[Federal Register Volume 67, Number 242 (Tuesday, December 17, 2002)]
[Proposed Rules]
[Pages 77350-77360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31673]



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Part III





Department of Health and Human Services





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42 CFR Parts 54 and 54a

45 CFR Part 96



Charitable Choice Regulations; Proposed Rule

  Federal Register / Vol. 67, No. 242 / Tuesday, December 17, 2002 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Parts 54 and 54a

45 CFR Part 96

RIN 0930-AA11


Charitable Choice Regulations Applicable to States Receiving 
Substance Abuse Prevention and Treatment Block Grants, Projects for 
Assistance in Transition From Homelessness Formula Grants, and to 
Public and Private Providers Receiving Discretionary Grant Funding From 
SAMHSA for the Provision of Substance Abuse Services Providing for 
Equal Treatment of SAMHSA Program Participants

AGENCY: Substance Abuse and Mental Health Services Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement the Charitable Choice 
statutory provisions of section 581-584 and section 1955 of the Public 
Health Service Act, applicable to the Substance Abuse Prevention and 
Treatment (SAPT) Block Grant program, the Projects for Assistance in 
Transition from Homelessness (PATH) formula grant program, insofar as 
recipients provide substance abuse services, and to SAMHSA 
discretionary grants for substance abuse treatment or prevention 
services, which are all administered by the Substance Abuse and Mental 
Health Services Administration (SAMHSA) of the U.S. Department of 
Health and Human Services. It is SAMHSA's policy that, within the 
framework of constitutional church-state guidelines, faith-based 
organizations should be able to compete on an equal footing for SAMHSA 
funding, and SAMHSA supports the participation of faith-based 
organizations in its programs for the provision of substance abuse 
services.

DATES: Submit written comments on this proposal by February 18, 2003. 
Submit written comments on the information collection provisions by 
January 16, 2003.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Office of Policy, Planning and Budget, 
SAMHSA, Attn: Winnie Mitchell by fax (301-443-1450) or e-mail 
([email protected]). Communications should refer to the above docket 
number and title. A copy of each communication submitted will be 
available for inspection and copying between 9 a.m. and 5 p.m. at the 
above address. Submit written comments on the information collection 
requirements to the Office of Information and Regulatory Affairs, 
OMB,Attn: Lauren Wittenberg by fax (202-395-6974) or e-mail ([email protected]).

FOR FURTHER INFORMATION CONTACT: Winnie Mitchell of the Office of 
Policy, Planning and Budget, SAMHSA by fax (301-443-1450) or e-mail 
([email protected]).

SUPPLEMENTARY INFORMATION:

Background

    Section 1955 of the Public Health Service Act, 42 U.S.C. 300x-65, 
as added by the Children's Health Act of 2000 (Pub. L. 106-310), as 
well as sections 581-584 of the Public Health Service Act, 42 U.S.C. 
290kk, et seq., as added by the Consolidated Appropriations Act (Pub. 
L. 106-554),(hereinafter referred to as ``SAMHSA Charitable Choice 
provisions'') set forth certain provisions which are designed to give 
people in need of substance abuse services a greater choice of SAMHSA-
supported substance abuse prevention and treatment programs. SAMHSA's 
Charitable Choice provisions ensure that religious organizations are 
able to compete on an equal footing for Federal substance abuse funding 
administered by SAMHSA, without impairing the religious character of 
such organizations and without diminishing the religious freedom of 
SAMHSA beneficiaries. These provisions apply to recipients of the 
Substance Abuse Prevention and Treatment (SAPT) Block Grant funds, the 
Projects for Assistance in Transition from Homelessness (PATH) formula 
grant funds, 42 U.S.C. 290cc-21, et seq., and to SAMHSA discretionary 
grants funds for substance abuse prevention and treatment services (42 
U.S.C. 290aa, et seq.)
    President Bush has made it one of his Administration's top 
priorities to ensure that Federal programs are fully open to faith-
based and community groups in a manner that is consistent with the 
Constitution. It is the Administration's view that faith-based 
organizations are an indispensable part of the social services network 
of the United States. Faith-based organizations, including places of 
worship, nonprofit organizations, and neighborhood groups, offer scores 
of social services to those in need. The SAMHSA Charitable Choice 
provisions are consistent with the Administration's belief that there 
should be an equal opportunity for all organizations--both faith-based 
and nonreligious--to participate as partners in Federal programs to 
serve Americans in need.

Purpose of Proposed Rule

    The SAMHSA Charitable Choice provisions contain important 
protections both for religious organizations that receive SAMHSA 
funding for substance abuse services and for the individuals who 
receive services from such programs. The objective of this proposed 
rule is to ensure that SAMHSA substance abuse programs are open to all 
eligible organizations, regardless of religious character or 
affiliation, and to establish clearly the proper uses to which funds 
may be put and the conditions for receipt of funding. The proposed 
regulations seek to provide maximum flexibility to the States and local 
governments, and to religious organizations that are ``program 
participants'' in implementing these provisions. In that vein, SAMHSA 
proposes that duly-designated officials from the States and applicants 
for SAMHSA discretionary funding for applicable programs assure that 
they will comply with these provisions.

Proposed Regulations

    The Department is proposing to amend the regulations to add 42 CFR 
part 54 and part 54a. Part 54 addresses implementation of these 
provisions with regard to SAMHSA's Substance Abuse Prevention and 
Treatment (SAPT) Block Grant, 42 U.S.C. 300x to 300x-66, and to 
SAMHSA's Projects for Assistance in Transition from Homelessness (PATH) 
Formula Grants, 42 U.S.C. 290cc-21 to 290cc-35, in which the State has 
most of the responsibility for implementation. Part 54a addresses 
implementation of these provisions with regard to SAMHSA's 
discretionary grant programs, 42 U.S.C. 290aa et seq., in which 
implementation responsibility is shared among SAMHSA, and the States 
and local governments as recipients of those grants. Some of the main 
provisions of the proposed rule are as follows, along with specific 
questions regarding the alternative service provision on which SAMHSA 
is seeking input during the regulatory comment process.
    Equal Treatment for Religious Organizations. Under SAMHSA's 
Charitable Choice provisions, organizations are eligible to participate 
in SAMHSA programs without regard to their religious character or 
affiliation, and organizations may not be excluded from the competition 
for Federal funds simply because they are religious. Specifically, 
religious organizations are eligible to compete for funding on the

