[Federal Register Volume 85, Number 12 (Friday, January 17, 2020)]
[Proposed Rules]
[Pages 2938-2949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26756]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Parts 50, 61 and 62

RIN 2900-AQ75


Equal Participation of Faith-Based Organizations in Veterans 
Affairs Programs: Implementation of Executive Order 13831

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The rule proposes to amend United States Department of 
Veterans Affairs (Department) general regulations to implement 
Executive Order 13831 (Establishment of a White House Faith and 
Opportunity Initiative). Among other changes, this rule proposes 
changes to provide clarity about the rights and obligations of faith-
based organizations participating in Department programs, clarify the 
Department's rules for financial assistance in regard to faith-based 
organizations, and eliminate certain requirements for faith-based 
organizations that no longer reflect executive branch guidance. This 
proposed rulemaking is intended to ensure that the Department's social 
service programs are implemented in a manner consistent with the 
requirements of federal law, including the First Amendment to the 
Constitution and the Religious Freedom Restoration Act.

DATES: Comments must be received by VA on or before February 18, 2020.

ADDRESSES: To ensure proper handling of comments, please reference RIN 
2900-AQ75--EQUAL PARTICIPATION OF FAITH-BASED ORGANIZATIONS IN VETERANS 
AFFAIRS PROGRAMS: IMPLEMENTATION OF EXECUTIVE ORDER 13831 on all 
electronic and written correspondence. The Department encourages the 
electronic submission of all comments through http://www.regulations.gov using the electronic comment form provided on that 
site. For easy reference, an electronic copy of this document is also 
available at that website. It is not necessary to submit paper comments 
that duplicate the electronic submission, as all comments submitted to 
http://www.regulations.gov will be posted for public review and are 
part of the official docket record. However, should you wish to submit 
written comments through regular or express mail, they should be sent 
to Director, Office of Regulation Policy and Management (00REG), 
Department of Veterans Affairs, 810 Vermont Avenue NW, Room 1064, 
Washington, DC 20420; or by fax to (202) 273-9026.

FOR FURTHER INFORMATION CONTACT: Conrad Washington, Deputy Director, 
Center for Faith and Opportunities Initiatives (00FB), Office of the 
Secretary, Department of Veterans Affairs, 810 Vermont Avenue NW; (VA 
CFOI), Washington, DC 20420, (202) 461-7689. (This is not a toll-free 
telephone number).

SUPPLEMENTARY INFORMATION: 

I. Posting of Public Comments

    Please note that all comments received are considered part of the 
public record and made available for public inspection online at http://www.regulations.gov. Information made available for public inspection 
includes personal identifying information (such as your name, address, 
etc.) voluntarily submitted by the commenter.
    If you wish to submit personal identifying information (such as 
your name, address, etc.) as part of your comment, but do not wish it 
to be posted online, you must include the phrase ``PERSONAL IDENTIFYING 
INFORMATION'' in the first paragraph of your comment. You must also 
locate all the personal identifying information that you do not want 
posted online in the first paragraph of your comment and identify what 
information you want the agency to redact. Personal identifying 
information identified and located as set forth above will be placed in 
the agency's public docket file, but not posted online.
    If you wish to submit confidential business information as part of 
your comment but do not wish it to be posted online, you must include 
the phrase ``CONFIDENTIAL BUSINESS INFORMATION'' in the first paragraph 
of your comment. You must also prominently identify confidential 
business information to be redacted within the comment. If a comment 
has so much confidential business information that it cannot be 
effectively redacted, the agency may choose not to post that comment 
(or to post that comment only partially) on http://www.regulations.gov. 
Confidential business information identified and located as set forth 
above will not be placed in the public docket file, nor will it be 
posted online.
    If you wish to inspect the agency's public docket file in person by 
appointment, please see the FOR FURTHER INFORMATION CONTACT paragraph.

II. Background

    Shortly after taking office in 2001, President George W. Bush 
signed Executive Order 13199, Establishment of White House Office of 
Faith-based and Community Initiatives, 66 FR 8499 (January 29, 2001). 
That Executive Order sought to ensure that ``private and charitable 
groups, including religious ones, . . . have the fullest opportunity 
permitted by law to compete on a level playing field'' in the delivery 
of social services. To do so, it created an office within the White 
House, the White House Office of Faith-Based and Community Initiatives 
with primary responsibility to ``establish policies, priorities, and 
objectives for the Federal Government's comprehensive effort to enlist, 
equip, enable, empower, and expand the work of faith-based and other 
community organizations to the extent permitted by law.''
    On December 12, 2002, President Bush signed Executive Order 13279, 
Equal Protection of the Laws for Faith-Based and Community 
Organizations, 67 FR 77141 (December 12, 2002). Executive Order 13279 
set forth the principles and policymaking criteria to guide Federal 
agencies in formulating and implementing policies with implications for 
faith-based organizations and other community organizations, to ensure 
equal protection of the laws for faith-based and 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 that had implications for faith-based and community 
organizations relating to their eligibility for 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 
articulated in the Order.
    Consistent with Executive Order 13279, the Department promulgated 
regulations at 38 CFR parts 50, 61, and 62 (``Parts 50, 61, and 62''). 
In particular, on September 26, 2003, VA codified Part 61, governing 
the Homeless Provider Grant and Per Diem

[[Page 2939]]

