[Federal Register Volume 85, Number 12 (Friday, January 17, 2020)]
[Proposed Rules]
[Pages 2974-2987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26923]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 87 and 1050

RIN 0991-AC13


Ensuring Equal Treatment of Faith-Based Organizations

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would amend the Department of Health and 
Human Services' (``Department'') general regulations to implement 
Executive Order 13831, on the Establishment of a White House Faith and 
Opportunity Initiative. This proposed rule proposes changes to provide 
clarity about the rights and obligations of faith-based organizations 
participating in Department programs, clarify the Department's guidance 
documents for financial assistance with regard to faith-based 
organizations, and eliminate certain requirements for faith-based 
organizations that no longer reflect executive branch guidance or 
Supreme Court precedent. This proposed rulemaking is intended to ensure 
that the Department's 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 HHS on or before February 18, 2020.

ADDRESSES: You may submit comments to this proposed rule, identified by 
RIN 0991-AC13, by any of the following methods:
     Federal eRulemaking Portal. You may submit electronic 
comments at http://www.regulations.gov by searching for the Docket ID 
number HHS-OS-2019-0012. Follow the instructions at http://www.regulations.gov online for submitting comments through this method.
     Regular, Express, or Overnight Mail: You may mail comments 
to U.S. Department of Health and Human Services, Center for Faith and 
Opportunity Initiatives (Partnership Center), Attention: Equal 
Treatment NPRM, RIN 0991-AC13, Hubert H. Humphrey Building, Room 747D, 
200 Independence Avenue SW, Washington, DC 20201.
     Hand Delivery/Courier: You may hand deliver comments to 
the U.S. Department of Health and Human Services, Center for Faith and 
Opportunity Initiatives, Attention: Equal Treatment NPRM, RIN 0991-
AC13, Hubert H. Humphrey Building, Room 747D, 200 Independence Avenue 
SW, Washington, DC 20201.
    All comments received by the methods and due date specified above 
will be posted without change to http://www.regulations.gov, including 
any personal information provided, and such posting may occur before or 
after the closing of the comment period.
    The Department will consider all comments received by the date and 
time specified in the DATES section above; but, because of the large 
number of public comments we normally receive on Federal Register 
documents, it is not able to provide individual acknowledgements of 
receipt.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery or security delays. Electronic 
comments with attachments should be in Microsoft Word or Excel; 
however, we prefer Microsoft Word.
    Please note that comments submitted by fax or email and those 
submitted after the comment period will not be accepted.
    Docket: For complete access to background documents or posted 
comments, go to http://www.regulations.gov and search for Docket ID 
number HHS-OS-2019-0012.

FOR FURTHER INFORMATION CONTACT: Center for Faith and Opportunity 
Initiatives at 202-260-6501.

SUPPLEMENTARY INFORMATION: 

I. 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

[[Page 2975]]