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same basis, and under the same eligibility requirements, as all other 
nonprofit organizations. The Federal government, and State and local 
governments administering Federal funds under SAMHSA substance abuse 
grant programs, are prohibited from discriminating against 
organizations on the basis of religion or their religious character.
    Restriction on Religious Activities By Organizations That Receive 
Funding Directly From SAMHSA. The proposed rule describes limitations 
on the use of substance abuse funds provided directly from SAMHSA or 
the relevant State or local government to an organization, as opposed 
to those funds that an organization receives as the result of the 
genuine and independent private choice of a beneficiary.\1\
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    \1\ In the Charitable Choice context, the term ``direct'' 
funding is used to describe funds that are provided ``directly'' by 
a governmental entity or an intermediate organization with the same 
duties as a governmental entity, as opposed to funds that an 
organization receives as the result of the genuine and independent 
private choice of a beneficiary. In other contexts, the term 
``direct'' funding may be used to refer to those funds that an 
organization receives directly from the Federal government (also 
known as ``discretionary'' funding), as opposed to funding that it 
receives from a State or local government (also known as 
``indirect'' or ``block grant'' funding). In these proposed 
regulations, the term ``direct'' has the former meaning.
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    Specifically, SAMHSA funds that are provided directly to a 
participating organization may not be used to support inherently 
religious activities, such as worship, religious instruction, or 
proselytization. If the organization engages in such activities, the 
activities must be offered separately, in time or location, from the 
programs or services funded with direct SAMHSA assistance, and 
participation must be voluntary for the beneficiaries of the SAMHSA-
funded programs or services. This requirement ensures that SAMHSA funds 
provided directly to religious organizations are not used to support 
inherently religious activities. Thus, SAMHSA funds provided directly 
to a participating organization, including formula grant funds, must 
not be used by a substance abuse treatment or prevention program, for 
example, to conduct prayer meetings, studies of sacred texts, or any 
other activity that is inherently religious.
    This restriction does not mean a SAMHSA-funded substance abuse 
service organization cannot engage in inherently religious activities. 
It means simply that such an organization cannot fund these activities 
with the funds provided directly by SAMHSA or the relevant State or 
local government. Thus, faith-based organizations that receive direct 
SAMHSA funds must take steps to separate, in time or location, their 
inherently religious activities from the government-funded services 
that they offer.
    In addition, any participation by a beneficiary in such religious 
activities must be voluntary. An invitation to participate in an 
organization's religious activities is not in itself inappropriate. 
However, participating religious organizations must be careful to 
reassure program beneficiaries that they will receive SAMHSA-funded 
help even if they do not participate in these activities, and that 
their decision will have no bearing on the services they receive. In 
short, any participation by recipients of SAMHSA-funded services in 
such religious activities must be voluntary and understood to be 
voluntary.
    These restrictions on inherently religious activities do not apply 
where SAMHSA funds are provided to religious organizations as a result 
of a genuine and independent private choice of a beneficiary. A 
religious organization may receive SAMHSA funds as the result of a 
beneficiary's genuine and independent private choice if, for example, 
the State has established a voucher, coupon, certificate, or similar 
funding mechanism for a beneficiary to redeem using SAMHSA funds under 
a program that is designed by a State to give that individual a choice 
among providers. Thus, religious organizations that receive SAMHSA 
funds to provide services as a result of a beneficiary's genuine and 
independent private choice need not separate, in time or location, 
their inherently religious activities from the SAMHSA-funded services 
they provide, provided they otherwise satisfy the requirements of the 
program.
    Religious Character and Independence of Religious Organizations. 
The proposed rule clarifies that a religious organization that 
participates in SAMHSA programs retains its independence from Federal, 
State, and local governments. It may continue to carry out its mission, 
including the definition, practice and expression of its religious 
beliefs, provided that it does not use direct SAMHSA funds to support 
any inherently religious activities, such as worship, religious 
instruction, or proselytization. Among other things, faith-based 
organizations may use their facilities to provide SAMHSA-funded 
substance abuse services, without removing religious art, icons, 
scriptures, or other symbols. In addition, a religious organization 
receiving funds from SAMHSA for substance abuse services may retain 
religious terms in its organization's name, may select its board 
members on a religious basis, and may include religious references in 
its organization's mission statements and other governing documents.
    Employment Practices. The proposed rule clarifies that the 
participation of a religious organization in, or its receipt of funds 
from, a SAMHSA substance abuse services program does not affect that 
organization's exemption provided under 42 U.S.C. 2000e-1 regarding 
employment practices.
    Title VII of the Federal Civil Rights Act of 1964 provides that a 
religious organization may, without running afoul of Title VII, hire 
employees who share its religious beliefs. This provision protects the 
religious liberty of communities of faith. It helps enable faith-based 
groups to promote common values, a sense of community and unity of 
purpose, and shared experiences through service--all of which can 
contribute to a religious organization's effectiveness. The SAMHSA 
Charitable Choice provisions thus reflect the recognition that a 
religious organization may determine that, in order to define or carry 
out its mission, it is important that it be able to take its faith into 
account in making employment decisions.
    To the extent that 42 U.S.C. 300x-57(a)(2) or 42 U.S.C. 290cc-
33(a)(2) imposes religious nondiscrimination requirements on the 
employment practices of program participants, the proposed rule 
clarifies that such requirements do not apply to program participants 
that demonstrate that these requirements would substantially burden 
their exercise of religion. In addition to being a reasonable 
construction of the SAMHSA Charitable Choice provisions, including 42 
U.S.C. 300x-57, 300x-65, 290cc-33, 290kk-1, and 290kk-2, the 
inapplicability of section 300x-57(a)(2) and 290cc-33(a)(2) to 
religious organizations that can demonstrate a substantial burden on 
their exercise of religion arises from the Religious Freedom 
Restoration Act, 42 U.S.C. 2000bb et seq. Under this statute, the 
government may not impose legal requirements that substantially burden 
a grantee's exercise of religion except in defined circumstances. 42 
U.S.C. 2000bb-1(a)-(b). As applied here, where a religious entity 
establishes that its exercise of religion would be substantially 
burdened by the religious nondiscrimination requirements of sections 
300x-57(a)(2) or 290cc-33(a)(2), the Religious Freedom Restoration Act 
supercedes those statutory requirements, thus exempting the religious 
entity therefrom.
    This determination is based on several factors: religious entities 
are

