Implementation of Executive Order 13559 Updating Participation in Department of Health and Human Services Programs by Faith-Based or Religious Organizations and Providing for Equal Treatment of Department of Health and Human Services Program Participants, 47271-47282 [2015-18256]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Administration for Children and Families

[Federal Register Volume 80, Number 151 (Thursday, August 6, 2015)]
[Proposed Rules]
[Pages 47271-47282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18256]



[[Page 47271]]

Vol. 80

Thursday,

No. 151

August 6, 2015

Part VIII





 Department of Health and Human Services





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 Administration for Children and Families





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45 CFR Parts 87 and 1050





Implementation of Executive Order 13559 Updating Participation in 
Department of Health and Human Services Programs by Faith-Based or 
Religious Organizations and Providing for Equal Treatment of Department 
of Health and Human Services Program Participants; Proposed Rule

Federal Register / Vol. 80 , No. 151 / Thursday, August 6, 2015 / 
Proposed Rules

[[Page 47272]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 87

Administration for Children and Families

45 CFR Part 1050

RIN 0991-AB96


Implementation of Executive Order 13559 Updating Participation in 
Department of Health and Human Services Programs by Faith-Based or 
Religious Organizations and Providing for Equal Treatment of Department 
of Health and Human Services Program Participants

AGENCY: Office of the Secretary and Administration for Children and 
Families (HHS), Department of Health and Human Services.

ACTION: Proposed rule; request for comments.

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SUMMARY: The United States Department Health and Human Services (HHS) 
proposes to amend its general regulations regarding the equal treatment 
of religious organizations in HHS programs and the protection of 
religious liberty for HHS social service providers and beneficiaries. 
Specifically, this proposed rule would: Clarify the definition of 
direct and indirect financial assistance, replace the term ``inherently 
religious activities'' with the term ``explicitly religious 
activities,'' require faith-based organizations administering a program 
supported with direct HHS financial assistance to provide beneficiaries 
with a written notice informing them of their religious liberty 
protections, including the right to a referral to an alternative 
provider if the beneficiary objects to the religious character of the 
organization providing services, and add a provision stating that 
decisions about awards of Federal financial assistance must be free 
from political interference and based on merit.

DATES: Comments must be submitted by October 5, 2015.

ADDRESSES: You may submit comments via the Federal eRulemaking Portal 
at www.regulations.gov. In addition, please include the Docket ID at 
the top of your comments.

FOR FURTHER INFORMATION CONTACT: For general information, please 
contact Acacia Bamberg Salatti, Director, U.S. Department of Health and 
Human Services Center for Faith-Based and Neighborhood Partnerships, 
200 Independence Ave. SW., Room 747D, Washington, DC 20201 or via email 
at Partnerships@hhs.gov, telephone: 202-358-3595, fax: 202-205-2727 
with contact number for confirmation of receipt 202-690-6060.

SUPPLEMENTARY INFORMATION: 

I. Background

    This proposal concerns and implements two Executive Orders: 
Executive Order 13279, Equal Protection of the Laws for Faith-Based and 
Community Organizations, issued on December 12, 2002, 67 FR 77141 (Dec. 
16, 2002) and Executive Order 13559, Fundamental Principles and 
Policymaking Criteria for Partnerships with Faith-Based and Other 
Neighborhood Organizations, issued on November 17, 2010, 75 FR 71319 
(Nov. 22, 2010), which amends Executive Order 13279. Executive Order 
13279 set forth the principles and policymaking criteria to guide 
Federal agencies in formulating and developing policies with 
implications for faith-based organizations and other community 
organizations, to ensure equal protection of the laws for faith-based 
and other community organizations, and to expand opportunities for, and 
strengthen the capacity of, faith-based and other community 
organizations to meet social needs in America's communities. In 
addition, Executive Order 13279 asked specified agency heads to review 
and evaluate existing policies relating to Federal financial assistance 
for social service programs, as defined within Executive Order 13279, 
and, where appropriate, to implement new policies that were consistent 
with and necessary to further the fundamental principles and 
policymaking criteria that have implications for faith-based and 
community organizations.
    HHS implemented Executive Order 13279 in regulations at 45 CFR part 
87 entitled ``Equal Treatment for Faith-based Organizations.'' The 
regulatory language provided in this notice is extensive because 45 CFR 
part 87 is being fundamentally revised to remove separate sections for 
discretionary grants and formula and block grants. Those distinctions 
are now made within a single regulatory section. The changes to these 
regulations clarify that faith-based and community organizations may 
participate in the Department's social service programs without regard 
to the organizations' religious character or affiliation, and are able 
to apply for and compete on an equal footing with other eligible 
organizations to receive federal financial assistance from HHS. These 
regulations further ensure that the Department's social service 
programs are implemented in a manner consistent with the Establishing 
Clause and the Free Exercise Clause of the First Amendment to the U.S. 
Constitution.
    In the existing regulations located at 45 CFR part 87, HHS social 
service providers, including State and local governments and other 
pass-through entities administering federal financial assistance from 
HHS, have certain responsibilities as recipients of federal financial 
assistance from HHS. Sections 87.1(e) and 87.2(e) of the current Equal 
Treatment regulations sets forth one of these responsibilities, namely 
that directly funded HHS social service providers must not discriminate 
for or against any beneficiary on the basis of religion or religious 
belief. In addition, HHS service providers must ensure that no direct 
federal financial assistance from HHS is used to support inherently 
religious activities as explained in Sec.  87.1(c) and Sec.  87.2(c). 
Inherently religious activities are currently described in the existing 
rule as ``activities that involve overt religious content such as 
worship, religious instruction, or proselytization.'' If such a 
provider engages in inherently religious activities, such activities 
must be offered separately, in time or location, from the social 
service programs receiving direct HHS financial assistance, and 
participation must be voluntary for the beneficiaries of HHS social 
service programs. Both Sec.  87.1(j) and Sec.  87.2(j), clarify that 
these responsibilities do not apply to social service programs where 
federal financial assistance from HHS is provided to a religious 
organization indirectly.
    Also in the standing regulations located at 45 CFR part 87, both 
Sec.  87.1(g) and Sec.  87.2(g) clarify that receipt of HHS grant 
support does not cause religious organizations to forfeit their 
exemption from title VII of the Civil Rights Act of 1964's prohibitions 
on employment discrimination on the basis of religion. However, the 
Equal Treatment Regulations do not alter the effect of other statutes 
which may require recipients of certain types of federal financial 
assistance from HHS to refrain from religious discrimination.
    Lastly, in the existing regulations at 45 CFR part 87, Sec.  
87.1(h) and Sec.  87.2(h) of the rule establishes alternative 
mechanisms by which organizations can prove they are nonprofit, which 
is sometimes an eligibility requirement for receiving federal financial 
assistance from HHS. Such mechanisms, however, do not apply where a 
statute requires a specific method for establishing nonprofit status.