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 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 Orders 13199 and 13279, on July 9, 2004, 
the Department of Health and Human Services (``HHS'' or ``Department'') 
promulgated regulations at 45 CFR part 87 (``Part 87''), 69 FR 42586 
(July 16, 2004). These regulations implemented the executive branch 
policy set forth in those Executive Orders that, within the framework 
of constitutional guidelines, religiously affiliated organizations 
should be able to compete on an equal footing with other organizations 
for the Department's funding without impairing the religious character 
of such organizations. The rulemaking created a new regulation on Equal 
Treatment for Faith-Based Organizations, and revised Department 
regulations to remove barriers to the participation of faith-based 
organizations in Department programs and to ensure that these programs 
were implemented in a manner consistent with applicable statutes, 
including the Religious Freedom Restoration Act (``RFRA''), and the 
requirements of the Constitution, including the Establishment, Free 
Exercise, and Free Speech Clauses of the First Amendment.
    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 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, including: Making both 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 regulations at Title 45 of the Code of 
Federal Regulations, part 87. The revised regulations 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. 45 CFR 87.1(c).
    On August 6, 2015, HHS issued a notice of proposed rulemaking to 
amend 45 CFR part 87 to comport with Executive Order 13559. 80 FR 47271 
(August 6, 2015). This notice of proposed rulemaking proposed to 
clarify what constitutes direct and indirect financial assistance; 
changed ``inherently religious activities'' to ``explicitly religious 
activities''; required faith-based recipients to provide beneficiaries 
with written notices with respect to certain rights, including the 
right to a referral if the beneficiary objects to the faith-based 
organization's religious character; and provided that decisions about 
awards of Federal financial assistance must be made based on merit 
without political interference. Id. at 47272. Eight other Federal 
agencies issued similar notices of proposed rulemaking (the ``2015 
NPRMs''). On April 4, 2016, one joint final rule was issued to finalize 
all nine of the 2015 NPRMs issued in response to Executive Order 13559. 
81 FR 19355 (April 4, 2016). As applicable to HHS, This joint final 
rule:
    (1) Required HHS to ensure that decisions about Federal financial 
assistance are made without political interference and without respect 
to recipient organizations' religious affiliation;
    (2) made clear that faith-based organizations are eligible to 
participate in social service programs on the same basis as any other 
private organization;
    (3) replaced the term ``inherently religious activities'' with the 
term ``explicitly religious activities'' in existing regulations as the 
basis for determining which activities cannot be supported with direct 
Federal financial assistance;
    (4) prohibited recipients of direct Federal financial assistance, 
but not indirect Federal financial assistance, from discriminating 
against beneficiaries in the provision of program services and in 
outreach activities relating to those services based on religion, a 
religious belief, a refusal to hold a religious belief, or a refusal to 
attend or participate in a religious practice;
    (5) distinguished between ``direct'' and ``indirect'' Federal 
financial assistance;
    (6) required faith-based providers--but not other providers--that 
receive direct Federal financial assistance under a domestic social 
service program to provide written notice to program beneficiaries and 
potential beneficiaries of various rights, including nondiscrimination 
based on religion, the requirement that participation in any religious 
activities must be voluntary and that they must be provided separately 
from the Federally funded activities, and that beneficiaries may report 
violations; and

[[Page 2976]]

    (7) required faith-based recipients of domestic direct social 
service program assistance to undertake reasonable efforts to identify 
an alternative provider if a beneficiary or prospective beneficiary 
objects to the religious character of the faith-based organization and, 
if such an alternative provider is available, to refer the beneficiary 
to an identified alternative provider and to make a record of the 
referral. See 81 FR at 19426-28.
    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 ``Federal 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 the 
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 that 
had been mandated in Executive Order 13559.

A. 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 (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 revised its 
regulations to conform to Executive Order 13559. 81 FR 19355.
    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 both 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. 2000bb-2000bb-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 providers, but 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 implications 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). 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

[[Page 2977]]

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.
    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.

B. 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 87, 
as most 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. See 45 CFR 87.3(i); 45 
CFR 1050.3(h) (incorporating the requirements of 45 CFR 87.3(i) by 
cross-reference).
    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 follow the law and the 
requirements and conditions applicable to the grants and contracts they 
receive. 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. at 856-57 (O'Connor, J., concurring in judgment) 
(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, therefore, no 
need for prophylactic protections that create administrative burdens on 
faith-based providers that are not imposed on similarly situated 
secular providers.

C. 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 
executive branch 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 at 19358, 19426-28. 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 at 19361-62.
    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 at 
19407-19426. In other words, the rule amended regulations to make the 
definition of ``indirect'' aid hinge on the availability of secular 
providers. See 81 FR at 19426 (definition in part 87). 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.

D. Overview of the Proposed Rule

    The Department proposes to amend Part 87 to implement Executive 
Order 13831 and conform more closely to the Supreme Court's current 
First Amendment jurisprudence; relevant federal statutes such as the 
RFRA; Executive Order 13279, as amended by Executive Orders 13559 and 
13831; and the Attorney General's Memorandum on Religious Liberty.

[[Page 2978]]

    Consistent with these authorities, this proposed rule would amend 
Part 87 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 would clarify that, among other things, faith-based 
organizations may apply for awards on the same basis as any other 
organization; that the Department would 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 
would 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 to the Constitution.
    Finally, the proposed rule would directly reference 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.

