The answer is no - the American flag is not required to be flown on flagpoles. The rule is - IF you include the American flag on your flagpole, THEN it must be flown on top of any other flags on that flagpole.
You can fly a smiley face flag with the words "Have a Nice Day" on it, and not have to top it with the American flag. You can put the Virginia battle flag (the flag in question since - as someone else pointed out - it is NOT "the" confederate flag) on top of a picture of Mitt Romney kissing Miss Piggy, and not top it with the American flag.
But IF you put the American flag on that flagpole with Mitt and the VA battle flag, the American flag has to be closest to the finial on top.
All flags on the flagpole are optional. It's only the order they need to be in, WHEN they are included, that matters.
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