[Federal Register Volume 69, Number 44 (Friday, March 5, 2004)]
[Proposed Rules]
[Pages 10354-10357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5092]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 69, No. 44 / Friday, March 5, 2004 / Proposed 
Rules  

[[Page 10354]]



DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 16

RIN: 0503-AA27


Participation of Religious Organizations in USDA Programs

AGENCY: Office of the Secretary, USDA.

ACTION: Proposed rule.

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SUMMARY: The United States Department of Agriculture (USDA) is 
proposing to implement executive branch policy that, within the 
framework of constitutional church-state guidelines, religious (or 
``faith-based'') organizations should be able to compete on an equal 
footing with other organizations for USDA assistance. This proposed 
rule would augment USDA regulations to bring them into compliance with 
this policy and ensure that USDA assistance programs are implemented in 
a manner consistent with the requirements of the Constitution, 
including the religion clauses of the first amendment.

DATES: Comments on this notice must be received on or before May 4, 
2004.

ADDRESSES: Send comments to: Deputy Director, Faith-Based and Community 
Initiatives, U.S. Department of Agriculture, Office of the Secretary, 
Room 200A, Washington, DC 20250; electronic mail: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Courtenay McCormick, Deputy Director, 
Faith-Based and Community Initiatives, U.S. Department of Agriculture, 
Office of the Secretary, Room 200A, Washington, DC 20250; telephone: 
202-720-3631 (this is not a toll-free number); electronic mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Faith-based organizations are an important part of the social 
services network of the United States, offering a multitude of social 
services to those in need. In addition to places of worship, faith-
based organizations include small nonprofit organizations created to 
provide one program or multiple services, as well as neighborhood 
groups formed to respond to a crisis or to lead community renewal. 
Faith-based groups everywhere, either acting alone or as partners with 
other service providers and government programs, serve the poor, and 
help to strengthen families and rebuild communities.
    All too often, however, Federal, State, and local governments have 
not taken full advantage of the partnering possibilities with faith-
based organizations, often due to lack of clarity of the parameters for 
such partnerships. In addition, Federal, State, and local governments 
have sometimes imposed unwarranted legal or regulatory barriers to the 
participation of faith-based organizations in government-funded social 
service programs.
    President Bush has directed Federal agencies, including USDA, to 
take steps to ensure that Federal policy and programs are fully open to 
faith-based and community organizations in a manner that is consistent 
with the Constitution. Religious organizations, either acting alone or 
as partners with other service providers and government programs, 
revitalize communities, provide community service, and provide children 
and low-income people access to food, a healthful diet, and nutrition 
education. The Administration believes that there should be an equal 
opportunity for all organizations--both religious and nonreligious--to 
participate in Federal programs.
    As part of these efforts, President Bush issued Executive Orders 
13279 and 13280 on December 12, 2002. Executive Order 13279, published 
in the Federal Register on December 16, 2002 (67 FR 77141), provides 
equal protection of the laws for faith-based and community 
organizations in their relationship with Federal programs. That 
Executive Order charged the executive branch's agencies, including 
USDA, to give equal treatment to faith-based and community groups that 
apply for funds to meet social needs in America's communities. The 
President called for an end to discrimination against faith-based 
organizations and, consistent with the First Amendment to the 
Constitution, ordered implementation of these policies throughout the 
executive branch, including, among other things, allowing organizations 
to retain their religious autonomy over their internal governance and 
composition of boards, and over their display of religious art, icons, 
scriptures, or other religious symbols, when participating in 
government-funded programs. Executive Order 13280, published in the 
Federal Register on December 16, 2002 (67 FR 77145), created a Center 
for Faith-Based and Community Initiatives in USDA and charged USDA to 
identify and eliminate regulatory, contracting, and other programmatic 
barriers to the full participation of faith-based and community 
organizations in its programs.
    The Executive Orders also charged the Federal agencies, including 
USDA, to ensure that all policies incorporated the principles outlined 
in Executive Order 13279. This proposed rule is part of USDA efforts to 
fulfill its responsibilities under these Executive Orders. In addition, 
this proposed rule is designed to ensure that the implementation of 
USDA programs is conducted in a manner consistent with the requirements 
of the Constitution, including the Religion Clauses of the First 
Amendment.

