[Federal Register Volume 69, Number 46 (Tuesday, March 9, 2004)]
[Proposed Rules]
[Pages 10951-10956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5110]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 74, 92, 96, and 87


Participation in Department of Health and Human Services Programs 
by Religious Organizations; Providing for Equal Treatment of all 
Department of Health and Human Services Program Participants

AGENCY: Office of the Secretary, Department of Health and Human 
Services.

ACTION: Proposed rule; request for comments.

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SUMMARY: This proposed rule is intended to implement executive branch 
policy that, within the framework of constitutional church-state 
guidelines, religiously affiliated (or ``faith-based'') organizations 
should be able to compete on an equal footing with other organizations 
for the Department's funding without impairing the religious character 
of such organizations. It proposes to revise Department regulations at 
45 CFR Parts 74, 92, and 96 to remove barriers to the participation of 
faith-based organizations in Department programs and to ensure that 
these programs are implemented in a manner consistent with applicable 
statutes and the requirements of the Constitution, including the 
Establishment, Free Exercise, and Free Speech Clauses of the First 
Amendment.

DATES: Comments must be submitted by May 10, 2004.

ADDRESSES: You may submit comments by any of the following methods. All 
submissions must include the agency name and Regulation Identifier 
Number (RIN) for this rulemaking:
     Mail: HHS/OS Executive Secretariat, Room 603-H, 
200 Independence Avenue, SW., Washington, DC 20201.
     Hand delivery/courier: HHS/OS Executive 
Secretariat, Room 603-H, 200 Independence Avenue, SW., Washington, DC 
20201. Delivery must be made between 10 a.m. and 5 p.m., Monday through 
Friday, except Federal holidays.
     Federal Rulemaking Portal: At Regulations.gov 
located at http://www.regulations.gov/index.cfm.
    Instructions: At Regulations.gov you may find, review, and submit 
comments on this and other proposed regulations open for comment and 
published in the Federal Register. Once you have performed a search and 
located the open proposed regulation, you may submit comments by 
clicking the ``Submit a Comment on this Regulation'' link. The link 
will open a blank comment form in a separate Internet browser window 
for you to fill out. The form is limited to 4,000 characters or roughly 
two pages of comments. You may send more than one comment form. In most 
cases, you may also attach an electronic file as a part of your 
comment. The comment form that appears when you click the ``Submit a 
Comment on this Regulation'' link is specific to the particular 
Department or Agency that will receive

[[Page 10952]]

the comment. The comment form includes instructions on how to submit 
the comment and what information must be provided for the comment to be 
considered. Comments must include the full name, postal address, and 
organizational or agency affiliation (if applicable) of the sender. The 
completed comment form will include a unique document identification 
number and a date and time stamp applied automatically by the 
Regulations.gov Web site. Comments submitted via the Regulations.gov 
are transmitted from the Regulations.gov Web site to the Department and 
assigned the Docket Identification Number for the action you are 
commenting on. All public comments received are then reviewed by the 
Department and taken into account when the final regulation is 
developed.

FOR FURTHER INFORMATION CONTACT: For information, contact Bobby J. 
Polito, Director, Center for Faith-Based and Community Initiatives, 
Department of Health and Human Services, Room 120F, 200 Independence 
Avenue, SW., Washington, DC 20201; telephone: (202) 358-3595 (this is 
not a toll-free number). Hearing or speech-impaired individuals may 
access this telephone number via TTY by calling the toll-free Federal 
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    This proposed rule is part of the Department's effort to fulfill 
its responsibilities under two Executive Orders issued by President 
Bush. The first of these Orders, Executive Order 13198 of January 29, 
2001, published in the Federal Register on January 31, 2001 (66 FR 
8497), created Centers for Faith-Based and Community Initiatives in 
five cabinet departments--Housing and Urban Development, Health and 
Human Services, Education, Labor, and Justice--and directed these 
Centers to identify and eliminate regulatory, contracting, and other 
programmatic obstacles to the equal participation of faith-based and 
community organizations in the provision of social services by their 
Departments. The second of these Executive Orders, Executive Order 
13279 of December 12, 2002, published in the Federal Register on 
December 16, 2002 (67 FR 77141), charged executive branch agencies to 
give equal treatment to faith-based and community groups that apply for 
funds to meet social needs in America's communities. President Bush 
thereby called for an end to discrimination against faith-based 
organizations and ordered implementation of these policies throughout 
the executive branch in a manner consistent with the First Amendment to 
the United States Constitution. He further directed that faith-based 
organizations be allowed 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. The Administration 
believes that there should be an equal opportunity for all 
organizations--both religious and nonreligious--to participate as 
partners in Federal programs.