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provided an exemption, under 42 U.S.C. 2000e-1(a), from the religious 
nondiscrimination requirements of the Civil Rights Act of 1964, which 
reflects Congress's judgment that employment decisions are an important 
component of religious entities' autonomy; many federal funding 
programs do not impose a religious nondiscrimination requirement upon 
the employment practices of grantees; 42 U.S.C. 300x-57(a)(2) and 
290cc-33(a)(2) do not apply to the discretionary grant programs 
administered by the Secretary under this title; and secular entities 
that administer federally funded social programs generally are not 
precluded from considering their ideologies in making employment 
decisions. Congress's highly selective application of religious 
nondiscrimination requirements in the employment context belies the 
notion that there is a compelling governmental interest in applying 
such requirements to entities that make decisions to hire individuals 
of a particular religion in order to maintain their religious identity, 
autonomy, and/or communal religious exercise. A recipient that 
demonstrates a substantial burden from the application of the religious 
nondiscrimination requirements of sections 300x-57(a)(2) or 290cc-
33(a)(2) is therefore entitled to employ individuals of a particular 
religion, notwithstanding the requirements of those provisions, as it 
would otherwise be entitled to do under 42 U.S.C. 2000e-1(a).
    A religious organization that is a recipient of SAMHSA funds for 
the provision of substance abuse services that wishes to establish a 
substantial burden from the application of 42 U.S.C. 300x-57(a)(2) or 
290cc-33(a)(2) to its organization, for the purpose of obtaining an 
exemption under 42 U.S.C. 2000bb, et seq., must certify : (1) That it 
sincerely believes that employing individuals of a particular religion 
is important to the definition and maintenance of its religious 
identity, autonomy, and/or communal religious exercise; (2) that it 
makes employment decisions on a religious basis in analogous programs; 
(3) that the grant would materially affect its ability to provide the 
type of services in question; and (4) that providing the services in 
question is expressive of its values or mission. The organization must 
maintain documentation to support these determinations and must make 
such documentation available to SAMHSA upon request.
    Finally, the proposed rule makes clear that nothing in this section 
shall be construed to modify or affect any State law or regulation that 
relates to discrimination in employment.
    Nondiscrimination Against Beneficiaries. The proposed rule also 
clarifies provisions of SAMHSA's Charitable Choice provisions that 
apply to the individuals who receive SAMHSA-funded services. First, the 
proposed rule makes it clear that religious organizations participating 
in a SAMHSA-funded substance abuse program are prohibited from 
discriminating against beneficiaries or potential beneficiaries on the 
basis of religion or religious belief. Accordingly, religious 
organizations, in providing substance abuse services funded in whole or 
in part by SAMHSA, and in their outreach activities related to such 
services, may not discriminate against current or prospective program 
beneficiaries on the basis of religion, a religious belief, a refusal 
to hold a religious belief, or a refusal to participate actively in a 
religious practice.
    Notice, Referral, and Provision of Alternative Services. SAMHSA 
invites specific comment on sections 54.8 and 54a.8 of the following 
regulations, regarding a program beneficiary's right to alternative 
services. In general, SAMHSA believes that securing alternative 
services for an individual at the local level may ultimately not be a 
function best performed by a Federal agency, but is rather best met by 
those who know the community best and are most informed about the 
availability of services. Because SAMHSA seeks to maximize State and 
provider flexibility in implementing these provisions, and because 
SAMHSA wants to ensure that the regulations rely on existing State and 
local practices for implementation, SAMHSA is seeking comment on the 
following general questions:
    [sbull] How can State and local flexibility be maximized in 
implementing these provisions?
    [sbull] How accurate are the paperwork burden estimates and how can 
the paperwork burden related to implementing these provisions be 
minimized?
    [sbull] How should SAMHSA track the effectiveness of the 
implementation of these Charitable Choice provisions? What methods 
should States and program participants use and report to ensure 
implementation of the Charitable Choice provisions?
    General Requirements. The proposed rule clarifies SAMHSA's 
Charitable Choice provisions stipulating that individuals who are 
receiving or may receive substance abuse services from a program 
participant funded in whole or in part by SAMHSA may object to the 
religious character of that participant, in which case they are 
entitled to receive services from an alternative provider. They have a 
right to receive a referral to an alternative provider within a 
reasonable period of time. That alternative provider must be reasonably 
accessible and have the capacity to provide comparable services to the 
individual. According to the SAMHSA Charitable Choice provisions, such 
services shall have a value that is not less than the value of the 
services that the individual would have received from the program 
participant to which the individual had such objection. The alternative 
provider need not be a secular organization. It must simply be a 
provider to which the program beneficiary has no religious objection.
    To implement this right, the proposed rule imposes obligations on 
both SAMHSA-funded religious organizations and the governmental entity 
administering the program with respect to notice, referral, and 
provision of services from alternative providers. SAMHSA recognizes 
that a range of methods of fulfilling these responsibilities is 
possible, and therefore does not seek to prescribe a single, inflexible 
referral system that States must adopt. Rather, SAMHSA encourages State 
agencies, working in concert with local governments, religious 
providers, and other program providers, to develop systems to comply 
with the requirements, monitor compliance, identify compliance 
problems, and take necessary corrective actions. It is important that 
State and local agencies and religious organizations work cooperatively 
to develop systems to comply with these provisions, monitor compliance, 
identify compliance problems and take necessary corrective actions.
    Notice. The SAMHSA Charitable Choice provisions require SAMHSA-
funded religious organizations providing substance abuse services, 
public agencies that refer individuals to such SAMHSA-funded programs, 
and the appropriate Federal, State, or local governments that 
administer these SAMHSA-funded programs to ensure that notice is 
provided to beneficiaries and prospective beneficiaries regarding 
alternative services. The notice must articulate clearly the program 
beneficiary's right to a referral and to services that reasonably meet 
the timeliness, capacity, accessibility, and equivalency requirements 
discussed above. A model notice, which States and religious 
organizations are free to use, is provided at the end of this proposed 
rule.

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    Referral to Alternative Provider. If an individual objects to the 
religious character of the substance abuse treatment or prevention 
program from which they are receiving services, the religious 
organization must refer the individual, within a reasonable period of 
time, to another provider of substance abuse services. SAMHSA invites 
specific comment on what constitutes a ``reasonable period of time'' 
under various circumstances. Should States be given the flexibility to 
determine this, given that there are established referral and substance 
abuse services systems in each State? Alternatively, should SAMHSA 
provide a clearer idea of what is a reasonable period of time (for 
example, ``within 48 hours,'' ``within one week,'' etc.)?
    In making a referral, the religious organization must consider any 
list that the State or local government makes available of other 
entities in a reasonably accessible geographic area that provide 
substance abuse services. For example, a religious organization could 
check SAMHSA's treatment facility locator at http://findtreatment.samhsa.gov to identify providers in the surrounding area 
and consult with the relevant governmental officials about referrals to 
programs that are reasonably accessible and of equal value. The locator 
includes residential treatment programs, outpatient treatment programs, 
and hospital inpatient programs for drug addiction and alcoholism. All 
information in the locator is updated each year, based on facility 
responses to SAMHSA's National Survey of Substance Abuse Services. 
Further updates are made monthly as new information is provided by 
facilities.
    SAMHSA-funded religious organizations must take reasonable steps to 
ensure that the individual makes contact with the alternative provider 
to which the individual is referred, and they must notify ``the 
appropriate Federal, State, or local government'' of the referral. In 
the case of the SAPT and PATH programs, the appropriate government is 
the State. In the case of SAMHSA's substance abuse prevention and 
treatment discretionary grant funding, it is either SAMHSA or the 
recipient State or local government.
    For SAPT or PATH programs, if the religious organization cannot 
locate an appropriate alternative provider for a referral, it should 
contact the State agency that administers the program. The State agency 
can then take steps to identify an appropriate alternative. In the 
event that the State agency is unable to locate an alternative 
provider, the State can contact SAPT block grant or PATH grant 
officials in SAMHSA for assistance. For SAMHSA discretionary grants 
made directly to religious organizations, the religious organization 
can work with SAMHSA to identify an appropriate referral. For SAMHSA 
discretionary grants to States and localities, the religious 
organization can work with the recipient government to identify an 
appropriate referral, using the referral system utilized by the State 
or locality as required by the rule.
    The religious organization (program participant) shall take 
reasonable steps to ensure that the individual makes contact with the 
alternative provider to which the individual is referred. All referrals 
are to be made in a manner consistent with all applicable 
confidentiality laws, including, but not limited to, 42 CFR part 2. 
Upon referring a program beneficiary to an alternative provider, the 
program participant shall notify the appropriate Federal, State, or 
local government agency that administers the program of such referral. 
It is the States' responsibility to determine the nature and timing of 
such notification under the SAPT block grant and the PATH program. 
SAMHSA invites specific comment on how referring organizations can 
ensure that individuals make contact with alternative providers, and 
whether and how they should document the steps they have taken, in a 
manner that is consistent with all applicable confidentiality laws. For 
example, should the provider be required to record and call the 
alternative provider to notify them of the referral; to provide the 
name and address of the alternative provider to the program 
beneficiary; and to make a second follow-up call to the alternative 
provider? What burdens would such requirements place on providers?
    Provision of Alternative Services. Under SAMHSA's Charitable Choice 
provisions, the responsibility for providing the alternative services 
rests with the ``the appropriate Federal, State, or local government'' 
that administers the program or is a program participant. Alternative 
service providers identified by the Federal, State, or local government 
must be reasonably accessible and have the capacity to provide 
comparable substance abuse services. The services provided by the 
alternative provider must have a value that is not less than the value 
of the services that the individual would have received from the 
referring organization.
    The SAMHSA Charitable Choice provisions require States to provide 
and fund alternative services for SAPT-funded and PATH program 
beneficiaries who have objected to the religious character of a program 
participant. States may use SAPT block grant and PATH grant funding to 
provide and fund such services from a provider to which the program 
beneficiaries do not have a religious objection, in a manner consistent 
with State law and policy.
    With respect to SAMHSA discretionary grant funding, when SAMHSA 
provides funding directly to another unit of government, such as a 
State or local government, that unit of government is responsible for 
providing the alternative services. When SAMHSA provides discretionary 
grant funding directly to nongovernmental organizations, SAMHSA is the 
responsible unit of government.
    SAMHSA invites comment on the following questions related to the 
implementation of this provision:
    [sbull] How can an alternative services system best be implemented 
in a system characterized by treatment gaps, shortages and waiting 
lists (i.e., how can program beneficiaries best be assured of 
alternative services?)
    [sbull] Similarly, what constitutes ``reasonably accessible 
services,'' given the differences in available services in various 
regions of the country?
    [sbull] What is the best understanding of the phrase ``services 
that * * * have a value that is not less than the value of [services 
that would otherwise be provided]''?
    [sbull] Under discretionary programs, what are the options for 
securing and financing alternative services? Would placing the 
responsibility on the grantee for securing alternative services as a 
condition of the grant award (including financing of such services, as 
necessary) be consistent with the statutory requirement that the 
appropriate Federal, State, or local governments ``provide'' 
alternative services? Or does the statute require these governmental 
entities to secure and finance alternative services? What sort of 
financial problems would be imposed by placing such responsibilities on 
grantees?
    Fiscal Accountability. The proposed rule outlines the financial 
responsibility incurred through the receipt of SAMHSA funds. Religious 
organizations that receive SAMHSA funds for substance abuse services 
are subject to the same regulations as other nongovernmental 
organizations to account, in accordance with generally accepted 
auditing and accounting principles, for the use of such funds. In 
addition, religious organizations are required to keep any Federal 
funds that they receive for substance abuse services segregated in a 
separate account from non-Federal funds. Only the segregated Federal 
funds are subject to

