Depending on where you live in the US, you can count on strong feelings as to whether the POW/MIA flag should be marched in a color guard for a parade.
Title 36 U.S. Code § 902 – National League of Families POW/MIA Flag
The information in the Flag Code is instructions for US government agency display. It has no information on a citizen, let alone the military, flying the flag.
League of Families Information
This information comes from a Veteran Service Organization, neither of which may dictate standards for the military. Link at the end of the article.
Military Service Manual Guidance
Other information that I have been able to find comes from AFI 34-1201, Protocol:
2.11.10. The POW/MIA flag will always be the last flag in any display.
What that means: In a line of flags, it will be the last flag in the stand. When flown from the same halyard as the US and a state flag, it is at the bottom, not in between the US and state. Certain agencies have written guidance counter to this. My reasoning here comes from extensive research, although certain states have written clear guidance to enforce the display.
2.11.11. The POW/MIA flag will always be the last flag in any display, except on the six national observances for which Congress has ordered display of the POW/MIA flag. On these days it is flown immediately below or adjacent to the United States flag as second in order of precedence (however it still would be flown after other national flags). The six national observances are National POW/MIA Recognition Day (third Friday of September), Armed Forces Day, Memorial Day, Flag Day, Independence Day and Veterans Day.
18.104.22.168. The POW/MIA flag is not carried or displayed in parades or reviews, however is authorized to be carried at official military funerals.
What that means: Even though this text is for the US Air Force, ALL SERVICES are not allowed to carry any non-military flag with very few exceptions and that includes the POW/MIA flag. Only an honor guard member may carry it as a Personal Color for the funeral of a former POW. Read here.
All Services. Military personnel in uniform or civilian clothing are not authorized to carry any non-military flag AR 840-10, MCO P5050.2 and AFI 34-1201. The POW/MIA flag is essentially the novelty flag of a private organization. This means all military color guards are not authorized to carry the POW/MIA flag in or outside of a color guard formation. Again, the only time the flag is carried on its own (never with guards) is during a funeral for a former POW. It is not carried in parades or paraded any other time.
Military, including JROTC, CAP, Sea Cadets, & Young Marines: No, you are not authorized to carry the POW/MIA flag.
First responders: Follow The Honor Guard Manual. Most likely you march a POW/MIA flag within the team formation. My advice is to stop including it in your color guard. March the US, state, and department flags.
Veterans groups: Veteran color guards follow a service D&C manual, which then dictates that you should follow the manuals that affect it (flag and protocol manuals). The end result is to not march it at all, it’s not authorized. Many veteran color guards carry it as part of their standard compliment of the American flag, joint service flags, and then the POW/MIA flag, but that’s not protocol to add any other flag: no state or POW flag is authorized. March the US and state flags or, if you want to march a joint service color guard: US, Army, MC, Navy, AF, & CG, no other flag is authorized in a full or partial joint service colors formation.
Depending on your location in the US, you will hear some very strong convictions (read: yelling matches) on whether it is OK to march it in a color team or not. Strong convictions do not replace written standards and just because a national veteran’s organization has written guidance does not mean that guidance has taken service standards into account. I know this is not comfortable to read.