E. Explanations for the Proposed Amendments to 45 CFR Part 87

1. Section 87.1 Definitions
a. Scope of Definitions
    The Department proposes to delete Sec.  87.1(a) as unnecessary and 
potentially confusing. The definition section of 45 CFR part 87, by 
convention, applies only to part 87. By specifying that a definition 
provided for part 87 may be defined differently in other statutes or 
regulations, Sec.  87.1(a) only introduces ambiguity as to whether 
definitions found in other statutes or regulations may supersede the 
definition provided in Sec.  87.1(a) for purposes of part 87, which was 
not intended and is potentially confusing. By removing Sec.  87.1(a), 
it should be clear that definitions provided in Sec.  87.1 apply for 
purposes of part 87, while not implying that these definitions 
supersede other definitions provided elsewhere in Federal law or 
regulation or that those definitions would supersede the definitions 
provided in Sec.  87.1 when interpreting part 87.
b. Definition of ``Direct Federal Financial Assistance,'' ``Federal 
Financial Assistance Provided Directly'' and ``Direct Funding''
    The Department proposes to re-number Sec.  87.1(b) as Sec.  87.1(a) 
and revise the definitions of ``direct Federal financial assistance,'' 
``Federal financial assistance provided directly,'' and ``direct 
funding'' to recognize that those terms refer to the direct funding 
itself, while maintaining the concepts in the current definition. Thus, 
the proposed revision to the definitions of ``direct Federal financial 
assistance,'' ``Federal financial assistance provided directly,'' and 
``direct funding'' are not intended to change the meanings of those 
terms as they are used in part 87, but rather to be more clear and more 
grammatically correct.
c. Definition of ``Directly Funded''
    The Department proposes to add a new Sec.  87.1(b) to define 
``directly funded'' as ``funded using direct Federal financial 
assistance.'' Previously, ``directly funded'' was included with the 
definitions of ``direct Federal financial assistance,'' ``Federal 
financial assistance provided directly,'' and ``direct funding'' in 
Sec.  87.1(b), but as ``directly funded'' is an adjective instead of a 
noun, including it in the terms defined in proposed Sec.  87.1(a) would 
introduce unnecessary confusion. The Department proposes to define 
``directly funded'' as ``funded using Direct Federal financial 
assistance.''
d. Definition of ``Indirect Federal Financial Assistance'' and 
``Federal Financial Assistance Provided Indirectly''
    The Department proposes to amend Sec.  87.1(c) to recognize that 
the terms ``indirect Federal financial assistance'' and ``Federal 
financial assistance provided indirectly'' refer to the indirect 
funding itself, while maintaining the concepts in the introductory 
language in the current Sec.  87.1(c). Thus, the Department would 
define the terms to mean ``financial assistance received by a service 
provider when the service provider is paid for services rendered 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.'' This proposed definition would remove limits on 
funding that are inconsistent with the First Amendment as the Supreme 
Court has interpreted it. See, e.g., Zelman, 536 U.S. 639; Trinity 
Lutheran Church of Columbia, 137 S. Ct. 2012. In particular, present 
Sec.  87.1(c)(1)(iii) limits the definition of the term to situations 
in which ``the beneficiary has at least one adequate secular option for 
the use of the voucher, certificate, or other similar means of 
Government-funded payment.'' Under the present rule, if there is a 
geographical region lacking a ``secular option'' for the use of the 
Government-provided payment, the Department would have to avoid 
distribution of benefits within that region. This requirement, however, 
violates the Supreme Court's admonition that the constitutionality of 
such programs should not depend on geography or ``whether and why'' a 
beneficiary chooses a particular program. Zelman, 536 U.S. at 656-58.
    The Department proposes to eliminate paragraphs (1)(i) and (ii) and 
(2) of the definition. Paragraph (1) of the current definition 
identifies when federal financial assistance provided to an 
organization is considered indirect. Because the proposed definition 
would define the terms by reference to the indirect funding itself, a 
separate listing of the elements that make Federal financial assistance 
indirect is unnecessary. For example, paragraph (1)(ii) is unnecessary: 
That an ``organization receives the assistance as a result of a 
decision of the beneficiary, not a decision of the government'' is 
self-evident from the aspect of the proposed definition that ``the 
service provider is paid for services rendered by means of a voucher, 
certificate, or other means of government-funded payment provided to a 
beneficiary who is able to

[[Page 2979]]

make a choice of a service provider.'' The Department proposes to 
eliminate paragraph (2) of the current definition because it is 
redundant with the definition of ``direct Federal financial 
assistance.''
e. Clarification of ``Federal Financial Assistance''
    The Department proposes to add a new Sec.  87.1(d) \1\ in order to 
clarify that ``Federal financial assistance'' does not include a tax 
credit, deduction, exemption, or guaranty contract. The section also 
clarifies that the beneficiary's use of assistance is not federal 
financial assistance: When a beneficiary acquires a good or service 
with the financial assistance they have received from the government, 
the vendor of that good or service is not receiving federal financial 
assistance.
---------------------------------------------------------------------------

