[Federal Register Volume 80, Number 151 (Thursday, August 6, 2015)]
[Proposed Rules]
[Pages 47302-47313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18258]



[[Page 47301]]

Vol. 80

Thursday,

No. 151

August 6, 2015

Part X





Department of Housing and Urban Development





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24 CFR Parts 5, 92, 570, et al.





Equal Participation of Faith-Based Organizations in HUD Programs: 
Implementation of E.O. 13559; Proposed Rule

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

[[Page 47302]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 92, 570, 574, 576, 578, 582, 583 and 1003

[Docket No. FR-5781-P-01]
RIN 2501-AD65


Equal Participation of Faith-Based Organizations in HUD Programs: 
Implementation of E.O. 13559

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to revise HUD's regulation that covers the 
equal participation of faith-based (religious) organizations in HUD 
Programs, including all of HUD's Native American Programs, as well as 
several program-specific regulations regarding the equal participation 
of faith-based organizations. These revisions are being undertaken to 
implement Executive Order 13559, Fundamental Principles and 
Policymaking Criteria for Partnerships with Faith-Based and Other 
Neighborhood Organizations. Executive Order 13559 revised Executive 
Order 13279, Equal Protection of the Laws for Faith-Based and Community 
Organizations, which provides the legal basis for HUD's current equal 
participation regulations. This rule implements changes to Executive 
Order 13279 made by Executive Order 13559, including changes to 
specific terminology, additional beneficiary protections, and 
clarifications on the responsibilities of intermediaries. In addition 
to proposing regulatory amendments to implement Executive Order 13559, 
HUD is also publishing for public comment a sample notice of 
beneficiary protections for use by faith-based organizations.

DATES: Comment Due Date. October 5, 2015.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. All comments received by mail are a part of 
the public record and will be posted to www.regulations.gov without 
change.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m., eastern time, 
weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
Federal Relay Service at 800-877-8339 (this is a toll-free number). 
Copies of all comments submitted are available for inspection and 
downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Paula Lincoln, Director, Center for 
Faith-Based and Neighborhood Partnerships, Department of Housing and 
Urban Development, 451 7th Street SW., Room 10184, Washington, DC 
20410-7000; telephone number 202-708-2404 (this is not a toll-free 
number). Hearing- and speech-impaired persons may access this number 
through TTY by calling the Federal Relay Service at 800-877-8339 (this 
is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On December 12, 2002, President Bush signed Executive Order 13279, 
Equal Protection of the Laws for Faith-Based and Community 
Organizations, which was published on December 16, 2002, at 67 FR 
77141. Executive Order 13279 set forth fundamental principles and 
policymaking criteria to guide Federal agencies in formulating and 
developing policies with implications for faith-based and other 
community organizations, to ensure equal protection of the laws for 
faith-based and other community organizations, and to expand 
opportunities for, and strengthen the capacity of, faith-based and 
other community organizations to meet social needs in America's 
communities. In addition, Executive Order 13279 directed specified 
agency heads to review and evaluate existing policies relating to 
Federal financial assistance for social service programs and, where 
appropriate, to implement new policies that were consistent with and 
necessary to further the fundamental principles and policymaking 
criteria that have implications for faith-based and community 
organizations.
    HUD implemented Executive Order 13279 through three final rules:
    Participation in HUD Programs by Faith-Based Organizations; 
Providing for Equal Treatment of all HUD Program Participants, 
published on September 30, 2003, at 68 FR 56396, and amended HUD's 
regulations in 24 CFR part 92 (HOME Investment Partnerships Program), 
part 570 (Community Development Block Grants), part 572 (HOPE for 
Homeownership of Single Family Homes (HOPE 3)), \1\ part 574 (Housing 
Opportunities for Persons with AIDS), part 576 (Emergency Shelter 
Grants Program, now Emergency Solutions Grants Program), part 582 
(Shelter Plus Care), part 583 (Supportive Housing Program), and part 
585 (Youthbuild Program); \2\
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    \1\ Part 572 was removed by a HUD final rule published on 
September 2, 2014, at 79 FR 51893.
    \2\ Part 585 was removed by a HUD final rule published on 
September 2, 2014, at 79 FR 51893.
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    Equal Participation of Faith-Based Organizations, published on July 
9, 2004, at 69 FR 41712, and amended HUD's regulations in 24 CFR part 5 
(General HUD Program Requirements and Waivers) and 24 CFR part 570 
(Community Development Block Grant Program); and
    Participation in HUD's Native American Programs by Religious 
Organizations; Providing for Equal Treatment of All Program 
Participants, published on October 22, 2004, at 69 FR 62164, and 
amended HUD's regulations at 24 CFR part 954 (Indian HOME

[[Page 47303]]