II. This Proposed Rule

A. Purpose of Proposed Rule

    Consistent with the President's initiative, this proposed rule 
would revise USDA policy and remove unwarranted barriers to the equal 
participation of faith-based organizations in USDA grant and 
cooperative agreement programs (``assistance programs''). The objective 
of this proposed rule is to ensure that USDA assistance programs are 
open to all qualified organizations, regardless of their religious 
character, and to establish clearly the proper uses to which USDA 
assistance may be put, and the conditions for receipt of USDA 
assistance.
    USDA supports the participation of faith-based organizations in its 
programs. This proposed rule will clarify, within the framework of 
constitutional guidelines, that faith-based organizations are able to 
access and compete on an equal footing with

[[Page 10355]]

other eligible organizations in USDA assistance programs. For purposes 
of defining this universe, this rule will apply to all recipients and 
subrecipients of USDA assistance covered by 7 CFR parts 3015, 3016, or 
3019, the USDA uniform administrative rules for recipients of USDA 
assistance.

B. Proposed Rule

1. Participation by Faith-Based Organizations in USDA Assistance 
Programs
    The proposed rule clarifies that organizations are eligible to 
participate in USDA assistance programs without regard to their 
religious character or affiliation, and that organizations may not be 
excluded from participation in USDA assistance programs simply because 
they are religious. Specifically, religious organizations are eligible 
to compete for USDA assistance and to access USDA assistance programs 
on the same basis, and under the same eligibility requirements, as all 
other nonprofit organizations. In selecting service providers, the 
Federal government and State and local governments administering 
support under USDA assistance programs are prohibited from 
discriminating for or against organizations on the basis of religion or 
their religious character. However, nothing in the rule precludes those 
administering USDA-supported assistance programs from accommodating 
religious organizations in a manner consistent with the Establishment 
Clause.
    Major international food assistance and development programs of the 
United States are, by statute, carried out by the United States Agency 
for International Development (USAID) using the funds and authorities 
of the Commodity Credit Corporation. This rule encompasses activities 
of the Corporation that are carried out by the Secretary of Agriculture 
but does not include those activities of the Corporation carried out by 
USAID.
2. Inherently Religious Activities
    The proposed rule states that a participating organization may not 
use USDA direct assistance \1\ 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 or supported with USDA direct assistance, and participation must 
be voluntary for the beneficiaries of the program or services funded or 
supported by USDA. This requirement ensures that USDA direct assistance 
provided to a participating organization may not be used, for example, 
to conduct prayer meetings, worship services, or any other activity 
that is inherently religious.
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    \1\ As used in this proposed rule, the terms ``direct USDA 
assistance'' refers to direct funding within the meaning of the 
Establishment Clause of the First Amendment. For example, direct 
USDA funding may mean that the government or an intermediate 
organization with similar duties as a governmental entity under a 
particular USDA program selects an organization and purchases the 
needed services straight from the organization. In contrast, 
indirect funding scenarios may place the choice of service provider 
in the hands of a beneficiary, and then pay for the cost of that 
service through a voucher, certificate, or other similar means of 
payment.
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    This restriction does not mean that an organization that receives 
USDA direct assistance cannot engage in inherently religious 
activities. It simply means such an organization cannot support these 
activities with USDA direct assistance. Thus, faith-based organizations 
that receive USDA direct assistance must take steps to separate, in 
time or location, their inherently religious activities from the USDA-
supported services that they offer.
    These restrictions on inherently religious activities do not apply 
to funds or benefits received from USDA indirectly, such as where USDA 
funding or benefits are provided to religious organizations as a result 
of a genuine and independent private choice of a beneficiary (and 
provided the participating religious organizations otherwise satisfy 
the requirements of the program). A religious organization may receive 
such funds as the result of a beneficiary's genuine and independent 
choice if, for example, a beneficiary redeems a voucher, coupon, 
certificate, or similar funding mechanism that was provided to that 
individual using USDA funds or benefits when there is a choice among 
providers. Such funds or benefits are not ``direct'' funds within the 
meaning of the Establishment Clause or ``USDA direct assistance'' 
within the meaning of this rule.
3. Independence of Faith-Based Organizations
    The proposed rule clarifies that a religious organization that 
participates in USDA programs and activities will retain its 
independence and may continue to carry out its mission, including the 
definition, practice, and expressions of its religious beliefs, 
provided that it does not use USDA direct assistance 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 USDA-
supported services, without removing religious art, icons, scriptures, 
or other religious symbols. In addition, a faith-based organization 
receiving USDA assistance may retain religious terms in its 
organization's name, select its board members and otherwise govern 
itself on a religious basis, and include religious references in its 
organization's mission statements and other governing documents. The 
proposed rule would also clarify that a faith-based organization's 
exemption from the federal prohibition on employment discrimination on 
the basis of religion, set forth in section 702 of the Civil Rights Act 
of 1964 (42 U.S.C. 2000e-1)--which allows religious organizations to 
employ individuals of a particular religion without violating Title VII 
of that Act--is not forfeited when the organization participates in a 
USDA assistance program. This provision helps enable faith-based groups 
to promote common values, a sense of community and unity of purpose, 
and shared experience through service--all of which can contribute to a 
faith-based organization's effectiveness. It thus helps protect the 
religious liberties of communities of faith. In keeping with the 
guarantees of institutional autonomy, the proposed regulation reflects 
Congress's 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.
4. Nondiscrimination in Providing Assistance
    The proposed rule clarifies that an organization that receives 
direct assistance from USDA shall not, in providing program assistance, 
discriminate against a program beneficiary or prospective program 
beneficiary on the basis of religion or religious belief. Accordingly, 
religious organizations, in providing services supported in whole or in 
part by USDA direct assistance, may not discriminate against current or 
prospective program beneficiaries on the basis of religion or a 
religious belief. The purpose of this rulemaking is to eliminate undue 
administrative barriers that USDA may have imposed to the participation 
of faith-based organizations in USDA assistance programs; it is not to 
alter existing statutory requirements, which will continue to apply to 
USDA assistance programs to the same extent that they applied prior to 
adoption of this proposed rule in final form.
    USDA domestic nutrition programs, including but not limited to 
those