[[Page 47273]]

    Shortly after taking office, President Obama signed Executive Order 
13498, Amendments to Executive Order 13199 and Establishment of the 
President's Advisory Council for Faith-Based and Neighborhood 
Partnerships, 74 FR 6533 (Feb. 9, 2009). Executive Order 13498 changed 
the name of the White House Office of Faith-Based and Community 
Initiatives to the White House Office of Faith-Based and Neighborhood 
Partnerships and established the President's Advisory Council for 
Faith-Based and Neighborhood Partnerships (Advisory Council). The 
President created the Advisory Council to bring together experts to, 
among other things, make recommendations to the President for changes 
in policies, programs, and practices that affect the delivery of social 
services by faith-based and other neighborhood organizations.
    The Advisory Council issued its recommendations in a report 
entitled A New Era of Partnerships: Report of Recommendations to the 
President in March 2010 (available at https://www.whitehouse.gov/sites/default/files/microsites/ofbnp-council-final-report.pdf). The Advisory 
Council Report included recommendations to amend Executive Order 13279 
in order to clarify the legal foundation of partnerships and offered a 
revised set of fundamental principles to guide agency decision-making 
in administering Federal financial assistance and support to faith-
based and neighborhood organizations.
    President Obama signed Executive Order 13559, Fundamental 
Principles and Policymaking Criteria for Partnerships with Faith-Based 
and Other Neighborhood Organizations, on November 17, 2010. 75 FR 71319 
(available at https://www.gpo.gov/fdsys/pkg/FR-2010-11-22/pdf/2010-29579.pdf). Executive Order 13559 incorporated the Advisory Council's 
recommendations by amending Executive Order 13279 to:
     Emphasize that religious providers are welcome to compete 
for government social service funding and maintain a religious identity 
as described in the order;
     Clarify (i) the principle that organizations engaging in 
explicitly religious activity must separate these activities in time or 
location from programs supported with direct Federal financial 
assistance, (ii) that participation in any explicit religious activity 
cannot be subsidized with direct Federal financial assistance, and 
(iii) that participation in such activities must be voluntary for the 
beneficiaries of the social service program supported with such Federal 
financial assistance;
     Direct agencies to adopt regulations and guidance that 
distinguish between ``direct'' and ``indirect'' Federal financial 
assistance;
     Clarify that the standards in these proposed regulations 
apply to sub-awards as well as prime awards;
     Require agencies that provide Federal financial assistance 
for social service programs to post online regulations, guidance 
documents, and policies that have implications for faith-based and 
neighborhood organizations and to post online a list of entities 
receiving such assistance;
     State that the Federal government has an obligation to 
monitor and enforce all standards regarding the relationship between 
religion and government in ways that avoid excessive entanglement 
between religious bodies and governmental entities;
     Require agencies that administer or award Federal 
financial assistance for social service programs to implement 
protections for the beneficiaries or of those programs (these 
protections include providing referrals to alternative providers if the 
beneficiary objects to the religious character of the organization 
providing services, and ensuring that written notice of these and other 
protections is provided to beneficiaries before they enroll in or 
receive services from the program); and
     State that decisions about awards of Federal financial 
assistance must be free from political interference or even the 
appearance of such interference, and must be made on the basis of 
merit, not on the basis of the religious affiliation, or lack of 
affiliation, of the recipient organization.
    In addition, Executive Order 13559 created the Interagency Working 
Group on Faith-Based and Other Neighborhood Partnerships (Working 
Group) to review and evaluate existing regulations, guidance documents, 
and policies. Executive Order 13559, Sec.  1(c) (amending Sec.  3 of 
Executive Order 13279).
    The Executive Order also required OMB, in coordination with the 
Department of Justice, to issue guidance to agencies on the 
implementation of the Order following receipt of the Working Group's 
report. In August 2013, OMB issued such guidance. In this guidance, OMB 
instructed specified agency heads to adopt regulations and guidance 
that will fulfill the requirements of the Executive Order to the extent 
such regulations and guidance do not exist and, where appropriate and 
to the extent permitted by law, to amend any existing regulations and 
guidance to ensure that they are consistent with the requirements set 
forth in Executive Order 13559. Memorandum from Sylvia M. Burwell, 
Director, on Implementation of Executive Order 13559 to Heads of 
Executive Departments and Agencies (Aug. 2, 2013) (available at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-19.pdf). 
Pursuant to the August 2, 2013 OMB Memo, the Department is hereby 
publishing this proposed rule amending its existing Equal Treatment 
regulations to ensure they are consistent with Executive Order 13279 as 
amended by Executive Order 13559.
    As explained below, the Department's existing Equal Treatment 
Regulations at 45 CFR part 87, already implements many of the 
provisions of Executive Order 13559. However, the regulation is being 
revised in order to meet the new requirements of Executive Order 13279 
that were added once it was amended by Executive Order 13559. The 
Department looks forward to comments on the fundamental changes within 
the proposed rule.

II. Overview of Proposed Rule

A. Purpose of the Proposed Rule

    Consistent with Executive Order 13559, this proposed rule would 
revise the Department's Equal Treatment Regulations to: (1) Clarify the 
distinction between direct and indirect Federal financial assistance as 
well as the rights and obligations of HHS social service providers; (2) 
replace the term ``inherently religious activities'' with the term 
``explicitly religious activities'' and designate the latter term as 
``including activities that involve overt religious content such as 
worship, religious instruction, or proselytization''; (3) require 
faith-based organizations administering a program supported with direct 
HHS financial assistance to provide beneficiaries with a written notice 
informing them of their religious liberty protections, including the 
right to a referral to an available alternative provider if the 
beneficiary objects to the religious character of the organization 
providing services, and (4) add a provision stating that decisions 
about awards of Federal financial assistance must be free from 
political interference and made based on merit. In order to accommodate 
the requisite changes, the proposed rule's format differs from the 
current rule. Unlike the current rule, the proposed rule is not 
sectioned based on grant type (i.e., discretionary grants or formula 
and block grants). In order to draw out distinctions based on the grant 
type, the rule includes an applicability section. These changes will 
ensure the

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Department's regulations implement all of the requirements of Executive 
Order 13279 as amended.
    These proposed rules will apply to grants awarded in HHS social 
service programs after the effective date of the Final Rule. As 
indicated in the applicability section, these include grants awarded in 
social service programs governed by either ``Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements'' at 45 CFR part 
75, or block grant regulations at 45 CFR part 96.
    Part 87 currently exempts grants governed by the Substance Abuse 
and Mental Health Services Administration (SAMHSA) Charitable Choice 
rule at 42 CFR part 54 and 45 CFR part 96, subpart L, as well as grants 
governed by the Temporary Assistance for Needy Families (TANF) 
Charitable Choice rule at 45 CFR part 260. Those grants will remain 
exempt from part 87. Those Charitable Choice rules currently provide 
their program beneficiaries who object to the religious character of an 
HHS supported social service provider with an option to request an 
alternative provider.
    Part 87 also currently exempts grants governed by the Community 
Services Block Grant (CSBG) Charitable Choice rule at 45 CFR part 1050. 
That Charitable Choice rule does not have an alternative provider 
provision. This proposed rule, which identifies new regulatory 
provisions and a conforming amendment, will apply to CSBG grants. In 
addition, this proposed rule identifies new regulatory provisions that 
will apply to the Childcare and Development Block Grant program, which 
is currently exempt from part 87 and does not have an alternative 
provider provision.

