service, during other than a period of war); see also Sidoran v. Commissioner, 640 F.2d 231, 233 (9th Cir. 1981) ("The Veterans' Administration's disability benefits program is intended to compensate a veteran for impairment resulting from service-connected injuries."), affg. T.C. Memo. 1979-56.

In general, monthly compensation for service-connected disability is paid on the basis of a rating of the claimant's disability, which is in turn based on a schedule of ratings of reductions in earning capacity from specific injuries or combination of injuries. See, e.g., 38 U.S.C. secs. 1114, 1134, 1155 (2000); 38 C.F.R. secs. 4.1-4.150 (2003).

Payments of Veterans' Administration benefits are tax exempt. 38 U.S.C. sec. 5301 (2000); Porter v. Aetna Cas. & Sur. Co., 370 U.S. 159, 160 (1962) ("Since 1873, it has been the policy of the Congress to exempt veterans' benefits from creditor actions as well as from taxation.").

At all times, Veterans' Administration disability payments will continue to be excluded from gross income.

In addition, even if a future serviceman who retires does not receive his disability benefits from the Veterans' Administration, he will still be allowed to exclude from his gross income an amount equal to the benefits he could receive from the Veterans' Administration. Otherwise, future members of the armed forces will be allowed to exclude military disability retirement payments from their gross income only if the payments are directly related to "combat injuries." * * * [S. Rept. 94-938, at 139 (1976), 1976-3 C.B. (Vol. 3) 49, 177.]

In other words, a retired serviceman ordinarily would be unable to exclude benefit payments received for a non-combat-related injury. See sec. 104(b)(2)(C) and (3). If such benefit payments otherwise meet the requirements of sec. 104(a)(4), however, sec. 104(b)(4) would allow the serviceman to exclude at least as much of the payments as equals any Veterans' Administration benefits which the serviceman would have been entitled to, but did not, receive.

Compensation

This benefit program evaluates disability resulting from all types of diseases and injuries encountered as a result of military service. The degrees of disability that are determined by VA represent, as far as can practicably be determined, the average loss in wages resulting from such diseases and injuries and their complications in civil occupations. Generally, the degrees of disability specified are also designed to compensate for considerable loss of working time from exacerbations or illnesses.

See the Fact Sheets for more information.
Eligibility criteria, see 38 CFR §3.4.

I'll keep researching the question posted here and update any results. I appreciate if any one else could contribute their knowledge on this blog site. Thank you.

Ekikaseven writes--

One would need to ask the particular program for which they are applying to be sure. However, while disability is NOT taxable (you do not have to report it as income); most places DO require that you count ALL income including Veteran's Disability as income when applying for benefits/assistance.

Yet, like I said, since some states do differ, just call the place at the place one is seeking assistance from to verify.

In response to VOA who posted a question to me about how the individual States supercede the Constitutional Supremecy Clause 38 USC 5301 (a)--

§ 5301. Nonassignability and exempt status of benefits

How Current is This?

(1) Payments of benefits due or to become due under any law administered by the Secretary shall not be assignable except to the extent specifically authorized by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary. The preceding sentence shall not apply to claims of the United States arising under such laws nor shall the exemption therein contained as to taxation extend to any property purchased in part or wholly out of such payments. The provisions of this section shall not be construed to prohibit the assignment of insurance otherwise authorized under chapter 19 of this title, or of servicemen’s indemnity.

(2) For the purposes of this subsection, in any case where a payee of an educational assistance allowance has designated the address of an attorney-in-fact as the payee’s address for the purpose of receiving a benefit check and has also executed a power of attorney giving the attorney-in-fact authority to negotiate such benefit check, such action shall be deemed to be an assignment and is prohibited.

(3) (A) This paragraph is intended to clarify that, in any case where a beneficiary entitled to compensation, pension, or dependency and indemnity compensation enters into an agreement with another person under which agreement such other person acquires for consideration the right to receive such benefit by payment of such compensation, pension, or dependency and indemnity compensation, as the case may be, except as provided in subparagraph (B), and including deposit into a joint account from which such other person may make withdrawals, or otherwise, such agreement shall be deemed to be an assignment and is prohibited.