Program),\3\ and 24 CFR part 1003 (Community Development Block Grants 
for Indian Tribes and Alaska Native Villages).
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    \3\ HUD stopped awarding grants on the Indian Home Program on 
September 30, 1997, and part 954 was removed by a HUD final rule 
published on February 9, 2012, at 77 FR 6673.
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    The regulations established by each of these three rules provide 
that faith-based (religious) organizations are eligible on the same 
basis as any other eligible organization to participate in HUD programs 
and activities; \4\ organizations may not engage in inherently 
religious activities as part of programs or services directly funded 
under a HUD program or activity; faith-based organizations that 
participate in HUD programs or activities may retain their 
independence; and a faith-based organization that participates in a HUD 
program does not forfeit its exemption from the Federal prohibition 
against employment discrimination on the basis of religion, as provided 
in title VII of the Civil Rights Act of 1964 (though some individual 
HUD programs may have independent statutory nondiscrimination 
requirements). These regulations also provide that organizations may 
not discriminate against beneficiaries or prospective beneficiaries on 
the basis of religion or religious beliefs; address the use of HUD 
funds for acquisition, construction, and rehabilitation of structures 
that are used for inherently religious activities; and clarify the 
attachment of requirements to State, tribal, and local funds that are 
commingled with HUD funds.
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    \4\ Faith-based organizations must also meet any applicable 
program requirements to participate in a HUD program.
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    On February 5, 2009, President Obama signed Executive Order 13498, 
entitled ``Amendments to Executive Order 13199 and Establishment of the 
President's Advisory Council for Faith-Based and Neighborhood 
Partnerships,'' which was published on February 9, 2009, at 74 FR 6533. 
Executive Order 13498 established the President's Advisory Council for 
Faith-Based and Neighborhood Partnerships (Advisory Council) for the 
purpose of bringing together experts to, among other things, make 
recommendations to the President for changes in policies, programs, and 
practices that affect the delivery of services by faith-based and other 
neighborhood organizations.
    The Advisory Council issued its recommendations in a report 
entitled ``A New Era of Partnerships: Report of Recommendations to the 
President'' in March 2010.\5\ The Advisory Council Report included 
recommendations to amend Executive Order 13279 to clarify the legal 
foundation of partnerships, and offered a new set of fundamental 
principles to guide agency decision-making in administering Federal 
financial assistance and support to faith-based and neighborhood 
organizations.
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    \5\ http://www.whitehouse.gov/sites/default/files/microsites/ofbnp-council-final-report.pdf.
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    On November 17, 2010, President Obama signed Executive Order 13559, 
entitled ``Fundamental Principles and Policymaking Criteria for 
Partnerships with Faith-Based and Other Neighborhood Organizations,'' 
which was published on November 22, 2010, at 75 FR 71319.\6\ Executive 
Order 13559 incorporated many of the Advisory Council's recommendations 
and amended Executive Order 13279, to revise and add additional 
fundamental principles and policymaking criteria for inclusion in 
guidance and regulations.\7\ The principles include:
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    \6\ http://www.gpo.gov/fdsys/pkg/FR-2010-11-22/pdf/2010-29579.pdf.
    \7\ Executive Order 13279, Section 2, paragraphs (e)-(j).
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     The Federal Government has an obligation to monitor and 
enforce all standards regarding the relationship between religion and 
the Federal Government in ways that avoid excessive entanglement 
between religious bodies and governmental entities;
     Organizations engaging in explicitly religious activities 
must separate these activities, in time or location, from programs 
supported with direct Federal financial assistance (including prime 
awards and sub-awards). Participation in any explicitly religious 
activity cannot be subsidized with direct Federal financial assistance 
(including prime awards and sub-awards), and participation in such 
activities must be voluntary for the beneficiaries of the social 
service program supported with such Federal financial assistance;
     Religious providers are welcome to compete for Federal 
Government funding and maintain a religious identity as described in 
the order;
     Agencies that administer or award Federal financial 
assistance must implement protections for the beneficiaries or 
prospective beneficiaries of those programs (these protections include 
providing referral to an alternative provider if the beneficiary 
objects to the religious character of the organization providing 
services, and ensuring that written notice of these and other 
protections is provided to beneficiaries before they enroll in or 
receive services from the program);
     Agencies that provide Federal financial assistance must 
post online regulations, guidance documents, and policies that have 
implications for faith-based and neighborhood organizations, and post 
online a list of entities receiving such assistance; and
     Agency decisions about awards of Federal financial 
assistance must be free from political interference or even the 
appearance of such interference, and must be made on the basis of 
merit, not on the basis of the religious affiliation, or lack of 
affiliation, of the recipient organization.
    In addition, Executive Order 13559 created the Interagency Working 
Group on Faith-Based and Other Neighborhood Partnerships (Working 
Group) for the purpose of reviewing and evaluating existing 
regulations, guidance documents, and policies.
    The Executive Order also stated that, following receipt of the 
Working Group's report, the Office of Management and Budget (OMB), in 
coordination with the Department of Justice, must issue guidance to 
agencies on the implementation of Executive Order 13559. The Working 
Group issued its report in April 2012.\8\ In August 2013, OMB issued 
guidance instructing specified agency heads to adopt regulations and 
guidance that will fulfill the requirements of Executive Order 13559, 
and to amend regulations and guidance to ensure that they are 
consistent with this Executive order.\9\
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    \8\ Recommendations of the Interagency Working Group on Faith-
Based and Other Neighborhood Partnerships, April 2012, at http://www.whitehouse.gov/sites/default/files/uploads/finalfaithbasedworkinggroupreport.pdf.
    \9\ M-13-19, ``Implementation of Executive Order 13559, 
`Fundamental Principles and Policymaking Criteria for Partnerships 
with Faith-based and Other Neighborhood Organizations','' August 2, 
2013, at http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-19.pdf.
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    Prior to the issuance of the August 2013 guidance and after the 
issuance of Executive Order 13559, HUD issued one interim rule, one 
final rule, and one proposed rule that incorporated language to reflect 
Executive Order 13559:
    Interim Rule: Homeless Emergency Assistance and Rapid Transition to 
Housing: Continuum of Care Program, published on July 31, 2012, at 77 
FR 45422, which provided a new regulation on the equal participation of 
faith-based organizations in 24 CFR part 578 (Continuum of Care 
Program);
    Final Rule: HOME Investment Partnerships Program: Improving 
Performance and Accountability; Updating Property Standards, published 
on July 24, 2013, at 78 FR 44627, which modified HUD's equal 
participation of faith-based organizations regulation in

[[Page 47304]]

24 CFR part 92 (HOME Investment Partnerships Program); and
    Proposed Rule: Homeless Emergency Assistance and Rapid Transition 
to Housing: Rural Housing Stability Assistance Program and Revisions to 
the Definition of ``Chronically Homeless,'' published on March 27, 
2013, at 78 FR 18725, which proposed regulations at 24 CFR part 579 for 
the new Rural Housing Stability Assistance Program, including a 
regulation on the equal participation of faith-based organizations.

II. This Proposed Rule

A. Overview of Proposed Regulations

    This proposed rule updates all HUD regulations governing the equal 
participation of faith-based organizations in HUD programs to reflect 
the new fundamental principles and policymaking criteria in Executive 
Order 13559. Some of the principles do not require regulations and will 
be included in guidance that will accompany the final rule to follow 
this proposed rule. HUD may issue guidance on the applicability of the 
Executive order and this proposed rule to particular programs or 
activities.
    HUD is implementing Executive Order 13559 by amending its Sec.  
5.109 regulation to: (1) Add definitions for direct Federal financial 
assistance, Federal financial assistance, indirect Federal financial 
assistance, and an intermediary; (2) state that decisions must be free 
from political interference or even the appearance of such 
interference; (3) clarify the separation of explicitly religious 
activities from activities funded with direct Federal financial 
assistance and defining explicitly religious activities; (4) clarify 
the responsibilities of intermediary organizations; (5) add new 
beneficiary protections, and (6) amend existing language in Sec.  5.109 
to include Executive Order 13559 changes.
    This proposed rule also proposes to remove duplicate faith-based 
regulations in 24 CFR parts 92, 570, 574, 576, 578, 582, 583, and 1003, 
and replaces them with cross-references to a uniform regulation at 
Sec.  5.109.