Program, as a final rule. Section 61.64 ensures that VA programs, under 
this part, are open to all qualified organizations, regardless of their 
religious character and establishes instructions for the proper uses of 
direct Federal financial assistance. VA's regulations at Parts 50 and 
62 are discussed below.
    President Obama maintained President Bush's program, but modified 
it in certain respects. Shortly after taking office, President Obama 
signed Executive Order 13498, Amendments to Executive Order 13199 and 
Establishment of the President's Advisory Council for Faith-Based and 
Neighborhood Partnerships, 74 FR 6533 (Feb. 9, 2009). This Executive 
Order changed the name of the White House Office of Faith-Based and 
Community Initiatives to the White House Office of Faith-Based and 
Neighborhood Partnerships, and it created an Advisory Council that 
subsequently submitted recommendations regarding the work of the 
Office.
    On November 10, 2010, VA published a final rule promulgating 38 CFR 
part 62, regulations implementing 38 U.S.C. 2044 by establishing a 
Supportive Services for Veteran Families (SSVF) program. 75 FR 68979. 
Through this program, VA offers grants identified in the regulations, 
that provide supportive services to very low-income veterans and 
families who are at risk for becoming homeless or who, in some cases, 
have recently become homeless. 38 CFR 62.62 provides that religious or 
faith-based organizations are eligible for supportive services grant 
funds on the same basis as any other organization.
    On November 17, 2010, President Obama signed Executive Order 13559, 
Fundamental Principles and Policymaking Criteria for Partnerships with 
Faith-Based and Other Neighborhood Organizations, 75 FR 71319 (November 
17, 2010). Executive Order 13559 made various changes to Executive 
Order 13279, which included: Making minor and substantive textual 
changes to the fundamental principles; adding a provision requiring 
that any religious social service provider refer potential 
beneficiaries to an alternative provider if the beneficiaries object to 
the first provider's religious character; adding a provision requiring 
that the faith-based provider give notice of potential referral to 
potential beneficiaries; and adding a provision that awards must be 
free of political interference and not be based on religious 
affiliation or lack thereof. An interagency working group was tasked 
with developing model regulatory changes to implement Executive Order 
13279 as amended by Executive Order 13559, including provisions that 
clarified the prohibited uses of direct financial assistance, allowed 
religious social service providers to maintain their religious 
identities, and distinguished between direct and indirect assistance. 
These efforts eventually resulted in amendments to agency regulations, 
including the Department's Part 50. This revised regulation defined 
``indirect assistance'' as government aid to a beneficiary, such as a 
voucher, that flows to a religious provider only through the genuine 
and independent choice of the beneficiary. 38 CFR 50.1(b).
    In particular, on April 4, 2016, VA published a final rule amending 
38 CFR 61.64 and 62.62 and promulgating 38 CFR part 50. 81 FR 19355. 
The regulations were amended to replace the term ``inherently religious 
activities'' with the term ``explicitly religious activities'' and 
defined the latter term in 38 CFR 50.1(a) as including activities that 
involve overt religious content such as worship, religious instruction, 
or proselytization. VA also added regulatory language to distinguish 
between direct and indirect Federal financial assistance; clarify the 
responsibilities of intermediaries; require certain notifications for 
beneficiaries when obtaining services from providers with religious 
affiliation; and provide guidance that decisions about awards of 
Federal financial assistance must be free from political interference 
or even the appearance of such interference. The rules required that 
faith-based providers, but not other providers, give notice of the 
right to an alternative provider specified in Executive Order 13559, 
along with various other rights, including nondiscrimination based on 
religion, that participation in any religious activities must be 
voluntary, that explicitly religious activities be provided separately 
from the federally funded activity, and that beneficiaries may report 
violations. The rules in Part 50 applied to social service programs as 
defined in Executive Order 13279. See 38 CFR 50.1(a). Based on this 
definition, VA determined that these rules only applied to the VA grant 
programs for homeless veterans established in 38 CFR 61 and 62.
    President Trump has given new direction to the program established 
by President Bush and continued by President Obama. On May 4, 2017, 
President Trump issued Executive Order 13798, Presidential Executive 
Order Promoting Free Speech and Religious Liberty, 82 FR 21675 (May 4, 
2017). Executive Order 13798 states that ``[f]ederal law protects the 
freedom of Americans and their organizations to exercise religion and 
participate fully in civic life without undue interference by the 
Federal Government. The executive branch will honor and enforce those 
protections.'' It directed the Attorney General to ``issue guidance 
interpreting religious liberty protections in Federal law.'' Pursuant 
to this instruction, the Attorney General, on October 6, 2017, issued 
the Memorandum for All Executive Departments and Agencies, ``Federal 
Law Protections for Religious Liberty,'' 82 FR 49668 (October 26, 2017) 
(the ``Attorney General's Memorandum on Religious Liberty'').
    The Attorney General's Memorandum on Religious Liberty emphasized 
that individuals and organizations do not give up religious liberty 
protections by providing government-funded social services, and that 
``government may not exclude religious organizations as such from 
secular aid programs . . . when the aid is not being used for 
explicitly religious activities such as worship or proselytization.''
    On May 3, 2018, President Trump signed Executive Order 13831, 
Executive Order on the Establishment of a White House Faith and 
Opportunity Initiative, 83 FR 20715 (May 3, 2018), amending Executive 
Order 13279 as amended by Executive Order 13559, and other related 
Executive Orders. Among other things, Executive Order 13831 changed the 
name of the ``White House Office of Faith-Based and Neighborhood 
Partnerships,'' as established in Executive Order 13498, to the ``White 
House Faith and Opportunity Initiative''; changed the way that 
initiative is to operate; directed departments and agencies with 
``Centers for Faith-Based and Neighborhood Partnerships'' to change 
those names to ``Centers for Faith and Opportunity Initiatives''; and 
ordered that departments and agencies without a Center for Faith and 
Opportunity Initiatives designate a ``Liaison for Faith and Opportunity 
Initiatives.'' Executive Order 13831 also eliminated the alternative 
provider referral requirement and requirement of notice thereof in 
Executive Order 13559 described above.

Alternative Provider Referral and Alternative Provider Notice 
Requirement

    Executive order 13559 imposed notice and referral burdens on faith-
based organizations not imposed on secular organizations. Section 1(b) 
of Executive Order 13559 had amended section 2 of Executive Order 
13279, entitled ``Fundamental Principles,'' by, in pertinent part, 
adding a new subsection

[[Page 2940]]

(h) to section 2. As amended, section 2(h)(i) provided: ``If a 
beneficiary or a 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, 
that organization shall, within a reasonable time after the date of the 
objection, refer the beneficiary to an alternative provider.'' Section 
2(h)(ii) directed agencies to establish policies and procedures to 
ensure that referrals are timely and follow privacy laws and 
regulations; that providers notify agencies of and track referrals; and 
that each beneficiary ``receives written notice of the protections set 
forth in this subsection prior to enrolling in or receiving services 
from such program'' (emphasis added). The reference to ``this 
subsection'' rather than to ``this Section'' indicated that the notice 
requirement of section 2(h)(ii) was referring only to the alternative 
provider provisions in subsection (h), not all of the protections in 
section 2. In 2016, the Department of Veterans Affairs revised its 
regulations to conform to Executive Order 13559. 38 CFR 50.2-50.3.
    In revising its regulations, the Department explained in 2015 that 
the revisions would implement the alternative provider provisions in 
Executive Order 13559. Executive Order 13831, however, has removed the 
alternative provider requirements articulated in Executive Order 13559. 
The Department also explained that the alternative provider provisions 
would protect religious liberty rights of social service beneficiaries. 
But, the methods of providing such protections were not required by the 
Constitution or any applicable law. Indeed, the selected methods are in 
tension with more recent Supreme Court precedent regarding 
nondiscrimination against religious organizations, with the Attorney 
General's Memorandum on Religious Liberty, and with the Religious 
Freedom Restoration Act (RFRA), 42 U.S.C. 20000bb-20000bb-4.
    As the Supreme Court recently clarified in Trinity Lutheran Church 
of Columbia, Inc. v. Comer, 137 S. Ct. 2012, 2019 (2017) (quoting 
Church of Lukumi Babalu Aye, Inc. v. Hialeah, 508 U.S. 520, 533 (1993) 
(alteration in original)): ``The Free Exercise Clause `protect[s] 
religious observers against unequal treatment' and subjects to the 
strictest scrutiny laws that target the religious for `special 
disabilities' based on their `religious status.' '' The Court in 
Trinity Lutheran added: ``[T]his Court has repeatedly confirmed that 
denying a generally available benefit solely on account of religious 
identity imposes a penalty on the free exercise of religion that can be 
justified only by a state interest `of the highest order.' '' Id. 
(quoting McDaniel v. Paty, 435 U.S. 618, 628 (1978) (plurality 
opinion); see also Mitchell v. Helms, 530 U.S. 793, 827 (2000) 
(plurality opinion) (``The religious nature of a recipient should not 
matter to the constitutional analysis, so long as the recipient 
adequately furthers the government's secular purpose.''); Attorney 
General's Memorandum on Religious Liberty, principle 6 (``Government 
may not target religious individuals or entities for special 
disabilities based on their religion.''). Applying the alternative 
provider requirement categorically to all faith-based and not to other 
providers of federally funded social services is thus in tension with 
the nondiscrimination principle articulated in Trinity Lutheran and the 
Attorney General's Memorandum on Religious Liberty.
    In addition, the alternative provider requirement could in certain 
circumstances raise concerns under RFRA. Under RFRA, where the 
government substantially burdens an entity's exercise of religion, the 
government must prove that the burden is in furtherance of a compelling 
government interest and is the least restrictive means of furthering 
that interest. 42 U.S.C. 2000bb-1(b). The World Vision OLC opinion 
makes clear that when a faith-based grant recipient carries out its 
social service programs, it may engage in an exercise of religion 
protected by RFRA and certain conditions on receiving those grants may 
substantially burden the religious exercise of the recipient. See 
Application of the Religious Freedom Restoration Act to the Award of a 
Grant Pursuant to a Juvenile Justice and Delinquency Prevention Act, 31 
O.L.C. 162, 169-71, 174-83 (June 29, 2007). Requiring faith-based 
organizations to comply with the alternative provider requirement could 
impose such a burden, such as in a case in which a faith-based 
organization has a religious objection to referring the beneficiary to 
an alternative provider that provided services in a manner that 
violated the organization's religious tenets. See Burwell v. Hobby 
Lobby Stores, Inc., 573 U.S. 682, 720-26 (2014). And it is far from 
clear that this requirement would meet the strict scrutiny that RFRA 
requires of laws that substantially burden religious practice. The 
Department is not aware of any instance in which a beneficiary has 
actually sought an alternative provider, undermining the suggestion 
that the interests this requirement serves are in fact important, much 
less compelling enough to outweigh a substantial burden on religious 
exercise. Moreover, even if the government's interest is compelling, it 
is doubtful that imposing notification and referral requirements on 
faith-based organizations is the least restrictive means of achieving 
that interest. VA often makes publicly available information about 
grant recipients that provide benefits under its programs, so VA could 
supply information to beneficiaries seeking an alternate provider.
    Executive Order 13831 chose to eliminate the alternative provider 
requirement for good reason. This decision avoids tension with the 
nondiscrimination principle articulated in Trinity Lutheran and the 
Attorney General's Memorandum on Religious Liberty, avoids problems 
with RFRA that may arise, and fits within the Administration's broader 
deregulatory agenda.