B. Proposed Amendments to HHS Equal Treatment Regulations

    HHS proposes to amend its Equal Treatment Regulations at 45 CFR 
part 87, to address the areas identified below.
1. Direct and Indirect Federal Financial Assistance
    Executive Order 13559 noted that new regulations should distinguish 
between ``direct'' and ``indirect'' Federal financial assistance 
because the limitation on explicitly religious activities applies to 
programs that are supported with ``direct'' Federal financial 
assistance but does not apply to programs supported with ``indirect'' 
Federal financial assistance. Executive Order 13559, Sec.  1(c) 
(amending Sec.  3(b) of Executive Order 13279).
    Programs are supported with direct Federal financial assistance 
when either the government or an pass-through entity, as identified in 
these proposed rules, selects a service provider and either purchases 
services from that provider (e.g., through a contract) or awards funds 
to that provider to carry out a social service (e.g., through a grant 
or cooperative agreement). Under these circumstances, there are no 
intervening steps in which the beneficiary's choice determines the 
provider's identity.
    ``Indirect'' Federal financial assistance is distinguishable 
because it places the choice of service provider in the hands of a 
beneficiary before the Federal government pays for the cost of that 
service through a voucher, certificate, or other similar means. For 
example, the Federal government could choose to allow the beneficiary 
to secure the needed service on his or her own. Alternatively, a 
Federal agency, operating under a neutral program of aid, could present 
each beneficiary with a list of all qualified providers from which the 
beneficiary could obtain services using a Federal government-provided 
certificate, e.g. through the use of Individual Training Accounts. 
Either way, the Federal government empowers the beneficiary to choose 
for himself or herself whether to receive the needed services, 
including those that contain explicitly religious activities, through a 
faith-based or other neighborhood organization. The Federal government 
could then pay for the beneficiary's choice of provider by giving the 
beneficiary a voucher or similar document. Alternatively, the Federal 
government could choose to pay the provider directly after asking the 
beneficiary to indicate his or her choice. See Freedom From Religion 
Found. v. McCallum, 324 F.3d 880, 882 (7th Cir. 2003).
    The Supreme Court has held that if a program meets certain 
criteria, the government may fund the program if, among other things, 
it places the benefit in the hands of individuals, who in turn have the 
freedom to choose the provider to which they take their benefit and 
``spend'' it, whether that provider is public or private, non-religious 
or religious. See Zelman v. Simmons-Harris, 536 U.S. 639, 652-53 
(2002). In these instances, the government does not encourage or 
promote any explicitly religious programs that may be among the options 
available to beneficiaries. Notably, the voucher scheme at issue in the 
Zelman decision, which was described by the Court as one of ``true 
private choice'' was also neutral toward religion and offered 
beneficiaries adequate secular options.
    The Department's current Equal Treatment Regulations do not provide 
explicit definitions for the terms ``direct Federal financial 
assistance'' and ``indirect Federal financial assistance.'' To help to 
clarify the distinction, the Department proposes to add definitions of 
these terms to Sec.  87.1, the section containing the definition of 
certain terms used in the Equal Treatment Regulations. Section 87.1(b) 
defines the term ``Direct Federal financial assistance.'' Consistent 
with Executive Order 13559's mandate to adopt regulations on ``the 
distinction between `direct' and `indirect' Federal financial 
assistance.'' Proposed paragraph (b) provides a definition for the 
terms ``direct Federal financial assistance,'' ``Federal financial 
assistance provided directly,'' ``direct funding'' and ``directly 
funded'' and defines them to mean that the Government or pass-through 
entity selects the provider and either purchases services from that 
provider (e.g., via a contract) or awards funds to that provider to 
carry out a service (e.g., via a grant or cooperative agreement). In 
general, Federal financial assistance will be treated as direct, unless 
it meets the definition of indirect Federal financial assistance or 
Federal financial assistance provided indirectly.
    Proposed paragraph (c) provides a definition for the term 
``indirect Federal financial assistance'' or ``Federal financial 
assistance provided indirectly'' and defines it to mean that the choice 
of the service provider is placed in the hands of the beneficiary, and 
the cost of that service is paid through a voucher, certificate, or 
other similar means of government-funded payment. Federal financial 
assistance provided to an organization is considered ``indirect'' when 
(1) the government funded program through which the beneficiary 
receives the voucher, certificate, or other similar means of 
government-funded payment is neutral toward religion; (2) the 
organization receives the assistance as a result of a decision of the 
beneficiary, not a decision of the government; and (3) the beneficiary 
has at least one adequate secular option for the use of the voucher, 
certificate, or other similar means of government-funded payment. 
Proposed Sec.  87.1(c)(1) notes that recipients of sub-awards that 
receive Federal financial assistance through programs administered by 
states or other pass-through entities are not considered recipients of 
indirect Federal financial assistance.
    The Department also proposes to add definitions for two additional 
terms used in 45 CFR part 87. Proposed paragraph (d) provides a 
definition for the term ``Pass-through entity'' as defined in 2 CFR 
200.74. Proposed

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paragraph (e) provides a definition for the term ``Recipient'' as 
defined in 2 CFR 200.86.
2. Inherently Religious Activities
    Existing agency regulations and Executive Order 13279 prohibits 
non-governmental organizations from using direct Federal financial 
assistance (e.g., government grants, contracts, sub-grants, and 
subcontracts) for ``inherently religious activities, such as worship, 
religious instruction, and proselytization.'' The term ``inherently 
religious'' has proven confusing. In 2006, for example, the Government 
Accountability Office (GAO) found that, while all 26 of the religious 
social service providers it interviewed said they understood the 
prohibition on using direct Federal financial assistance for 
``inherently religious activities,'' four of the providers described 
acting in ways that appeared to violate that rule. GAO, Faith-Based and 
Community Initiative: Improvements in Monitoring Grantees and Measuring 
Performance Could Enhance Accountability, GAO-06-616, at 34-35 (June 
2006) (available at https://www.gao.gov/new.items/d06616.pdf).
    Further, while the Supreme Court has sometimes used the term 
``inherently religious,'' it has not used it to indicate the boundary 
of what the Government may subsidize with direct Federal financial 
assistance. If the term is interpreted narrowly, it could permit 
actions that the Constitution prohibits. On the other hand, one could 
also argue that the term ``inherently religious'' is too broad rather 
than too narrow.
    The Supreme Court has determined that the Government cannot 
subsidize ``a specifically religious activity in an otherwise 
substantially secular setting.'' Hunt v. McNair, 413 U.S. 734, 743 
(1973). It has also said a direct aid program impermissibly advances 
religion when the aid results in governmental indoctrination of 
religion. See Mitchell v. Helms, 530 U.S. 793, 808 (2000) (Thomas, J., 
joined by Rehnquist, C.J., Scalia, and Kennedy, JJ. plurality); id. at 
845 (O'Connor, J., joined by Breyer, J., concurring in the judgment); 
Agostini v. Felton, 521 U.S. 203, 223 (1997). This terminology is 
fairly interpreted to prohibit the Government from directly subsidizing 
any ``explicitly religious activity,'' including activities that 
involve overt religious content. Thus, direct Federal financial 
assistance should not be used to pay for activities such as religious 
instruction, devotional exercises, worship, proselytizing or 
evangelism; production or dissemination of devotional guides or other 
religious materials; or counseling in which counselors introduce 
religious content. Similarly, direct Federal financial assistance may 
not be used to pay for equipment or supplies to the extent they are 
allocated to such activities. Activities that are secular in content, 
such as serving meals to the needy or using a nonreligious text to 
teach someone to read, are not considered ``explicitly religious 
activities'' merely because the provider is religiously motivated to 
provide those services. Secular activity also includes the study or 
acknowledgement of religion as a historical or cultural reality.
    The Department, therefore, proposes to replace the term 
``inherently religious activities'' with the term ``explicitly 
religious activities'' throughout the Equal Treatment Regulations and 
to define the latter term as ``including activities that involve overt 
religious content such as worship, religious instruction, or 
proselytization.'' These changes in language are consistent with the 
use of the term ``explicitly religious activities'' in Executive Order 
13559 and will provide greater clarity and more closely match 
constitutional standards as they have been developed in case law.
3. Pass-Through Entities
    The Department also proposes to add regulatory language at proposed 
Sec.  87.3(m) that will clarify the rights and responsibilities of 
pass-through entities. A pass-through entity is an entity, including a 
non-governmental organization, acting under a contract, grant, or other 
agreement with the Federal Government or with a State or local 
government, that accepts Federal financial assistance and distributes 
that assistance to other organizations that, in turn, provide 
government-funded social services. Each pass-through entity must abide 
by all statutory and regulatory requirements by, for example, providing 
any services supported with direct Federal financial assistance in a 
religiously neutral manner that does not include explicitly religious 
activities. The pass-through entity also has the same duties as the 
government to comply with these rules by, for example, selecting any 
providers to receive Federal financial assistance in a manner that does 
not favor or disfavor organizations on the basis of religion or 
religious belief. While pass-through entities may be used to distribute 
Federal financial assistance to other organizations in some programs, 
pass-through entities remain accountable for the Federal financial 
assistance they disburse. Accordingly, pass-through entities must 
ensure that any providers to which they disburse Federal financial 
assistance also comply with these rules. If the pass-through entity is 
a non-governmental organization, it retains all other rights of a non-
governmental organization under the statutory and regulatory provisions 
governing the program.
    A State's use of pass-through entities does not relieve the State 
of its traditional responsibility to effectively monitor the actions of 
such organizations. States are obligated to manage the day-to-day 
operations of grant and sub-grant supported activities to ensure 
compliance with applicable Federal requirements and performance goals. 
Moreover, a State's use of pass-through entities does not relieve the 
State of its responsibility to ensure that providers are selected, and 
deliver services, in a manner consistent with the First Amendment's 
Establishment Clause.
4. Protections for Beneficiaries
    Executive Order 13559 indicates a variety of valuable protections 
for the religious liberty rights of social service beneficiaries. These 
protections are aimed at ensuring that Federal financial assistance is 
not used to coerce or pressure beneficiaries along religious lines, and 
to make beneficiaries aware of their rights, through appropriate 
notice, when potentially obtaining services from providers with a 
religious affiliation.
    Executive Order 13559, Sec.  1(b) (amending Sec.  2(d) of Executive 
Order 13279) makes clear that all organizations that receive Federal 
financial assistance for the purpose of delivering social services are 
prohibited from discriminating against beneficiaries or potential 
beneficiaries of those programs on the basis of religion, a religious 
belief, refusal to hold a religious belief, or a refusal to attend or 
participate in a religious practice, and this proposed rule implements 
confirming changes for greater consistency with that principle. Both 
also state that organizations offering explicitly religious activities 
(including activities that involve overt religious content such as 
worship, religious instruction or proselytization) must not use direct 
Federal financial assistance to subsidize or support those activities, 
and that any explicitly religious activities must be offered outside of 
programs that are supported with direct Federal financial assistance 
(including through prime awards or sub-awards). In other words, to the 
extent that a directly funded organization provides explicitly 
religious activities, those activities must be offered