II. This Proposed Rule

    This rule proposes to amend the Department's uniform administrative 
requirements at 45 CFR Parts 74, 92, and 96 and is applicable only to 
those grants, agreements, and other financial assistance covered by 
such requirements.
    The objective of the proposed rule is to ensure that the 
Department's discretionary grants, formula and block grants, and other 
financial assistance are open to all qualified organizations, 
regardless of their religious character or affiliation, and to 
establish clearly the proper uses to which funds could be put and the 
conditions for receipt of funding. In addition, this proposed rule is 
designed to ensure that the implementation of the Department's programs 
is conducted in a manner consistent with the requirements of Federal 
law and the Constitution, including the Establishment, Free Exercise, 
and Free Speech Clauses of the First Amendment. The proposed rule has 
the following specific objectives:
    1. Participation by faith-based organizations in Department of 
Health and Human Services programs. The proposed rule provides that 
organizations are eligible to participate in Department programs 
without regard to their religious character or affiliation, and that 
organizations not be excluded from the competition for Department funds 
simply because they are religious. Specifically, religious 
organizations are eligible to compete for funding on the same basis, 
and under the same eligibility requirements, as other organizations. 
The Department, as well as state and local governments administering 
funds under Department programs or intermediate organizations with the 
same duties as a governmental entity under this part, are prohibited 
from discriminating for or against organizations on the basis of 
religious character or affiliation in the selection of service 
providers. Nothing in the rule, however, would preclude those 
administering Department-funded programs from accommodating religious 
organizations in a manner consistent with the Establishment Clause.
    2. Inherently religious activities. The proposed rule describes the 
requirements that would be applicable to all recipient organizations 
regarding the use of Department funds for inherently religious 
activities. Specifically, a participating organization may not use 
direct financial assistance from the Department to support inherently 
religious activities, such as worship, religious instruction, or 
proselytization. If the organization engages in such activities, it 
would be required to offer them separately, in time or location, from 
the programs or services funded with direct Department assistance, and 
participation must be voluntary, and understood to be voluntary, for 
the beneficiaries of the Department-funded programs or services. This 
requirement ensures that direct financial assistance from the 
Department to religious organizations is not used to support inherently 
religious activities. Such assistance may not be used, for example, to 
conduct worship services, prayer meetings, or any other activity that 
is inherently religious.
    The proposed rule clarifies that this restriction does not mean 
that an organization that receives Department funds may not engage in 
inherently religious activities, but only that such an organization may 
not fund these activities with direct financial assistance from the 
Department. It further provides that the restrictions on inherently 
religious activities do not apply where Department funds are provided 
to religious organizations as a result of a genuine and independent 
private choice of a beneficiary (e.g., under a program that gives a 
beneficiary a Department-funded voucher, coupon, certificate, or 
another funding mechanism designed to give that beneficiary a choice 
among providers) or through other indirect funding mechanisms, provided 
the religious organizations otherwise satisfy the requirements of the 
program.
    In this proposed rule, the term ``direct financial assistance'' 
means that the government or an intermediate organization with the same 
duties as a governmental entity under this part selects the provider 
and purchases the needed services straight from the provider (e.g., via 
a contract or cooperative agreement). In contrast, indirect funding 
scenarios typically place the choice of service provider in the hands 
of the beneficiary, and then