Other Notice Requirements

    As noted above, Executive Order 13559 amended Executive Order 13279 
by adding a right to an alternative provider and notice of this right.
    While Executive Order 13559's requirement of notice to 
beneficiaries was limited to notice of alternative providers, Part 50 
as recently amended goes further than Executive Order 13559 by 
requiring that faith-based social service providers funded with direct 
Federal funds provide a much broader notice to beneficiaries and 
potential beneficiaries. This requirement applies only to faith-based 
providers and not to other providers. In addition to the notice of the 
right to an alternative provider, the rule requires notice of 
nondiscrimination based on religion; that participation in religious 
activities must be voluntary and separate in time or space from 
activities funded with direct federal funds; and that beneficiaries or 
potential beneficiaries may report violations.
    Separate and apart from these notice requirements, Executive Order 
13279, as amended, clearly set forth the underlying requirements of 
nondiscrimination, voluntariness, and the holding of religious 
activities separate in time or place from any federally funded 
activity. Faith-based providers of social services, like other 
providers of social services, are required to sign assurances that they 
will follow the law and the requirements of grants and contracts they 
receive. {See, e.g., 28 CFR 38.7{time} . There is no basis on which to 
presume that they are less likely than other social service providers 
to follow the law. See Mitchell, 530 U.S. 856-57

[[Page 2941]]

(O'Connor, J. concurring) (noting that in Tilton v. Richardson, 403 
U.S. 672 (1971), the Court's upholding of grants to universities for 
construction of buildings with the limitation that they only be used 
for secular educational purposes ``demonstrate[d] our willingness to 
presume that the university would abide by the secular content 
restriction.''). There is thus no need for prophylactic protections 
that create administrative burdens on faith-based providers and that 
are not imposed on other providers.

Definition of Indirect Federal Financial Assistance

    Executive Order 13559 directed its Interagency Working Group on 
Faith-Based and Other Neighborhood Partnerships to propose model 
regulations and guidance documents regarding, among other things, ``the 
distinction between `direct' and `indirect' Federal financial 
assistance[.]'' 75 FR 71319, 71321 (2010). Following issuance of the 
Working Group's report, the 2016 joint final rule amended existing 
regulations to make that distinction, and to clarify that 
``organizations that participate in programs funded by indirect 
financial assistance need not modify their program activities to 
accommodate beneficiaries who choose to expend the indirect aid on 
those organizations' programs,'' need not provide notices or referrals 
to beneficiaries, and need not separate their religious activities from 
supported programs. 81 FR 19355, 19358 (2016). In so doing, the final 
rule attempted to capture the definition of ``indirect'' aid that the 
U.S. Supreme Court employed in Zelman v. Simmons-Harris, 536 U.S. 639 
(2002). See 81 FR 19355, 19361-62 (2016).
    In Zelman, the Court concluded that a government funding program is 
``one of true private choice''--that is, an indirect-aid program--where 
there is ``no evidence that the State deliberately skewed incentives 
toward religious'' providers. Id. at 650. The Court upheld the 
challenged school-choice program because it conferred assistance 
``directly to a broad class of individuals defined without reference to 
religion'' (i.e., parents of schoolchildren); it permitted 
participation by both religious and nonreligious educational providers; 
it allocated aid ``on the basis of neutral, secular criteria that 
neither favor nor disfavor religion''; and it made aid available ``to 
both religious and secular beneficiaries on a nondiscriminatory 
basis.'' Id. at 653-54 (quotation marks omitted). While the Court noted 
the availability of secular providers, it specifically declined to make 
its definition of indirect aid hinge on the ``preponderance of 
religiously affiliated private'' providers in the city, as that 
preponderance arose apart from the program; doing otherwise, the Court 
concluded, ``would lead to the absurd result that a neutral school-
choice program might be permissible in some parts of Ohio, . . . but 
not in'' others. Id. at 656-58. In short, the Court concluded that 
``[t]he constitutionality of a neutral . . . aid program simply does 
not turn on whether and why, in a particular area, at a particular 
time, most [providers] are run by religious organizations, or most 
recipients choose to use the aid at a religious [provider].'' Id. at 
658.
    The final rule issued after the Working Group's report included 
among its criteria for indirect Federal financial assistance a 
requirement that beneficiaries have ``at least one adequate secular 
option'' for use of the Federal financial assistance. See 81 FR 19355, 
19407-19426 (2016). In other words, the rule amended regulations to 
make the definition of ``indirect'' aid hinge on the availability of 
secular providers. A regulation defining ``indirect Federal financial 
assistance'' to require the availability of secular providers is in 
tension with the Supreme Court's choice not to make the definition of 
indirect aid hinge on the geographically varying availability of 
secular providers. Thus, it is appropriate to amend existing 
regulations to bring the definition of ``indirect'' aid more closely 
into line with the Supreme Court's definition in Zelman.

Overview of the Proposed Rule

    The Department proposes to amend Parts 50, 61, and 62 to implement 
Executive Order 13831 and conform more closely to the Supreme Court's 
current First Amendment jurisprudence; relevant federal statutes such 
as RFRA; Executive Order 13279, as amended by Executive Orders 13559 
and 13831, and the Attorney General's Memorandum on Religious Liberty.
    Consistent with these authorities, this proposed rule would amend 
Part 50 to conform to Executive Order 13279, as amended, by deleting 
the requirement that faith-based social service providers refer 
beneficiaries objecting to receiving services from them to an 
alternative provider and the requirement that faith-based organizations 
provide notices that are not required of secular organizations.
    This proposed rule would also make clear that a faith-based 
organization that participates in Department-funded programs or 
services shall retain its autonomy; right of expression; religious 
character; and independence from Federal, State, and local governments. 
It would further clarify that none of the guidance documents that the 
Department or any State or local government uses in administering the 
Department's financial assistance shall require faith-based 
organizations to provide assurances or notices where similar 
requirements are not imposed on secular organizations, and that any 
restrictions on the use of grant funds shall apply equally to faith-
based and secular organizations.
    This proposed rule would additionally require that the Department's 
notices or announcements of award opportunities and notices of awards 
or contracts include language clarifying the rights and obligations of 
faith-based organizations that apply for and receive federal funding. 
The language will clarify that, among other things, faith-based 
organizations may apply for awards on the same basis as any other 
organization; that the Department will not, in the selection of 
recipients, discriminate against an organization on the basis of the 
organization's religious exercise or affiliation; and that a faith-
based organization that participates in a federally funded program 
retains its independence from the government and may continue to carry 
out its mission consistent with religious freedom protections in 
federal law, including the Free Speech and Free Exercise Clauses of the 
First Amendment to the Constitution.
    Finally, the proposed rule would directly reference to the 
definition of ``religious exercise'' in RFRA, and would amend the 
definition of ``indirect Federal Financial assistance'' to align more 
closely with the Supreme Court's definition in Zelman.