[[Page 10356]]

established under the Richard B. Russell National School Lunch Act, 42 
U.S.C. 1751 et seq., and the Child Nutrition Act of 1966, 42 U.S.C. 
1771 et seq., have long benefited from the strong participation of 
faith-based and community-based schools and similar organizations 
delivering healthful foods and nutritious meals to our school children. 
The Federal funds and commodities used in the delivery of the domestic 
nutrition programs rely on participating organizations to ensure the 
benefits reach individuals as the ultimate program beneficiaries.
    Supreme Court jurisprudence has long noted that the provision of 
school lunch assistance to parochial schools is permissible under the 
Establishment Clause. See, e.g., Lemon v. Kurtzman, 403 U.S. 602, 616 
(1971). In order to avoid any interpretation of section 16.3(a) that 
would infringe on admissions policies of religious schools, programs 
under the National School Lunch Act, the Child Nutrition Act, and 
international school feeding programs under various authorities 
available to the Commodity Credit Corporation and USDA are exempt from 
the provisions of that paragraph.
5. Structures Used for Religious Activities
    The proposed rule would also clarify that USDA direct assistance 
funds may not be used for acquisition, construction, or rehabilitation 
of structures to the extent that those structures are used for 
inherently religious activities. USDA direct assistance funds may be 
used for the acquisition, construction, or rehabilitation of structures 
only to the extent that those structures are used for conducting 
eligible activities under specific USDA programs. Where a structure is 
used for both eligible and inherently religious activities, the 
proposed rule clarifies that USDA direct assistance funds may not 
exceed the cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities. 
Sanctuaries, chapels and other rooms that a USDA-funded religious 
organization uses as its principal place of worship, however, are 
ineligible for USDA-funded improvements. Of course, USDA direct 
assistance funds may be used for acquisition, construction, or 
rehabilitation of structures only to the extent authorized by the 
applicable program statutes and regulations. Disposition of real 
property after the term of the grant or cooperative agreement, or any 
change in use of the property during the term of the grant or 
cooperative agreement, is subject to government-wide regulations 
governing real property disposition (see 7 CFR parts 3015, 3016, and 
3019).
    In addition to the restrictions on structures, faith-based 
organizations, like all other organizations receiving USDA assistance, 
are subject to restrictions on the use of such funds for equipment, 
supplies, labor, indirect costs and similar costs of regular 
maintenance and oversight. USDA assistance may be used only for that 
portion of these costs that support program activities. For example, if 
an employee of a faith-based organization is responsible for operating 
a USDA-funded program and for operating an inherently religious 
activity, that employee's salary and benefits must be pro-rated based 
on the amount of their time spent on each activity. The proposed rule 
clarifies that any laws, regulations, and guidance on the allowable 
program costs apply to faith-based organizations the same as any other 
organization.

