Date: December 22, 1997 [VAOPGCPREC 39-97]{.underline}

From: Acting General Counsel (022)

Subj: Countability as Income of Reparations Paid to Victims of Nazi
Persecution \-- XXXXXXXXXXXXXXXXX

To: Director, Compensation and Pension Service (213B)

**QUESTION PRESENTED:**

Are reparations paid to a veteran's spouse, a victim of Nazi
persecution, by the Federal Republic of Germany (FRG) countable as
income for purposes of Department of Veterans Affairs (VA) pension
programs and parents'

dependency and indemnity compensation (DIC)?

**COMMENTS:**

1\. In the matter which gave rise to this request for opinion, the
veteran had been in receipt of nonservice-connected pension under the
section-306 pension program. In an eligibility verification report, the
veteran reported that the veteran's spouse receives approximately \$700
per month in reparations from the FRG government. If these reparations
are counted as income, the amount of the veteran's family's income
exceeds the maximum allowable for section-306 pension. The veteran has
explained that the reparations are intended to compensate his spouse's
family whose possessions, including the family's business and home, were
seized by the Nazis when they fled Germany in 1939.

2\. Following World War II, the FRG entered into an agreement known as
Protocol No. 1 with the Conference on Jewish Material Claims against
Germany, which required the FRG to enact laws that would compensate
Jewish

victims of Nazi persecution directly. The German laws implementing
Protocol No. 1, which are known by the

acronym of their German title as BEG, provide compensation to those who
suffered physical injury or loss of

freedom, property, income, or professional and financial advancement as
a result of that persecution. [^1] Office of German, Austrian and Swiss
Affairs, Bureau of European and Canadian Affairs, U.S. Dep't of State,
*German*

*Compensation for National Socialist Crimes* (March 1996).

3\. Section 1503(a) of title 38, United States Code, which governs
income computation for improved-pension

purposes, states that "\[i\]n determining annual income . . . all
payments of any kind or from any source . . . shall be included except"
as specifically provided in that section. The history of this provision
indicates Congress' purpose "that a pensioner's total annual nonpension
income shall be included in determining the amount of pension payable,
unless a specific exclusion from such income is authorized by law." S.
Rep. No. 1329, 95th Cong., 2d Sess. 22 (1978); *see also* H.R. Conf.
Rep. No. 1768, 95th Cong., 2d Sess. 22 (1978), *reprinted in* 1978
U.S.C.C.A.N. 5702, 5708. Section 1315(f)(1) of title 38, United States
Code, pertaining to parents' DIC, contains language similar to that of
section 1503(a). Section 306 of the Veterans' and Survivors' Pension
Improvement Act of 1978 provides that persons entitled to receive
pension under the provisions of title 38 amended by that act (referred
to as "section-306 pensioners"), or under section 9(b) of the Veterans'
Pension Act of 1959, Pub. L. No. 86-211 ("old-law pensioners") may
continue receiving pension payments at the monthly rate being paid on
December 31, 1978, "subject to all provisions of law applicable to basic
eligibility for and payment of pension" as in effect on December 31,
1978, and subject to specified income limitations. Pub. L. No. 95-588, §
306(a)(2), (b)(3), 92 Stat. 2497, 2508, 2509 (1978). Annual income for
purposes of section-306 pension is to be "determined in accordance with
section 503 of title 38, United States Code, as in effect on December
31, 1978," which section included language identical to that quoted
above from current section 1503(a), although the specific income
exclusions in the two statutes differed. Pub. L. No. 95-588, §
306(a)(2)(A), 92 Stat. at 2508. Annual income for purposes of old-law
pension is to be "determined in accordance with the applicable
provisions of law, as in effect on December 31, 1978." Pub. L. No.
95-588, § 306(b)(3), 92 Stat. at 2509. Those provisions contained a
limited list of specific items which were not considered income for
old-law pension purposes. None of the referenced income-computation
provisions contains an exclusion from income for reparations paid to
victims of Nazi persecution or more generally for restitution payments
of this nature. [^2]

4\. In 1994, Congress enacted Pub. L. No. 103-286, 108 Stat. 1450 (42
U.S.C. § 1437a note), which provides, in section 1(a), that
"\[p\]ayments made to individuals because of their status as victims of
Nazi persecution shall be disregarded in determining eligibility for and
the amount of benefits or services to be provided under any Federal or
federally assisted program which provides benefits or services based, in
whole or in part, on need." The law is

applicable to determinations made on or after August 1, 1994, "with
respect to payments . . . made before, on, or after such date." Pub. L.
No. 103-286, § 1(b), 108 Stat. 1450.