Explanations for the Proposed Amendments to Parts 50, 61, and 62

Section 50.1
Definitions
    Proposed section 50.1 would define the terms used in Part 50. 
Provisions governing the application of these terms such as what is in 
current section 50.1(a) would be addressed in proposed section 50.2. In 
proposed section 50.1(a), VA would revise the definition of ``Direct 
Federal financial assistance'' currently defined in 38 CFR 50.1(b)(1) 
in order to provide clarity.
    In proposed section 50.1(b), current section 50.1(b)(2), defining 
indirect federal financial assistance, is to be changed and current 
section 50.1(b)(2) would be removed in order to clarify the text by 
eliminating extraneous language

[[Page 2942]]

and to align the text more closely with the First Amendment as 
described above. See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 
(2002); Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 
2012 (2017).
    Current section 50.1(c), on the recipients of subgrants, is 
proposed to be deleted and replaced with a provision clarifying that 
the coverage of ``federal financial assistance'' does not include tax 
credit, deduction, exemption, guaranty contracts, or the use of any 
assistance by any individual who is the ultimate beneficiary under any 
such program.
    Current section 50.1(d), which defines ``intermediary'', is 
proposed to be changed in order to provide clarity using the term 
``pass-through entity'' instead and to align the text more closely with 
other federal regulations. See, e.g., 28 CFR 38.3(c)(1).
    Current section 50.1(e), which governs selection by intermediaries 
of service providers to receive direct federal financial assistance, is 
proposed to be revised, moved and renumbered as section 50.2(k). 
Section 50.1(e) is proposed to be replaced with a provision clarifying 
that ``programs and services'' have the same meaning as ``social 
services program'' defined in Executive Order 13279. This is consistent 
with how that term is defined in current section 50.1(a).
    The information on intermediaries in current section 50.1(f) is 
proposed to be addressed in section 50.2. Proposed 50.1(f) would 
provide a definition of the term ``recipient.''
    The information in current section 50.1(f) is proposed to be moved 
to section 50.2(d) and changed in order to align the text more closely 
with the First Amendment and with RFRA. See, e.g., Zelman v. Simmons-
Harris, 536 U.S. 639 (2002); principles 4, 10-15, and 20 10-15 of the 
Attorney General's Memorandum on Religious Liberty, 82 FR 49668 
(October 26, 2017).
    Proposed new section 50.1(g) would define religious exercise as 
having the meaning given to the term in 42 U.S.C. 2000cc-5(7)(A) which 
states: ``In general. The term `religious exercise' includes any 
exercise of religion, whether or not compelled by, or central to, a 
system of religious belief.'' This would clarify that the agency uses 
the term ``religious exercise'' in these regulations consistent with 
the definition that applies in RFRA, see Burwell v. Hobby Lobby Stores, 
Inc., 573 U.S. 682, 696 (2014).
Section 50.2
Faith-Based Organizations and Federal Financial Assistance
    As explained above, current section 50.2, which covers beneficiary 
protections and notice to beneficiaries of those protections, is 
proposed to be removed.
    A new section 50.2(a) is proposed to be added to align text 
currently in section 50.1 more closely with the First Amendment, RFRA, 
and other VA regulations. See, e.g., Zelman v. Simmons-Harris, 536 U.S. 
639 (2002), Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. 
Ct. 2012 (2017); principles 2, 3, 6-7, 9-17, 19, and 20 of the Attorney 
General's Memorandum on Religious Liberty, 82 FR 49668 (October 26, 
2017); Exec. Order No. 13279, 67 FR 77141 (December 12, 2002), as 
amended by Exec. Order No. 13559, 75 FR 71319 (November 17, 2010), and 
Exec. Order No. 13831, 83 FR 20715 (May 8, 2018); Application of the 
Religious Freedom Restoration Act to the Award of a Grant Pursuant to 
the Juvenile Justice and Delinquency Prevention Act, 31 Op. O.L.C. 162 
(2007) (World Vision Opinion); 38 CFR 61.64(a), and 38 CFR 62.62(a). 
This new section 50.2(a) would affirm that faith-based or religious 
organizations are eligible on the same basis as any other organization 
to participate in VA awarding agency programs and services. It would 
also make clear that VA and State and local governments and pass-
through entities receiving funds under any VA awarding agency program 
or service may not, in the selection of service providers, discriminate 
for or against an organization's religious exercise or affiliation. 
Finally, it would require notices or announcements of award 
opportunities and notices of award or contracts to include language 
informing faith-based organizations of some of the protections and 
requirements under this regulation.
    Section 50.2(b) is proposed to be added to align text currently in 
section 50.1(a) more closely with the First Amendment, RFRA, and other 
federal regulations. See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 
(2002), Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 
2012 (2017); principles 2, 3, 6-7, 9-17, 19, and 20 of the Attorney 
General's Memorandum on Religious Liberty, 82 FR 49668 (October 26, 
2017); Exec. Order No. 13279, 67 FR 77141 (December 12, 2002), as 
amended by Exec. Order No. 13559, 75 FR 71319 (November 17, 2010), and 
Exec. Order No. 13831, 83 FR 20715 (May 8, 2018); 28 CFR 38.2(c), 
38.5(a); 38 CFR 61.64(b)(1) and (c), 38 CFR 62.62(b)(1) and (c).
    Section 50.2(c) is proposed to be added in order to clarify the 
text currently in section 50.1 and to align it more closely with the 
First Amendment, RFRA, and other federal regulations by providing more 
detail about the autonomy from government that a faith-based 
organization retains while participating in government programming. 
See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002), Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017); 
principles 9-15, 19, and 20 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017); Exec. Order No. 
13279, 67 FR 77141 (December 12, 2002), as amended by Exec. Order No. 
13831, 83 FR 20715 (May 8, 2018); 28 CFR part 38.5(b); 38 CFR 61.64(d), 
and 38 CFR 62.62(d).
    As noted above, current section 50.1(f) is proposed to be moved to 
section 50.2(d) and revised in order to align more closely with the 
First Amendment, RFRA, and other federal regulations. See, e.g., Zelman 
v. Simmons-Harris, 536 U.S. 639 (2002); principles 10-15 of the 
Attorney General's Memorandum on Religious Liberty, 82 FR 49668 
(October 26, 2017); 28 CFR 38.5(c). In particular, section 50.2(d) 
would permit faith-based organizations receiving indirect Federal 
financial assistance as a result of the independent choice of a 
beneficiary to require the beneficiary's attendance at all activities 
that are fundamental to the program.
    Section 50.2(e) is proposed to be added in order to align these 
regulations more closely with the First Amendment and with RFRA by 
making clear that faith-based organizations shall not be required to 
provide assurances when non-faith based organizations are not, shall be 
treated equally to non-faith based organizations, and may be eligible 
for or entitled to an accommodation under federal law while 
participating in the program. See, e.g., Trinity Lutheran Church of 
Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017)); principles 6, 7, and 
10-15 of the Attorney General's Memorandum on Religious Liberty, 82 FR 
49668 (October 26, 2017).
    Section 50.2(f) is proposed to clarify that religious organizations 
retain their exemption from the Federal prohibition on employment 
discrimination based on religion while participating in VA programs and 
in order to align more closely with other federal regulations. See, 
e.g., 28 CFR 38.5(e).
    Section 50.2(g) is proposed to clarify that if some VA grant 
programs require an organization be a nonprofit

[[Page 2943]]