[[Page 10953]]

pay for the cost of that service through a voucher, certificate, or 
other similar means of payment.
    3. Independence of faith-based organizations. The proposed rule 
also clarifies that a religious organization that participates in 
Department programs retains 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 direct financial 
assistance from the Department to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, a faith-based organization could use space in its 
facilities to provide Department-funded services without removing 
religious art, icons, scriptures, or other religious symbols. In 
addition, a Department-funded religious organization 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.
    4. Employment practices. The proposed rule also clarifies that 
religious organizations do not forfeit their exemption from the Federal 
prohibition of employment discrimination on the basis of religion set 
forth in section 702 (a) of the Civil Rights Act of 1964. Some 
Department programs, however, have independent statutory 
nondiscrimination requirements related to employment discrimination. 
Therefore, organizations should consult with the appropriate grant 
program office.
    5. Nondiscrimination in providing assistance. The proposed rule 
provides that an organization that receives direct financial assistance 
from the Department may not, in providing program assistance supported 
by such funding, discriminate against a program beneficiary or 
prospective program beneficiary on the basis of religion or religious 
belief.
    6. Assurance requirements. All organizations that participate in 
Department programs, including organizations with religious character 
or affiliations are required to carry out eligible activities in 
accordance with all program requirements and other applicable 
requirements governing the conduct of Department-funded activities, 
including those prohibiting the use of direct financial assistance from 
the Department to engage in inherently religious activities. The 
Department will not require only religious organizations to provide 
assurances that they will not use monies or property for inherently 
religious activities. Any restrictions on the use of financial 
assistance shall apply equally to religious and non-religious 
organizations. Thus, the Department intends to create a ``level playing 
field.''

III. Findings and Certifications

Executive Order 12866

    Executive Order 12866 (as amended by Executive Order 13258) directs 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any one year). Executive Order 12866 requires that regulations be 
reviewed to ensure that they are consistent with the priorities and 
principles set forth in the Executive Order. The Department has 
determined that this rule is consistent with these priorities and 
principles. This rule is considered a ``significant regulatory action'' 
under section 3 (f) of the Executive Order, and therefore has been 
reviewed by the Office of Management and Budget.

Regulatory Flexibility Analysis

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), must review and approve this proposed rule and certify 
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 
Department grantees. Rather, the purpose of the proposed rule is to 
remove policy prohibitions that currently restrict the equal 
participation of religious or religiously affiliated organizations in 
the Department=s 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.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act requires that 
agencies assess anticipated costs and benefits before issuing any rule 
that may result in expenditure in any one year by state, local, or 
tribal governments, in the aggregate, or by the private sector, of $110 
million or more. This proposed rule would not mandate any requirements 
for state, local, or tribal governments, nor would it result in 
expenditures by the private sector of $110 million or more in any one 
year.

Executive Order 13132--Federalism

    Executive Order 13132 prohibits an agency from publishing any rule 
that has federalism implications if the rule either imposes substantial 
direct compliance costs on state and local governments and is not 
required by statute, or the rule preempts state law, unless the agency 
meets the consultation and funding requirements of section 6 of the 
Executive Order. Consistent with Executive Order 13132, the Department 
specifically solicits comments from state and local government 
officials on this proposed rule.

List of Subjects

45 CFR Part 74

    Administrative Practice and Procedures, Grants.

45 CFR Part 92

    Administrative Practice and Procedures, Grants.

45 CFR Part 96

    Administrative Practice and Procedures, Block Grants.

45 CFR Part 87

    Administrative Practice and Procedures, Grant Programs-social 
programs, public assistance programs, nonprofit organizations.

    For the reasons stated in the preamble, the Department proposes to 
amend chapter I of Title 45 of the Code of Federal Regulations as 
follows:

PART 74--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR AWARDS AND 
SUBAWARDS TO INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, OTHER 
NONPROFIT ORGANIZATIONS, AND COMMERCIAL ORGANIZATIONS; AND CERTAIN 
GRANTS AND AGREEMENTS WITH STATES, LOCAL GOVERNMENTS AND INDIAN 
TRIBAL GOVERNMENTS

    1. The authority citation for part 74 continues to read as follows:

    Authority: 5 U.S.C. 301

    2. In subpart B add Sec.  74.18 to read as follows:

[[Page 10954]]

Sec.  74.18  Participation by faith-based organizations.