B. Specific Proposed Amendments

1. New Definitions
    This proposed rule adds a new paragraph (b) to Sec.  5.109 
providing definitions for direct Federal financial assistance, Federal 
financial assistance, indirect Federal financial assistance, and an 
intermediary, meaning one that accepts and distributes Federal 
financial assistance.
    Executive Order 13559 noted that new regulations should distinguish 
between ``direct'' and ``indirect'' Federal financial assistance 
because the limitation on explicitly religious activities applies to 
programs that are supported with ``direct'' Federal financial 
assistance but does not apply to programs supported with ``indirect'' 
Federal financial assistance. To clarify this distinction, the proposed 
rule provides definitions of these terms.
    Programs are supported with ``direct'' Federal financial assistance 
when either the Federal Government or an intermediary, as identified in 
this proposed rule, selects a service provider and either purchases 
services from that provider (i.e., through a contract) or awards funds 
to that provider to carry out an activity (e.g., through a grant, sub-
grant, sub-award, or cooperative agreement). Under these circumstances, 
there are no intervening steps in which the beneficiary's choice 
determines the provider's identity, the beneficiary being the end user 
of the service, product, or assistance.
    ``Indirect'' Federal financial assistance is distinguishable 
because it places the choice of service provider in the hands of a 
beneficiary before the Federal Government pays for the cost of that 
service through a voucher, certificate, or other similar means. For 
example, the Federal Government could choose to allow the beneficiary 
to secure the needed service on their own. Alternatively, a 
governmental agency, operating under a program of aid that has at least 
one secular provider, could present each beneficiary or prospective 
beneficiary with a list of all qualified providers from which the 
beneficiary could obtain services using a Government-provided 
certificate. Either way, the Government empowers the beneficiaries to 
choose for themselves whether to receive the needed services, including 
those that contain explicitly religious activities, through a faith-
based or other neighborhood organization. The Federal Government could 
then pay for the beneficiary's choice of provider by giving the 
beneficiary a voucher or similar document. Alternatively, the Federal 
Government could choose to pay the provider directly after asking the 
beneficiary to indicate the beneficiary's choice.\10\ An example would 
be the Housing Choice Voucher Program.
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    \10\ See Freedom From Religion Found. v. McCallum, 324 F.3d 880, 
882 (7th Cir. 2003).
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    The Supreme Court has held that if a program meets certain 
criteria, the Government may fund the program if, among other things, 
the program places the benefit in the hands of individuals, who, in 
turn, have the freedom to choose the provider from which they receive 
their benefit and ``spend'' the Government funds, whether that provider 
is public or private, non-religious or religious. See Zelman v. 
Simmons-Harris, 536 U.S. 639, 652-53 (2002). In these instances, the 
Government does not encourage or promote any explicitly religious 
programs that may be among the options available to beneficiaries. 
Notably, the voucher scheme at issue in the Zelman decision, which was 
described by the Court as one of ``true private choice'' \11\ was also 
neutral toward religion and offered beneficiaries adequate secular 
options. This type of Federal financial assistance is considered 
``indirect.'' Accordingly, these criteria also are included in the text 
of the proposed definition of ``indirect Federal financial 
assistance.''
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    \11\ Zelman. at 653.
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    HUD also adds the definition of ``Federal financial assistance'' 
from Executive Order 13279 to clarify the new definitions ``direct 
Federal financial assistance'' and ``indirect Federal financial 
assistance.''
    HUD also proposes a definition for intermediary. An intermediary is 
an entity, including a nongovernmental organization, acting under a 
contract, grant, or other agreement with the Federal Government or with 
a State, tribal or local government that accepts Federal financial 
assistance and distributes that assistance to other organizations that, 
in turn, provide Government-funded services. This definition clarifies 
the application of these requirements to recipients of Federal 
financial assistance from HUD that are classified as intermediaries.
2. Decisions Must Be Free From Political Interference
    This proposed rule adds to the existing paragraph (b) of Sec.  
5.109, redesignated as paragraph (c) under the proposed rule, that 
decisions about awards of Federal financial assistance must be free 
from political interference or even the appearance of such interference 
and must be made on the basis of merit, not on the basis of religion or 
religious belief. To comply with this requirement, entities that award 
Federal financial assistance (HUD or an intermediary) should instruct 
participants in the awarding process to refrain from taking religious 
affiliations or non-religious affiliations into account in the process 
of awarding or allocating funds; i.e., an organization should not 
receive favorable or unfavorable marks merely because it is affiliated 
or unaffiliated with a religious body, or

[[Page 47305]]

related or unrelated to a specific religion. In addition, when 
selecting peer reviewers, entities that award Federal financial 
assistance should never ask about religious affiliation or take such 
matters into account, but should encourage religious, political, and 
professional diversity among peer reviewers by advertising for these 
positions in a wide variety of venues.
3. Separation of Explicitly Religious Activities From Activities Funded 
With Direct Federal Financial Assistance and Definition of Explicitly 
Religious Activities
    This proposed rule would amend paragraphs (c) and (d) in Sec.  
5.109, redesignated as paragraphs (d) and (e) under this proposed rule, 
to clarify the requirement that activities supported by direct Federal 
financial assistance must be separate from explicitly religious 
activities; define ``explicitly religious activities;'' and replace the 
term ``inherently religious activities'' with the term ``explicitly 
religious activities.''
    Executive Order 13559 makes clear that all organizations that 
receive Federal financial assistance are prohibited from discriminating 
against beneficiaries or potential beneficiaries of Federal programs on 
the basis of religion, a religious belief, refusal to hold a religious 
belief, or a refusal to attend or participate in a religious practice. 
Executive Order 13559 also states that organizations offering 
explicitly religious activities (including activities that involve 
overt religious content such as worship, religious instruction, or 
proselytization) must not use direct Federal financial assistance to 
subsidize or support those activities, and that any explicitly 
religious activities must be offered outside of programs that are 
supported with direct Federal financial assistance (including through 
prime awards or sub-awards). In other words, to the extent that an 
organization provides explicitly religious activities, those activities 
must be offered separately, in time or location, from programs or 
services supported with direct Federal financial assistance.
    HUD's existing regulations and Executive Order 13279 prohibit 
nongovernmental organizations from using direct Federal financial 
assistance (e.g., government grants, contracts, sub-grants, sub-awards, 
and subcontracts) for ``inherently religious activities, such as 
worship, religious instruction, and proselytization.'' The term 
``inherently religious,'' however, has proven confusing. In 2006, for 
example, the Government Accountability Office (GAO) found that, 
although all 26 of the religious social service providers it 
interviewed said they understood the prohibition on using direct 
Federal financial assistance for ``inherently religious activities,'' 
four of the providers described acting in ways that appeared to violate 
that rule.\12\
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    \12\ GAO, Faith-Based and Community Initiative: Improvements in 
Monitoring Grantees and Measuring Performance Could Enhance 
Accountability, GAO-06-616, at 34-35 (June 2006) (available at 
http://www.gao.gov/new.items/d06616.pdf).
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    Further, though the Supreme Court has sometimes used the term 
``inherently religious,'' the Court has not used this term to indicate 
the boundary of what the Government may subsidize with direct Federal 
financial assistance. If the term is interpreted narrowly, it could 
permit actions that the Constitution prohibits. On the other hand, one 
could also argue that the term ``inherently religious'' is too broad 
rather than too narrow. For example, some might consider their 
provision of a hot meal to a needy person to be an ``inherently 
religious'' act when it is undertaken from a sense of religious 
motivation or obligation, even though it has no overt religious 
content.
    The Court has determined that the Government cannot subsidize ``a 
specifically religious activity in an otherwise substantially secular 
setting.'' \13\ The Court has also said a direct aid program 
impermissibly advances religion when the aid results in governmental 
indoctrination of religion.\14\ This terminology is fairly interpreted 
to prohibit the Government from directly subsidizing any ``explicitly 
religious activity,'' including activities that involve overt religious 
content. Thus, direct Federal financial assistance must not be used to 
pay for activities such as religious instruction, devotional exercises, 
worship, proselytizing or evangelism; production or dissemination of 
devotional guides or other religious materials; or counseling in which 
counselors introduce religious content. Similarly, direct Federal 
financial assistance may not be used to pay for equipment or supplies 
to the extent they are allocated to such activities.
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    \13\ Hunt v. McNair, 413 U.S. 734, 743 (1973).
    \14\ See Mitchell v. Helms, 530 U.S. 793, 808 (2000) (Thomas, 
J., joined by Rehnquist, C.J., Scalia, and Kennedy, JJ., plurality); 
Helms, at 845 (O'Connor, J., joined by Breyer, J., concurring in the 
judgment); Agostini v. Felton, 521 U.S. 203, 223 (1997).
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    HUD provides the following activities as examples of permissible 
use of funds, but anticipates that such activities would generally not 
apply to HUD programs. Activities that are secular in content, such as 
serving meals to the needy or using a nonreligious text to teach 
someone to read, are not considered ``explicitly religious activities'' 
merely because the provider is religiously motivated to provide those 
services. The study or acknowledgement of religion as a historical or 
cultural reality also would not be considered an explicitly religious 
activity. Notwithstanding the general prohibition on the use of direct 
Federal financial assistance to support explicitly religious 
activities, there are rare instances when religious activities may be 
Federally financed under the Establishment Clause and not subject to 
the direct Federal financial assistance restrictions; for instance, in 
situations where Federal financial assistance is provided to chaplains 
to work with inmates in prisons, detention facilities, or community 
correction centers through social service programs.\15\ Since such 
activities have only been recognized in correctional settings, they 
would likely not arise in HUD-funded programs.
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    \15\ Where there is extensive Government control over the 
environment of the Federally financed social service program, 
program officials may sometimes need to take affirmative steps to 
provide an opportunity for beneficiaries of the social service 
program to exercise their religion. See Cruz v. Beto, 405 U.S. 319, 
322 n.2 (1972) (per curiam) (``reasonable opportunities must be 
afforded to all prisoners to exercise the religious freedom 
guaranteed by the First and Fourteenth Amendment without fear of 
penalty''); Katcoff v. Marsh, 755 F.2d 223, 234 (2d Cir. 1985) 
(finding it ``readily apparent'' that the Government is obligated by 
the First Amendment ``to make religion available to soldiers who 
have been moved by the Army to areas of the world where religion of 
their own denominations is not available to them''). Without such 
efforts, religious freedom might not exist for these beneficiaries. 
Accordingly, services such as chaplaincy services would not be 
considered explicitly religious activities that are subject to 
direct financial aid restrictions.
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    It is important to emphasize that the restrictions on explicitly 
religious content apply to content generated by the administrators of 
the program receiving direct Federal financial assistance, not to 
spontaneous comments made by individual beneficiaries about their 
personal lives in the context of these programs. For example, if a 
person administering a federally funded job skills program asks 
beneficiaries to describe how they gain the motivation necessary for 
their job searches and some beneficiaries refer to their faith or 
membership in a faith community, these kinds of comments do not violate 
the restrictions and should not be censored. In this context, it is 
clear that the administrator of the Government-funded program did not 
orchestrate or encourage such comments.
    HUD, therefore, proposes to replace the term ``inherently religious 
activities'' with the term ``explicitly

