[Federal Register Volume 61, Number 157 (Tuesday, August 13, 1996)]
[Rules and Regulations]
[Pages 41960-41963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20414]
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LEGAL SERVICES CORPORATION
45 CFR Part 1610
Use of Non-LSC Funds
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule completely revises the Legal Services
Corporation's (``Corporation'' or ``LSC'') regulation concerning the
use of funds from a source other than the Corporation (``non-LSC
funds''). The revisions are intended to implement the Corporation's FY
1996 appropriations act that applies most of the restrictions contained
in that act to all of a recipient's funds and to make certain technical
corrections to the regulation. Although this rule is effective upon
publication, the Corporation solicits public comment on the interim
rule in anticipation of adoption of a final rule at a later time.
DATES: The interim rule is effective on August 13, 1996. Comments must
be submitted on or before September 12, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St. NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor Fortuno, General Counsel, (202)
336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the LSC Board of Directors
(``Board'') requested the LSC staff to prepare an interim rule to
implement Section 504 in the Corporation's FY 1996 appropriations act,
Public Law 104-134, 110 Stat. 1321 (1996), which applies most
restrictions contained therein to any person or entity receiving LSC
funds, effectively restricting all of a recipient's funds to the same
degree that it restricts LSC funds. The Committee held hearings on
staff proposals on July 8 and 19, and the Board adopted this interim
rule on July 20 for publication in the Federal Register.
The Committee recommended and the Board agreed to publish this rule
as an interim rule. An interim rule is necessary in order to provide
prompt and critically necessary guidance to LSC recipients on
legislation that is already effective and carries severe penalties for
noncompliance. Because of this great need for guidance on how to comply
with substantially revised legislative requirements, prior notice and
public comment are impracticable, unnecessary, and contrary to the
public interest. See 5 U.S.C. 553(b)(3)(B) and 553(d)(3). Accordingly,
this interim rule is effective upon publication.
However, the Corporation also solicits comments on this interim
rule for review and consideration by the Committee and Board. After
receipt of written public comment, the Committee intends to hold public
hearings to discuss the written comments and to hear oral comments. It
is anticipated that a final rule will be issued which will supersede
this interim rule.
Part 1610 is completely revised by this interim rule. Generally,
this rule serves two purposes. First, it incorporates the restrictions
imposed by the Corporation's FY 1996 appropriations act, 110 Stat. 1321
(1996), which apply to both a recipient's LSC funds and its non-LSC
funds. Past appropriations acts have applied restrictions contained in
those acts only to the funds appropriated thereunder. In contrast, the
FY 1996 appropriations act prohibits LSC from funding any recipient
that engages in certain specified activities or that fails to act in a
manner consistent with certain appropriations act requirements. This
rule also makes several technical revisions to the prior rule to
correct those provisions that were never revised to be consistent with
longstanding amendments to the LSC Act.
A section-by-section discussion of this interim rule is provided
below.
Section 1610.1 Purpose
The purpose of this rule is to implement statutory restrictions on
a recipient's use of non-LSC funds. The statutory restrictions are
found in the LSC Act, 42 U.S.C. 2996 et seq., and the Corporation's FY
1996 appropriations act, Public Law 104-134, 110 Stat. 1321 (1996).
Section 1610.2 Definitions
``Purposes prohibited by the LSC Act.'' The definition of
``purposes prohibited by the LSC Act'' has been revised in several
ways. First, reference to a prohibition on the representation of
juveniles has been deleted because it is no longer in the LSC Act.
Second, it is revised to reflect the fact that certain restrictions on
activities in the LSC Act no longer reflect the law, because broader
restrictions on those activities are included in the Corporation's FY
1996 appropriations act. Accordingly, references to the LSC Act's
prohibitions on legislative and administrative representation, 42
U.S.C. 2996f(a)(5), and on advocacy training, 42 U.S.C. 2996f(b)(5),
have been deleted from this definition and are incorporated instead
into the definition of ``activity prohibited by or inconsistent with
Section 504'' in Sec. 1610.2(b). Third, the definition now references
the Corporation's regulations which implement the various restrictions.