    The funds provided under this part shall be administered in 
compliance with the standards set forth in part 87 (Equal Treatment for 
Faith-based Organizations) of this chapter.
    3. In Sec.  74.17, add paragraph (a) and add and reserve (b) to 
read as follows:


Sec.  74.17  Certifications and representations.

* * * * *
    (a) The funds provided under this part shall be administered in 
compliance with the standards set forth in part 87 (Equal Treatment for 
Faith-based Organizations) of this chapter.
    (b) [Reserved]

PART 92--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS

    4. The authority for part 92 continues to read as follows:

    Authority: 5 U.S.C. 301.
    5. In subpart B add Sec.  92.13 and 92.14 to read as follows:


Sec.  92.13  Participation by faith-based organizations.

    The funds provided under this part shall be administered in 
compliance with the standards set forth in part 87 (Equal Treatment for 
Faith-based Organizations) of this chapter.


Sec.  92.14  Compliance With Part 87

    The funds provided under this part shall be administered in 
compliance with the standards set forth in part 87 (Equal Treatment for 
Faith-based Organizations) of this chapter.

PART 96--BLOCK GRANTS

    6. The authority citation for part 96 is revised to read as 
follows:

    Authority: 31 U.S.C. 1243 note, 7501-7507; 42 U.S.C. 300w et 
seq.; 300x et seq., 300y et seq., 701 et seq., 8621 et seq., 9901 et 
seq., 1397 et seq.; 5 U.S.C. 301/

    7. In subpart B add Sec.  96.18 to read as follows:


Sec.  96.18  Participation by faith-based organizations.

    The funds provided under this part shall be administered in 
compliance with the standards set forth in part 87 (Equal Treatment for 
Faith-based Organizations) of this chapter.
    8. Add Part 87 to read as follows:

PART 87--EQUAL TREATMENT FOR FAITH-BASED ORGANIZATIONS

Sec.
87.1 Discretionary grants
87.2 Formula and block grants

    Authority: 5 U.S.C. 301.


Sec.  87.1  Discretionary grants.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in any Department program for which 
they are otherwise eligible. Neither the Department nor any state or 
local government and other intermediate organizations receiving funds 
under any Department program shall, in the selection of service 
providers, discriminate for or against an organization on the basis of 
the organization's religious character or affiliation. As used in this 
section, ``program'' refers to activities supported by discretionary 
grants under which recipients are selected through a competitive 
process. As used in this section, the term ``recipient'' means an 
organization receiving financial assistance from an HHS awarding agency 
to carry out a project or program and includes the term `grantee' as 
used in 45 CFR Parts 74, 92, and 96.
    (b) Organizations that receive direct financial assistance from the 
Department under any Department program may not engage in inherently 
religious activities, such as worship, religious instruction, or 
proselytization, as part of the programs or services funded with direct 
financial assistance from the Department. If an organization conducts 
such activities, the activities must be offered separately, in time or 
location, from the programs or services funded with direct financial 
assistance from the Department, and participation must be voluntary for 
beneficiaries of the programs or services funded with such assistance.
    (c) A religious organization that participates in the Department-
funded programs or services will retain its independence from federal, 
state, and local governments, and may continue to carry out its 
mission, including the definition, practice, and expression of its 
religious beliefs, provided that it does not use direct financial 
assistance from the Department to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, a faith-based organization may use space in its 
facilities to provide programs or services funded with financial 
assistance from the Department without removing religious art, icons, 
scriptures, or other religious symbols. In addition, a religious 
organization that receives financial assistance from the Department 
retains its authority over its internal governance, and it may retain 
religious terms in its organization's name, select its board members on 
a religious basis, and include religious references in its 
organization's mission statements and other governing documents in 
accordance with all program requirements and other applicable 
requirements governing the conduct of Department-funded activities.
    (d) An organization that participates in programs funded by direct 
financial assistance from the Department shall not, in providing 
services, discriminate against a program beneficiary or prospective 
program beneficiary on the basis of religion or religious belief.
    (e) No grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation that is used by the Department or 
a state or local government in administering financial assistance from 
the Department shall require only religious organizations to provide 
assurances that they will not use monies or property for inherently 
religious activities. Any restrictions on the use of grant funds shall 
apply equally to religious and non-religious organizations. All 
organizations that participate in Department programs, including 
organizations with religious character or affiliations, must carry out 
eligible activities in accordance with all program requirements and 
other applicable requirements governing the conduct of Department-
funded activities, including those prohibiting the use of direct 
financial assistance from the Department to engage in inherently 
religious activities. No grant document, agreement, covenant, 
memorandum of understanding, policy, or regulation that is used by the 
Department or a state or local government in administering financial 
assistance from the Department shall disqualify religious organizations 
from participating in the Department's programs because such 
organizations are motivated or influenced by religious faith to provide 
social services, or because of their religious character or 
affiliation.
    (f) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, set 
forth in section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 
2000e-1, is not forfeited when the organization receives direct or 
indirect financial assistance from the Department. Some Department 
programs, however, contain independent statutory provisions requiring 
that all recipients agree not to discriminate in employment on the 
basis of religion. Accordingly, recipients should consult with the 
appropriate Department program office if they have