[[Page 47276]]

separately in time or location from programs or services supported with 
direct Federal financial assistance. As noted above, participation in 
those religious activities must be completely voluntary for 
beneficiaries of programs supported by direct Federal financial 
assistance.
    To strengthen the protections provided to beneficiaries, Executive 
Order 13559 requires that organizations administering a program that is 
supported by direct Federal financial assistance must give written 
notice in a manner prescribed by the Department to beneficiaries of 
their religious liberty protections, including the right to be referred 
to an alternative provider when available. If a beneficiary or of a 
social service program supported by Federal financial assistance 
objects to the religious character of an organization that provides 
services under the program, the social service program must refer the 
beneficiary to an alternative provider. Accordingly, the proposed rule 
supplements existing beneficiary protections in the Equal Treatment 
Regulations by adding two new sections to the regulations--one 
addressing the written notice requirement at proposed Sec.  87.3(i) and 
the other addressing the referral requirement at proposed Sec.  
87.3(j).
a. Written Notice
    Executive Order 13279, as amended by Executive Order 13559, 
requires that the Secretary of Health and Human Services, among other 
agency heads, establish policies and procedures designed to ensure that 
each beneficiary of a social service program receives written notice of 
their religious liberty protections. Executive Order 13279, Sec.  
2(h)(ii) as amended by Executive Order 13559, Sec.  1, 75 FR at 71320-
21. Consistent with this mandate, proposed Sec.  87.3(i) requires HHS 
social service providers with a religious affiliation to give 
beneficiaries written notice of their religious liberty protections 
when seeking or obtaining services supported by direct HHS financial 
assistance. The notice is set forth in proposed paragraph Sec.  87.3(i) 
and informs beneficiaries that:
    (1) The organization may not discriminate against beneficiaries on 
the basis of religion or religious belief;
    (2) the organization may not require beneficiaries to attend or 
participate in any explicitly religious activities, and any 
participation by beneficiaries in such activities must be purely 
voluntary;
    (3) the organization must separate out in time or location any 
explicitly religious activities from activities supported with direct 
federal financial assistance from HHS;
    (4) if a beneficiary objects to the religious character of the 
organization, the organization will undertake reasonable efforts to 
identify and refer the beneficiary to an alternative provider to which 
there is no objection; and
    (5) beneficiaries may report violations of these enumerated 
religious liberty protections to the awarding entity.
    The purpose of the notice is to make beneficiaries aware of their 
religious liberty protections and helps to ensure that beneficiaries 
are not coerced or pressured along religious lines in order to obtain 
HHS-supported social service programs. An example of the notice is 
provided as Appendix A to the preamble.
    As indicated in proposed Sec.  87.3(i), when the nature of the 
service provided or exigent circumstances make it impracticable to 
provide such written notice in advance of the actual service, service 
providers must advise beneficiaries of their protections at the 
earliest available opportunity. In cases where service providers only 
have brief interaction with beneficiaries, or when beneficiaries 
receive what may be a one-time service from a provider, providers may 
clearly post the written notice in a service area.
b. Referral Requirements
    Proposed Sec.  87.3(j) implements Executive Order 13559's 
requirement that a beneficiary be referred to an alternative provider 
when he or she objects to the religious character of an organization 
that provides services under the federally-financed program. Executive 
Order 11246, Sec.  2(h)(i) as amended by Executive Order 13559, Sec.  
1; 75 FR 71320. Accordingly, paragraph (j) of proposed Sec.  87.3 
provides that, if a beneficiary of a social service program supported 
by direct Federal financial assistance objects to the religious 
character of an organization that provides services under the program, 
that organization must promptly undertake reasonable efforts to 
identify and refer the beneficiary to an alternative provider to which 
the beneficiary has no objection. Paragraph (j) of proposed Sec.  87.3 
states that a referral may be made to another religiously affiliated 
provider, if the beneficiary has no objection to that provider. But if 
the beneficiary requests a secular provider, and a secular provider 
that offers the needed services is available, then a referral must be 
made to that provider.
    Paragraph Sec.  87.3(j) specifies that, except for services 
provided by telephone, internet, or similar means, the referral must be 
to an alternative provider that is in geographic proximity to the 
organization making the referral and that offers services that are 
similar in substance and quality to those offered by the organization. 
The alternative provider also must have the capacity to accept 
additional clients. If a Federally-supported alternative provider meets 
these requirements and is acceptable to the beneficiary, a referral 
must be made to that provider. If, however, there is no Federally-
supported alternative provider that meets these requirements and is 
acceptable to the beneficiary, a referral should be made to an 
alternative provider that does not receive Federal financial assistance 
but does meet these requirements and is acceptable to the beneficiary.
    If an organization is unable to identify an alternative provider, 
the organization is required under paragraph (k) of proposed Sec.  87.3 
to notify the awarding entity and that entity is to determine whether 
there is any other suitable alternative provider to which the 
beneficiary may be referred. This means that a religious social service 
provider that is the prime recipient of Federal financial assistance 
must notify the HHS awarding agency; whereas, a religious social 
service provider that has been funded through a sub-award from a prime 
recipient of Federal financial assistance must notify the prime 
recipient entity from which it has received funds. The prime recipient 
of Federal financial assistance must notify the HHS awarding agency 
when a sub-recipient makes a referral to an alternative provider or is 
unable to identify an alternative provider. An HHS social service prime 
recipient may request assistance from the HHS awarding entity in 
identifying an alternative service provider. Further, the executive 
order and the proposed rule require the relevant government agency to 
ensure that appropriate and timely referrals are made to an appropriate 
provider. Referrals must be made in a manner consistent with applicable 
laws and regulations. It must be noted, however, that in some 
instances, the awarding entity may also be unable to identify a 
suitable alternative provider.
5. Political or Religious Affiliation
    Consistent with Sec.  2(j) of Executive Order 11246 as amended by 
Sec.  1 of Executive Order 13559, the proposed rule adds a new 
provision at proposed Sec.  87.3(l) to require that decisions about 
awards of Federal financial assistance must be free from political 
interference or even the appearance of such interference and must be 
made based on