(B) Notwithstanding subparagraph (A), nothing in this paragraph is intended to prohibit a loan involving a beneficiary under the terms of which the beneficiary may use the benefit to repay such other person as long as each of the periodic payments made to repay such other person is separately and voluntarily executed by the beneficiary or is made by preauthorized electronic funds transfer pursuant to the Electronic Funds Transfers Act (15 U.S.C. 1693 et seq.).

(C) Any agreement or arrangement for collateral for security for an agreement that is prohibited under subparagraph (A) is also prohibited and is void from its inception.

(b) This section shall prohibit the collection by setoff or otherwise out of any benefits payable pursuant to any law administered by the Secretary and relating to veterans, their estates, or their dependents, of any claim of the United States or any agency thereof against

(1) any person other than the indebted beneficiary or the beneficiary’s estate; or

(2) any beneficiary or the beneficiary’s estate except amounts due the United States by such beneficiary or the beneficiary’s estate by reason of overpayments or illegal payments made under such laws to such beneficiary or the beneficiary’s estate or to the beneficiary’s dependents as such. If the benefits referred to in the preceding sentence are insurance payable by reason of yearly renewable term insurance, United States Government life insurance, or National Service Life Insurance issued by the United States, the exemption provided in this section shall not apply to indebtedness existing against the particular insurance contract upon the maturity of which the claim is based, whether such indebtedness is in the form of liens to secure unpaid premiums or loans, or interest on such premiums or loans, or indebtedness arising from overpayments of dividends, refunds, loans, or other insurance benefits.

(c) (1) Notwithstanding any other provision of this section, the Secretary may, after receiving a request under paragraph

(2) of this subsection relating to a veteran, collect by offset of any compensation or pension payable to the veteran under laws administered by the Secretary the uncollected portion of the amount of any indebtedness associated with the veteran’s participation in a plan prescribed in chapter 73 of title 10.

(2) If the Secretary concerned (as defined in section 101 (5) of title 37) has tried under section 3711 (a) of title 31 to collect an amount described in paragraph (1) of this subsection in the case of any veteran, has been unable to collect such amount, and has determined that the uncollected portion of such amount is not collectible from amounts payable by that Secretary to the veteran or that the veteran is not receiving any payment from that Secretary, that Secretary may request the Secretary to make collections in the case of such veteran as authorized in paragraph (1) of this subsection.

(3) (A) A collection authorized by paragraph (1) of this subsection shall be conducted in accordance with the procedures prescribed in section 3716 of title 31 for administrative offset collections made after attempts to collect claims under section 3711(a) of such title.

(B) For the purposes of subparagraph (A) of this paragraph, as used in the second sentence of section 3716 (a) of title 31—

(i) the term “records of the agency” shall be considered to refer to the records of the department of the Secretary concerned; and

(ii) the term “agency” in clauses (3) and (4) shall be considered to refer to such department.

(4) Funds collected under this subsection shall be credited to the Department of Defense Military Retirement Fund under chapter 74 of title 10 or to the Retired Pay Account of the Coast Guard, as appropriate.

(d) Notwithstanding subsection (a) of this section, payments of benefits under laws administered by the Secretary shall not be exempt from levy under subchapter D of chapter 64 of the Internal Revenue Code of 1986 (26 U.S.C. 6331 et seq.).

(e) In the case of a person who—

(1) has been determined to be eligible to receive pension or compensation under laws administered by the Secretary but for the receipt by such person of pay pursuant to any provision of law providing retired or retirement pay to members or former members of the Armed Forces or commissioned officers of the National Oceanic and Atmospheric Administration or of the Public Health Service; and

(2) files a waiver of such pay in accordance with section 5305 of this title in the amount of such pension or compensation before the end of the one-year period beginning on the date such person is notified by the Secretary of such person’s eligibility for such pension or compensation, the retired or retirement pay of such person shall be exempt from taxation, as provided in subsection (a) of this section, in an amount equal to the amount of pension or compensation which would have been paid to such person but for the receipt by such person of such pay.