Fourth, citations to the LSC Act for the restrictions on political
activities, criminal proceedings, actions challenging criminal
convictions, organizing activities, school desegregation, Selective
Service and military desertion have been revised to correspond to the
numbering changes that were made by amendments to the LSC Act. Fifth,
this definition includes only those restrictions on private funds
required by Section 1010(c) of the LSC Act which applies only to an
activity identified as a ``purpose prohibited by [the LSC Act].''
Accordingly, the reference to fee-generating cases has been deleted
because involvement in a fee-generating case is not a purpose
prohibited by the LSC Act. Neither the LSC Act nor the appropriations
act prohibits legal services programs from undertaking representation
in fee-generating cases. The LSC Act simply requires that any fee-
generating cases undertaken by a recipient must be ``in accordance with
guidelines promulgated by the Corporation.'' The Corporation's
guidelines on fee-generating cases is 45 CFR Part 1609. With a few
exceptions, this rule requires recipients to first determine whether
private representation is available for any particular fee-generating
case before accepting the case. This implements the Congressional
intent that scarce Federal funds not be used for cases for which
private representation is available. Recipients should note that the
issue of attorneys' fees, which had been included in part 1609 is now
the subject of section 504(a)(13) of the Corporation's FY 1996
appropriations act, and is dealt with in a new interim rule, 45 CFR
Part 1642. In this rule, attorneys' fees are appropriately included in
Sec. 1610.2(b)(9).
``Activity prohibited by or inconsistent with Section 504'' is a
new
[[Page 41961]]
definition that lists the restrictions and prohibitions in Section
504(a) of the Corporation's FY 1996 appropriations act that completely
restrict the listed activities, regardless of the source of funding.
The definition also makes reference to subsections 504(b) and 504(e),
which provide exceptions to those prohibitions on activities supported
by non-LSC funds.
``IOLTA funds'' is a new definition and is used in the revised
section on authorized uses of non-LSC funds. IOLTA funds are defined as
funds derived from programs established by State court rules or
legislation that collect and distribute interest earned on lawyers'
client trust accounts.
``Non-LSC funds'' are defined as funds derived from a source other
than the Corporation and would include both public and private funds.
``Private funds'' are defined as funds derived from an individual
or entity other than a governmental source or LSC.
The definition of ``public funds'' is similar to the definition for
``public funds'' in part 1600 of the Corporation's regulations. The
definition clarifies that, for the purposes of this part, IOLTA funds
will be treated in the same manner as public funds.
The definition of ``tribal funds'' is revised from the definition
of ``tribal funds'' in part 1600 of these regulations in order to track
the statutory language of section 504. ``Tribal funds'' are defined as
funds received by a recipient from an Indian tribe or from a private
nonprofit foundation or organization that are given for the benefit of
Indians or Indian tribes.
The definition of ``private attorney'' and the corollary definition
of ``law firm'' are included to help clarify the meaning of the
applicability section of this regulation. A ``private attorney'' means
an attorney engaged in the practice of law on a for-profit basis. A
``law firm'' is two or more private attorneys who have formed a
partnership, corporation, or similar entity for the private practice of
law on a for-profit basis.
``State or local entity of attorneys'' would include a State or
local bar association, a pro bono or judicare program, or other similar
entity, such as a panel of attorneys participating in a pre-paid legal
services program.
Section 1610.3 Prohibition
The prohibition section has been revised to include the
restrictions on various activities in Section 504 of the Corporation's
FY 1996 appropriations act.
Section 1610.4 Authorized Use of Other Funds
This section has been revised to reflect the fact that the
restrictions in Section 504 apply to activities supported by all funds
except tribal funds, while those restrictions in the LSC Act which are
not covered by Section 504, still apply only to LSC and private funds.
Section 1610.4(a): Paragraph (a) sets out an exception included in
both the LSC Act and Section 504 for tribal funds. The exception
exempts tribal funds from the general prohibition on the use of non-LSC
funds, as long as the tribal funds are used for the purposes for which
they were provided.
Section 1610.4(b). Section 1610.4(b) continues the exception in the
LSC Act for public funds which permits recipients to use public funds
in accordance with the purposes for which the funds were provided.