organization to be eligible for funding, the funding announcements and 
grant application solicitations must specify that nonprofit status is 
required and the statutory authority for requiring such status and 
describe the documentation by which a non-profit may prove its status 
as such. In addition, this section would provide an accommodation for 
certain organizations that maintain sincerely held religious beliefs 
against application for tax exempt status under Sec.  501(c)(3) of the 
Internal Revenue Code. The Department proposes to recognize that 
organizations with sincerely-held religious beliefs that cannot apply 
for status as a 501(c)(3) tax-exempt entity may provide evidence 
sufficient to establish that the organizations would otherwise qualify 
as a nonprofit organization. This provision would be added in order to 
align more closely with RFRA and with other federal regulations. See, 
e.g., principles 10-15 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017); 28 CFR 38.5(g).
    Section 50.2(h) is proposed to be added in order to allow, but not 
require, the commingling of a recipient's own funds with VA funds, but 
would require that all commingled funds be subject to the requirements 
of Part 50. This is consistent with the current VA regulations at 38 
CFR 61.64(f) and 38 CFR 62.62(f).
    Section 50.2(i) is proposed to be added in order to include and 
clarify the requirements in section 50.4 of the current regulation and 
would align the text more closely with other federal regulations. See, 
e.g., 28 CFR 38.4(b).
    Section 50.2(j) is proposed to be added in order to ensure that VA 
and State or local governments or pass-through entities receiving funds 
under any VA awarding agency program or service do not construe these 
regulations to advantage or disadvantage historic or well-established 
religions or sects in comparison with other religions or sects in 
accordance with the First Amendment. See, e.g., Larson v. Valente, 456 
U.S. 228 (1982); principle 8 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017).
    Section 50.2(k) is proposed to be added in order to clarify the 
rights and responsibilities of pass-through entities. This would revise 
and expand on the current VA regulation at 38 CFR 50.1(e) in order to 
provide more clarity regarding these entities' rights and 
responsibilities.
Section 50.3
Beneficiary Protections; Referral Requirements
    As discussed above current section 50.3 is proposed to be deleted 
to align more closely with the First Amendment and with RFRA. See, 
e.g., See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002), Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017); 
principles 2, 3, 6-7, 9-17, 19, and 20 of the Attorney General's 
Memorandum on Religious Liberty, 82 FR 49668 (October 26, 2017); Exec. 
Order No. 13279, 67 FR 77141 (December 12, 2002), as amended by Exec. 
Order No. 13559, 75 FR 71319 (November 17, 2010), and Exec. Order No. 
13831, 83 FR 20715 (May 8, 2018).
Section 50.4
Political or Religious Affiliation
    Section 50.4 is proposed to be renumbered and clarified at Section 
50.2(i).
Appendix A and Appendix B
    A new Appendix A and Appendix B are proposed to be added in order 
to align more closely with the First Amendment and with RFRA. See, 
e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002); Trinity Lutheran 
Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017); principles 
2, 3, 6, 7, 9-17, 19, and 20 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017); Exec. Order No. 
13279, 67 FR 77141 (December 12, 2002), as amended by Exec. Order No. 
13559, 75 FR 71319 (November 17, 2010), and Exec. Order No. 13831, 83 
FR 20715 (May 8, 2018). Language substantially similar to Appendix A 
would be added to notices and announcements of award opportunities. 
Language substantially similar to Appendix B would be added to notices 
of award or contacts.
PART 61--VA HOMELESS PROVIDERS GRANT AND PER DIEM PROGRAM
Subpart F--Awards, Monitoring, and Enforcement of Agreements
Section 61.64
Faith-Based Organizations
    Section 61.64 is proposed to be revised to replace ``religious 
organizations'' with ``faith-based organizations'' including in the 
title of the section. These changes are intended to be non-substantive 
and are consistent with those proposed to be made in Parts 50 and 62. 
They are consistent with the terminology used in the relevant Executive 
Orders.
    In addition, section 61.64(b)(2) which defines ``indirect financial 
assistance'' and ``direct Federal financial assistance'' for purposes 
of the VA Homeless Providers grant and per diem program is proposed to 
be changed in order to clarify the text by eliminating extraneous 
language and to align the text more closely with the First Amendment. 
See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002); Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017).
PART 62--SUPPORTIVE SERVICES FOR VETERAN FAMILIES PROGRAM
Section 62.62
Faith-Based Organizations
    Section 62.62 is proposed to be revised to replace ``religious 
organizations'' with ``faith-based organizations'' including in the 
title of the section. These changes are intended to be non-substantive 
and are consistent with those proposed to be made in Parts 50 and 61 
and with the terminology in the relevant Executive Orders. In addition, 
non-substantive changes are proposed in section 62.62(d), (e), (f), to 
remedy errors in the current rule.
    Finally, section 62.62(b)(2), which defines ``indirect financial 
assistance'' and ``direct Federal financial assistance'' for purposes 
of the Supportive Services for Veteran Families Program, is proposed to 
be changed in order to clarify the text by eliminating extraneous 
language and to align the text more closely with the First Amendment. 
See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002); Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017).

III. Regulatory Certifications

Executive Order 12866, 13563, and 13771

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 13563 recognizes that some benefits and costs are 
difficult to quantify and provides that, where appropriate and 
permitted by law, agencies may consider and discuss qualitatively

[[Page 2944]]

values that are difficult or impossible to quantify, including equity, 
human dignity, fairness, and distributive impacts. The Department is 
issuing these proposed regulations upon a reasoned determination that 
their benefits justify their costs. In choosing among alternative 
regulatory approaches, the Department selected the approaches that it 
believes maximizes net benefits. Based on the analysis that follows, 
the Department believes that the proposed regulations are consistent 
with the principles in Executive Order 13563.
    In accordance with Executive Orders 12866 and 13563, the Department 
has assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The potential costs and cost 
savings associated with this regulatory action are those resulting from 
the removal of the notification and referral requirements of Executive 
Order 13279, as amended by Executive Order 13559 and further amended by 
Executive Order 13831, and those determined to be necessary for 
administering the Department's programs and activities. For example, 
the Department recognizes that the removal of the notice and referral 
requirements could impose some costs on beneficiaries who may now need 
to investigate alternative providers on their own if they object to the 
religious character of a potential social service provider. The 
Department invites comment on any information that it could use to 
quantify this potential cost. The Department also notes a potential 
quantifiable cost savings associated with the removal of the notice and 
referral requirements. The Department invites comment on any data by 
which it could assess the actual implementation costs of the notice and 
referral requirement--including any estimates of staff time spent on 
compliance with the requirement, in addition to the printing costs for 
the notices referenced above--and thereby accurately quantify the cost 
savings of removing these requirements.
    In terms of benefits, the Department recognizes a non-quantified 
benefit to religious liberty that comes from removing requirements 
imposed solely on faith-based organizations, in tension with the 
principles of free exercise articulated in Trinity Lutheran. The 
Department also recognizes a non-quantified benefit to grant recipients 
and beneficiaries alike that comes from increased clarity in the 
regulatory requirements that apply to faith-based organizations 
operating social-service programs funded by the federal government. 
Beneficiaries will also benefit from the increased capacity of faith-
based social-service providers to provide services, both because these 
providers will be able to shift resources otherwise spent fulfilling 
the notice and referral requirements to provision of services, and 
because more faith-based social service providers may participate in 
the marketplace once relieved of the concern of excessive governmental 
involvement.
    This proposed rule is expected to be an E.O. 13771 deregulatory 
action.
    The Office of Information and Regulatory Affairs has determined 
that this rule is a significant regulatory action under Executive Order 
12866.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities.
    The Department has determined that this rule will not have a 
significant economic impact on a substantial number of small entities. 
Although small entities participating in VA's Grant and Per Diem and 
Supportive Services for Veterans Families programs would be affected by 
this proposed rule, any economic impact would be minimal. Therefore, VA 
is exempt from the initial and final regulatory flexibility analysis 
requirements of 5 U.S.C. 603 and 604.

Executive Order 12988: Civil Justice Reform

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, ``Civil Justice Reform.'' The provisions of this proposed 
rule will not have preemptive effect with respect to any State or local 
laws, regulations, or policies that conflict with such provision or 
which otherwise impede their full implementation. The rule will not 
have retroactive effect.

Executive Order 13175: Consultation and Coordination With Indian Tribal 
Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    The Department has assessed the impact of this rule on Indian 
tribes and determined that this rule does not, to our knowledge, have 
tribal implications that require tribal consultation under Executive 
Order 13175.

Executive Order 13132: Federalism

    Executive Order 13132 directs that, to the extent practicable and 
permitted by law, an agency shall not promulgate any regulation that 
has federalism implications, that imposes substantial direct compliance 
costs on State and local governments, that is not required by statute, 
or that preempts State law, unless the agency meets the consultation 
and funding requirements of section 6 of the Executive Order. Because 
each change proposed by this rule does not have federalism implications 
as defined in the Executive Order, does not impose direct compliance 
costs on State and local governments, is required by statute, or does 
not preempt State law within the meaning of the Executive Order, the 
Department has concluded that compliance with the requirements of 
section 6 is not necessary.

