History of the Loophole in 42 U.S.C. § 659

For simplicity, we refer to Section 659 as it is numbered in US Code.
See Footnote 1. below.

Loophole

States are using a loophole in Section 659 of Title 42 to convert veteran benefits into state revenue.

This loophole says that VA benefits received by military retirees can be garnished to repay the state for the cost of welfare based on alimony or child support orders.

It should say that ALL of the benefits provided by the Department of Veterans Affairs (VA) are exempt from state jurisdiction, thereby exempt from Title IV-D because the Uniformed Services Former Spouses Protection Act (USFSPA) Pub. Law 97-252 (1982) and the Veterans Judicial Review Act (VJRA) Pub. Law 100-687 (1988) canceled that part of Section 659. It simply became a "dead letter” which is a law that is on the books, but is canceled by some other law.

The result is a conflict between the complete preemption of state jurisdiction expressed current positive law 38 USC §511 and the idea that Section 659 might somehow give states jurisdiction to garnish VA benefits they have no jurisdiction to touch.

Veteran benefits have NEVER been part of state jurisdiction on divorce, alimony or child support. That does not mean veterans are exempt from divorce, alimony or child support. It means that state courts are required to obey the law that says veteran benefits cannot be touched by "ANY legal or equitable process whatever, either before or after receipt" because 42 U.S.C. §659 has NO effect on 38 U.S.C. §511 or § 5301. The loophole in Section 659 is NOT enforceable because it has been DEAD LETTER since the VJRA.

The focus of this article is on how states are generating revenue by committing fraud upon the United States under the welfare system.

Timeline

From 1935 to 1975, Congress paid 90% of the Aid to Families with Dependent Children (AFDC) child welfare expenses by direct reimbursement to states under Title IV of the Social Security Act.

In 1975, that was reduced from 90% to 75%, but Congress gave states an opportunity to compete for "Incentive Payments" to help make up for that reduction. The rules of this competition are listed in Part D of Title IV (42 U.S.C. §651 to §669a).

Data Behind H.R.17045

According to the Senate Report No. 93-1356 on House Resolution 17045 , when the Title IV child welfare system was created in 1935, the death of the father was the main reason that children received Aid to Families with Dependent Children (AFDC) payments.

In 1939, the monthly Survivor Insurance benefit was created under Title II and that seriously reduced the number of children receiving AFDC when their fathers died.

From 1940 to 1961, the percentage of children on AFDC because of the death of their fathers went from 40% down to 7.7%. By 1973, that percentage had dropped to 4%.

In 1956, the Disability Insurance benefits were added to Title II of the Social Security Act. From 1961 to 1973, the number of children going on AFDC when their fathers became disabled went down from 18.1% to 10.2%.

That left children receiving AFDC just because their fathers were not there to support them in the home, shifting the percentage up from 66.7% to 80.2%.

By December 1974, when the Report was published, 80% of 11 million children were on AFDC because their fathers did not live with them or pay enough money for them.

Part of the 1975 law was to reduce the overall cost of Title IV child welfare by cutting the percentage of direct payments to states and another part of the plan was to allocate a smaller pool of money and give states an opportunity to compete for it.

The purpose of the Title IV-D collection system established by H.R.17045 was to reduce the number of children going on welfare by making fathers afraid of being punished for leaving their families.

Page 42 of Senate Report No. 93-1356 says The immediate result will be a lower welfare cost to the taxpayer but, more importantly, as an effective support collection system is established fathers will be deterred from deserting their families to welfare and children will be spared the effects of family breakup.

The "Incentive" competition was to get states to make more child support orders with larger amounts. This became the financial motivation for states to cheat the system by committing fraud upon the United States based on veteran benefits and other federal funds the states were NEVER supposed to get.

State legislatures and courts have turned this competition into an extortion racket that is using children to steal money from disabled veterans who cannot defend themselves from predatory corruption.

In 1977, Congress added Section 662 to define which federal pay and benefits could be garnished to repay the states for child welfare costs. Section 662 made it clear that all VA compensation and pension benefits were exempt from Title IV-D except for VA disability compensation received by military retirees who waived their retired pay to receive the VA benefits.

USFSPA

In 1981, the Supreme Court decision on McCarty v. McCarty explained that states have no jurisdiction to divide military retired pay as if it were a property asset of the marriage.

In 1982, Congress enacted the Uniformed Services Former Spouses Protection Act (USFSPA) which defined exactly how states are allowed to connect "disposable retired pay" to divorce, alimony and child support, but did NOT cancel the federal preemption described in McCarty. Isolating disposable retired pay from veteran benefits cut the tie that might have allowed veteran benefits to be treated as a tax-free extension of retired pay for Title IV-D collections.