However, because the Corporation's FY 1996 appropriations act contains
no exception for public funds for most of its restrictions on
activities, language is added providing that public funds may not be
used for any activity prohibited by or inconsistent with Section 504.
In accordance with current LSC policy, the section also provides that
for purposes of applying this regulation, IOLTA funds are to be treated
the same as public funds.
Section 1610.4(c). Paragraph (c) states the exception that allows
recipients to use private funds if they use them for the purposes for
which they were provided and if they do not use their private funds for
any activity prohibited by the LSC Act or prohibited by or inconsistent
with section 504.
Section 1610.4(d). Section 1610.4(d) reflects section 504(d)(2)(B)
of the Corporation's FY 1996 appropriations act, which provides that a
recipient may use non-LSC funds to provide legal assistance to
financially ineligible persons, provided that the funds are used for
the specific purpose for which they were received and are not used in a
manner that violates the LSC Act or Section 504.
Section 1610.5 Notification
This section incorporates the requirement of section 504(d)(1) of
the Corporation's FY 1996 appropriations act that recipients may not
accept funds from non-LSC sources unless they provide written notice to
the funders that their funds may not be used in any manner inconsistent
with the LSC Act or section 504. The requirement applies only to cash
contributions; recipients are not required to notify persons or
organizations who make non-cash donations or volunteer their time or
services to the recipient.
In an effort to relieve recipients of some of the administrative
burden that might be imposed by this requirement, the proposed
regulation contains a de minimis exception. The exception relieves
recipients of the notice requirement for contributions of less than
$250. This exception is intended to apply to relatively small
contributions made by clients, attorneys or other funders who are
generally supportive of the recipient's program. The $250 threshold was
chosen because section 170(f)(8) of the Internal Revenue Code requires
donors who contribute $250 or more to a charity to obtain documentation
of the contribution in the form of an acknowledgement; and the Board
decided that, if the recipient had to provide an acknowledgement to the
donor anyway, it did not constitute any significant additional burden
to incorporate the required notification into the acknowledgement.
Section 1610.6 Applicability
The title to this section has been changed from ``waiver'' to
``applicability'' to reflect the fact that section 1010(c) of the LSC
Act, upon which it is based, provides that certain types of grants are
not subject to the statutory prohibition. Because by law such
situations are not covered by the prohibition, there should be no need
for a waiver. Indeed, it has always been LSC's practice to allow the
activities covered by this section, without affirmatively granting
waivers.
Section 1610.6(a). Paragraph (a) deals with the issue of criminal
representation and is intended to clarify the applicability of both the
LSC Act's provisions on criminal representation and Section 504's
prohibition on representation of persons who are incarcerated in
Federal, State or local prisons. The provision in the Corporation's FY
1996 appropriations act prohibiting recipients from representing such
incarcerated persons was not intended to amend section 1010(c) of the
LSC Act which permits LSC to award grants and contracts to, and LSC
recipients to enter into subgrants, contracts or judicare arrangements
with, private attorneys or law firms or legal aid organizations which
handle criminal cases in their non-LSC funded practices. Accordingly,
this paragraph makes it clear that the restrictions of the FY 1996
appropriations act on the representation of incarcerated persons does
not apply to the non-LSC funded representation of clients in criminal
cases or matters of
[[Page 41962]]
such private attorneys, law firms or State or local entities of
attorneys. Nor does it apply to legal aid organizations that provide
criminal legal services through a separately funded public defender
program, regardless of whether any of their clients are prisoners.
Finally, this paragraph makes it clear that a recipient may accept
court appointments in criminal cases, under certain circumstances, even
if the clients they are appointed to defend are incarcerated.
Section 1610.6(b). This new provision makes it clear that if
recipients use non-LSC funds to contract with individuals or entities,
such as bar associations, pro bono programs or other non-profit
organizations to provide legal services under a recipient's PAI or
similar program, the restrictions of this part would apply to the funds
transferred but would not apply to the individual or entity's other
non-LSC funds. This provision is consistent with current LSC policy
that states that a transfer of non-LSC funds to another organization is
not a subgrant under 45 CFR Part 1627. Although the non-LSC funds
transferred under contract are subject to the restrictions of this
part, these restrictions do not attach to any other funds of the person
or entity.