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audit by the government under the SAMHSA program.
    Effect on State and Local Funds. The proposed rule, consistent with 
42 U.S.C. 300x-65(d), provides that if a State or local government 
contributes its own funds to supplement SAMHSA-funded substance abuse 
activities, the State or local government has the option to separate 
out the Federal funds or commingle them. However, if the funds are 
commingled, the SAMHSA Charitable Choice provisions apply to all of the 
commingled funds.
    Treatment of intermediate organizations. The proposed rule provides 
that, if a nongovernmental organization (referred to here as an 
``intermediate organization''), acting under a contract or other 
agreement with the Federal Government or a State or local government, 
is given the authority under the contract or agreement to select other 
nongovernmental organizations to provide services under any substance 
abuse program, the intermediate organization has the same duties under 
the SAMHSA Charitable Choice provisions and the implementing 
regulations as the government and must ensure that there is compliance 
with the SAMHSA Charitable Choice provisions. The intermediate 
organization retains all other rights of a nongovernmental organization 
under SAMHSA's Charitable Choice provisions.
    Educational Requirements for Personnel in Drug Treatment Programs. 
The proposed rule reiterates the requirement of 42 U.S.C. 290kk-3, 
which provides that, in determining whether personnel of a program 
participant that has a record of successful drug treatment for the 
preceding three years have satisfied State or local requirements for 
education and training, a State or local government shall not 
discriminate against education and training provided to such personnel 
by a religious organization, so long as such education and training is 
comparable to the coursework or training provided by nonreligious 
organizations or is comparable to education and training that the State 
or local government would otherwise credit for purposes of determining 
whether the relevant requirements have been satisfied.
    Assurances and State Oversight of the Charitable Choice 
Requirements. In order to ensure that States receiving grant funding 
under the SAPT block grant and PATH formula grant programs abide by the 
Charitable Choice provisions and provide oversight of religious 
organizations that provide substance abuse services under such 
programs, the proposed rule requires States, as part of their 
applications for funding under each program, to certify that they will 
comply with all of the requirements of the SAMHSA Charitable Choice 
provisions and to submit to the Secretary a summary each year of the 
steps it has taken to implement this regulation. The Department is 
proposing changes to existing regulations for the SAPT block grant to 
require such assurance and summary. Similar assurances, to be signed by 
applicants for SAMHSA PATH funds and discretionary substance abuse 
treatment and prevention grants, will be added to the assurances listed 
in PHS Form 5161, Public Health Service Grant Application for State and 
Local Government Applicants and Non-governmental Applicants for Health 
Services Projects.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when rulemaking is 
necessary, to select regulatory approaches that provide the greatest 
net benefits (including potential economic, environmental, public 
health, safety distributive and equity effects). We have determined 
that the rule is a ``significant regulatory action'' under section 3(f) 
of the Executive Order, and it has therefore been reviewed by the 
Office of Management and Budget under that order.

Regulatory Flexibility

    The Regulatory Flexibility Act (5 U.S.C. chapter 6) requires that 
regulatory actions be analyzed to determine whether they will have a 
significant impact on a substantial number of small entities. We have 
determined that this is not a ``major'' rule under the Regulatory 
Flexibility Act of 1980, and that it will not have an effect on the 
States or on the distribution of power and responsibilities among the 
various levels of government.

Unfunded Mandates

    The Unfunded Mandates Reform Act requires that agencies prepare an 
assessment of anticipated costs and benefits before developing any rule 
that may result in an expenditure by State, local or tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more in any given year. We have determined that this rule will not 
result in an aggregate expenditure by State, local or tribal 
governments of $100 million or more in any given year.

Executive Order 13132: Federalism Implications

    Executive Order 13132, Federalism, requires that Federal agencies 
consult with State and local government officials in the development of 
regulatory policies with federalism implications. Consistent with 
Executive Order 13132, we specifically solicit comment from State and 
local government officials on this proposed rule.