Plain Language Instructions

    The Department makes every effort to promote clarity and 
transparency in its rulemaking. In any regulation, there is a tension 
between drafting language that is simple and straightforward and 
drafting language that gives full effect to issues of legal 
interpretation. The Department is proposing a number of changes to this 
regulation to enhance its clarity and satisfy the plain language 
requirements, including revising the organizational scheme and adding 
headings to make it more user-friendly. If any commenter has 
suggestions for how the regulation could be written more clearly, 
please provide comments using the contact information provided in the 
introductory section of this proposed rule entitled, FOR FURTHER 
INFORMATION CONTACT.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (at 44 U.S.C. 3507) requires 
that VA consider the impact of paperwork and other information 
collection burdens

[[Page 2945]]

imposed on the public. Under 44 U.S.C. 3507(a), an agency may not 
collect or sponsor the collection of information, nor may it impose an 
information collection requirement unless it displays a currently valid 
OMB control number. See also 5 CFR 1320.8(b)(3)(vi). This proposed rule 
includes provisions constituting the removal and discontinuance of an 
existing and approved Office of Management and Budget (OMB) control 
number. OMB control number 2900-0828, titled Equal Protection of the 
Laws for Faith-Based and Community, is proposed to be discontinued.
    Accordingly, under 44 U.S.C. 3507(d), VA has submitted a copy of 
this rulemaking action to OMB for its review. If OMB does not approve 
the discontinuation of the collection of information as requested, VA 
will immediately remove the provisions containing a collection of 
information or take such other action as is directed by OMB.
    Comments on the discontinuation of the collection of information 
contained in this proposed rule should be submitted to the Office of 
Management and Budget, Attention: Desk Officer for the Department of 
Veterans Affairs, Office of Information and Regulatory Affairs, 727 
17th St. NW, Washington, DC 20503. Comments should indicate that they 
are submitted in response to ``RIN 2900-AP75--Equal Protection of the 
Laws for Faith-Based and Community Organizations.''
    OMB may file comment on the discontinuance of the collection of 
information contained in this proposed rule within 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment to OMB is best assured of having its full effect if OMB 
receives it within 60 days of publication. This does not affect the 
deadline for the public to comment on the proposed rule.
    The Department considers comments by the public on proposed 
amendments to collections of information in--
     Evaluating whether the proposed or amended collections of 
information are necessary for the proper performance of the functions 
of the Department, including whether the information will have 
practical utility;
     Evaluating the accuracy of the Department's estimate of 
the burden of the proposed or amended collections of information, 
including the validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be amended or collected; and
     Minimizing the burden of the collections of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    The collection of information being discontinued is described 
immediately following this paragraph, under its title.
    Title: Equal Protection of the Laws for Faith-Based and Community 
Organizations.
     Summary of collection of information: The new collection 
of information in proposed 38 CFR 50.2 would require faith-based or 
religious organizations that receive VA financial assistance in 
providing social services to beneficiaries to provide to beneficiaries 
(or prospective beneficiaries) written notice informing them of certain 
protections.
     Description of need for information and proposed use of 
information: The collection(s) of information is necessary to (1) Allow 
beneficiaries to obtain services from non faith-based organizations; 
(2) Allow beneficiaries to report violation of VA procedures regarding 
faith-based organizations.
     Description of likely respondents: Veterans and family 
members.
     Estimated number of respondents: 190,700.
     Estimated frequency of responses: We estimate that 0.1% of 
beneficiaries would request alternative placements: 1,907 
beneficiaries.
     Estimated average burden per response: 2 minutes.
     Estimated total annual reporting and recordkeeping burden: 
64 hours.

----------------------------------------------------------------------------------------------------------------
                                   Number of           Number of          Number of                   Number of
            VA form               respondents    x     responses    x      minutes          /           hours
----------------------------------------------------------------------------------------------------------------
Written Notices for                   190,700              1,907                  2       by 60 =            64
 Beneficiary Rights...........
----------------------------------------------------------------------------------------------------------------

    In VA's 2017 Information Collection Request package, we estimated 
that the annual burden would be 64 hours. To determine the estimated 
annual burden costs savings to respondents as a result of discontinuing 
the existing collection of information, VA used general wage data from 
the May 2017 Bureau of Labor Statistics (BLS) website, https://www.bls.gov/oes/current/oes_nat.htm, VA used the BLS wage code of ``00-
0000 All Occupations, which has a mean hourly wage/salary workers of 
$24.98. VA estimates the total annual burden costs savings to 
respondents to be $1,598.72 ($24.98 per hour * 64 burden hours).

Unfunded Mandates Reform Act

    Section 4(2) of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1503(2), excludes from coverage under that Act any proposed or final 
Federal regulation that ``establishes or enforces any statutory rights 
that prohibit discrimination on the basis of race, color, religion, 
sex, national origin, age, handicap, or disability.'' Accordingly, this 
rulemaking is not subject to the provisions of the Unfunded Mandates 
Reform Act.

List of Subjects

38 CFR Part 50

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Day care, Dental health, Drug abuse, Government contracts, Grant 
programs--health, Grant programs--veterans, Health care, Health 
facilities, Health professions, Health records, Homeless, Mental health 
programs, Per-diem program, Reporting and recordkeeping requirements, 
Travel and transportation expenses, Veterans.

38 CFR Part 61

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Day care, Dental health, Drug abuse, Government contracts, Grant 
programs--health, Grant programs--veterans, Health care, Health 
facilities, Health professions, Health records, Homeless, Mental health 
programs, Reporting and recordkeeping requirements, Travel and 
transportation expenses, Veterans.

38 CFR Part 62

    Administrative practice and procedure, Day care, Disability 
benefits, Government contracts, Grant programs--health, Grant 
programs--housing and community development, Grant programs--Veterans, 
Health care, Homeless, Housing, Indians--lands, Individuals with 
disabilities, Low and moderate income housing, Manpower

[[Page 2946]]

training programs, Medicaid, Medicare, Public assistance programs, 
Public housing, Relocation assistance, Rent subsidies, Reporting and 
recordkeeping requirements, Rural areas, Social security, Supplemental 
Security Income (SSI), Travel and transportation expenses, Unemployment 
compensation.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Pamela 
Powers, Chief of Staff, Department of Veterans Affairs, approved this 
document on September 20, 2019, for publication.

Consuela Benjamin,
Regulation Development Coordinator, Office of Regulation Policy & 
Management, Office of the Secretary, Department of Veterans Affairs.

    Accordingly, for the reasons set forth in the preamble, the 
Secretary proposes to amend parts 50, 61, and 62 of title 38 of the 
Code of Federal Regulations, respectively, as follows:

PART 50--RELIGIOUS AND COMMUNITY ORGANIZATIONS: PROVIDING 
BENEFICIARY PROTECTIONS TO POLITICAL OR RELIGIOUS AFFILIATION

0
1. Part 50 is revised to read as follows:

PART 50--EQUAL TREATMENT FOR FAITH-BASED ORGANIZATIONS

Sec.
50.1 Definitions.
50.2 Faith-based organizations and Federal financial assistance.
Appendix A to Part 50--Notice or Announcement of Award 
Opportunities.
Appendix B to Part 50--Notice of Award or Contract.

    Authority: 38 U.S.C. 501 and as noted in specific sections.


Sec.  50.1   Definitions.

    (a) Direct Federal financial assistance, Federal financial 
assistance provided directly, direct funding, or directly funded means 
financial assistance received by an entity selected by the government 
or pass-through entity (under this part) to carry out a service (e.g., 
by contract, grant, or cooperative agreement). References to ``Federal 
financial assistance'' will be deemed to be references to direct 
Federal financial assistance, unless the referenced assistance meets 
the definition of ``indirect Federal financial assistance'' or 
``Federal financial assistance provided indirectly.''
    (b) Indirect Federal financial assistance or Federal financial 
assistance provided indirectly means financial assistance received by a 
service provider when the service provider is paid for services by 
means of a voucher, certificate, or other means of government-funded 
payment provided to a beneficiary who is able to make a choice of a 
service provider. Federal financial assistance provided to an 
organization is considered ``indirect'' within the meaning of the 
Establishment Clause of the First Amendment to the U.S. Constitution 
when--
    (1) The government program through which the beneficiary receives 
the voucher, certificate, or other similar means of government funded 
payment is neutral toward religion; and
    (2) The organization receives the assistance as a result of a 
genuine, independent choice of the beneficiary.
    (c) Federal financial assistance does not include a tax credit, 
deduction, exemption, guaranty contracts, or the use of any assistance 
by any individual who is the ultimate beneficiary under any such 
program.
    (d) Pass-through entity means an entity, including a nonprofit or 
nongovernmental organization, acting under a contract, grant, or other 
agreement with the Federal Government or with a State or local 
government, such as a State administering agency, that accepts direct 
Federal financial assistance as a primary recipient or grantee and 
distributes that assistance to other organizations that, in turn, 
provide government-funded social services.
    (e) Programs or services has the same definition as ``social 
service program'' in Executive Order 13279.
    (f) Recipient means a non-Federal entity that receives a Federal 
award directly from a Federal awarding agency to carry out an activity 
under a Federal program. The term recipient does not include 
subrecipients, but does include pass-through entities.
    (g) Religious exercise has the meaning given to the term in 42 
U.S.C. 2000cc-5(7)(A).