5\. This legislation was prompted in large part by a decision by the
Department of Housing and Urban

Development, subsequently modified, to count FRG reparations as annual
income in determining eligibility for low-income assisted housing. *See*
140 Cong. Rec. S9259-60 (daily ed. July 19, 1994) (statement of Sen.
DeConcini); *see* *also* 140 Cong. Rec. H5529, H5530 (daily ed. July 12,
1994) (statements of Reps. Towns, Coppersmith, and Gilman). The Internal
Revenue Service had concluded that the compensation paid by the FRG is
in the nature of reimbursement for the deprivation of civil or personal
rights and therefore did not constitute taxable income to the recipients
for Federal income tax purposes. Rev. Rul. 56-518, 1956-2 C.B. 25; *see
also* Rev. Rul. 58-370, 1958-2 C.B. 14 (same conclusion regarding
similar payments by Federal Republic of Austria). Proponents of the
legislation also noted a decision by the United States Court of Appeals
for the Ninth Circuit, *Grunfeder v. Heckler,* 748 F.2d 503 (9th Cir.
1984) (*en banc*), which overturned a determination by the Social
Security Administration that German reparation payments made to victims
of Nazi persecution constituted countable income for purposes of
determining eligibility for supplemental security income under the
Social Security Act. 140 Cong. Rec. at S9260 (statement of
Sen. DeConcini); 140 Cong. Rec. at H5529 (statement of Rep. Waxman). In
order to insure fair and consistent treatment of victims of Nazi
persecution under all Federal benefit programs, proponents advocated
what became section 1 of Pub. L. No. 103-286 as a means of establishing
"a uniform standard regarding reparations payments to Holocaust victims
. . . within the Federal Government." 140 Cong. Rec. at H5530 (statement
of Rep. Gilman). Senator DeConcini described the legislation as
"prevent\[ing\] all Government agencies" from considering such
reparations payments in determining eligibility for need-based benefits.
140 Cong. Rec. at S9259 (statement of Sen. DeConcini).

6\. The language of section 1(a) of Pub. L. No. 103-286, which refers to
"any Federal . . . program which provides benefits . . . based, in whole
or in part, on need," effectuates Congress' objective to create a
uniform standard

applicable to all Federal need-based programs and is broad enough to
encompass the improved, section-306, and old-law pension programs and
the parents' DIC program. To the extent of any conflict between the
statutes

governing these programs, which do not exclude reparations payments from
income-computation, and Pub. L. No. 103-286, the latter, more recently
enacted, law must control. 2B Norman J. Singer, Sutherland Statutory

Construction § 51.02 (5th ed. 1992); *see also* VAOPGCPREC 4-93 (O.G.C.
Prec. 4-93); VAOPGCPREC 71-90 (O.G.C. Prec. 71-90). We therefore
conclude that reparation payments to victims of Nazi persecution may not
be considered countable income for purposes of determining eligibility
for these benefits. Further, to the extent that a claimant's net worth
may be relevant to determining "eligibility for and the amount of
benefits" under VA need-based programs, as it is for purposes of
improved pension and section-306 pension (but not old-law pension and
parents' DIC), section 1(a) of Pub. L. No. 103-286 would preclude
consideration of reparation payments to victims of Nazi persecution in
determining net worth.

Finally, we note that section 1(d) of Pub. L. No. 103-286, 108 Stat.
1450, requires any government agency that has not disregarded reparation
payments to victims of Nazi persecution in making eligibility
determinations for Federal need-based benefits to make a "good faith
effort" to notify any person who may have been denied benefits based
upon the receipt of these reparations of the potential eligibility of
that person for the benefits. We suggest that the Veterans Benefits
Administration attempt to determine whether the reparation payments in
question may have been counted in determining eligibility for need-based
benefits administered by VA and, if so, whether it would be

feasible to identify and notify claimants who may have been denied
benefits on this basis.

**HELD:**

Reparations paid by the Federal Republic of Germany to individuals who
were victims of Nazi persecution are not countable as income or net
worth for purposes of determining eligibility for section-306, old-law,
and improved pension, and parents' dependency and indemnity
compensation.

Robert E. Coy

[^1]: The German title of this collection of laws is
    "Bundes­entschaedigungsgesetz. The German compensation efforts

    were codified in three laws. The first law, entitled the
    "Supplementary law for the Compensation of the Victims of National
    Socialist Persecution," enacted October 1, 1953, implemented the
    initial German compensation program. The "Federal Law for the
    Compensation of the Victims of National Socialist Persecution,"
    enacted June 29, 1956, expanded the scope of the first law. The
    "Final Federal Compensation Law," enacted September 14, 1965,
    increased the number of persons eligible for compensation and the
    assistance offered. U.S. Dep't of State, *German Compensation for
    National Socialist Crimes.*

[^2]: The veteran contends that the reparations are not countable as
    income for purposes of determining pension entitlement because they
    constitute reimbursement for a casualty loss. The exclusion for
    reimbursements for casualty loss found at 38 U.S.C. §§ 1315(f)(1)(I)
    and 1503(a)(5) would not be applicable to section-306 and old-law
    pension because the exclusion was not part of the statutes governing
    those programs as in effect on December 31, 1978. *See* Pub. L.
    No. 100-687, § 1402, 102 Stat. 4105, 4129 (1988) (adding
    casualty-loss exclusion for improved pension and parents' DIC). We
    need not address whether the reparation payments constitute
    reimbursement for a casualty loss for purposes of determining
    entitlement to improved-pension and parents' DIC in light of our
    conclusion based upon Pub. L. No. 103-286. *See* *infra.*