[[Page 47306]]

religious activities'' and define the latter term as ``including 
activities that involve overt religious content such as worship, 
religious instruction, or proselytization.'' These changes in language 
will provide greater clarity and more closely match constitutional 
standards as they have been developed in case law.
    These restrictions would not diminish existing regulatory 
protections for the religious identity of faith-based providers. The 
proposed rule would not affect, for example, organizations' ability to 
use religious terms in their organizational names, select board members 
on a religious basis, include religious references in mission 
statements and other organizational documents, and post religious art, 
messages, scriptures and symbols in buildings where Federal financial 
assistance is delivered.
4. Responsibilities of Intermediary Organizations
    HUD also proposes to add a new paragraph (f) to Sec.  5.109 to 
clarify the responsibilities of intermediaries, which may include 
States, tribes, or units of local governments. Each intermediary must 
abide by all statutory and regulatory requirements by, for example, 
providing any services supported with direct Federal financial 
assistance in a religiously neutral manner that does not include 
explicitly religious activities. The intermediary also has the same 
duties as the Federal Government to comply with these rules by, for 
example, selecting any providers to receive Federal financial 
assistance in a manner that does not favor or disfavor organizations on 
the basis of religion or religious belief. While intermediaries may be 
used to distribute Federal financial assistance to other organizations 
in some programs, intermediaries remain accountable for the Federal 
financial assistance they disburse. Accordingly, intermediaries must 
ensure that any providers to which they disburse Federal financial 
assistance also comply with these rules; for example, through funding 
contracts or agreements. If the intermediary is a nongovernmental 
organization, it retains all other rights of a nongovernmental 
organization under the statutory and regulatory provisions governing 
the program.
    A State's use of intermediaries does not relieve the State of its 
traditional responsibility to effectively monitor the actions of such 
organizations. States are obligated to manage the day-to-day operations 
of grant- and sub-grant-supported activities to ensure compliance with 
applicable Federal requirements and performance goals. Moreover, a 
State's use of intermediaries does not relieve the State of its 
responsibility to ensure that providers are selected, and deliver 
services, in a manner consistent with the First Amendment's 
Establishment Clause.
5. New Beneficiary Protections
    This rule proposes to add a new paragraph (g) to Sec.  5.109 
implementing a variety of valuable protections for the religious 
liberty rights of beneficiaries. These protections are aimed at 
ensuring that Federal financial assistance is not used to coerce or 
pressure beneficiaries along religious lines, and to make beneficiaries 
aware of their rights, through appropriate notice, when potentially 
obtaining services from providers with a religious affiliation.
    Executive Order 13559 requires that faith-based organizations 
providing services under a program that is supported by direct Federal 
financial assistance give written notice in a manner prescribed by the 
agency to beneficiaries and prospective beneficiaries of their right to 
be referred to an alternative provider if they object to the 
organization's religious character, when available. Written notice 
should be provided prior to enrollment or receipt of services. However, 
when the nature of the service provided or exigent circumstances make 
it impracticable to provide such written notice in advance of the 
actual service, service providers must advise beneficiaries in writing 
of their protections at the earliest available opportunity. A sample 
notification of beneficiary rights is attached in appendix A for public 
comment.
    If a beneficiary or prospective beneficiary of a social service 
program supported by Federal financial assistance objects to the 
religious character of an organization that provides services under the 
program, the organization must attempt to refer the beneficiary to an 
alternative provider. More specifically, the proposed rule provides 
that, if a beneficiary or prospective beneficiary of a program 
supported by direct Federal financial assistance objects to the 
religious character of an organization that provides services under the 
program, that organization shall promptly undertake reasonable efforts 
to identify and refer the beneficiary to an alternative provider to 
which the prospective beneficiary has no objection. HUD will provide 
further guidance regarding the referral requirement.
    A referral may be made to another religiously affiliated provider, 
if the beneficiary has no objection to that provider. But if the 
beneficiary requests a secular provider, and a secular provider that 
offers the needed services is available, then a referral must be made 
to that provider. The proposed rule specifies that, except for services 
provided by telephone, Internet, or similar means, the referral would 
be to an alternative provider that is in reasonable geographic 
proximity to the organization making the referral and that offers 
services that are similar in substance and quality to those offered by 
the referring organization. The alternative provider also would need to 
have the capacity to accept additional clients. If a Federally 
supported alternative provider meets these requirements and is 
acceptable to the beneficiary, a referral should be made to that 
provider. If, however, there is no Federally supported alternative 
provider that meets these requirements and is acceptable to the 
beneficiary, a referral should be made to an alternative provider that 
does not receive Federal financial assistance but does meet these 
requirements and is acceptable to the beneficiary. In the case of a 
referral, the organization should follow up with the beneficiary, if 
the beneficiary provides contact information, or the organization to 
which the beneficiary has been referred unless the beneficiary opts out 
of follow up. Under no circumstances, however, may an organization 
violate privacy laws in following up on a beneficiary referral.
    If an organization is unable to identify an alternative provider, 
the organization is required under the proposed rule to notify HUD or 
the intermediary, if applicable, and that entity would determine 
whether there is any other suitable alternative provider to which the 
beneficiary may be referred. Further, the Executive order and the 
proposed rule require that HUD or the intermediary ensure that 
appropriate and timely referrals are made to an appropriate provider, 
and that referrals are made in a manner consistent with applicable 
privacy laws and regulations. It must be noted that in some instances 
that HUD or the intermediary may also be unable to identify a suitable 
alternative provider. In all instances, the organization must maintain 
records of all requests for referrals, referrals made, and attempts to 
make a referral. HUD will issue guidance to clarify what constitutes 
reasonable efforts to identify an alternative provider.
6. Amending Existing Sec.  5.109 To Include Executive Order 13559 
Changes
    HUD also proposes to amend the other paragraphs in Sec.  5.109 to 
include the new Executive Order 13559

[[Page 47307]]

principles and to make clarifying changes, including the replacement of 
the terms religious organizations with faith-based organization and 
``inherently religious'' with ``explicitly religious;'' adding the term 
``direct Federal financial assistance'' where appropriate; and 
clarifying that the regulations apply to all HUD programs, including 
all of HUD's Native American programs.
    In addition, HUD proposes to replace the current reference to 24 
CFR parts 84 and 85 with a reference to 2 CFR part 200 in new paragraph 
(j) of this proposed rule. The Federal Government-wide regulations 
governing real property disposition at 24 CFR 84 and 85 have been 
replaced by the new provision at 2 CFR part 200 for awards made on or 
after December 26, 2014. When program-specific regulations governing 
real property disposition conflict with the real property disposition 
regulations in 2 CFR part 200, the HUD program office will provide 
guidance on recipients' (or subrecipients') compliance 
responsibilities.