III. Findings and Certifications

Executive Order 12866--Regulatory Planning and Review

    The proposed rule is issued in conformance with Executive Order 
12866 on Regulatory Planning and Review. The Office of Management and 
Budget (OMB) has determined that this is a significant regulatory 
action as defined by Executive Order 12866. Accordingly, OMB has 
reviewed this proposed rule.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. This proposed rule does not impose 
any Federal mandates on any state, local, or tribal governments or the 
private sector within the meaning or Unfunded Mandates Reform Act of 
1995.

Executive Order 13132, Federalism

    Executive Order 13132, Federalism, requires that Federal agencies 
consult with state and local governments and their 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.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. The proposed rule 
would not impose any new costs, or modify existing costs, applicable to 
USDA assistance recipients. Rather, the purpose of the proposed rule is 
to remove policy prohibitions that currently restrict equal 
participation of faith-based organizations in USDA assistance programs. 
Notwithstanding the Department's determination that this rule will not 
have a significant economic effect on a substantial number of small 
entities, the Department specifically invites comments regarding any 
less burdensome alternatives to this rule that will meet the 
Department's objectives as described in this preamble.

Government Paperwork Elimination Act

    USDA is committed to compliance with the Government Paperwork 
Elimination Act (Pub. L. 105-277), which requires government agencies 
to provide the public the option of submitting information or 
transacting business electronically to the maximum extent possible.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency from the public 
before they can be implemented. There is no additional information 
collection burden imposed by this Proposed Rule.

List of Subjects in 7 CFR Part 16

    Administrative practice and procedure, Agriculture, Grant programs, 
Reporting and recording-keeping requirements.

    For the reasons stated in the preamble, USDA proposes to add part 
16 of Title 7 of the Code of Federal Regulations as follows:

PART 16--PARTICIPATION OF RELIGIOUS ORGANIZATIONS IN USDA PROGRAMS

16.1 Purpose and applicability.
16.2 Rights of religious organizations.
16.3 Responsibilities of religious organizations.
16.4 Effect on State and local funds.
16.5 Compliance.

    Authority: 5 U.S.C. 301; E.O. 13279, 67 FR 77141, 3 CFR, 2002 
Comp., p.258; E.O. 13280, 67 FR 77145, 3 CFR, 2002 Comp., p. 262.


[[Page 10357]]




Sec.  16.1  Purpose and applicability.

    (a) The purpose of this part is to set forth USDA policy regarding 
equal participation of religious organizations in USDA assistance 
programs for which non-profit organizations are eligible.
    (b) Except as otherwise specifically provided in this part, the 
policy outlined in this part applies to all recipients and 
subrecipients of USDA assistance to which 7 CFR parts 3015, 3016, or 
3019 apply, and recipients and subrecipients of Commodity Credit 
Corporation assistance that is administered by agencies of USDA.


Sec.  16.2  Rights of religious organizations.