[[Page 47277]]

merit, not on the basis of religion or religious belief. This 
requirement will increase confidence that the rules applicable to 
Federal financial assistance are being observed and that decisions 
about government grants are made on the merits of proposals, not on 
political or religious considerations. The awarding entity must 
instruct participants in the awarding process to refrain from taking 
religious affiliations or non-religious affiliations into account in 
this process; i.e., an organization should not receive favorable or 
unfavorable marks merely because it is affiliated or unaffiliated with 
a religious body, or related or unrelated to a specific religion. When 
selecting grant reviewers, the awarding entity should never ask about 
religious affiliation or take such matters into account. But it should 
encourage diversity among reviewers by advertising for these positions 
in a wide variety of venues.

III. Regulatory Procedures

Executive Orders 12866 and 13563

    Executive Orders (E.O.) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. Section 
3(f) of E.O. 12866 defines a ``significant regulatory action'' as an 
action that is likely to result in a rule that: (1) Has an annual 
effect on the economy of $100 million or more or adversely and 
materially affects a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local or 
Tribal governments or communities (also referred to as ``economically 
significant''); (2) creates serious inconsistency or otherwise 
interferes with an action taken or planned by another agency; (3) 
materially alters the budgetary impacts of entitlement grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raises novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in E.O. 12866.
    The Department believes that the only provisions of this proposed 
rule likely to impose costs on the regulated community are the 
requirements that HHS social service providers with a religious 
affiliation: (1) Give beneficiaries a written notice informing them of 
their religious liberty protections when seeking or obtaining services 
supported by direct HHS financial assistance, (2) at the beneficiary's 
request, make reasonable efforts to identify and refer the beneficiary 
to an alternative provider to which the beneficiary has no objection, 
and (3) document such action. To minimize compliance costs and allow 
maximum flexibility in implementation, the proposed rule provides the 
language of the notice directly within the proposed rule. Additionally, 
the preamble incudes an example of the notice in Appendix A to the 
preamble. An estimate of the burden, in term of the number of hours 
involved in referring beneficiaries, is discussed in the Paperwork 
Reduction Act section of this proposed rule.
    At this time, there is no known source of information to quantify 
precisely the numbers or proportions of program beneficiaries who will 
request referral to alternative providers. We are not aware of any 
instances in which a beneficiary of a program of the Department has 
objected to receiving services from a faith-based organization. There 
is however a possibility that we will begin to see objections when, as 
a result of the implementation of this rule, beneficiaries begin to 
receive notices of their option to request referral to an alternative 
service provider. We therefore estimate that the number of requests for 
referrals will be one per year for each faith-based or religious 
organization that receives HHS funding through prime or sub-awards. 
While a precise estimate is not available, we believe that this 
estimate is reasonable, though it likely errs on the higher end in view 
of our experience at the Department of Health and Human Services. The 
Substance Abuse and Mental Health Services Administration (SAMHSA), 
which administers beneficiary substance abuse service programs under 
titles V and XIX of the Public Health Service Act, 42 U.S.C. 290aa, et 
seq. and 42 U.S.C. 300x-21 et seq. Specifically, 42 U.S.C. 290kk-1 and 
300x-65, requires faith-based organizations that receive assistance 
under the Act to provide notice to beneficiaries of their ability under 
statute to request an alternative service provider. Recipients of 
assistance must also report all referrals to the appropriate federal, 
state, or local government agency that administers the SAMHSA program. 
To date, SAMHSA has not received any reports of referral by recipients 
or subrecipients. The Department invites interested parties to provide 
data on which to base estimates of the number of beneficiaries who will 
request referral to an alternative service provider and the attendant 
compliance cost service providers may face.
    Notwithstanding the absence of concrete data, the Department 
believes that this proposed rule is not significant within the meaning 
of the Executive Order because the annual costs associated with 
complying with the written notice and referral requirements will not 
approach $100 million.

Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) at 5 U.S.C. 603(a) requires 
agencies to prepare and make available for public comment an initial 
regulatory flexibility analysis which will describe the impact of the 
proposed rule on small entities. Section 605 of the RFA allows an 
agency to certify a rule, in lieu of preparing an analysis, if the 
proposed rulemaking is not expected to have a significant economic 
impact on a substantial number of small entities. Furthermore, under 
the Small Business Regulatory Enforcement Fairness Act of 1996, 5 
U.S.C. 801 (SBREFA), an agency is required to produce compliance 
guidance for small entities if the rule has a significant economic 
impact on a substantial number of small entities. The RFA defines small 
entities as small business concerns, small not-for-profit enterprises, 
or small governmental jurisdictions.
    As described above, the Department has made every effort to ensure 
that the disclosure and referral requirements of the proposed rule 
impose minimum burden and allow maximum flexibility in implementation 
by providing in the rule the notice for providers to give beneficiaries 
informing them of their protections and by not proscribing a specific 
format for making referrals. The Department estimates it will take no 
more than two minutes for providers to print, duplicate, and distribute 
an adequate number of disclosure notices for potential beneficiaries. 
In addition, the Department estimates an upper limit of $100 for the 
annual cost of materials (paper, ink, toner) to print multiple copies 
of the notices. Because these costs will be borne by every small 
service provider with a religious affiliation, the Department believes 
that a substantial number of these small entities may be affected by 
this provision. However, the Department does not believe that a 
compliance cost of less than $100 per provider per year is a 
significant percentage of a provider's total revenue. In addition, we 
note that after the first year, the labor cost associated with 
compliance will

[[Page 47278]]

likely decrease because small service providers will be familiar with 
the requirements.
    The rule will also require religious social service providers, at 
the beneficiary's request, to make reasonable efforts to identify and 
refer the beneficiary to an alternative provider to which the 
beneficiary has no objection. If an organization is unable to identify 
an alternative provider, the organization is required to notify the 
awarding entity and that entity is to determine whether there is any 
other suitable alternative provider to which the beneficiary may be 
referred. An HHS social service pass-through entity may request 
assistance from the HHS awarding agency in identifying an alternative 
service provider. The Department estimates that an estimated one 
request for referral per year will require no more than two hours of a 
social service provider's time each year. This estimate includes the 
time required to identify service providers that provide similar 
services, preferably under the same or similar programs to the one 
under which the beneficiary is being served by the faith-based 
organization. The estimate also includes the time required to determine 
whether one of the alternative providers has the capacity to serve the 
beneficiary and whether that provider is acceptable to the beneficiary. 
Also, depending on whether the beneficiary asked the faith-based 
organization to follow up either with the beneficiary or the 
alternative service provider to determine whether the referral is 
successful, this estimate includes the time required to do the follow-
up. The Department does not believe that referral costs will be 
appreciable for small service providers. The Department invites 
interested parties to provide data on which we can formulate better 
estimates of the compliance costs associated with the disclosure and 
referral requirements of this proposed rule.