III. Tribal Consultation

    HUD's policy is to consult with Indian tribes early in the process 
on matters that have tribal implications. Accordingly, on November 19, 
2014, HUD sent letters to all tribal leaders participating in HUD 
programs, informing them of the nature of this forthcoming rulemaking. 
HUD received no comments in response to those letters. Tribal leaders 
are welcome to provide public comments on this proposed rule.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, and safety effects; distributive impacts; and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. Under Executive Order 12866 (Regulatory Planning 
and Review), a determination must be made whether a regulatory action 
is significant and, therefore, subject to review by OMB in accordance 
with the requirements of the order. This proposed rule meets the 
principles of Executive Order 13563 in that its implementation of 
Executive Order 13559 harmonizes HUD's proposed regulations with those 
of the other Federal agencies, but does not rise to the level of 
significant regulatory action as defined in Executive Order 12866. This 
proposed rule clarifies existing principles and policies applicable to 
faith-based and neighborhood organizations participating in Federally 
funded programs. In addition, this proposed rule underwent extensive 
review by the Office of Faith-Based Neighborhood Partnerships and the 
Working Group.
    With respect to the principles of Executive Order 13563, this 
proposed rule, as discussed above, would further provide for the equal 
participation of faith-based organizations in HUD's programs, and 
clarify the rights of entities participating in HUD programs and the 
beneficiaries they serve. This proposed rule would also add the 
following provisions that HUD believes will likely impose costs on the 
regulated community: (1) That faith-based organizations that carry out 
an activity with direct Federal financial assistance from HUD must give 
beneficiaries and prospective beneficiaries written notice of the 
protections listed at Sec.  5.109(g)(1) of this proposed rule, and (2) 
that if a beneficiary or prospective beneficiary objects to the 
religious character of the organization, the organization must make 
reasonable efforts to identify and refer the beneficiary or prospective 
beneficiary to an alternative provider to which the beneficiary or 
prospective beneficiary has no objection. To minimize compliance costs 
on these recipients, this proposed rule includes a sample written 
notice that a faith-based organization can provide to a beneficiary or 
prospective beneficiary. An estimate of the cost of providing this 
notice is discussed in the Paperwork Reduction Act section of this 
proposed rule.

Environmental Impact

    This proposed rule sets forth nondiscrimination standards. 
Accordingly, under 24 CFR 50.19(c)(3), this proposed rule is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Unfunded Mandates Reform Act

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

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities.
    This proposed rule would provide more access for entities to 
participate in HUD programs by clarifying requirements for 
participation in HUD programs. In addition, the proposed rule requires 
that faith-based organizations that carry out activities under a HUD 
program with direct Federal financial assistance must give 
beneficiaries and prospective beneficiaries written notice of the 
protections listed at Sec.  5.109(g)(1) of this proposed rule. This 
includes notification that the organization must undertake reasonable 
efforts to identify and refer the beneficiary to an alternative 
provider to which the beneficiary has no objection, if the beneficiary 
objects to the religious character of the organization. The 
organization must inform the beneficiary or prospective beneficiary in 
writing and, if a referral is made, the organization would be required 
to notify HUD or the intermediary.
    As described above, HUD has made every effort to ensure that the 
written notice and referral requirements of the proposed rule impose 
minimum burden and allow maximum flexibility in implementation by 
providing a sample notice that organizations may provide to 
beneficiaries informing them of the protections listed at Sec.  
5.109(g)(1) of this proposed rule and by not prescribing a specific 
format for making referrals through this proposed rule. HUD estimates 
it will take no more than 2 hours for service providers to familiarize 
themselves with the notice requirements of this proposed rule and print 
and duplicate an adequate number of written notices for prospective 
beneficiaries. Using the May 2013 Bureau of Labor Statistics hourly 
mean wage of $22.81 for a Training and Development Specialist, the 
labor cost is approximately $45.62 per service provider for preparing 
the notice. In addition, HUD estimates an upper limit of $100 for the 
annual cost of materials (paper, ink, toner) to print multiple copies 
of the notices. Because these costs will be borne by every faith-based 
organization that carries out an activity under a HUD program with 
direct

[[Page 47308]]

Federal financial assistance, HUD believes that a substantial number of 
small entities will be affected by this provision. However, HUD does 
not believe that a compliance cost of less than $200 per service 
provider per year is a significant percentage of any service provider's 
total revenue. In addition, HUD notes that, after the first year, the 
labor costs associated with compliance will likely decrease 
significantly because small service providers will be familiar with the 
requirements.
    In addition, HUD does not foresee that the cost to comply with 
effective communication requirements pursuant to Section 504 of the 
Rehabilitation Act of 1973 and its implementing regulations at 24 CFR 
8.6 will exceed the estimated cost of $200 per service provider. 
However, HUD specifically invites comments on whether there would be 
additional costs to make this accommodation.
    The rule will also require faith-based organizations, upon a 
beneficiary's objection, to make reasonable efforts to identify and 
refer the beneficiary to an alternative provider to which the 
beneficiary has no objection. HUD estimates that each referral will 
require 2 hours of a Training and Development Specialist's time to 
process at a labor cost of $22.81 per hour. Although HUD does not have 
any way to determine the number of referrals that will occur in any 1 
year, HUD does not believe that referral costs will be significant for 
small service providers. HUD invites interested parties to provide data 
on which HUD can formulate better estimates of the compliance costs 
associated with the written notice and referral requirements of this 
proposed rule.
    Notwithstanding HUD's determination that this proposed rule would 
not have a significant effect on a substantial number of small 
entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives 
and the principles in Executive Order 13559, as described in this 
preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either: (1) Imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive order. This proposed rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments nor preempt State law 
within the meaning of the Executive order.