    \1\ As discussed below, the Department proposes to renumber 
Sec. Sec.  87.1(d) and (e) as Sec. Sec.  87.1(e) and (f).
---------------------------------------------------------------------------

f. Definition of ``Pass-Through Entity''
    The Department proposes to re-number Sec.  87.1(d) as Sec.  87.1(e) 
and to revise the definition of ``pass-through entity'' in order to 
provide clarity, as the current definition of ``pass-through entity'' 
uses the terms ``subaward'' and ``subrecipient,'' terms that may need 
further definition for those not familiar with government funding 
mechanisms. The proposed definition would eliminate the use of those 
terms and, instead, define ``pass-through entity'' as an entity that 
accepts direct Federal financial assistance as a primary recipient or 
grantee and then distributes that assistance to other organizations 
that, in turn, provide government-funded social services. For similar 
reasons and to provide greater specificity, the proposed definition 
would not use the term ``non-Federal entity,'' but rather ``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.'' 
The proposed definition is not intended to change the meaning of the 
term.
g. Definition of ``Recipient''
    The Department proposes to re-number Sec.  87.1(e) as Sec.  87.1(f) 
and to revise the definition of ``recipient'' to clarify that the term 
``recipient'' includes pass-through entities.
h. Definition of ``Religious Exercise''
    The Department proposes to add Sec.  87.1(g) to define ``religious 
exercise'' for purposes of part 87 as having the definition used in the 
Religious Land Use and Individualized Persons Act of 2000 (RLUIPA), 42 
U.S.C. 2000cc-5(7)(A). Namely, ``religious exercise'' would ``include[ 
] any exercise of religion, whether or not compelled by, or central to, 
a system of religious belief.'' The Department proposes to use the 
RLUIPA definition of ``religious exercise'' because that is the 
definition used by Congress in both RLUIPA and RFRA. Thus, that 
definition has been interpreted by courts in analyzing those two 
statutes, which provides an extensive legal framework that can be used 
in understanding what does or does not constitute religious exercise.
2. Section 87.3 Faith-Based Organizations and Federal Financial 
Assistance
a. Proposed Section 87.3(a)
    The Department proposes to amend Sec.  87.3(a) to avoid confusion 
and to clarify the extent of protections available for faith-based 
organizations that would like to participate in government programs. 
Specifically, the Department proposes to revise this paragraph to refer 
to only ``faith-based organizations,'' instead of ``faith-based or 
religious organizations'': The term ``faith-based organizations'' 
encompasses ``religious organizations,'' and including both terms could 
be misinterpreted as implying a difference between ``faith-based 
organizations'' and ``religious organizations'' while, in fact, the 
terms are used interchangeably.
    The Department also proposes to revise Sec.  87.3(a), by inserting, 
as the second sentence of the provision, recognition of the 
government's obligation to provide religious accommodations where 
consistent with Federal law, the Attorney General's Memorandum on 
Religious Liberty, and the Religion Clauses of the First Amendment to 
the U.S. Constitution. The Department also proposes to change the terms 
``religious character or affiliation'' to ``religious affiliation or 
exercise.'' This change is intended to provide clarity as many Federal 
religious civil rights laws--as well as the First Amendment to the U.S. 
Constitution--protect religious ``exercise'' and there is, therefore, a 
body of law providing legal guidance on protecting religious exercise, 
which does not exist with respect to the term ``character.'' Using 
unique terms in Sec.  87.3(a) additionally creates confusion because it 
could be presumed that ``religious character'' means something 
different than ``religious affiliation'' or ``exercise,'' but it is 
unclear what that distinction would be. By changing ``religious 
character or affiliation'' to ``religious affiliation or exercise,'' 
Sec.  87.3(a) becomes more consistent with similar protections in 
Federal law, and preexisting legal structures can be used in 
interpreting Sec.  87.3(a).
    The Department proposes to delete the last sentence of the current 
section 87.3(a)--that ``program'' refers to activities supported by 
discretionary, formula, or block grants--because this statement could 
be misunderstood and is redundant. Section 87.2 explains in detail the 
scope of part 87, including certain discretionary, formula, and block 
grants that are exempted from the provisions of part 87. The simple 
statement that ``program'' in section 87.3(a) refers to activities 
supported by ``discretionary, formula or block grants'' could be 
misinterpreted as asserting that all activities supported by such 
grants are ``programs'' covered by section 87.3, but this understanding 
would be inaccurate, as section 87.2 makes clear. Because section 87.2 
provides the correct scope of applicability of part 87, the additional 
statement in section 87.3(a) is more confusing than helpful.
    Finally, the Department proposes to include a requirement that 
notices or announcements of award opportunities and notices of awards 
or contracts, issued by HHS awarding agencies, shall include language 
similar to those found in appendices to the proposed rule, which serve 
as notice to potential recipients of federal financial assistance of 
certain protections afforded to them under federal law. See, e.g., 
principles 6, 10-15, and 20 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017); 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''). This change is intended to ensure 
that faith-based organizations are aware of their legal protections so 
that they will not fail to participate in government programs because 
of confusion about what options are available to them and to ensure 
that pass-through entities are aware of legal protections that apply to 
faith-based subrecipients.
b. Proposed Section 87.3(b)
    The Department proposes to revise Sec.  87.3(b) to increase clarity 
and to avoid violating the constitutional rights of faith-based 
organizations. Specifically, the Department proposes to apply Sec.  
87.3(b) only to organizations that ``receive'' direct Federal financial 
assistance, instead of to organizations that ``apply for or receive'' 
such