Paperwork Reduction Act

    The purposes of the Paperwork Reduction Act of 1995 (PRA), 44 
U.S.C. 3501 et seq., include minimizing the paperwork burden on 
affected entities. The PRA requires certain actions before an agency 
can adopt or revise a collection of information, including publishing a 
summary of the collection of information and a brief description of the 
need for and proposed use of the information.
    A Federal agency may not conduct or sponsor a collection of 
information unless it is approved by OMB under the PRA, and displays a 
currently valid OMB control number, and the public is not required to 
respond to a collection of information unless it displays a currently 
valid OMB control number. Also, notwithstanding any other provisions of 
law, no person shall be subject to penalty for failing to comply with a 
collection of information if the collection of information does not 
display a currently valid OMB control number (44 U.S.C. 3512). This 
rule may require the collection of additional information from 
beneficiaries should a request for referral to an alternative service 
provider be received.
    Section Sec.  87.3(i) would impose requirements on religious social 
service providers to give beneficiaries a standardized notice 
instructing beneficiaries of their protections. The Department has 
determined this notice is not a collection of information subject to 
OMB clearance under the PRA because the Federal Government has provided 
the exact text that a provider must use. See 5 CFR 1320.3(c)(2). The 
beneficiary's response, however, is subject to OMB clearance under the 
PRA. In the sample notice provided as an appendix to this Notice of 
Proposed Rulemaking (NPRM), care has been taken to limit the 
information to simply obtaining minimal identifying information and 
providing check boxes for material response. The new reporting 
requirement in proposed section 87.3(k), and the record keeping that is 
necessary to comply with that requirement, would be subject to the 
Paperwork Reduction Act.
    To quantify this potential collection, and recognizing the need for 
OMB clearance as a possibility, the Department has estimated the burden 
that the beneficiary response would impose on faith-based or religious 
recipients by reviewing data from the most recent assessment of the 
number of faith-based or religious organizations in 65 HHS grant 
programs. During the assessment, which was conducted in 2007, the 
Center for Faith-based and Neighborhood Partnerships reviewed the names 
of our nonprofit and private recipients to determine whether they use 
religious terms in their names. This approach was necessary as HHS does 
not currently collect information that directly identifies a recipient 
as a faith-based or religious organization. The data from this review 
was used to estimate the number of faith-based organizations that 
receive discretionary grants from the Department. According to the 2007 
data, an estimated 10% of HHS awards were made to faith-based or 
religious organizations. While we recognize that Section Sec.  87.3(i) 
of this NPRM does not impose the same methodology as the 2007 survey to 
identify social service providers with a religious character, our 2007 
survey provides best estimates of the proportion of HHS supported 
social service providers to the extent practicable.
    Using the most recently completed fiscal year of 2014, the 
Department (excluding the National Institutes of Health) awarded 13,720 
discretionary grants. Using the previously justified estimate of 10%, 
the Department estimates that 1,372 discretionary grants will be 
awarded to faith-based or religious organizations. Furthermore, using 
our estimate of one request for referral per a year per a faith-based 
or religious organization, we estimate that there will be 1,372 
requests for referral per year. Multiplying that number times the two 
hours of a social service provider's time, we estimates the Total 
Estimated Annual Burden Hours will be 2,744 hours per a year.
    We have not estimated the burden on State and local entities or on 
pass-through entities because today we have no data on which to base 
such an estimate. As the Department does not have a direct relationship 
with sub-recipients, asking States to estimate the number of its sub-
recipients that are faith-based or religious organizations would impose 
significant burden and require approval of an information collection 
request of its own.
    Religious social service providers that would be subject to these 
requirements would have to keep records to show that they have met the 
referral requirements in the proposed regulations. We do not include an 
estimate of the burden of maintaining the records needed to demonstrate 
compliance with the requirements imposed on religious social service 
providers. The record-keeping and reporting burden that these proposed 
regulations would add is so small that, under most programs, it would 
not measurably increase the burden that already exists under current 
program and administrative requirements. If, due to the unique nature 
of a particular program, the record-keeping burden associated with 
these proposed regulations is large enough to be measurable, that 
burden will be calculated under the record-keeping and reporting 
requirements of the affected program and identified in information 
collection requests that are submitted to OMB for PRA approval. 
Therefore, we have not included any estimate of record-keeping burden 
in this PRA analysis.
    The Department will submit an information-collection request (ICR) 
to OMB to obtain PRA approval for the information-collection formatting

[[Page 47279]]

requirements contained in this notice of proposed rulemaking (NPRM).

Executive Order 13132

    Section 6 of Executive Order 13132 requires Federal agencies to 
consult with State entities when a regulation or policy may have a 
substantial direct effect on the States or the relationship between the 
National Government and the States, or the distribution of power and 
responsibilities among the various levels of government, within the 
meaning of the Executive Order. Section 3(b) of the Executive Order 
further provides that Federal agencies must implement regulations that 
have a substantial direct effect only if statutory authority permits 
the regulation and it is of national significance.
    This proposed rule does not have a substantial direct effect on the 
States or the relationship between the National Government and the 
States, or the distribution of power and responsibilities among the 
various levels of Government, within the meaning of the Executive Order 
13132. Any action taken by a State as a result of the proposed rule 
would be at its own discretion as the rule imposes no requirements.

Unfunded Mandates Reform Act of 1995

    This regulatory action has been reviewed in accordance with the 
Unfunded Mandates Reform Act of 1995 (Reform Act). Under the Reform 
Act, a Federal agency must determine whether a regulation proposes a 
Federal mandate that would result in increased expenditures by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any single year. The Department has 
determined this proposed rule does not include any Federal mandate that 
may result in increased expenditure by State, local, and Tribal 
governments in the aggregate of more than $100 million, or increased 
expenditures by the private sector of more than $100 million.

Effect on Family Life

    The Department certifies that this proposed rule has been assessed 
according to section 654 of the Treasury and General Government 
Appropriations Act, enacted as part of the Omnibus Consolidated and 
Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 
Stat. 2681), for its effect on family well-being. It will not adversely 
affect the well-being of the nation's families. Therefore, the 
Department certifies that this proposed rule does not adversely impact 
family well-being.

Appendix A to the Preamble--Example Notice

Written Notice of Beneficiary Protections

Name of Organization:

Name of Program:

Contact Information for Program Staff (name, phone number, and email 
address, if appropriate):

Because this program is supported in whole or in part by financial 
assistance from the Federal Government, we are required to let you 
know that--

 We may not discriminate against you on the basis of 
religion or religious belief;

 We may not require you to attend or participate in any 
explicitly religious activities that are offered by us, and any 
participation by you in these activities must be purely voluntary;

 We must separate in time or location any privately funded 
explicitly religious activities from activities supported with 
direct Federal financial assistance;

 If you object to the religious character of our 
organization, we must make reasonable efforts to identify and refer 
you to an alternative provider to which you have no objection; and

 You may report violations of these protections to the 
awarding agency/entity.