Paperwork Reduction Act

    The proposed rule includes a new information collection section. 
Section 5.109(g) would impose requirements on faith-based organizations 
that carry out activities under a HUD program with direct Federal 
financial assistance to give beneficiaries (or prospective 
beneficiaries) written notice of certain protections described in this 
proposed rule; beneficiaries can provide a written response that may 
impose a burden under the Paperwork Reduction Act (PRA); and faith-
based organizations must provide a referral if a beneficiary or 
prospective beneficiary objects to the religious character of the 
organization. This rule also requires the retention of records to show 
that the referral requirements in this rulemaking have been met.
    HUD estimates that a faith-based organization would need 2 minutes 
to distribute to each beneficiary the notice required in these proposed 
regulations. This estimate takes into consideration the likelihood 
that, in one-on-one interactions between a staff member and a 
beneficiary, providing the notice might take longer than a minute. 
Conversely, providing notice to a group of beneficiaries at the same 
time would take significantly less than a minute for each beneficiary 
because a few beneficiaries would pass the notice to the remaining 
beneficiaries in a group.
    HUD estimates that in cases where a beneficiary objects to the 
religious character of a faith-based organization, the time required 
for the faith-based organization to make a reasonable effort to 
identify an alternative provider and refer a beneficiary to that 
provider would be about 2 hours. This estimate includes the time 
required to identify service providers that provide similar services, 
preferably under the same or similar programs to the one under which 
the beneficiary is being served by the faith-based organization. The 
estimate also includes the time required to determine whether one of 
the alternative providers is acceptable to the beneficiary. Also, 
depending on whether the beneficiary asked the faith-based organization 
to follow up either with the beneficiary or the alternative service 
provider to determine whether the referral is successful, this estimate 
includes the time required to do the follow-up.
    The Department of Health and Human Services, Substance Abuse and 
Mental Health Services Administration (SAMHSA), implemented a similar 
referral requirement in its 2003 final rule, 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 (SAMHSA Program Rule), 68 FR 56430. Since SAMHSA 
implemented the referral requirement, the SAMHSA program office has 
received no reports of requests for an alternative provider. Because 
faith-based organizations are required to provide a written 
notification of the beneficiary's rights under this proposed rule, 
requests for referrals may be more likely. However, given SAMHSA's 
experience, HUD estimates that 0.10 percent of beneficiaries and 
potential beneficiaries would request referrals to alternative 
providers. HUD will monitor its programs to assess whether this 
estimate is accurate.
    HUD is not estimating the burden of maintaining the records needed 
to demonstrate compliance with the requirements imposed on faith-based 
organizations. HUD has recordkeeping requirements included in 
information collection instruments for HUD programs. Those collection 
instruments cover burdens imposed by program and administrative 
requirements that exist under current, OMB-approved, information 
collection instruments and each of those collections has an OMB-
assigned information collection control number.
    The recordkeeping burden that this proposed rule would add to those 
program-specific information collection instruments is so small that, 
under most programs, it would not measurably increase the burden that 
already exists under current program and administrative requirements. 
If, due to the unique nature of a particular program, the recordkeeping 
burden associated with these proposed regulations is large enough to be 
measurable, that burden will be calculated under the recordkeeping and 
reporting requirements of the affected program and identified in 
information collection requests that are submitted to OMB for PRA 
approval. Therefore, we have not included any estimate of recordkeeping 
burden in this PRA analysis.
    The new information collection requirements contained in this 
proposed

[[Page 47309]]

rule have been submitted to OMB under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520). In accordance with the Paperwork Reduction 
Act, an agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection 
displays a currently valid OMB control number.
    The burden of the information collections in this proposed rule is 
estimated as follows:

                                                           Reporting and Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Number of respondents in covered programs                                     Estimated        Estimated
        24 CFR Section        -----------------------------------------------------------------------     Number of         average       annual burden
                                  CPD        FHEO     Housing       OLHCHH         PD&R       PIH         responses      response time      (in hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5.109(g) (Written Notice of      196,487        400     30,400             250      3,141    495,375  1 per             2 minutes per             24,202
 Rights).                                                                                              beneficiary.      beneficiary.
5.109(g) (Referral)..........        198          1         30               1          3        495  1 per             2 hours per                1,456
                                                                                                       beneficiary.      beneficiary.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Burden (for all HUD  .........  .........  .........  ..............  .........  .........  ................  ...............           25,658
     programs covered by this
     rulemaking).
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (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 
collection techniques or other forms of information technology; for 
example, permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposed rule by name and docket number (FR-5781-P-01) and must 
be sent to: HUD Desk Officer, Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Email: [email protected], 
Fax: 202-395-6947 and
    Colette Pollard, Reports Liaison Officer, Department of Housing and 
Urban Development, 451 Seventh Street SW., Room 2204, Washington, DC 
20410-7000.
    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make them 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov Web site can be viewed by other 
commenters and interested members of the public. Commenters should 
follow the instructions provided on that site to submit comments 
electronically.

Catalog of Federal Domestic Assistance

    The regulatory amendments contained in this proposed rule apply to 
all HUD assistance programs for which faith-based organizations are 
eligible to participate. The Catalog of Federal Domestic Assistance 
(CFDA) number for a particular HUD program may be found on the CFDA Web 
site at: http://www.cfda.gov.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Crime, 
Government contracts, Grant programs-housing and community development, 
Individuals with disabilities, Intergovernmental relations, Loan 
programs-housing and community development, Low and moderate income 
housing, Mortgage insurance, Penalties, Pets, Public housing, Rent 
subsidies, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation, Wages.

24 CFR Part 92

    Administrative practice and procedure, Grant programs-housing and 
community development, Low and moderate income housing, Manufactured 
housing, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs-education, Grant programs-
housing and community development, Guam, Indians, Loan programs-housing 
and community development, Low and moderate income housing, Northern 
Mariana Islands, Pacific Island Trust Territory, Puerto Rico, Reporting 
and recordkeeping requirements, Student aid, Virgin Islands.

24 CFR Part 574

    Community facilities, Grant programs-housing and community 
development, Grant programs-social programs, HIV/AIDS, Low and moderate 
income housing, Reporting and recordkeeping requirements.

24 CFR Part 576

    Community facilities, Grant programs-housing and community 
development, Grant programs-social programs, Homeless, Reporting and 
recordkeeping requirements.

24 CFR Part 578

    Community facilities, Continuum of Care, Emergency solutions 
grants, Grant programs-housing and community development, Grant 
programs-social programs, Homeless, Rural housing, Reporting and 
recordkeeping requirements, Supportive housing programs- housing and 
community development, Supportive services.

24 CFR Part 582

    Civil rights, Community facilities, Grant programs-housing and 
community development, Grant programs-social

[[Page 47310]]

programs, Homeless, Individuals with disabilities, Mental health 
programs, Nonprofit organizations, Rental subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 583

    Civil rights, Community facilities, Employment, Grant programs-
housing and community development, Grant programs-social programs, 
Homeless, Indians, Individuals with disabilities, Mental health 
programs, Nonprofit organizations, Reporting and recordkeeping 
requirements, Technical assistance.

24 CFR Part 1003

    Alaska, Community development block grants, Grant programs-housing 
and community development, Grant programs- Indians, Indians, Reporting 
and recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR parts 5, 92, 570, 574, 576, 578, 582, 583 and 
1003 as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority citation for 24 CFR part 5 is revised to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 1437n, 3535(d), Sec. 
327, Pub. L. 109-115, 119 Stat. 2936, Sec. 607, Pub. L. 109-162, 119 
Stat. 3051, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258, and 
E.O. 13559, 75 FR 71319, 3 CFR, 2010 Comp., p. 273.

0
2. In Sec.  5.109:
0
a. The section heading is revised;
0
b. Paragraphs (a), (b), (c), (d), (f), (g), and (h) are revised;
0
c. Paragraph (e) is redesignated as paragraph (i);
0
d. New paragraph (e) is added; and
0
e. Paragraphs (j) and (k) are added, to read as follows:


Sec.  5.109  Equal participation of Faith-based Organizations in HUD 
programs.