[[Page 10955]]

questions about the scope of any applicable requirement.
    (g) In general, the Department does not require that a recipient, 
including a religious organization, obtain tax-exempt status under 
section 501(c)(3) of the Internal Revenue Code to be eligible for 
funding under Department programs. Many grant programs, however, do 
require an organization to be a ``nonprofit organization'' in order to 
be eligible for funding. Funding announcements and other grant 
application solicitations that require organizations to have nonprofit 
status will specifically so indicate in the eligibility section of the 
solicitation. In addition, any solicitation that requires an 
organization to maintain tax-exempt status will expressly state the 
statutory authority for requiring such status. Recipients should 
consult with the appropriate Department program office to determine the 
scope of any applicable requirements. In Department programs in which 
an applicant must show that it is a nonprofit organization, the 
applicant may do so by any of the following means:
    (1) Proof that the Internal Revenue Service currently recognizes 
the applicant as an organization to which contributions are tax 
deductible under section 501(c)(3) of the Internal Revenue Code;
    (2) A statement from a state or other governmental taxing body or 
the state secretary of state certifying that:
    (i) The organization is a nonprofit organization operating within 
the state; and
    (ii) No part of its net earnings may benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of 
incorporation or similar document that clearly establishes the 
nonprofit status of the applicant; or
    (4) Any item described in paragraphs (g)(1) through (3) of this 
section if that item applies to a state or national parent 
organization, together with a statement by the state or parent 
organization that the applicant is a local nonprofit affiliate.
    (h) If a state or local government contributes its own funds, 
including but not limited to matching 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 
section shall apply to all of the commingled funds in the same manner, 
and to the same extent, as the provisions apply to the Federal funds.
    (i) To the extent otherwise permitted by Federal law, the 
restrictions on inherently religious activities set forth in this 
section do not apply where Department funds 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. 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, or certificate, allowing the 
beneficiary to direct where funds are to be paid, or through a similar 
funding mechanism provided to that beneficiary and designed to give 
that beneficiary a genuine and independent choice among providers.