[[Page 2980]]

assistance. Nothing in Sec.  87.3(b), which relates to the use of 
direct Federal financial assistance, is relevant to organizations that 
apply for direct Federal financial assistance or have applied to 
participate in government programs, but have not received any direct 
Federal financial assistance. Including ``apply for'' in Sec.  87.3(b) 
only discourages organizations from applying to participate in 
government programs without cause.
    The Department also proposes to revise the prohibition, in the 
first sentence of the provision, that organizations may not ``support 
or engage in any explicitly religious activity'' as part of a program 
or service funded with direct Federal financial assistance, to state, 
instead, that organizations may not ``engage in'' such activity. The 
inclusion of the word ``support'' is vague and overly broad, and may 
encompass protected activity. For example, if a faith-based 
organization provides addiction counseling that is funded through 
direct Federal financial assistance and provides attendees a map of the 
location that labels a room as a ``chapel,'' would providing that map 
to program participants raise claims that the organization is 
``supporting'' its explicitly religious activities because a program 
participant may see that the facility includes a chapel and thereby 
engage in such religious activity? Prohibiting organizations from 
``engaging in'' explicitly religious activity is sufficient to prevent 
any impermissible uses of direct Federal financial assistance.
    The balance of Sec.  87.3(b) would be unchanged by this proposed 
rule.
c. Proposed Section 87.3(c)
    The Department proposes to revise Sec.  87.3(c), which clarifies 
that faith-based organizations receiving Federal financial assistance 
may do so while fully retaining their religious character. 
Specifically, the Department proposes to change ``faith-based or 
religious organization'' to ``faith-based organization'' for the 
reasons described above.
    The Department also proposes to explain, in the first sentence of 
Sec.  87.3(c), the protections that faith-based organizations maintain 
against being compelled to change their religious identity or mission 
as a result of accepting direct Federal financial assistance, by 
explicitly recognizing that faith-based organizations retain their 
autonomy, right of expression, and religious character--in addition to 
the present statement that faith-based organizations retain their 
independence from Federal, state, and local governments. The Department 
additionally proposes to amend the clause, ``including the definition, 
practice, and expression of its religious beliefs,'' to ``including the 
definition, development, practice, and expression of its religious 
beliefs.'' The added term ``development'' clarifies that faith-based 
organizations that receive Federal financial assistance can continue 
the development of their religious beliefs, and not merely expressions 
or practice of their religious beliefs. The Department does not propose 
to change the phrase ``religious character'' to ``religious affiliation 
or exercise'' as proposed in Sec.  87.3(a), because this sentence 
already explicitly references the autonomy, definition, development, 
practice, and expression of religious beliefs.
    The Department proposes to delete the clause, ``provided that it 
does not use direct financial assistance from an HHS awarding agency 
(including through a prime or sub-award) to support or engage in any 
explicitly religious activities (including activities that involve 
overt religious content such as worship, religious instruction, or 
proselytization)'' as redundant. The scrupulous repetition of the 
restrictions placed on faith-based entities each time the Department 