    (a) Purpose. Consistent with Executive Order 13279 (issued on 
December 12, 2002, 67 FR 77141), entitled ``Equal Protection of the 
Laws for Faith-Based and Community Organizations,'' as amended by 
Executive Order 13559 (issued on November 17, 2010, 75 FR 71319), 
entitled ``Fundamental Principles and Policymaking Criteria for 
Partnerships With Faith-Based and Other Neighborhood Organizations,'' 
this section describes requirements for ensuring the equal 
participation of faith-based organizations in HUD programs. These 
requirements apply to all HUD programs, including all of HUD's Native 
American Programs, except as may be otherwise noted in the respective 
program regulations in title 24 of the Code of Federal Regulations 
(CFR), or unless inconsistent with certain HUD programs authorizing 
statutes.
    (b) Definitions. The following definitions apply to this section:
    Direct Federal financial assistance means Federal financial 
assistance provided when a Federal Government agency or an 
intermediary, as defined in this section, selects the provider and 
either purchases services from that provider (i.e., via a contract) or 
awards funds to that provider to carry out an activity (e.g., via 
grant, sub-grant, sub-award, or cooperative agreement). The recipients 
of sub-grants or sub-awards that receive Federal financial assistance 
through State-administered programs (e.g., flow-through programs) are 
considered recipients of direct Federal financial assistance. In 
general, Federal financial assistance shall be treated as direct, 
unless it meets the definition of indirect Federal financial 
assistance.
    Federal financial assistance means assistance that non-Federal 
entities receive or administer in the forms of grants, contracts, 
loans, loan guarantees, property, cooperative agreements, food 
commodities, direct appropriations, or other assistance, but does not 
include a tax credit, deduction, or exemption.
    Indirect Federal financial assistance means Federal financial 
assistance provided when the choice of the service provider is placed 
in the hands of the beneficiary, and the cost of that service is paid 
through a voucher, certificate, or other similar means of Government-
funded payment. Federal financial assistance provided to an 
organization is considered indirect when the Government program through 
which the beneficiary receives the voucher, certificate, or other 
similar means of Government-funded payment is neutral toward religion; 
the organization receives the assistance as a result of a decision of 
the beneficiary, not a decision of the Government; and the beneficiary 
has at least one adequate secular option for the use of the voucher, 
certificate, or other similar means of Government-funded payment.
    Intermediary means an entity, including a nongovernmental 
organization, acting under a contract, grant, or other agreement with 
the Federal Government or with a State, tribal or local government, 
that accepts Federal financial assistance and distributes that 
assistance to other entities that, in turn, carry out activities under 
HUD programs.
    (c) Equal participation of faith-based organizations in HUD 
programs. Faith-based organizations are eligible, on the same basis as 
any other organization, to participate in HUD programs. Neither the 
Federal Government, nor a State, tribal or local government, nor any 
other entity that administers any HUD program, shall discriminate 
against an organization on the basis of the organization's religious 
character or affiliation. In addition, decisions about awards of 
Federal financial assistance must be free from political interference 
or even the appearance of such interference and must be made on the 
basis of merit, not on the basis of religion or religious belief.
    (d) Separation of explicitly religious activities from direct 
Federal financial assistance.
    (1) A faith-based organization that applies for, or participates 
in, a HUD program supported with Federal financial assistance retains 
its independence and may continue to carry out its mission, including 
the definition, development, practice, and expression of its religious 
beliefs, provided that it does not use direct Federal financial 
assistance that it receives (e.g., via contract, grant, sub-grant or 
sub-award or cooperative agreement) to support or engage in any 
explicitly religious activities (including activities that involve 
overt religious content such as worship, religious instruction, or 
proselytization), or in any other manner prohibited by law.
    (2) A faith-based organization that receives direct Federal 
financial assistance may use space (including a sanctuary, chapel, 
prayer hall, or other space) in its facilities (including a temple, 
synagogue, church, mosque, or other place of worship) to carry out 
activities under a HUD program without removing religious art, icons, 
scriptures, or other religious symbols. In addition, a faith-based 
organization participating in a HUD program retains its authority over 
its internal governance, and 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.
    (e) Explicitly religious activities. If an organization engages in 
explicitly religious activities (including activities that involve 
overt religious content such as worship, religious instruction, or 
proselytization), the explicitly religious activities must be offered 
separately, in time or location, from the activities supported by 
direct Federal financial assistance and participation must be voluntary 
for the beneficiaries of the activities that receive direct Federal 
financial assistance.

[[Page 47311]]

    (f) Intermediary responsibilities to ensure equal participation of 
faith-based organizations in HUD programs. If an intermediary--acting 
under a contract, grant, or other agreement with the Federal Government 
or with a State, tribal or local government that is administering a 
program supported by Federal financial assistance--is given the 
authority to select a nongovernmental organization to receive Federal 
financial assistance under a contract, grant, sub-grant, sub-award, or 
cooperative agreement, the intermediary must ensure that such 
organization complies with the requirements of this section. If the 
intermediary is a nongovernmental organization, it retains all other 
rights of a nongovernmental organization under the program's statutory 
and regulatory provisions.
    (g) Beneficiary protections. Faith-based organizations that receive 
direct Federal financial assistance to carry out activities under a HUD 
program must give written notice to beneficiaries and prospective 
beneficiaries of the program describing certain protections available 
to them, as provided in this subsection. In addition, if a beneficiary 
or prospective beneficiary objects to the religious character of the 
organization carrying out activities under the HUD program, that 
organization must promptly undertake reasonable efforts to identify and 
refer the beneficiary or prospective beneficiary to an alternative 
provider to which the beneficiary or prospective beneficiary has no 
such objection.
    (1) Written notice. The written notice must be given in a manner 
prescribed by HUD, and state that:
    (i) The organization may not discriminate against beneficiaries on 
the basis of religion or religious belief;
    (ii) The organization may not require beneficiaries to attend or 
participate in any explicitly religious activities that are offered by 
the organization, and any participation by beneficiaries in such 
activities must be purely voluntary;
    (iii) The organization must separate, in time or location, any 
privately funded explicitly religious activities from activities 
supported by direct Federal financial assistance;
    (iv) If a beneficiary objects to the religious character of the 
organization, the organization must undertake reasonable efforts to 
identify and refer the beneficiary to an alternative provider to which 
the beneficiary has no such objection; and
    (v) Beneficiaries may report violations of these protections to HUD 
(or the intermediary, if applicable).
    (2) Timing of notice. The written notice must be given to 
prospective beneficiaries prior to the time they enroll in the program 
or receive services from such programs. When the nature of the service 
provided or exigent circumstances make it impracticable to provide such 
written notice in advance of the actual service, the organization 
providing the services with direct Federal financial assistance must 
provide written notice to beneficiaries of their protections at the 
earliest available opportunity.
    (3) Referral requirements. (i) If a beneficiary or prospective 
beneficiary of a program that receives direct Federal financial 
assistance from HUD objects to the religious character of an 
organization that provides services under the program, that 
organization must promptly undertake reasonable efforts to identify and 
refer the beneficiary or prospective beneficiary to an alternative 
provider to which the beneficiary or prospective beneficiary has no 
such objection.
    (ii) A referral may be made to another faith-based organization, if 
the beneficiary or prospective beneficiary has no objection to that 
provider based on the provider's religious character. But if the 
beneficiary or prospective beneficiary requests a secular provider, and 
a secular provider is available, then a referral must be made to that 
provider.
    (iii) Except for services provided by telephone, Internet, or 
similar means, the referral must be to an alternative provider that is 
in reasonable geographic proximity to the organization making the 
referral and that offers services that are similar in substance and 
quality to those offered by the organization. The alternative provider 
also must have the capacity to accept additional clients.
    (iv) When the organization makes a referral to an alternative 
provider, or when the organization determines that it is unable to 
identify an alternative provider, the organization shall notify HUD (or 
the intermediary, if applicable). If the organization is unable to 
identify an alternative provider, HUD (or the intermediary, if 
applicable) shall determine whether there is any other suitable 
alternative provider to which the beneficiary or prospective 
beneficiary may be referred. An intermediary that receives a request 
for assistance in identifying an alternative provider may request 
assistance from HUD.
    (h) Nondiscrimination requirements. No recipient of Federal 
financial assistance may discriminate against a beneficiary or 
prospective beneficiary of a HUD program on the basis of religion or 
religious belief in carrying out activities with Federal financial 
assistance.
* * * * *
    (j) Acquisition, construction, and rehabilitation of structures. 
Direct Federal financial assistance 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 a 
HUD program. Where a structure is used for both eligible and explicitly 
religious activities (including activities that involve overt religious 
content such as worship, religious instruction, or proselytization), 
direct Federal financial assistance may not exceed the cost of the 
share of acquisition, construction, or rehabilitation attributable to 
eligible activities in accordance with the cost accounting requirements 
applicable to the HUD program. However, acquisition, construction, or 
rehabilitation of sanctuaries, chapels, or other rooms that a HUD-
funded faith-based organization uses as its principal place of worship, 
may not be paid with direct Federal financial assistance. Disposition 
of real property after use for the authorized purpose, or any change in 
use of the property from the authorized purpose, is subject to 
Governmentwide regulations governing real property disposition (see, 
e.g., 2 CFR part 200).
    (k) Commingling of Federal and State, tribal, and local funds. If a 
State, tribal, or local government voluntarily contributes its own 
funds to supplement direct Federal financial assistance for an 
activity, the State, tribal or local government has the option to 
segregate those funds or commingle them with the direct Federal 
financial assistance. However, if the funds are commingled, the 
requirements of this section apply to all of the commingled funds. 
Further, if a State, tribal, or local government is required to 
contribute matching funds to supplement direct Federal financial 
assistance for an activity, the matching funds are considered 
commingled with the direct Federal financial assistance and, therefore, 
subject to the requirements of this section. Some HUD programs' 
requirements govern any activity assisted under those programs. 
Accordingly, recipients should consult with the appropriate HUD program 
office to determine the scope of applicable requirements.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
3. The authority citation for 24 CFR part 92 continues to read as 
follows:


[[Page 47312]]


    Authority:  42 U.S.C. 3535(d) and 12701-12839.

0
4. Revise Sec.  92.257 to read as follows:


Sec.  92.257  Equal participation of Faith-Based Organizations.

    The HUD program requirements in Sec.  5.109 of this subtitle apply 
to the HOME program.

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
5. The authority citation for 24 CFR part 570 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 5301-5320.

0
6. In Sec.  570.200 revise paragraph (j) to read as follows:


Sec.  570.200  General policies.

* * * * *
    (j) Equal participation of Faith-Based Organizations. The HUD 
program requirements in Sec.  5.109 of this title apply to the CDBG 
program.

PART 574--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

0
7. The authority citation for 24 CFR part 574 continues to read as 
follows:

    Authority:  42 U.S.C. 3535(d) and 12901-12912.

0
8. In Sec.  574.300, revise paragraph (c) to read as follows:


Sec.  574.300  Eligible activities.

* * * * *
    (c) Equal participation of Faith-Based Organizations. The HUD 
program requirements in Sec.  5.109 of this title apply to the HOPWA 
program.

PART 576--EMERGENCY SOLUTIONS GRANTS PROGRAM

0
9. The authority citation for 24 CFR part 576 continues to read as 
follows:

    Authority:  42 U.S.C. 11371 et seq., 42 U.S.C. 3535(d).

0
10. Revise Sec.  576.406 to read as follows:


Sec.  576.406  Equal participation of Faith-Based Organizations.

    The HUD program requirements in Sec.  5.109 of this title apply to 
the ESG program.

PART 578--CONTINUUM OF CARE PROGRAM

0
11. The authority citation for 24 CFR part 578 continues to read as 
follows:

    Authority:  42 U.S.C. 11371 et seq., 42 U.S.C. 3535(d).

0
12. In Sec.  578.87, revise paragraph (b) to read as follows:


Sec.  578.87  Limitation on use of funds.

* * * * *
    (b) Equal participation of Faith-Based Organizations. The HUD 
program requirements in Sec.  5.109 of this title apply to the 
Continuum of Care program.
* * * * *

PART 582--SHELTER PLUS CARE

0
13. The authority citation for 24 CFR part 582 continues to read as 
follows:

    Authority:  42 U.S.C. 3535(d) and 11403-11407b.

0
14. In Sec.  582.115, revise paragraph (c) to read as follows:


Sec.  582.115  Limitations on assistance.

* * * * *
    (c) Equal participation of Faith-Based Organizations. The HUD 
program requirements in Sec.  5.109 of this title apply to the S+C 
program.
* * * * *

PART 583--SUPPORTIVE HOUSING PROGRAM

0
15. The authority citation for 24 CFR part 583 continues to read as 
follows:

    Authority: 42 U.S.C. 11389 and 3535(d).

0
16. In Sec.  583.150, revise paragraph (b) to read as follows:


Sec.  583.150  Limitations on use of assistance.

* * * * *
    (b) Equal participation of Faith-Based Organizations. The HUD 
program requirements in Sec.  5.109 of this title apply to the 
Supportive Housing Program.
* * * * *

PART 1003--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND 
ALASKA NATIVE VILLAGES

0
17. The authority citation for 24 CFR part 1003 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 5301 et seq.

0
18. Revise Sec.  1003.600 to read as follows:


Sec.  1003.600  Equal participation of Faith-Based Organizations.

    The HUD program requirements in Sec.  5.109 of this title apply to 
the ICDBG program.

    Dated: May 27, 2015.
Juli[aacute]n Castro,
Secretary.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix A

WRITTEN NOTICE OF BENEFICIARY RIGHTS

Name of Organization:

Name of Program:

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

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

 We may not discriminate against you on the basis of 
religion or religious belief;
 We may not require you to attend or participate in any 
explicitly religious activities that are offered by us, and any 
participation by you in these activities must be purely voluntary;
 We must separate, in time or location, any privately funded 
explicitly religious activities from activities supported with 
direct Federal financial assistance;
 If you object to the religious character of our 
organization, we must make reasonable efforts to identify and refer 
you to an alternative provider to which you have no objection; and
 You may report violations of these protections to HUD [or 
the intermediary, if applicable].

We must give you this written notice before you enroll in our 
program or receive services from the program, as required by [Insert 
Federal Agency's regulations].

BENEFICARY REFERRAL REQUEST

    If you object to receiving services from us based on the 
religious character of our organization, please complete this form 
and return it to the program contact identified above. Your use of 
this form is voluntary.
    If you object to the religious character of our organization, we 
must make reasonable efforts to identify and refer you to an 
alternative provider to which you have no objection. We cannot 
guarantee, however, that in every instance, an alternative provider 
will be available. With your consent, we will follow up with you or 
the organization to which you are referred to determine whether you 
have contacted that organization.

( ) Please check if you want to be referred to another service 
provider.

Please provide the following information if you want us to follow up 
with you:

 Your Name:

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

Please provide the following information if you want us to follow up 
with the service provider only.

 Your Name:

You are permitted to withhold your name, though if you choose to do 
so, we will be unable to follow up with you or the service provider 
about your referral.

( ) Please check if you do not want follow-up.

FOR STAFF USE ONLY

1. Date of Objection: __/ __/ __

2. Referral (check one):

[[Page 47313]]

 ( ) Individual was referred to (name of alternative provider and 
contact information):
 ( ) Individual left without a referral
 ( ) No alternative service provider is available--summarize below 
what efforts you made to identify an alternative (including reaching 
out to HUD or the intermediary, if applicable):

3. Follow-up date: __/ __/ __
 ( ) Individual contacted alternative provider
 ( ) Individual did not contact alternative provider

4. Staff name and initials:

[FR Doc. 2015-18258 Filed 8-5-15; 8:45 am]
 BILLING CODE P