Section 1610.6(c). This section clarifies that, except as provided
in paragraph (a) of Sec. 1610.6, this part does not apply to transfers
of LSC funds which are already governed by 45 CFR Part 1627. It should
be noted that when LSC funds are transferred to a subrecipient, the
subrecipient cannot engage in any activities restricted by Sec. 504 and
the restriction attaches to both the subrecipient's LSC funds and its
non-LSC funds. This ensures compliance with the Congressional intent
that no funds provided by the Corporation for financial assistance are
provided to a person or entity that engages in activities prohibited by
Section 504.
Section 1610.7 Accounting
This section has been renumbered but has not been otherwise
revised. There has been no change to this statutory accounting
requirement. Currently, recipients are directed by the accounting
provisions in both the 1981 and 1986 versions of the Corporation's
Audit and Accounting Guide for Recipients and Auditors (``Guide'') to
account for their LSC and non-LSC funds separately. See page 12 in the
1986 Guide and pages 2-3 in the 1981 Guide.
List of Subjects in 45 CFR Part 1610
Grant programs--law, Legal services.
For reasons set forth in the preamble, LSC revises 45 CFR Part 1610
to read as follows:
PART 1610--USE OF NON-LSC FUNDS
Sec.
1610.1 Purpose.
1610.2 Definitions.
1610.3 Prohibition.
1610.4 Authorized use of other funds.
1610.5 Notification.
1610.6 Applicability.
1610.7 Accounting.
Authority: 42 U.S.C. 2996i; 110 Stat. 1321 (1996).
Sec. 1610.1 Purpose.
This part is designed to implement statutory restrictions on the
use of non-LSC funds by LSC recipients.
Sec. 1610.2 Definitions.
(a) Purpose prohibited by the LSC Act means any activity prohibited
by the following sections of the LSC Act and those provisions of the
Corporation's regulations that implement such sections of the Act:
(1) Sections 1006(d)(3), 1006(d)(4), 1007(a)(6), and 1007(b)(4) of
the LSC Act and 45 CFR Part 1608 of the LSC Regulations (Political
activities);
(2) Section 1007(a)(10) of the LSC Act (Activities inconsistent
with professional responsibilities);
(3) Section 1007(b)(2) of the LSC Act and 45 CFR Part 1613 of the
LSC Regulations (Criminal proceedings);
(4) Section 1007(b)(3) of the LSC Act and 45 CFR Part 1615 of the
LSC Regulations (Actions challenging criminal convictions);
(5) Section 1007(b)(7) of the LSC Act and 45 CFR Part 1612 of the
LSC Regulations (Organizing activities);
(6) Section 1007(b)(8) of the LSC Act (Abortions);
(7) Section 1007(b)(9) of the LSC Act (School desegregation); and
(8) Section 1007(b)(10) of the LSC Act (Violations of Military
Selective Service Act or military desertion).
(b) Activity prohibited by or inconsistent with Section 504 means
any activity prohibited by, or inconsistent with the requirements of,
the following sections of 110 Stat. 1321 (1996) and those provisions of
the Corporation's regulations that implement those sections:
(1) Section 504(a)(1) and 45 CFR Part 1632 of the LSC Regulations
(Redistricting);
(2) Sections 504(a)(2) through (6), as modified by Sections 504(b)
and (e), and 45 CFR Part 1612 of the LSC Regulations (Legislative and
administrative advocacy);
(3) Section 504(a)(7) and 45 CFR Part 1617 of the LSC Regulations
(Class actions);
(4) [Reserved]
(5) Section 504(a)(9) and 45 CFR Part 1620 of the LSC Regulations
(Priorities);
(6) Section 504(a)(10) and 45 CFR Part 1635 of the LSC Regulations
(Timekeeping);
(7) Section 504(a)(11) and 45 CFR Part 1626 of the LSC Regulations
(Aliens);
(8) Section 504(a)(12) and 45 CFR Part 1612 of the LSC Regulations
(Public policy training);
(9) [Reserved]
(10) Section 504(a)(14) (Abortion litigation);
(11) [Reserved]
(12) [Reserved]
(13) Section 504(a)(17) and 45 CFR Part 1633 of the LSC Regulations
(Drug-related evictions); and
(14) [Reserved]
(c) IOLTA funds means funds derived from programs established by
State court rules or legislation that collect and distribute interest
on lawyers' trust accounts.
