The answer is: when the lieutenant colonel has been dismissed from the service. A new article over at the Military Law and Justice blog reports the dismissal of former Lieutenant Colonel Terry Lakin has been approved and that he is no longer entitled to use the title.
The Terry Lakin Action Fund web site apparently hasn’t gotten the message, continuing to use the title and show a picture of Dr. Lakin in military uniform. If Lakin is using his former rank in conjunction with fundraising, he may be in violation of the Stolen Valor Act. Check out the linked article for more information.