We must give you this notice before you enroll in our program or 
receive services from the program.

Beneficary Referral Request

If you object to receiving services from us based on the religious 
character of our organization, please complete this form and return 
it to the program contact identified above. If you object, we will 
make reasonable efforts to refer you to another service provider. 
With your consent, we will follow up with you or the organization to 
which you were referred to determine whether you contacted that 
organization.

Please check if applicable:

( ) I want to be referred to another service provider

.If you checked above that you wish to be referred to another 
service provider, please check one of the following:

( ) Please follow up with me.
 Name:

 Best way to reach me (phone/address/email):

( ) Please do not follow up.

List of Subjects

45 CFR Part 87

    Administrative practice and procedure; Claims; Courts; Government 
employees; Religious Discrimination.

45 CFR Part 1050

    Grant programs-social programs.
    For the reasons stated in the preamble, under the Authority of 5 
U.S.C. 301, the Department of Health and Human Services and the 
Administration for Children and Families, respectively, propose to 
amend 45 CFR parts 87 and 1050 as set forth below:

0
1. Revise part 87 to read as follows:

PART 87--EQUAL TREATMENT FOR FAITH-BASED ORGANIZATIONS

Sec.
87.1 Definitions.
87.2 Applicability.
87.3 Grants.

    Authority:  5 U.S.C. 301.


Sec.  87.1  Definitions.

    (a) These are the definitions for terms used in this part. 
Different definitions may be found in Federal statutes or regulations 
that apply more specifically to particular program or activities.
    (b) The terms direct Federal financial assistance, Federal 
financial assistance provided directly, direct funding, and directly 
funded mean that the government or a pass-through entity [under this 
part] selects the provider and either purchases services from that 
provider (e.g., via a contract) or awards funds to that provider to 
carry out a service (e.g., via grant or cooperative agreement). In 
general, Federal financial assistance shall be treated as direct, 
unless it meets the definition of ``indirect Federal financial 
assistance'' or ``Federal financial assistance provided indirectly.''
    (c) The term indirect Federal financial assistance or Federal 
financial assistance provided indirectly means that the choice of the 
service provider is placed in the hands of the beneficiary, and the 
cost of that service is paid through a voucher, certificate, or other 
similar means of government-funded payment.
    (1) Federal financial assistance provided to an organization is 
considered indirect when:
    (i) The Government program through which the beneficiary receives 
the voucher, certificate, or other similar means of Government-funded 
payment is neutral toward religion;
    (ii) The organization receives the assistance as a result of a 
decision of the beneficiary, not a decision of the government; and
    (iii) The beneficiary has at least one adequate secular option for 
the use of the voucher, certificate, or other similar means of 
Government-funded payment.
    (2) The recipients of sub-grants that receive Federal financial 
assistance through State-administered programs are not considered 
recipients of ``indirect Federal financial assistance'' [or recipients 
of ``Federal funds provided indirectly''] as those terms are used in 
this part.

[[Page 47280]]

    (d) Pass-through entity means a non-Federal entity that provides a 
subaward to a subrecipient to carry out part of a Federal program.
    (e) Recipient means a non-Federal entity that receives a Federal 
award directly from a Federal awarding agency to carry out an activity 
under a Federal program. The term recipient does not include 
subrecipients.


Sec.  87.2  Applicability.

    This part applies to grants awarded in HHS social service programs 
governed by either Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements at 45 CFR part 75 or Block Grant 
regulations at grants governed by 45 CFR part 96, except as provided in 
paragraphs (a) and (b) of this section.
    (a) Discretionary grants. This part is not applicable to the 
discretionary grant programs that are governed Substance Abuse and 
Mental Health Services Administration (SAMHSA) Charitable Choice 
regulations found at 42 CFR part 54a. This part is also not applicable 
to discretionary grant programs that are governed by the Community 
Services Block Grant Charitable Choice regulations at 45 CFR part 1050, 
with the exception of Sec.  87.1 and Sec.  87.3(i) through (l) which do 
apply to such discretionary grants.
    (b) Formula and block grants. This part is not applicable to non-
discretionary and block grant programs governed by the SAMHSA 
Charitable Choice regulations found at 42 CFR part 54 and 45 CFR part 
96, subpart L, or the Temporary Assistance for Needy Families (TANF) 
Charitable Choice regulations at 45 CFR part 260. Block grants governed 
by the Community Service Block Grant (CSBG) Charitable Choice 
regulations at 45 CFR part 1050 do not apply to this part, with the 
exception that Sec.  87.1 and Sec.  87.3(i) through (l) do apply to 
such block grants. This part is not applicable to Child Care and 
Development Block Grants governed by 45 CFR part 98, with the exception 
that Sec.  87.1 and Sec.  87.3(b), (c) and (i) through (m) do apply to 
such block grants.


Sec.  87.3  Grants.

    (a) Faith-based or religious organizations are eligible, on the 
same basis as any other organization, to participate in any HHS 
awarding agency program for which they are otherwise eligible. Neither 
the HHS awarding agency, nor any State or local government and other 
pass-through entity receiving funds under any HHS awarding agency 
program shall, in the selection of service providers, discriminate for 
or against an organization on the basis of the organization's religious 
character or affiliation. As used in this section, ``program'' refers 
to activities supported by discretionary, formula or block grants.
    (b) Organizations that apply for or receive direct financial 
assistance from an HHS awarding agency may not support or engage in any 
explicitly religious activities (including activities that involve 
overt religious content such as worship, religious instruction, or 
proselytization), as part of the programs or services funded with 
direct financial assistance from the HHS awarding agency, or in any 
other manner prohibited by law. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded with direct financial 
assistance from the HHS awarding agency, and participation must be 
voluntary for beneficiaries of the programs or services funded with 
such assistance. The use of indirect Federal financial assistance is 
not subject to this restriction. Religious activities that can be 
publicly funded under the Establishment Clause, such as chaplaincy 
services, likewise would not be considered ``explicitly religious 
activities'' that is subject to direct Federal financial assistance 
restrictions.
    (c) A faith-based or religious organization that participates in 
HHS awarding agency-funded programs or services will retain its 
independence from Federal, State, and local governments, and may 
continue to carry out its mission, including the definition, practice, 
and expression of its religious beliefs, provided that it does not use 
direct financial assistance from the HHS awarding agency (including 
through a prime or sub-award) to support or engage in any explicitly 
religious activities (including activities that involve overt religious 
content such as worship, religious instruction, or proselytization). A 
faith-based or religious organization may use space in its facilities 
to provide programs or services funded with financial assistance from 
the HHS awarding agency without removing religious art, icons, 
scriptures, or other religious symbols. In addition, a faith-based or 
religious organization that receives financial assistance from the HHS 
awarding agency retains its authority over its internal governance, and 
it may retain religious terms in its organization's name, select its 
board members on a religious basis, and include religious references in 
its organization's mission statements and other governing documents in 
accordance with all program requirements, statutes, and other 
applicable requirements governing the conduct of HHS Awarding Agency-
funded activities.
    (d) An organization that participates in programs funded by 
financial assistance from an HHS awarding agency shall not, in 
providing services, discriminate against a program beneficiary or 
prospective program beneficiary on the basis of religion, a religious 
belief, a refusal to hold a religious belief, or a refusal to attend or 
participate in a religious practice.
    (e) No grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation that is used by an HHS awarding 
agency or a State or local government in administering financial 
assistance from the HHS awarding agency shall require only faith-based 
or religious organizations to provide assurances that they will not use 
monies or property for explicitly religious activities. Any 
restrictions on the use of grant funds shall apply equally to religious 
and non-religious organizations. All organizations that participate in 
HHS awarding agency programs, including organizations with religious 
character or affiliations, must carry out eligible activities in 
accordance with all program requirements and other applicable 
requirements governing the conduct of HHS awarding agency-funded 
activities, including those prohibiting the use of direct financial 
assistance to engage in explicitly religious activities. No grant 
document, agreement, covenant, memorandum of understanding, policy, or 
regulation that is used by the HHS awarding agency or a State or local 
government in administering financial assistance from the HHS awarding 
agency shall disqualify faith-based or religious organizations from 
participating in the HHS awarding agency's programs because such 
organizations are motivated or influenced by religious faith to provide 
social services, or because of their religious character or 
affiliation.
    (f) A faith-based or religious organization's exemption from the 
Federal prohibition on employment discrimination on the basis of 
religion, set forth in section 702(a) of the Civil Rights Act of 1964, 
42 U.S.C. 2000e-1, is not forfeited when the faith-based or religious 
organization receives direct or indirect financial assistance from an 
HHS awarding agency. Some HHS awarding agency programs, however, 
contain independent statutory provisions requiring that all recipients 
agree not to discriminate in employment