Paperwork Reduction Act of 1995

    This proposed rule contains information collections which are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3507(d)). The 
title, description and respondent description of the information 
collections are shown in the following paragraphs with an estimate of 
the annual reporting and recordkeeping burden. Included in the estimate 
is the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    Title: Regulations to Implement SAMHSA's Charitable Choice 
Statutory Provisions--42 CFR Parts 54 and 54a.
    Description: Section 1955 of the Public Health Service Act (42 
U.S.C. 300x-65), as amended by the Children's Health Act of 2000 (Pub. 
L. 106-310) and sections 581-584 of the Public Health Service Act (42 
U.S.C. 290kk et seq., as added by the Consolidated Appropriations Act 
(Pub. L. 106-554)), set forth various provisions which aim to ensure 
that religious organizations are able to compete on an equal footing 
for Federal funds to provide substance abuse services. These provisions 
allow religious organizations to offer substance abuse services to 
individuals without impairing the religious character of the 
organizations or the religious freedom of the individuals who receive 
the services. The provisions apply to the Substance Abuse Prevention 
and Treatment Block Grant (SAPT BG), to the Projects for Assistance in 
Transition from Homelessness (PATH) formula grant program, and to 
certain Substance Abuse and Mental Health Services Administration 
(SAMHSA) discretionary grant programs (programs that pay for substance 
abuse treatment and prevention services, not for certain infrastructure 
and technical assistance activities). Every effort has been made to 
assure that the reporting, recordkeeping and disclosure requirements of 
the proposed regulations allow maximum

[[Page 77355]]

flexibility in implementation and impose minimum burden.
    Description of Respondents: Not-for-profit institutions; State, 
Local or Tribal Government.
    Response burden estimate: This proposed rule includes requirements 
for disclosure by program participants to program beneficiaries of 
their rights to receipt of services from an alternative service 
provider, for notification by program participants to the applicable 
level of government of referrals made to alternative service providers, 
and requirements for reporting of activities to comply with these 
regulations. The rule also requires that a program participant under 
the Substance Abuse Prevention and Treatment Block Grant (SAPT BG) and 
the Projects for Assistance in Transition from Homelessness (PATH) 
programs that believes it would be substantially burdened by 
application of the requirements of 42 U.S.C. 300x-57(a)(2) or 42 U.S.C. 
290cc-33(a)(2) must sign a certification to that effect and must 
maintain documentation to support the certification.

                                             Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
                                                     Number of     Responses per     Hours per
           42 CFR citation and purpose               responses      respondent       response       Total hours
----------------------------------------------------------------------------------------------------------------
   Part 54--States Receiving SAPT Block Grants and/or Projects for Assistance in Transition from Homelessness
                                                     Grants
----------------------------------------------------------------------------------------------------------------
                                                    Reporting
----------------------------------------------------------------------------------------------------------------
54.8(c)(4) Program 40 4 0.33 53 participant                   40               4            0.33              53
 notification to responsible unit of government
 regarding referrals to alternative service
 providers......................................
54.8(e) Annual report 56 1 2.00 112 by PATH                   56               1            2.00             112
 grantees on activities undertaken to comply
 with 42 CFR Part 54............................
                                                   Disclosure
----------------------------------------------------------------------------------------------------------------
54.8(b) Program participant notice to program
 beneficiaries of rights to referral to an
 alternative service provider...................
    SAPT BG.....................................           1,000             275             .05          13,750
    PATH........................................             100             170             .05             850
-------------------------------------------------
                                                  Recordkeeping
----------------------------------------------------------------------------------------------------------------
54.6(b) Documentation must be maintained to                   50               1            1.00              50
 demonstrate significant burden for program
 participants under 42 U.S.C. 300x-57 or 42
 U.S.C. 290cc-33(a)(2)..........................
                                                 -----------------
    Part 54--Subtotal...........................           1,156  ..............          14,815
-------------------------------------------------
Part 54a--States, local governments and religious organizations receiving funding under Title V of the PHS Act
 for substance abuse prevention and treatment services..........................................................
----------------------------------------------------------------------------------------------------------------
                                                    Reporting
----------------------------------------------------------------------------------------------------------------
54a.8(c)(1)(iv) Program participant notification              25               4            .083               8
 to State or local government of a referral to
 an alternative provider........................
54a(8)(d) Program participant notification to                 20               2             .25              10
 SAMHSA of referrals............................
-------------------------------------------------
                                                   Disclosure
----------------------------------------------------------------------------------------------------------------
54a.8(b) Program participant notice to program               100             275             .05           1,375
 beneficiaries of rights to referral to an
 alternative service provider...................
                                                 -----------------
    Part 54a--Subtotal..........................             100  ..............  ..............           1,393
                                                 =================
        Total...................................           1,256  ..............  ..............          16,208
----------------------------------------------------------------------------------------------------------------

    In addition, the regulations for the Substance Abuse Prevention 
andTreatment Block Grant (45 CFR part 96) will be amended to include at 
45 CFR 92.122(f)(5) a requirement to include as part of the annual 
report a description of the activities the State has undertaken to 
comply with 42CFR part 54. This reporting burden is estimated as 
follows:

----------------------------------------------------------------------------------------------------------------
                                                 Number of      Responses per      Hours per
        45 CFR citation and  purpose            respondents       respondent        response       Total hours
----------------------------------------------------------------------------------------------------------------
96.122(f)(5) Annual report of activities the              60                1                2              120
 State undertook to comply with 42 CFR Part
 54.........................................
----------------------------------------------------------------------------------------------------------------

    As required by section 3507(d) of the PRA the Secretary has 
submitted a copy of this proposed rule to OMB for its review. Comments 
on the information collection requirements are specifically solicited 
in order to: (1) Evaluate

[[Page 77356]]

whether the proposed collection of information is necessary for the 
proper performance of DHHS's functions, including whether the 
information will have practical utility; (2) evaluate the accuracy of 
DHHS's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (3) enhance the quality, utility, and clarity of the information 
to be collected; and (4) minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to DHHS on the proposed 
regulations.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, OMB. (address above).

Executive Order 13175: Consultation and Coordination With Indian Tribal 
Governments

    Executive Order 13175 (65 FR 67249, November 6, 2000) requires us 
to develop an accountable process to ensure ``meaningful and timely 
input by tribal officials in the development of regulatory policies 
that have tribal implications.'' Although it is not clear that the 
proposed rule will have tribal implications, we specifically solicit 
comment on this proposed rule from tribal officials.

    Dated: December 12, 2002.
Tommy G. Thompson,
Secretary of Health and Human Services.

List of Subjects

42 CFR Parts 54 and 54a

    Grant programs--social programs, Public assistance programs, 
Substance abuse treatment.

45 CFR Part 96

    Grant programs--social programs

    The Department of Health and Human Services proposes to amend 42 
CFR chapter I and 45 CFR subtitle A as follows:
    1. Add a new part 54 to title 42 of the Code of Federal Regulations 
to read as follows:

42 CFR--CHAPTER I

PART 54--CHARITABLE CHOICE REGULATIONS APPLICABLE TO STATES 
RECEIVING SUBSTANCE ABUSE PREVENTION AND TREATMENT BLOCK GRANTS 
AND/OR PROJECTS FOR ASSISTANCE IN TRANSITION FROM HOMELESSNESS 
GRANTS

Sec.
54.1 Scope.
54.2 Definitions.
54.3 Nondiscrimination against religious organizations.
54.4 Religious activities.
54.5 Religious character and independence.
54.6 Employment practices.
54.7 Nondiscrimination requirement.
54.8 Right to services from an alternative provider.
54.9 Assurances and State oversight of the Charitable Choice 
requirements.
54.10 Fiscal accountability.
54.11 Effect on State and local funds.
54.12 Treatment of intermediate organizations.
54.13 Educational requirements for personnel in drug treatment 
programs.

    Authority: 42 U.S.C. 300x-65 et seq., 42 U.S.C. 290kk et seq., 
42 U.S.C. 300x-21, et seq., 42 U.S.C. 290cc-21, et seq., and 42 
U.S.C. 2000bb, et seq.


Sec.  54.1  Scope.

    These provisions apply only to awards that pay for substance abuse 
prevention and treatment services under 42 U.S.C. 300x-21 et seq., and 
42 U.S.C. 290cc-21 to 290cc-35. This part does not apply to awards 
under any such authorities for activities that do not involve the 
direct provision of substance abuse services, such as for 
infrastructure activities authorized under section 1971 of the PHS Act, 
42 U.S.C. 300y, and for technical assistance activities. This part 
implements the SAMHSA Charitable Choice provisions, 42 U.S.C. 300x-65 
and 42 U.S.C. 290kk, et seq.