Sec.  87.2  Formula and block grants.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in any Department program for which 
they are otherwise eligible. Neither the Department nor any state or 
local government receiving funds under any Department program nor any 
intermediate organization with the same duties as a governmental entity 
under this part shall, in the selection of service providers, 
discriminate for or against an organization on the basis of the 
organization's religious character or affiliation. As used in this 
section, ``program'' refers to activities supported by formula or block 
grants. As used in this section, the term ``recipient'' means an 
organization receiving financial assistance from an HHS awarding agency 
to carry out a project or program and includes the term 'grantee' as 
used in 45 CFR Parts 74, 92, and 96.
    (b) Organizations that receive direct financial assistance from the 
Department may not engage in inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
programs or services funded with direct financial assistance from the 
Department. If an organization conducts such activities, the activities 
must be offered separately, in time or location, from the programs or 
services funded with direct financial assistance from the Department, 
and participation must be voluntary for beneficiaries of the programs 
or services funded with such assistance.
    (c) A religious organization that participates in the Department-
funded programs or services will retain its independence from federal, 
state, and local governments, and may continue to carry out its 
mission, including the definition, practice, and expression of its 
religious beliefs, provided that it does not use direct financial 
assistance from the Department to support any inherently religious 
activities, such as worship, religious instruction, or proselytization. 
Among other things, a faith-based organization that receives financial 
assistance from the Department may use space in its facilities, without 
removing religious art, icons, scriptures, or other religious symbols. 
In addition, a religious organization that receives financial 
assistance from the Department retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's mission statements and other 
governing documents in accordance with all program requirements and 
other applicable requirements governing the conduct of Department-
funded activities.
    (d) An organization that participates in programs funded by direct 
financial assistance from the Department shall not, in providing 
services, discriminate against a program beneficiary or prospective 
program beneficiary on the basis of religion or religious belief.
    (e) No grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation that is used by the Department or 
a state or local government in administering financial assistance from 
the Department shall require only religious organizations to provide 
assurances that they will not use monies or property for inherently 
religious activities. Any restrictions on the use of grant funds shall 
apply equally to religious and non-religious organizations. All 
organizations that participate in Department programs, including 
organizations with religious character or affiliations, must carry out 
eligible activities in accordance with all program requirements and 
other applicable requirements governing the conduct of Department-
funded activities, including those prohibiting the use of direct 
financial assistance to engage in inherently religious activities. No 
grant document, agreement, covenant, memorandum of understanding, 
policy, or regulation that is used by the Department or a state or 
local government in administering financial assistance from the 
Department shall disqualify religious organizations from participating 
in the Department's programs because such organizations are motivated 
or influenced by religious faith to provide

[[Page 10956]]

social services, or because of their religious character or 
affiliation.
    (f) 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 the religious organization receives 
direct or indirect financial assistance from Department. Some 
Department programs, however, contain independent statutory provisions 
requiring that all recipients agree not to discriminate in employment 
on the basis of religion. Accordingly, grantees should consult with the 
appropriate Department program office if they have questions about the 
scope of any applicable requirement.
    (g) In general, the Department does not require that a recipient, 
including a religious organization, obtain tax-exempt status under 
section 501(c)(3) of the Internal Revenue Code to be eligible for 
funding under Department programs. Many grant programs, however, do 
require an organization to be a ``nonprofit organization'' in order to 
be eligible for funding. Individual solicitations that require 
organizations to have nonprofit status will specifically so indicate in 
the eligibility section of a solicitation. In addition, any 
solicitation that requires an organization to maintain tax-exempt 
status will expressly state the statutory authority for requiring such 
status. Grantees should consult with the appropriate Department program 
office to determine the scope of any applicable requirements. In 
Department programs in which an applicant must show that it is a 
nonprofit organization, the applicant may do so by any of the following 
means:
    (1) Proof that the Internal Revenue Service currently recognizes 
the applicant as an organization to which contributions are tax 
deductible under section 501(c)(3) of the Internal Revenue Code;
    (2) A statement from a state or other governmental taxing body or 
the state secretary of state certifying that:
    (i) The organization is a nonprofit organization operating within 
the state; and
    (ii) No part of its net earnings may benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of 
incorporation or similar document that clearly establishes the 
nonprofit status of the applicant; or
    (4) Any item described in paragraphs (g)(1) through (3) of this 
section if that item applies to a state or national parent 
organization, together with a statement by the state or parent 
organization that the applicant is a local nonprofit affiliate.
    (h) If a state or local government contributes its own funds, 
including but not limited to matching 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 
section shall apply to all of the commingled funds in the same manner, 
and to the same extent, as the provisions apply to the Federal funds.
    (i) To the extent otherwise permitted by Federal law, the 
restrictions on inherently religious activities set forth in this 
section do not apply where Department funds 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. 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, or certificate, allowing the 
beneficiary to direct where funds are to be paid, or through a similar 
funding mechanism provided to that beneficiary and designed to give 
that beneficiary a choice among providers.

    Dated: March 1, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-5110 Filed 3-4-04; 8:58 am]
BILLING CODE 4154-07-P