explains what they are free to do gives the impression that the 
Department is conflicted about the participation of such entities. The 
Department welcomes the participation of faith-based entities in its 
programs.
    The Department also proposes to change the sentence, ``A faith-
based or religious organization may use space in its facilities to 
provide programs or services funded with financial assistance from the 
HHS awarding agency without removing religious art, icons, scriptures, 
or other religious symbols,'' to ``A faith-based organization may use 
space in its facilities to provide programs or services funded with 
financial assistance from the HHS awarding agency without concealing, 
removing, or altering religious art, icons, scriptures, or other 
religious symbols.'' The proposed addition of the terms ``concealing'' 
and ``altering'' would clarify that the rule protects against not only 
the removal of religious items, but also seemingly less burdensome or 
permanent actions such as concealing or altering those items. This 
proposed addition would further explain the freedom that faith-based 
entities have to receive federal funding and operate without 
interference with their religious mission, and that federal funding is 
not a pretext for the government to interfere with the religious 
mission of a faith-based entity.
    In the third sentence of Sec.  87.3(c), the Department proposes to 
insert reference to the fact that, by virtue of the receipt of federal 
financial assistance, a faith-based organization would not lose the 
protections of law described in the Attorney General's Memorandum on 
Federal Law Protections for Religious Liberty. The Attorney General's 
memorandum speaks directly to the protections of Federal statutory and 
constitutional law with respect to faith-based organizations that seek 
to participate in governmental programs.
    The Department also proposes to modify the statement (in that same 
sentence) that a faith-based organization may ``select its board 
members on a religious basis'' to ``select its board members on the 
basis of their acceptance of or adherence to the religious tenets of 
the organization.'' This proposed change would provide greater clarity 
as to the nature of faith-based organizations' right to select board 
members on a religious basis.
    Finally, the Department proposes to delete the clause, ``in 
accordance with all program requirements, statutes, and other 
applicable requirements governing the conduct of HHS funded 
activities'' as redundant. This redundancy risks giving faith-based 
entities the impression that there are conditions on the preceding 
language, which could have a chilling effect on their participation.
d. Proposed Section 87.3(d)
    The Department proposes to revise Sec.  87.3(d) to clarify when an 
entity receiving Federal financial assistance may operate in a 
religion-specific manner.
    The Department proposes to change the applicability description, in 
the first sentence of Sec.  87.3(d), from ``an organization that 
participates in any programs funded by financial assistance from an HHS 
awarding agency'' to ``an organization that receives direct or indirect 
Federal financial assistance.'' Mere participation in programs that are 
funded by the government does not implicate Sec.  87.3(d), but rather 
it is the receipt of Federal financial assistance that implicates Sec.  
87.3(d).
    The Department also proposes to remove the word ``outreach'' from 
the first sentence of Sec.  87.3(d) to avoid violating the First 
Amendment rights of recipients. The use of ``outreach'' in the present 
Sec.  87.3(d) is ambiguous, and could be read to prohibit an 
organization from providing information about its programs in contexts 
that have primarily religious audiences. For