Sec.  54.2  Definitions.

    (a) Applicable program means the programs authorized under:
    (1) The Substance Abuse Prevention and Treatment (SAPT) Block 
Grant, 42 U.S.C. 300x to 300x-66, and
    (2) The Projects for Assistance in Transition from Homelessness 
(PATH) Formula Grants, 42 U.S.C. 290cc-21 to 290cc-35 insofar as they 
fund substance abuse prevention and/or treatment services.
    (b) Religious organization means a nonprofit religious 
organization.
    (c) Program beneficiary means an individual who receives substance 
abuse services under a program funded in whole or in part by applicable 
programs.
    (d) Program participant means a public or private entity that has 
received financial assistance, under an applicable program.
    (e) SAMHSA means the Substance Abuse and Mental Health Services 
Administration.
    (f) SAMHSA Charitable Choice provisions means the provisions of 42 
U.S.C. 300x-65 and 42 U.S.C. 290kk.
    (g) Direct funding or Funds provided directly means funding that is 
provided to an organization directly by a governmental entity or 
intermediate organization that has the same duties as a governmental 
entity, as opposed to funding that an organization receives as the 
result of the genuine and independent private choice of a beneficiary 
through a voucher, certificate, coupon, or other similar mechanism.


Sec.  54.3  Nondiscrimination against religious organizations.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in applicable programs, as long as 
their services are provided consistent with the Establishment Clause 
and the Free Exercise Clause of the First Amendment to the United 
States Constitution. Except as provided herein or in the SAMHSA 
Charitable Choice provisions, nothing in these regulations shall 
restrict the ability of the Federal government, or a State or local 
government, from applying to religious organizations the same 
eligibility conditions in applicable programs as are applied to any 
other nonprofit private organization.
    (b) Neither the Federal government nor a State or local government 
receiving funds under these programs shall discriminate against an 
organization that is, or applies to be, a program participant on the 
basis of the organization's religious character or affiliation.


Sec.  54.4  Religious activities.

    No funds provided directly from SAMHSA or the relevant State or 
local government to organizations participating in applicable programs 
may be expended for inherently religious activities, such as worship, 
religious instruction, or proselytization. If an organization conducts 
such activities, it must offer them separately, in time or location, 
from the programs or services for which it receives funds directly from 
SAMHSA or the relevant State or local government under any

[[Page 77357]]

applicable program, and participation must be voluntary for the program 
beneficiaries.


Sec.  54.5  Religious character and independence.

    A religious organization that participates in an applicable program 
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. The organization may 
not expend funds that it receives directly from SAMHSA or the relevant 
State or local government, to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, faith-based organizations may use space in their 
facilities to provide services supported by applicable programs, 
without removing religious art, icons, scriptures, or other symbols. In 
addition, a SAMHSA-funded religious organization retains the 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.


Sec.  54.6  Employment practices.

    (a) The participation of a religious organization in, or its 
receipt of funds from, an applicable program does not affect that 
organization's exemption provided under 42 U.S.C. 2000e-1 regarding 
employment practices.
    (b) To the extent that 42 U.S.C. 300x-57(a)(2) or 42 U.S.C. 290cc-
33(a)(2) precludes a program participant from employing individuals of 
a particular religion to perform work connected with the carrying on 
its activities, those provisions do not apply if such program 
participant is a religious corporation, association, educational 
institution, or society and can demonstrate that its religious exercise 
would be substantially burdened by application of these religious 
nondiscrimination requirements to its employment practices in the 
program or activity at issue.
    (1) In order to make this demonstration, the program participant 
must certify:
    (i) That it sincerely believes that employing individuals of a 
particular religion is important to the definition and maintenance of 
its religious identity, autonomy, and/or communal religious exercise;
    (ii) That it makes employment decisions on a religious basis in 
analogous programs;
    (iii) That the grant would materially affect its ability to provide 
the type of services in question; and
    (iv) That providing the services in question is expressive of its 
values or mission.
    (2) The organization must maintain documentation to support the 
determinations in paragraph (b)(1) of this section and must make such 
documentation available to SAMHSA upon request.
    (c) Nothing in this section shall be construed to modify or affect 
any State law or regulation that relates to discrimination in 
employment.
    (d) The phrases ``with respect to the employment,'' ``individuals 
of a particular religion,'' and ``religious corporation, association, 
educational institution, or society'' shall have the same meaning as 
those terms have under section 702 of the Civil Rights Act of 1964, 42 
U.S.C. 2000e-1(a).


Sec.  54.7  Nondiscrimination requirement.

    A religious organization that is a program participant shall not, 
in providing program services or engaging in outreach activities under 
applicable programs, 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 actively 
participate in a religious practice.


Sec.  54.8  Right to services from an alternative provider.

    (a) General requirements. If an otherwise eligible program 
beneficiary or prospective program beneficiary objects to the religious 
character of a program participant, within a reasonable period of time 
after the date of such objection, such program beneficiary shall have 
rights to notice, referral, and alternative services, as outlined in 
paragraphs (b) through (d) of this section.
    (b) Notice. Program participants that refer an individual to 
alternative service providers, and the State government that 
administers the applicable programs, shall ensure that notice of the 
individual's right to services from an alternative provider is provided 
to program beneficiaries or prospective beneficiaries. The notice must 
clearly articulate the program beneficiary's right to a referral and to 
services that reasonably meet the requirements of timeliness, capacity, 
accessibility, and equivalency as discussed in this section.
    (c) Referral to an alternative provider. If a program beneficiary 
or prospective program beneficiary objects to the religious character 
of a program participant that is a religious organization, that 
participating religious organization shall, within a reasonable time 
after the date of such objection, refer such individual to an 
alternative provider. The State shall have a system in place to ensure 
that referrals are made to an alternative provider. That system shall 
ensure that the following occurs:
    (1) The religious organization that is a program participant shall, 
within a reasonable time after the date of such objection, refer the 
beneficiary to an alternative provider.
    (2) In making such referral, the program participant shall consider 
any list that the State or local government makes available to entities 
in the geographic area that provide program services, which may include 
utilizing any treatment locator system developed by SAMHSA;
    (3) All referrals shall be made in a manner consistent with all 
applicable confidentiality laws, including, but not limited to, 42 CFR 
part 2 (``Confidentiality of Alcohol and Drug Abuse Patient Records'');
    (4) Upon referring a program beneficiary to an alternative 
provider, the program participant shall notify the State of such 
referral; and
    (5) The program participant shall ensure that the program 
beneficiary makes contact with the alternative provider to which he or 
she is referred.
    (d) Provision and Funding of Alternative Services. The State, in 
administering the SAPT block grant and PATH programs, shall provide to 
an otherwise eligible program beneficiary or prospective program 
beneficiary who objects to the religious character of a program 
participant and fund services from an alternative provider that is 
reasonably accessible and has the capacity to provide comparable 
services to the individual. Such services shall have a value that is 
not less than the value of the services that the individual would have 
received from the program participant to which the individual had such 
objection. The alternative provider need not be a secular organization. 
It must simply be a provider to which the program beneficiary has no 
religious objection.
    (e) PATH Annual Report. As part of the annual report to SAMHSA, 
PATH grantees shall include a description of the activities the grantee 
has taken to comply with 42 CFR part 54.