The exemption tables for disabled veterans does not preclude counting veterans benefits as income in monetary assistance programs like food stamps or cash payments.

TREASURY OFFSET PROGRAM

Payments Exempt from Offset by Disbursing Officials(Nontax Debt Collection)

PAYMENTS EXEMPT BY FEDERAL LAW
Payment Agency	Type of Payment	Statutory Exemption (U.S. Code)
Department of Education	Payments under a program administered by the Secretary of Education under Title IV of the Higher Education Act of 1965	31 U.S.C. ' 3716(c)(1)(C)
Department of Veterans Affairs	Payments of benefits under any law administered by the Secretary of Veterans Affairs, including: * Pension programs * Parents= dependency and indemnity compensation programs * Disability and death compensation * Dependency and indemnity compensation * Monetary educational assistance * Monetary benefits under training (including work study allowances) and rehabilitation programs * Special monetary benefits * Life insurance payments * Funeral and burial expenses * Financial assistance for adapted housing and automobile equipment * Minimum income widow * Special allowance under 38 U.S.C. ' 1312 * Attorney fees withheld from retroactive benefits for representation at the Board of Veterans Appeals * Clothing allowance * Apportionment funds * Accrued benefits * Child support withholdings * Reimbursements for travel, medical, rehabilitation, and health care related needs and activities	38 U.S.C. ' 5301(a)
Department of the Treasury	Payments under the tariff laws	31 U.S.C. ' 3701(d)
Department of Labor/Social Security Administration	Payments under the Black Lung Benefits Act, other than payments under Part B	30 U.S.C. ' 932(a) [incorporating 33 U.S.C. ' 916]
Department of Labor	Longshore and Worker=s Compensation Act payments	33 U.S.C. ' 916
Railroad Retirement Board	Tier 2 Railroad Retirement benefit payments	45 U.S.C. ' 231m
Department of Agriculture	Federal Crop Insurance indemnity payments	7 U.S.C. ' 1509
Department of Defense	Survivors benefits (military retirement) payments	10 U.S.C. ' 1450(i)
Department of Defense	Medal of Honor pension payments	38 U.S.C. ' 1562(c)
Social Security Administration/Department of Health and Human Services	Payments made under the Social Security Act, except to the extent provided under 31 U.S.C. ' 3716(c) [Debt Collection Improvement Act]	31 U.S.C. ' 3701(d)
Federal Emergency Management Agency	Payments made under the Cerro Grande Fire Assistance Act (covering claims resulting from the wildfire in New Mexico in May 2000)	Public Law 106-246

PAYMENTS EXEMPT BY FEDERAL LAW FOR COLLECTION OF STATE NONTAX DEBTS AND PAST-DUE SUPPORT OBLIGATIONS
Payment Agency	Type of Payment	Statutory Exemption (U.S. Code)
See above	All payments listed above as APayments Exempt by Federal Law@	See above
Railroad Retirement Board	Railroad Retirement benefit payments	45 U.S.C. ' 231m, 31 U.S.C. ' 3716(h)
Social Security Administration	Payments made under the Social Security Act	31 U.S.C. ' 3701(d), 31 U.S.C. ' 3716(h), 42 U.S.C. ' 407 and 42 U.S.C. ' 1383(d)(1)
Department of Labor/Social Security Administration	Payments under the Black Lung Benefits Act	31 U.S.C. ' 3716(h), 30 U.S.C. ' 932(a) [incorporating 33 U.S.C. ' 916]
PAYMENTS EXEMPT BY ACTION OF THE SECRETARY OF THE TREASURY (31 U.S.C. ' 3716(c)(3)(B))
Payment Agency	Type of Payment
All Agencies	Federal Loan payments other than travel advances [see 31 CFR 285.5 (e)(2)(vii)]
Social Security Administration	Social Security Supplemental Security Income (SSI) benefit payments Federal Old-Age, Survivors, and Disability Insurance (OASDI) benefits being offset internally by SSA
Department of Agriculture	Department of Agriculture, Food and Nutrition Services benefit payments made under the following programs: * Food stamp program * Nutrition assistance program for Puerto Rico * Special supplemental nutrition program for women, infants, and children (WIC) * WIC farmer=s market nutrition program * National school lunch program * Summer food service program * Child and adult care food program * Special milk program for children * School breakfast program Payments made under the following Rural Development programs: Multi-Family Rental Assistance program Community Facilities direct loans and grants Single Family Housing-Homeownership direct loans and grants Single Family Housing-Technical Assistance grants Multi-Family Housing direct loans and grants Multi-Family Housing Preservation grants Business and Industry direct loans Intermediary Relending direct loans Rural Business Opportunity grants Rural Business Enterprise grants Rural Economic Development direct loans Water and Waste Disposal direct loans and grants