Sec.  50.2   Faith-based organizations and Federal financial 
assistance.

    (a) Faith-based organizations are eligible, on the same basis as 
any other organization and considering any permissible accommodation, 
to participate in any VA awarding agency program or service. Neither 
the VA awarding agency nor any State or local government or other pass-
through entity receiving funds under any VA awarding agency program or 
service shall, in the selection of service providers, discriminate for 
or against an organization on the basis of the organization's religious 
exercise or affiliation. Notices or announcements of award 
opportunities and notices of award or contracts shall include language 
substantially similar to that in Appendix A and B, respectively, to 
this part.
    (b) Organizations that receive direct financial assistance from a 
VA awarding agency may not engage in any explicitly religious 
activities (including activities that involve overt religious content 
such as worship, religious instruction, or proselytization) as part of 
the programs or services funded with direct financial assistance from 
the VA awarding agency, or in any other manner prohibited by law. 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 VA awarding agency, and 
participation must be voluntary for beneficiaries of the programs or 
services funded with such assistance. The use of indirect Federal 
financial assistance is not subject to this restriction. Nothing in 
this part restricts the VA's authority under applicable Federal law to 
fund activities, such as the provision of chaplaincy services, that can 
be directly funded by the Government consistent with the Establishment 
Clause.
    (c) A faith-based organization that participates in programs or 
services funded by a VA awarding agency will retain its autonomy; right 
of expression; religious character; and independence from Federal, 
State, and local governments, and may continue to carry out its 
mission, including the definition, development, practice, and 
expression of its religious beliefs. A faith-based organization that 
receives direct Federal financial assistance may use space in its 
facilities to provide programs or services funded with financial 
assistance from the VA awarding agency without concealing, removing, or 
altering religious art, icons, scriptures, or other religious symbols. 
In addition, a faith-based organization that receives Federal financial 
assistance from a VA awarding agency does not lose the protections of 
law. Such a faith-based organization retains its authority over its 
internal governance, and it may retain religious terms in its name, 
select its board members on the basis of their acceptance of or 
adherence to the religious tenets of the organization, and include 
religious references in its mission statements and other governing 
documents.


[[Page 2947]]


    Note 1 to paragraph (c): Memorandum for All Executive 
Departments and Agencies, From the Attorney General, ``Federal Law 
Protections for Religious Liberty'' (Oct. 6, 2017) (describing 
federal law protections for religious liberty).

    (d) An organization that receives direct or indirect Federal 
financial assistance shall not, with respect to services, or, in the 
case of direct Federal financial assistance, outreach activities funded 
by such financial assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of 
religion, a religious belief, a refusal to hold a religious belief, or 
a refusal to attend or participate in a religious practice. However, an 
organization receiving indirect Federal financial assistance need not 
modify its program activities to accommodate a beneficiary who chooses 
to expend the indirect aid on the organization's program and may 
require attendance at all activities that are fundamental to the 
program.
    (e) A faith-based organization is not rendered ineligible by its 
religious exercise or affiliation to access and participate in 
Department programs. No grant document, agreement, covenant, memorandum 
of understanding, policy, or regulation that is used by a VA awarding 
agency or a State or local government in administering Federal 
financial assistance from any VA awarding agency shall require faith-
based organizations to provide assurances or notices where they are not 
required of non-faith-based organizations. Any restrictions on the use 
of grant funds shall apply equally to faith-based and non-faith-based 
organizations. All organizations that participate in VA awarding agency 
programs or services, including organizations with religious character 
or affiliations, must carry out eligible activities in accordance with 
all program requirements, subject to any required or appropriate 
religious accommodation, and other applicable requirements governing 
the conduct of activities funded by any VA awarding agency, including 
those prohibiting the use of direct financial assistance to engage in 
explicitly religious activities. No grant document, agreement, 
covenant, memorandum of understanding, policy, or regulation that is 
used by the VA awarding agency or a State or local government in 
administering financial assistance from the VA awarding agency shall 
disqualify faith-based organizations from participating in the VA 
awarding agency's programs or services because such organizations are 
motivated or influenced by religious faith to provide social services, 
or because of their religious exercise or affiliation.
    (f) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, 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 Federal 
financial assistance from a VA awarding agency. An organization 
qualifying for such exemption may select its employees on the basis of 
their acceptance of or adherence to the religious tenets of the 
organization. Some VA awarding agency programs, however, contain 
independent statutory provision affecting a recipient's ability to 
discriminate in employment. Recipients should consult with the 
appropriate VA awarding agency program office if they have questions 
about the scope of any applicable requirement, including in light of 
any additional constitutional or statutory protections for employment 
decisions that may apply.
    (g) In general, VA awarding agencies do not require that a 
recipient, including a faith-based organization, obtain tax-exempt 
status under section 501(c)(3) of the Internal Revenue Code to be 
eligible for funding under VA awarding agency programs. Some 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 VA awarding agency program office 
to determine the scope of any applicable requirements. In VA awarding 
agency 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;
    (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; or
    (5) For an entity that holds a sincerely-held religious belief that 
it cannot apply for a determination as an entity that is tax-exempt 
under section 501(c)(3) of the Internal Revenue Code, evidence 
sufficient to establish that the entity would otherwise qualify as a 
nonprofit organization under paragraphs (g)(2) through (g)(4) of this 
section.
    (h) If a recipient contributes its own funds in excess of those 
funds required by a matching or grant agreement to supplement VA 
awarding agency-supported activities, the recipient has the option to 
segregate those additional funds or commingle them with the Federal 
award funds. If the funds are commingled, the provision of this part 
shall apply to all of the commingled funds in the same manner, and to 
the same extent, as the provisions apply to the Federal funds. With 
respect to the matching funds, the provisions of this part apply 
irrespective of whether such funds are commingled with Federal funds or 
segregated.
    (i) Decisions about awards of Federal financial assistance must be 
made on the basis of merit, not on the basis of the religious 
affiliation, or lack thereof, of a recipient organization, and must be 
free from political interference or even the appearance of such 
interference.
    (j) Neither the VA awarding agency nor any State or local 
government or other pass-through entity receiving funds under any VA 
awarding agency program or service shall construe these provisions in 
such a way as to advantage or disadvantage faith-based organizations 
affiliated with historic or well-established religions or sects in 
comparison with other religions or sects.
    (k) If a pass-through entity, acting under a contract, grant, or 
other agreement with the Federal Government or with a State or local 
government that is administering a program supported by Federal 
financial assistance, is given the authority under the contract, grant, 
or agreement to select non-governmental organizations to provide 
services funded by the Federal Government, the pass-through entity must 
ensure compliance

[[Page 2948]]

with the provisions of this part and any implementing regulations or 
guidance by the sub-recipient. If the pass-through entity is a non-
governmental organization, it retains all other rights of a non-
governmental organization under the program's statutory and regulatory 
provisions.

Appendix A to Part 50--Notice or Announcement of Award Opportunities

    Faith-based organizations may apply for this award on the same 
basis as any other organization, as set forth at and, subject to the 
protections and requirements of part 50 and 42 U.S.C. 2000bb et 
seq., the Department will not, in the selection of recipients, 
discriminate against an organization on the basis of the 
organization's religious exercise or affiliation.
    A faith-based organization that participates in this program 
will retain its independence from the government and may continue to 
carry out its mission consistent with religious freedom protections 
in federal law, including the Free Speech and Free Exercise Clauses 
of the First Amendment, 42 U.S.C. 2000bb et seq., 42 U.S.C. 238n, 42 
U.S.C. 18113, 42 U.S.C. 2000e-1(a) and 2000e-2(e), 42 U.S.C. 
12113(d), and the Weldon Amendment, among others. Religious 
accommodations may also be sought under many of these religious 
freedom protection laws.
    A faith-based organization may not use direct financial 
assistance from the Department to support or engage in any 
explicitly religious activities except where consistent with the 
Establishment Clause of the First Amendment and any other applicable 
requirements. Such an organization also may not, in providing 
services funded by the Department, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of 
religion, a religious belief, a refusal to hold a religious belief, 
or a refusal to attend or participate in a religious practice.