[[Page 77358]]

Sec.  54.9  Assurances and State oversight of the charitable choice 
requirements.

    In order to ensure that States receiving grant funding under the 
SAPT block grant and PATH formula grant programs comply with the SAMHSA 
Charitable Choice provisions and provide oversight of religious 
organizations that provide substance abuse services under such 
programs, States are required as part of their applications for funding 
to certify that they will comply with all of the requirements of such 
provisions and the implementing regulations under this part, and that 
they will provide such oversight of religious organizations.


Sec.  54.10  Fiscal accountability.

    (a) Religious organizations that receive applicable program funds 
for substance abuse services are subject to the same regulations as 
other nongovernmental organizations to account, in accordance with 
generally accepted auditing and accounting principles, for the use of 
such funds.
    Religious organizations shall segregate Federal funds they receive 
under an applicable program into a separate account from non-Federal 
funds. Only the Federal funds shall be subject to audit by government 
under the SAMHSA program.


Sec.  54.11  Effect on State and local funds.

    If a State or local government contributes its own funds to 
supplement activities carried out under the applicable programs, the 
State or local government has the option to separate out the Federal 
funds or commingle them. If the funds are commingled, the provisions of 
this part 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.


Sec.  54.12  Treatment of intermediate organizations.

    If a nongovernmental organization (referred to here as an 
``intermediate organization''), acting under a contract or other 
agreement with the Federal Government or a State or local government, 
is given the authority under the contract or agreement to select 
nongovernmental organizations to provide services under any applicable 
program, the intermediate organization shall have the same duties under 
this part as the government. The intermediate organization retains all 
other rights of a nongovernmental organization under this part and the 
SAMHSA Charitable Choice provisions.


Sec.  54.13  Educational requirements for personnel in drug treatment 
programs.

    In determining whether personnel of a program participant that has 
a record of successful drug treatment for the preceding three years 
have satisfied State or local requirements for education and training, 
a State or local government shall not discriminate against education 
and training provided to such personnel by a religious organization, so 
long as such education and training is comparable to that provided by 
nonreligious organizations, or is comparable to education and training 
that the State or local government would otherwise credit for purposes 
of determining whether the relevant requirements have been satisfied.
    2. Add a new part 54a to title 42 of the Code of Federal 
Regulations to read as follows:

PART 54a--CHARITABLE CHOICE REGULATIONS APPLICABLE TO STATES, LOCAL 
GOVERNMENTS AND RELIGIOUS ORGANIZATIONS RECEIVING FUNDING UNDER 
TITLE V OF THE PUBLIC HEALTH SERVICE ACT, 42 U.S.C. 290aa, ET SEQ., 
FOR SUBSTANCE ABUSE PREVENTION AND TREATMENT SERVICES

Sec.
54a.1 Scope.
54a.2 Definitions.
54a.3 Nondiscrimination against religious organizations.
54a.4 Religious activities.
54a.5 Religious character and independence.
54a.6 Employment practices.
54a.7 Nondiscrimination requirement.
54a.8 Right to services from an alternative provider.
54a.9 Oversight of the Charitable Choice requirements.
54a.10 Fiscal accountability.
54a.11 Effect on State and local funds.
54a.12 Treatment of intermediate organizations.
54a.13 Educational requirements for personnel in drug treatment 
programs.
54a.14 Determination of nonprofit status.

    Authority: 42 U.S.C. 300x-65, and 42 U.S.C. 290kk, et seq., 42 
U.S.C. 290aa, et seq.


Sec.  54a.1  Scope.

    These provisions apply only to awards that pay for substance abuse 
prevention and treatment services under Title V of the Public Health 
Service Act, 42 U.S.C. 290aa, et seq., which are administered by the 
Substance Abuse and Mental Health Services Administration. This part 
does not apply to awards under any such authorities for only mental 
health services or for certain infrastructure and technical assistance 
activities, such as cooperative agreements for technical assistance 
centers, that do not provide direct services to clients. This part 
implements the provisions of 42 U.S.C. 300x-65 and 42 U.S.C. 290kk, et 
seq.


Sec.  54a.2  Definitions.

    (a) Applicable program means the programs authorized under Title V 
of the PHS ct, 42 U.S.C. 290aa, et seq., for the provision of substance 
abuse prevention and or treatment services.
    (b) Religious organization means a nonprofit religious 
organization.
    (c) Program beneficiary means an individual who receives substance 
abuse services under a program funded in whole or in part by applicable 
programs.
    (d) Program participant means a public or private entity that has 
received financial assistance under an applicable program.
    (e) SAMHSA means the Substance Abuse and Mental Health Services 
Administration.
    (f) SAMHSA Charitable Choice provisions means the provisions of 42 
U.S.C. 300x-65 and 42 U.S.C. 290kk et seq.
    (g) Direct funding or Funds provided directly means funding that is 
provided to an organization directly by a governmental entity or 
intermediate organization that has the same duties as a governmental 
entity, as opposed to funding that an organization receives as the 
result of the genuine and independent private choice of a beneficiary 
through a voucher, certificate, coupon, or other similar mechanism.


Sec.  54a.3  Nondiscrimination against religious organizations.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in applicable programs as long as 
their services are provided consistent with the Establishment Clause 
and the Free Exercise Clause of the First Amendment to the United 
States Constitution. Except as provided herein or in the SAMHSA 
Charitable Choice provisions, nothing in these regulations shall 
restrict the ability of the Federal government, or a State or local 
government, from applying to religious organizations the same 
eligibility conditions in applicable programs as are applied to any 
other nonprofit private organization.
    (b) Neither the Federal government nor a State or local government 
receiving funds under these programs shall discriminate against an 
organization that is, or applies to be, a program participant on the 
basis of the

[[Page 77359]]

organization's religious character or affiliation.


Sec.  54a.4  Religious activities.

    No funds provided directly from SAMHSA or the relevant State or 
local government to organizations participating in applicable programs 
may be expended for inherently religious activities, such as worship, 
religious instruction, or proselytization. If an organization conducts 
such activities, it must offer them separately, in time or location, 
from the programs or services for which it receives funds directly from 
SAMHSA or the relevant State or local government under any applicable 
program, and participation must be voluntary for the program 
beneficiaries.


Sec.  54a.5  Religious character and independence.

    A religious organization that participates in an applicable program 
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. The organization may 
not expend funds that it receives directly from SAMHSA or the relevant 
State or local government to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, faith-based organizations may use space in their 
facilities to provide services supported by applicable programs, 
without removing religious art, icons, scriptures, or other symbols. In 
addition, a SAMHSA-funded religious organization retains the 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.


Sec.  54a.6  Employment practices.

    (a) The participation of a religious organization in or its receipt 
of funds from an applicable program does not affect that organization's 
exemption provided under 42 U.S.C. 2000e-1 regarding employment 
practices.
    (b) Nothing in this section shall be construed to modify or affect 
any State law or regulation that relates to discrimination in 
employment.


Sec.  54a.7  Nondiscrimination requirement.

    A religious organization that is a program participant shall not, 
in providing program services or engaging in outreach activities under 
applicable programs, 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 actively 
participate in a religious practice.


Sec.  54a.8  Right to services from an alternative provider.