Federal Emergency Management Agency	Federal Emergency Management Agency payments under the following disaster relief and emergency assistance programs: * Individual & family grant program * Disaster housing * Crisis counseling assistance & training * Disaster unemployment assistance * Cora Brown fund (disaster aid) * Community disaster loan * Public assistance to states & local governments * Fire suppression assistance * Urban search & rescue * Assistance to Firefighters Grant Program
Department of Justice	Payments to eligible claimants pursuant to the September 11^th Victims Compensation Fund
Pension Benefit Guaranty Corporation	Pension Benefit Guaranty payments as follows: * Premium refunds to pension plans and plan sponsors * Financial assistance to multiemployer plans * Contractor bank payments to participants and beneficiaries
Department of Housing and Urban Development	Payments under the following programs: Annual Contributions for Operation of Low-Income Housing Projects Contributions for Low-Income Housing Projects (Development) * Public Housing Modernization Program (Modernization) Lease Adjustments Section 8 Low-Income Housing Assistance (Rental Voucher Program * Section 8 Counseling; Family Self Sufficiency (excluding payments for administrative costs) Revitalization of Severely Distressed Public Housing (Hope VI) Public and Assisted Housing Drug Elimination Family Investment Centers Indian Homeownership Program (Mutual Help Homeownership) grants Hope 3 Program (HOPE for Homeownership of Single Family Homes) Home Program (HOME Investment Partnerships) Section 8 Payment Rental Assistance Section 236 Direct Loans for the Elderly or Handicapped Section 202 Rental Supplements (Section 101) Safe Neighborhood Grants Drug Elimination Grants Two Homeless Assistance Programs (Supportive Housing, Emergency Shelter Grants, Shelter Plus Care Program and Section 8 Moderate Rehabilitation Single Room Occupancy Program) Home Equity Conversion Mortgage Program Flexible Subsidy Program Mark-to-Market Portfolio Reengineering Demonstration Program Community Development Block Grants to municipal governments, counties and townships Housing Opportunities for Persons with Acquired Immune Deficiency Syndrome (HOPWA) Grants to Historically Black Colleges and Universities Service Coordinator and Congregate Housing Services Programs

Department of Health and Human Services

Payments under the following:

*Vaccine Injury Compensation Program (other than death benefits)

*Tribal Law 93-638 Contracts/Compacts

*to National Institutes of Health Clinical Center patients

*Ricky Ray Hemophilia Relief Fund Act of 1998 (Ricky Ray Fund)

Payments to small, non-profit organizations and/or Indian Tribes/Tribal organizations serving areas for which no alternative organization is available to provide the grant-specific services under the following programs:

*Head Start

*Abandoned Infants

*Native American

*Transitional Living

*Refugee Assistance-Voluntary Agency

* Community Services Block Grant

*Refugee and Entrant Assistance

*Family Support Center and Gateway Demonstration

*Runaway and Homeless Youth

*Drug Education and Prevention for Homeless Youth

*Youth Initiative and Youth Gangs

*Older American Grants for Native Americans

Department of Interior

Payments made to Indian tribes and tribal organizations under the provisions of the Indian Self-Determination and Education Assistance Act

This should be enough ammunition for veterans to ask their attorneys if the State has the right, under law of the Secretary, to count veteran disability benefits as income for public assistance, in which case each State has their rights to count veteran disability benefits as income for public assistance under SSI.

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Can you exclude veteran disability benefits as income when applying for public assistance?

§ 5301. Nonassignability and exempt status of benefits

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