Appendix B to Part 50--Notice of Award or Contract

    A faith-based organization that participates in this program 
retains its independence from the government and may continue to 
carry out its mission consistent with religious freedom protections 
in federal law, including the Free Speech and Free Exercise clauses 
of the Constitution, 42 U.S.C. 2000bb et seq., 42 U.S.C. 238n, 42 
U.S.C. 18113, 42 U.S.C. 2000e-1(a) and 2000e-2(e), 42 U.S.C. 
12113(d), and the Weldon Amendment, among others. Religious 
accommodations may also be sought under many of these religious 
freedom protection laws.
    A faith-based organization may not use direct financial 
assistance from the Department to support or engage in any 
explicitly religious activities except when consistent with the 
Establishment Clause and any other applicable requirements. Such an 
organization also may not, in providing services funded by the 
Department, discriminate against a program beneficiary or 
prospective program beneficiary on the basis of religion, a 
religious belief, a refusal to hold a religious belief, or a refusal 
to attend or participate in a religious practice.

PART 61--VA HOMELESS PROVIDERS GRANT AND PER DIEM PROGRAM

0
2. The authority citation for part 61 continues to read as follows:

    Authority: 38 U.S.C. 501, 2001, 2002, 2011, 2012, 2013, 2061, 
2064.

0
3. Revise Sec.  61.64 to read as follows:


Sec.  61.64  Faith-Based Organizations.

    (a) Organizations that are faith-based are eligible, on the same 
basis as any other organization, to participate in VA programs under 
this part. 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 or lack thereof.
    (b)(1) No organization may use direct financial assistance from VA 
under this part to pay for any of the following:
    (i) Explicitly religious activities such as, religious worship, 
instruction, or proselytization; or
    (ii) Equipment or supplies to be used for any of those activities.
    (2) For purposes of this section, ``Indirect financial assistance'' 
means Federal financial assistance in which a service provider receives 
program funds through a voucher, certificate, agreement or other form 
of disbursement, as a result of the genuine, independent choice of a 
private beneficiary. ``Direct Federal financial assistance'' means 
Federal financial assistance received by an entity selected by the 
government or a pass-through entity as defined in 38 CFR 50.1(d) to 
provide or carry out a service (e.g., by contract, grant, or 
cooperative agreement). References to ``financial assistance'' will be 
deemed to be references to direct Federal financial assistance, unless 
the referenced assistance meets the definition of ``indirect Federal 
financial assistance'' in this paragraph.
    (c) Organizations that engage in explicitly religious activities, 
such as worship, religious instruction, or proselytization, must offer 
those services separately in time or location from any programs or 
services funded with direct financial assistance from VA, and 
participation in any of the organization's explicitly religious 
activities must be voluntary for the beneficiaries of a program or 
service funded by direct financial assistance from VA.
    (d) A faith-based organization that participates in VA programs 
under this part will retain its independence from Federal, state, or 
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 VA under 
this part to support any explicitly religious activities, such as 
worship, religious instruction, or proselytization. Among other things, 
faith-based organizations may use space in their facilities to provide 
VA-funded services under this part, without concealing, removing, or 
altering religious art, icons, scripture, or other religious symbols. 
In addition, a VA-funded faith-based organization retains its authority 
over its internal governance, and it may retain religious terms in its 
organization's name, select its board members and otherwise govern 
itself on a religious basis, and include religious reference in its 
organization's mission statements and other governing documents.
    (e) An organization that participates in a VA program under this 
part shall not, in providing direct program assistance, discriminate 
against a program beneficiary or prospective program beneficiary 
regarding housing, supportive services, or technical assistance, on the 
basis of religion or religious belief.
    (f) If a state or local government voluntarily contributes its own 
funds to supplement Federally funded activities, the state or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this provision applies to 
all of the commingled funds.
    (g) To the extent otherwise permitted by Federal law, the 
restrictions on explicitly religious activities set forth in this 
section do not apply where VA funds are provided to faith-based 
organizations through indirect assistance as a result of a genuine and 
independent private choice of a beneficiary, provided the faith-based 
organizations otherwise satisfy the requirements of this part. A faith-
based 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 a similar funding 
mechanism provided to that beneficiary and designed to give that 
beneficiary a choice among providers.

PART 62--SUPPORTIVE SERVICES FOR VETERAN FAMILIES PROGRAM

0
4. The authority citation for part 61 continues to read as follows:


[[Page 2949]]


    Authority: 38 U.S.C. 501, 2044, and as noted in specific 
sections.

0
5. Revise Sec.  62.62 to read as follows:


Sec.  62.62   Faith-Based Organizations

    (a) Organizations that are faith-based are eligible, on the same 
basis as any other organization, to participate in the Supportive 
Services for Veteran Families Program under this part. 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 or lack thereof.
    (b)(1) No organization may use direct financial assistance from VA 
under this part to pay for any of the following:
    (i) Explicitly religious activities such as, religious worship, 
instruction, or proselytization; or
    (ii) Equipment or supplies to be used for any of those activities.
    (2) For purposes of this section, ``Indirect financial assistance'' 
means Federal financial assistance in which a service provider receives 
program funds through a voucher, certificate, agreement or other form 
of disbursement, as a result of the genuine, independent choice of a 
private beneficiary. ``Direct Federal financial assistance'' means 
Federal financial assistance received by an entity selected by the 
government or a pass-through entity as defined in 38 CFR 50.1(d) to 
provide or carry out a service (e.g., by contract, grant, or 
cooperative agreement). References to ``financial assistance'' will be 
deemed to be references to direct Federal financial assistance, unless 
the referenced assistance meets the definition of ``indirect Federal 
financial assistance'' in this paragraph.
    (c) Organizations that engage in explicitly religious activities, 
such as worship, religious instruction, or proselytization, must offer 
those services separately in time or location from any programs or 
services funded with direct financial assistance from VA under this 
part, and participation in any of the organization's explicitly 
religious activities must be voluntary for the beneficiaries of a 
program or service funded by direct financial assistance from VA under 
this part.
    (d) A faith-based organization that participates in the Supportive 
Services for Veteran Families Program under this part will retain its 
independence from Federal, state, or 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 VA under this part to support any 
explicitly religious activities, such as worship, religious 
instruction, or proselytization. Among other things, faith-based 
organizations may use space in their facilities to provide VA-funded 
services under this part, without concealing, removing, or altering 
religious art, icons, scripture, or other religious symbols. In 
addition, a VA-funded faith-based organization retains its authority 
over its internal governance, and it may retain religious terms in its 
organization's name, select its board members and otherwise govern 
itself on a religious basis, and include religious reference in its 
organization's mission statements and other governing documents.
    (e) An organization that participates in a VA program under this 
part shall not, in providing direct program assistance, discriminate 
against a program beneficiary or prospective program beneficiary 
regarding housing, supportive services, or technical assistance, on the 
basis of religion or religious belief.
    (f) If a state or local government voluntarily contributes its own 
funds to supplement Federally funded activities, the state or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this provision applies to 
all of the commingled funds.
    (g) To the extent otherwise permitted by Federal law, the 
restrictions on explicitly religious activities set forth in this 
section do not apply where VA funds are provided to faith-based 
organizations through indirect assistance as a result of a genuine and 
independent private choice of a beneficiary, provided the faith-based 
organizations otherwise satisfy the requirements of this part. A faith-
based 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 a similar funding 
mechanism provided to that beneficiary and designed to give that 
beneficiary a choice among providers.

[FR Doc. 2019-26756 Filed 1-16-20; 8:45 am]
BILLING CODE 8320-01-P