    (a) General requirements. If an otherwise eligible program 
beneficiary or prospective program beneficiary objects to the religious 
character of a program participant, within a reasonable period of time 
after the date of such objection, such program beneficiary shall have 
rights to notice, referral, and alternative services, as outlined in 
subsections 54.8a(b)-(d) of this section. With respect to SAMHSA 
discretionary programs, for purposes of determining what is the 
appropriate Federal, State, or local government, the following 
principle shall apply: When SAMHSA provides funding directly to another 
unit of government, such as a State or local government, that unit of 
government is responsible for providing the alternative services. When 
SAMHSA provides discretionary grant funding directly to a 
nongovernmental organization, SAMHSA is the responsible unit of 
government.
    (a) Notice. Program participants that refer an individual to 
alternative providers, and the appropriate Federal, State, or local 
governments that administer the applicable programs, shall ensure that 
notice of the individual's rights to services from an alternative 
provider is provided to program beneficiaries or prospective 
beneficiaries. The notice must clearly articulate the program 
beneficiary's right to a referral and to services that reasonably meet 
the requirements of timeliness, capacity, accessibility, and 
equivalency as discussed in this section.
    (c) Referral to services from an alternative provider. If a program 
beneficiary or a prospective program beneficiary objects to the 
religious character of a program participant that is a religious 
organization, that participating religious organization shall, within a 
reasonable time after the date of such objection, refer such individual 
to an alternative provider.
    (1) When the State or local government is the responsible unit of 
government , the State shall have a system in place to ensure that such 
referrals are made. That system shall ensure that the following occurs:
    (i) The religious organization that is a program participant shall, 
within a reasonable time after the date of such objection, refer the 
beneficiary to an alternative provider.
    (ii) In making such referral, the program participant shall 
consider any list that the State or local government makes available to 
entities in the geographic area that provide program services, which 
may include utilizing any treatment locator system developed by SAMHSA;
    (iii) All referrals are to be made in a manner consistent with all 
applicable confidentiality laws, including, but not limited to, 42 CFR 
part 2 (``Confidentiality of Alcohol and Drug Abuse Patient Records'');
    (iv) Upon referring a program beneficiary to an alternative 
provider, the program participant shall notify the responsible unit of 
government of such referral;
    (2) When SAMHSA is the responsible unit of government, the referral 
process is as follows:
    (i) When a program beneficiary requests alternative services, the 
program participant will seek to make such a referral.
    (ii) If the religious organization cannot locate an appropriate 
provider of alternative services, the program participant will contact 
SAMHSA. They will work together to identify additional alternative 
providers, utilizing the SAMHSA Treatment Locator system, if 
appropriate.
    (iii) The program participant will contact these alternative 
providers and seek to make the referral, in a manner consistent with 
all applicable confidentiality laws, including, but not limited to, 42 
CFR part 2 (``Confidentiality of Alcohol and Drug Abuse Patient 
Records'')
    (iv) In the event the program participant is still unable to locate 
an alternative provider, it may again contact SAMHSA for assistance.
    (d) Referral Reporting Procedures. The program participant shall 
notify the appropriate Federal, state or local government agency that 
administers the program of such referral. If a State or local 
government is the responsible unit of government, they may determine 
their own reporting procedures. When SAMHSA is the responsible unit of 
government, this notification will occur during the course of the 
regular reports that may be required under the terms of the funding 
award.
    (e) Provision and Funding of Alternative Services. The responsible 
unit of government, as defined in subsection (a), shall provide to an 
otherwise eligible program beneficiary or prospective program 
beneficiary who objects to the religious character of a program 
participant, services and fund services from an alternative provider 
that is reasonably accessible to, and has

[[Page 77360]]

the capacity to provide such services to the individual. Such services 
shall have a value that is not less than the value of the services that 
the individual would have received from the program participant to 
which the individual had such objection. The alternative provider need 
not be a secular organization. It must simply be a provider to which 
the program beneficiary has no religious objection.


Sec.  54a.9  Oversight of the Charitable Choice requirements.

    In order to ensure that program funds are used in compliance with 
the SAMHSA Charitable Choice provisions, applicants for funds under 
applicable programs are required, as part of their applications for 
funding, to certify that they will comply with all of the requirements 
of the SAMHSA Charitable Choice provisions and the implementing 
regulations under this part.


Sec.  54a.10  Fiscal accountability.

    (a) Religious organizations that receive applicable program funds 
for substance abuse services are subject to the same regulations as 
other nongovernmental organizations to account, in accordance with 
generally accepted auditing and accounting principles, for the use of 
such funds.
    (b) Religious organizations shall segregate Federal funds they 
receive under applicable programs into a separate account from non-
Federal funds Only the Federal funds shall be subject to audit by the 
government under the SAMHSA program.


Sec.  54a.11  Effect on State and local funds.

    If a State or local government contributes its own funds to 
supplement activities carried out under the applicable programs, the 
State or local government has the option to separate out the Federal 
funds or commingle them. If the funds are commingled, the provisions of 
this part 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.


Sec.  54a.12  Treatment of intermediate organizations.

    If a nongovernmental organization (referred to here as an `` 
intermediate organization''), acting under a contract or other 
agreement with the Federal Government or a State or local government, 
is given the authority under the contract or agreement to select 
nongovernmental organizations to provide services under any applicable 
program, the intermediate organization shall have the same duties under 
this part as the government. The intermediate organization retains all 
other rights of a nongovernmental organization under this part and the 
SAMHSA Charitable Choice provisions.


Sec.  54a.13  Educational requirements for personnel in drug treatment 
programs.

    In determining whether personnel of a program participant that has 
a record of successful drug treatment for the preceding three years 
have satisfied State or local requirements for education and training, 
a State or local government shall not discriminate against education 
and training provided to such personnel by a religious organization, so 
long as such education and training is comparable to that provided by 
nonreligious organizations, or is comparable to education and training 
that the State or local government would otherwise credit for purposes 
of determining whether the relevant requirements have been satisfied.


Sec.  54a.14  Determination of nonprofit status.

    The nonprofit status of any SAMHSA applicant can be determined by 
any of the following:
    (a) Reference to the organization's listing in the Internal Revenue 
Service's (IRS) most recent list of tax-exempt organizations described 
in section 501(c)(3) of the IRS code.
    (b) A copy of a currently valid IRS Tax exemption certificate.
    (c) A statement from a State taxing body, State Attorney General, 
or other appropriate State official certifying that the applicant 
organization has a nonprofit status and that none of the net earnings 
accrue to any private shareholder or individuals.
    (d) A certified copy of the organization's certificate of 
incorporation or similar document if it clearly establishes the 
nonprofit status of the organization.
    (e) Any of the above proof for a State or national parent 
organization and a statement signed by the parent organization that the 
applicant organization is a local nonprofit affiliate.

45 CFR Subtitle A

PART 96--[AMENDED]

    3. In 45 CFR subtitle A, amend part 96 as follows:
    a. In Sec.  96.122, add paragraph (f)(5)(v) to read as follows:


Sec.  96.122  Application content and procedures

* * * * *
    (f) * * *
    (5) * * *
    (v) A description of the activities the State has undertaken to 
comply with 42 CFR part 54.
* * * * *
    b. In Sec.  96.123, add paragraph (a)(18) to read as follows:


Sec.  96.123  Assurances

    (a) * * *
    (18) The State will comply with the requirements of 42 CFR part 54.

[FR Doc. 02-31673 Filed 12-12-02; 4:32 pm]
BILLING CODE 4160-17-P