[[Page 47281]]

on the basis of religion. Accordingly, recipients should consult with 
the appropriate HHS awarding agency program office if they have 
questions about the scope of any applicable requirement.
    (g) In general, the HHS awarding agency does not require that a 
recipient, including a faith-based or religious organization, obtain 
tax-exempt status under section 501(c)(3) of the Internal Revenue Code 
to be eligible for funding under HHS awarding agency programs. Many 
grant programs, however, do require an organization to be a ``nonprofit 
organization'' in order to be eligible for funding. Funding 
announcements and other grant application solicitations that require 
organizations to have nonprofit status will specifically so indicate in 
the eligibility section of the solicitation. In addition, any 
solicitation that requires an organization to maintain tax-exempt 
status will expressly state the statutory authority for requiring such 
status. Recipients should consult with the appropriate HHS awarding 
agency program office to determine the scope of any applicable 
requirements. In HHS awarding agency programs in which an applicant 
must show that it is a nonprofit organization, the applicant may do so 
by any of the following means:
    (1) Proof that the Internal Revenue Service currently recognizes 
the applicant as an organization to which contributions are tax 
deductible under section 501(c)(3) of the Internal Revenue Code;
    (2) A statement from a State or other governmental taxing body or 
the State secretary of State certifying that:
    (i) The organization is a nonprofit organization operating within 
the State; and
    (ii) No part of its net earnings may benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of 
incorporation or similar document that clearly establishes the 
nonprofit status of the applicant; or
    (4) Any item described in paragraphs (g)(1) through (3) of this 
section, if that item applies to a State or national parent 
organization, together with a statement by the State or parent 
organization that the applicant is a local nonprofit affiliate.
    (h) If a recipient contributes its own funds in excess of those 
funds required by a matching or grant agreement to supplement HHS 
awarding agency-supported activities, the recipient has the option to 
segregate those additional funds or commingle them with the Federal 
award funds. If the funds are commingled, the provisions of this 
section shall apply to all of the commingled funds in the same manner, 
and to the same extent, as the provisions apply to the Federal funds. 
With respect to the matching funds, the provisions of this section 
apply irrespective of whether such funds are commingled with Federal 
funds or segregated.
    (i) Faith-based or religious organizations providing social 
services to beneficiaries under an HHS program that is supported by 
direct Federal financial assistance must give written notice to 
beneficiaries of certain protections. This written notice must be given 
to beneficiaries prior to the time they enroll in the program or 
receive services from such programs. When the nature of the service 
provided or exigent circumstances make it impracticable to provide such 
written notice in advance of the actual service, service providers must 
advise beneficiaries of their protections at the earliest available 
opportunity. Notice must be given in a manner prescribed by the HHS 
awarding agency. This notice must state that:
    (1) The organization may not discriminate against beneficiaries on 
the basis of religion or religious belief;
    (2) The organization may not require beneficiaries to attend or 
participate in any explicitly religious activities that are offered by 
the organization, and any participation by beneficiaries in such 
activities must be purely voluntary;
    (3) The organization must separate in time or location any 
privately funded explicitly religious activities from activities 
supported by direct Federal financial assistance;
    (4) If a beneficiary objects to the religious character of the 
organization, the organization will undertake reasonable efforts to 
identify and refer the beneficiary to an alternative provider to which 
the beneficiary has no objection; and
    (5) Beneficiaries may report violations of these protections to the 
awarding entity.
    (j) If a beneficiary of a social service program supported by the 
HHS awarding agency objects to the religious character of an 
organization that provides services under the program, that 
organization must promptly undertake reasonable efforts to identify and 
refer the beneficiary to an alternative provider to which the 
beneficiary has no objection. A referral may be made to another faith-
based or religious organization, if the beneficiary has no objection to 
that provider. But if the beneficiary requests a secular provider, and 
a secular provider is available, then a referral must be made to that 
provider. Except for services provided by telephone, internet, or 
similar means, the referral must be to an alternative provider that is 
in reasonable geographic proximity to the organization making the 
referral and that offers services that are similar in substance and 
quality to those offered by the organization. The alternative provider 
also must have the capacity to accept additional clients.
    (k) When the organization makes a referral to an alternative 
provider, or when the organization determines that it is unable to 
identify an alternative provider, the organization must notify the 
prime recipient entity from which it has received funds. The prime 
recipient of Federal financial assistance must notify the HHS awarding 
agency when a sub-recipient makes a referral to an alternative provider 
or is unable to identify an alternative provider.
    (l) Decisions about awards of Federal financial assistance must be 
free from political interference or even the appearance of such 
interference and must be made on the basis of merit, not on the basis 
of religion or religious belief.
    (m) If a pass-through entity, acting under a contract, grant, or 
other agreement with the Federal government or with a State or local 
government that is administering a program supported by Federal 
financial assistance, is given the authority under the contract, grant, 
or agreement to select non-governmental organizations to provide 
services funded by the Federal government, the pass-through entity must 
ensure compliance with the provisions of this part and any implementing 
rules or guidance by the sub-recipient. If the pass-through entity is a 
non-governmental organization, it retains all other rights of a non-
governmental organization under the program's statutory and regulatory 
provisions.

PART 1050--CHARITABLE CHOICE UNDER THE COMMUNITY SERVICES BLOCK 
GRANT ACT PROGRAMS

0
2. The authority citation for part 1050 continues to read as follows:

    Authority:  42 U.S.C. 9901 et seq.

0
3. Amend Sec.  1050.3 by revising paragraph (h) to read as follows:


Sec.  1050.3  What conditions apply to the Charitable Choice provisions 
of the CSBG Act?

* * * * *
    (h) If a nongovernmental pass-through entity, acting under a grant, 
contract, or other agreement with the Federal, State or local 
government, is given the authority to select nongovernmental

[[Page 47282]]

organizations to provide services under an applicable program, then the 
intermediate organization must ensure that there is compliance with 
these Charitable Choice provisions and 45 CFR 87.1 and 87.3(i) through 
(l). The pass-through entity retains all other rights of a 
nongovernmental organization under the Charitable Choice provisions.

    Dated: July 20, 2015.
Sylvia M. Burwell,
Secretary.
[FR Doc. 2015-18256 Filed 8-5-15; 8:45 am]
 BILLING CODE 4150-24-P