    (a) A religious organization is eligible, on the same basis as any 
other eligible non-profit organization, to access and participate in 
USDA assistance programs. Neither the Federal government nor a State or 
local government receiving USDA assistance shall, in the selection of 
service providers, discriminate for or against a religious organization 
on the basis of the organization's religious character or affiliation.
    (b) A religious organization that participates in USDA programs 
will retain its independence and may continue to carry out its mission, 
including the definition, practice, and expression of its religious 
beliefs, provided that it does not use USDA direct assistance to 
support any inherently religious activities, such as worship, religious 
instruction, or proselytization. Among other things, a religious 
organization may:
    (1) Use space in its facilities to provide services and programs 
without removing religious art, icons, scriptures, or other religious 
symbols,
    (2) Retain religious terms in its organization's name,
    (3) Select its board members and otherwise govern itself on a 
religious basis, and
    (4) Include religious references in its organizations' mission 
statements and other governing documents.
    (c) In addition, a religious organization's exemption from the 
Federal prohibition on employment discrimination on the basis of 
religion, set forth in section 702(a) of the Civil Rights Act of 1964, 
42 U.S.C. 2000e-1, is not forfeited when an organization receives USDA 
assistance.


Sec.  16.3  Responsibilities of religious organizations.

    (a) An organization that participates in programs and activities 
supported by USDA direct assistance programs shall not discriminate 
against a program beneficiary or prospective program beneficiary on the 
basis of religion or religious belief.
    (b) Nothing in paragraph (a) shall be construed to prevent 
religious organizations that receive USDA assistance under the Richard 
B. Russell National School Lunch Act, 42 U.S.C. 1751 et seq., the Child 
Nutrition Act of 1966, 42 U.S.C.1771 et seq., or USDA international 
school feeding programs from considering religion in their admissions 
practices.
    (c) Organizations that receive direct assistance funds from USDA 
under any USDA program may not engage in inherently religious 
activities, such as worship, religious instruction, or proselytization, 
as part of the programs or services supported with direct assistance 
from USDA. If an organization conducts such activities, the activities 
must be offered separately, in time or location, from the programs or 
services supported with direct assistance from USDA, and participation 
must be voluntary for beneficiaries of the programs or services 
supported with such direct assistance. These restrictions on inherently 
religious activities do not apply where USDA funds or benefits are 
provided to religious organizations as a result of a genuine and 
independent private choice of a beneficiary or through other indirect 
funding mechanisms, provided the religious organizations otherwise 
satisfy the requirements of the program.
    (d)(1) USDA direct assistance funds may not be used for the 
acquisition, construction, or rehabilitation of structures to the 
extent that those structures are used by the USDA funding recipients 
for inherently religious activities. USDA direct assistance funds may 
be used for the acquisition, construction, or rehabilitation of 
structures only to the extent that those structures are used for 
conducting activities and only to the extent authorized by the 
applicable program statutes and regulations. Where a structure is used 
for both eligible and inherently religious activities, USDA direct 
assistance funds may not exceed the cost of those portions of the 
acquisition, construction, or rehabilitation that are attributable to 
eligible activities in accordance with the cost accounting requirements 
applicable to USDA funds. Sanctuaries, chapels, or other rooms that an 
organization receiving direct assistance funds from USDA uses as its 
principal place of worship, however, are ineligible for USDA-funded 
improvements. Disposition of real property after the term of the grant 
or any change in use of the property during the term of the grant is 
subject to government-wide regulations governing real property 
disposition (see 7 CFR parts 3016 and 3019).
    (2) Any use of USDA assistance funds for equipment, supplies, 
labor, indirect costs and the like shall be prorated between the USDA 
program or activity and any use for other purposes by the religious 
organization in accordance with applicable laws, regulations, and 
guidance.
    (3) Nothing in this section shall be construed to prevent the 
residents of housing receiving USDA assistance funds from engaging in 
religious exercise within such housing.


Sec.  16.4  Effect on State and local funds.

    If a State or local government voluntarily contributes its own 
funds to supplement activities carried out under programs governed by 
this part, the State or local government has the option to separate out 
the USDA assistance 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 USDA assistance funds.


Sec.  16.5  Compliance.

    USDA agencies will monitor compliance with this part in the course 
of regular oversight of USDA programs.

Ann M. Veneman,
Secretary of Agriculture.
[FR Doc. 04-5092 Filed 3-4-04; 8:45 am]
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