(d) Non-LSC funds means funds derived from a source other than the
Corporation.
(e) Private funds means funds derived from an individual or entity
other than a governmental source or LSC.
(f) Public funds means non-LSC funds derived from a Federal, State,
or local government or instrumentality of a government. For purposes of
this part, IOLTA funds shall be treated in the same manner as public
funds.
(g) Tribal funds means funds received from an Indian tribe or from
a private nonprofit foundation or organization for the benefit of
indians or Indian tribes.
(h) Private attorney means any attorney who is engaged in the
private practice of law on a for-profit basis. A ``law firm'' is a
group of two or more private attorneys who are engaged in the private
practice of law as a partnership, professional corporation, or similar
arrangement.
(i) State or local entity of attorneys means a State or local
voluntary or mandatory bar association, pro bono or judicare program,
or other similar entity of attorneys.
Sec. 1610.3 Prohibition.
A recipient may not use non-LSC funds for any purpose prohibited by
the LSC Act or for any activity prohibited by or inconsistent with
section 504 , unless such use is authorized by Secs. 1610.4 or 1610.6
of this part.
Sec. 1610.4 Authorized use of other funds.
(a) A recipient may receive tribal funds and expend them in
accordance
[[Page 41963]]
with the specific purposes for which the tribal funds were provided.
(b) A recipient may receive public or IOLTA funds and use them in
accordance with the specific purposes for which they were provided, if
the funds are not used for any activity prohibited by or inconsistent
with section 504.
(c) A recipient may receive private funds and use them in
accordance with the purposes for which they were provided, provided
that the funds are not used for any activity prohibited by the LSC Act
or prohibited or inconsistent with section 504.
(d) A recipient may use non-LSC funds to provide legal assistance
to an individual who is not financially eligible for services under
part 1611 of this chapter, provided that the funds are used for the
specific purposes for which those funds were provided and are not used
for any activity prohibited by the LSC Act or prohibited by or
inconsistent with section 504.
Sec. 1610.5 Notification.
(a) Except as provided in paragraph (b) of this section, no
recipient may accept funds from any source other than the Corporation,
unless the recipient provides written notification to the source of the
funds that the funds may not be expended for any purpose or activity
prohibited under this part.
(b) A recipient is not required to provide such notification for
contributions of less than $250.
Sec. 1610.6 Applicability.
(a) The prohibitions referred to in Secs. 1610.2(a)(3) (Criminal
proceedings), (a)(4) (Actions challenging criminal convictions) or
(b)(11) (Prisoner litigation) of this part will not apply to the non-
LSC funds of the attorney, law firm, entity of attorneys, or the public
defender program or project and will not apply to funds received to
support criminal or related cases accepted pursuant to a court
appointment, if the Corporation or a recipient makes a contract or
other arrangement for the provision of civil legal assistance with:
(1) A private attorney, law firm or state or local entity of
attorneys that represents clients in criminal cases or matters,
(2) A legal aid organization that provides criminal and related
legal assistance through a separately funded public defender program or
project; or
(3) A legal aid organization that accepts criminal or related cases
pursuant to a court appointment.
(b) If a recipient uses non-LSC funds to enter into a contract or
other arrangement with another person or entity for the provision of
civil legal assistance, the restrictions referred to in this part will
apply to the funds transferred, but will not apply to the other non-LSC
funds of the person or entity.
(c) Except as provided in paragraph (a) of this section, this part
does not apply to a transfer of LSC funds. Transfer of LSC funds is
governed by 45 CFR part 1627.
Sec. 1610.7 Accounting.
Funds received by a recipient from a source other than the
Corporation shall be accounted for as separate and distinct receipts
and disbursements in a manner directed by the Corporation.
Dated: August 6, 1996.
Victor M. Fortuno,
General Counsel.
[FR Doc. 96-20414 Filed 8-12-96; 8:45 am]
BILLING CODE 7050-01-P