VJRA

In 1987, the Supreme Court decision on Rose v. Rose explained that state jurisdiction was not "clearly preempted" by 38 U.S.C. §211 and explained how dishonest lawyers would exploit the loopholes in §211 to slip around the other laws intended to protect veterans.

In 1988, Congress superseded Rose v. Rose by amending 38 U.S.C. §211 to close the loopholes found by the Court. The Veterans Judicial Review Act (VJRA) reaffirmed the FACT that veteran benefits have NEVER been part of state jurisdiction.

Lawyers with bad intent say that Rose v. Rose holds precedent over 38 USC §511 because the Court held that "The Tennessee statute, as construed by the state courts to authorize an award of disability benefits as child support, is not preempted under the Supremacy Clause of Article VI, since it does not conflict with federal law." That was based primarily on the EXACT words of §211.

When the VJRA changed the EXACT words of §211 corresponding to the ruling in Rose, that invoked the Supremacy Clause by giving the Administrator exclusive jurisdiction on how benefits are provided and then established Complete Federal Preemption with ONLY limited exceptions for appeal to certain federal courts.

These bad lawyers keep arguing that preemption only applies to rating decisions, but that is just another lie for profit.
According to 38 USC §511 and the Supremacy Clause, if there is ANY question about whether states are Required to Obey 38 USC §5301, it belongs to the Secretary of the VA on ONLY certain federal courts. State courts have NO jurisdiction to "interpret" Title 38.

The VJRA superseded Rose v. Rose by making it absolutely clear that veteran benefits are a federal matter of law which has NEVER belonged to state jurisdiction. Thus, veteran benefits are totally exempt from Title IV-D. Regardless of whether the veteran is a retiree or not, states have NO possibility of jurisdiction to extract money from veteran benefits by attachment in support orders or by seizure, garnishment, contempt or jail.

In other words, when the VJRA closed the loopholes in §211, it closed every other loophole created by Rose v. Rose.

Mansell v. Mansell (1989)

In 1989, the Supreme Court decision on Mansell v. Mansell pointed out that the "plain and precise language" of the USFSPA is proof of Congressional Intent to "create new benefits for former spouses and to place limits on state courts designed to protect military retirees."

One of the most significant things in Mansell was that the Court verified by Congressional Record that both House and Senate discussed and REJECTED the notion of canceling federal preemption of state jurisdiction.

The result is that states have NO possibility of jurisdiction to misinterpret the USFSPA or to enforce any "indemnification" language in family court orders or settlement agreements.

The state court has no power to step over the line of federal preemption and subject matter jurisdiction cannot be established by any kind of agreement between the veteran and former spouse.

In 1996, the direct reimbursement to states was cut down again from 75% to 66% and the whole landscape of the welfare system was changed. AFDC was replaced by Temporary Assistance for Needy Families (TANF), time limits for welfare services were set, stricter work requirements were required, and the competition for incentive money was expanded to include all child support orders made or enforced, whether the children were on welfare or not.

At the same time, 42 U.S.C. §662 was repealed and parts of it were merged into §659. This is how the obsolete dead letter part about military retirees became a dead letter loophole in current law.

From this point forward, the incentive competition became far more aggressive and predatory. States figured out that it was really easy to cheat the system by padding their statistics with federal benefit money that has ALWAYS been exempt from state jurisdiction.

FYI: Veteran benefits are just the tip of the iceberg.
States are also cheating the system by going after Social Security Disability Insurance (SSDI), Combat Related Special Compensation (CRSC), active military Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS).

From 1998 to present day, states receive 66% of child welfare expenses by direct reimbursement under Title IV and then get more federal money through the Title IV-D “incentive payments,” and get even more money by the illegal seizure of veteran benefits and other protected federal funds. This is explained more in the report on how states get federal funds to pay for child support enforcement systems.

In 2017, Mansell was revisited and upheld in Howell v. Howell wherein the Court reiterated the point that states are required to follow the definition of "disposable retired pay" found in the USFSPA and all the indemnification clauses and such are just semantic nonsense.

The State Title IV-D agency is now just a Money Machine that grinds up our children to generate income for the state by committing fraud upon the federal government. Everything states are doing to seize veteran benefits for divorce, alimony or child support, is just predatory embezzlement of federal funds that were NEVER meant to go to the states.

Recap:

States have NEVER been given jurisdiction to decide how VA benefits are distributed between veterans and their dependents.
States have NEVER been given a RIGHT to money from veteran benefits.
Regardless of whether a veteran is a retiree or not, Section 659 has NO Effect on Title 38 veteran benefits or on the USFSPA definition of "disposable retired pay."
The loophole in Section 659 is "Dead-Letter" but it is still financial motivation for states to commit fraud upon the United States through Title IV-D.