[[Page 2981]]

example, the present Sec.  87.3(d) could be read to prohibit a church 
from including an addiction assistance program that receives Federal 
financial assistance in a list of church programs provided in a church 
newsletter if that newsletter primarily reaches church members, even 
though the church may be advertising its addiction assistance program 
in non-religious contexts as well. Prohibiting a house of worship from 
providing information about programs to its members impermissibly 
interferes with its free speech rights and its right to internal 
governance.
    The second sentence of Sec.  87.3(d) provides that ``an 
organization that participates in a program funded by indirect 
financial assistance need not modify its program activities to 
accommodate a beneficiary who chooses to expend the indirect aid on the 
organization's program.'' The Department proposes to amend this 
sentence by adding the clause, ``and may require attendance at all 
activities that are fundamental to the program.'' The proposed addition 
of this clause would clarify the previous statement and ensure that a 
beneficiary of indirect Federal financial assistance remains free to 
choose to participate in a program that includes a mandatory religious 
element. See 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).
e. Proposed Section 87.3(e)
    The Department proposes to revise Sec.  87.3(e) to use language 
consistent with that used in the rest of part 87 and to ensure that 
assurance or notice requirements are not imposed on faith-based 
organizations that are not imposed on other organizations. 
Specifically, the Department proposes to change the first sentence, 
``No grant document, agreement, covenant, memorandum of understanding, 
policy, or regulation that is used by an HHS awarding agency or a State 
or local government in administering financial assistance from the HHS 
awarding agency shall require only faith-based or religious 
organizations to provide assurances that they will not use monies or 
property for explicitly religious activities,'' to ``No grant document, 
agreement, covenant, memorandum of understanding, policy, or regulation 
used by an HHS awarding agency or a State or local government in 
administering Federal financial assistance from the HHS awarding agency 
shall require faith-based organizations to provide assurances or 
notices where they are not required of non-faith-based organizations.'' 
This revision is necessary to ensure that faith-based organizations are 
not subject to additional burdens not required of non-faith-based 
organizations. Requiring that faith-based organizations provide 
assurances or notices that are not required of other organizations, 
solely distinguished by the organizations' being faith-based or not, 
may violate the Religion Clauses of the First Amendment.
    For reasons described above and to use consistent language 
throughout part 87, the Department also proposes to change references, 
in Sec.  87.3(e), to ``religious organizations'' or ``faith-based or 
religious organizations'' to ``faith-based organizations'' and to use 
the phrase ``religious affiliation or exercise'' instead of ``religious 
character or affiliation.''
    The Department also proposes to recognize that requirements on 
organizations to carry out particular program requirements is subject 
to required or permitted accommodations, by inserting a parenthetical 
``(except where modified or exempted by any required or appropriate 
accommodations)'' into the third sentence of Sec.  87.3(e). This 
proposed addition would not be a substantive change; such 
accommodations may or must already be granted when permitted or 
provided for by law, but the inclusion of an explicit recognition of 
this legal protection ensures that protected organizations are aware 
that such legal protections exist. See Trinity Lutheran Church of 
Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017); principles 5, 6, 7, 8, 
10-15, and 20 of the Attorney General's Memorandum on Religious 
Liberty, 82 FR 49668 (October 26, 2017). The Department notes that the 
nature of particular religious accommodations and the conditions under 
which such accommodations may or must be provided varies dependent on 
relevant statutes and contexts. For instance, RFRA ``requires the 
government to show that it cannot accommodate the religious adherent 
while achieving its interest through a viable alternative, which may 
include, in certain circumstances, expenditure of additional funds, 
modification of existing exemptions, or creation of a new program'' 
(principle 14 of the Attorney General's Memorandum on Religious 
Liberty), while Title VII's employment nondiscrimination protections 
require employers to provide religious accommodations ``except when an 
employer can establish that a particular aspect of such observance or 
practice cannot reasonably be accommodated without undue hardship to 
the business'' (principle 17 of the Attorney General's Memorandum on 
Religious Liberty). Because of the diverse religious accommodations 
that may be implicated, the Department is unsure whether including a 
definition of ``religious accommodation'' would provide clarity or 
confusion. The Department solicits comment on whether the rule should 
include a definition of ``religious accommodation,'' and, if so, how 
the Department should define the term.
f. Proposed Section 87.3(f)
    The Department proposes to revise Sec.  87.3(f) to use language 
consistent with that used in the rest of part 87, to clarify the 
meaning of the religious hiring exemption, and to provide further 
information about statutory provisions that impose certain 
nondiscrimination requirements on all recipients in particular 
programs. Specifically, for the reasons described above, the Department 
proposes to use the term ``faith-based organization'' instead of 
``faith-based or religious organization'' in Sec.  87.3(f).
    The Department also proposes to clarify, by revising the statutes 
cited in section 87.3(f) to include 42 U.S.C. 2000e-2 and 42 U.S.C. 
12113(d)(2) and by adding a new second sentence to section 87.3(f), 
that faith-based organizations may select their employees ``on the 
basis of their acceptance of or adherence to the religious tenets of 
the organization.'' This proposed clarification is based on those 
statutory descriptions of religious employment exemptions and ensures 
that faith-based organizations understand the scope of the religious 
employment exemption. See 42 U.S.C. 12113(d)(2).
    The Department additionally proposes to revise the statement, in 
the current second and third sentences of section 87.3(f), regarding 
independent statutory requirements with respect to discrimination in 
employment, to more generally provide notice that particular programs 
may have independent statutory requirements that are applicable to all 
recipients and to expand the suggestion that organizations consult with 
the appropriate HHS awarding agency with respect to how these 
independent requirements affect their participation in government 
programs and how they interact with other constitutional or statutory 
protections. To accomplish this revision, the Department proposes to 
delete the present second sentence of section 87.3(f) and to expand the 
third sentence of section 87.3(f) to make clear

[[Page 2982]]

that the suggestion of consulting with the appropriate HHS awarding 
agency program office extends to questions ``in light of any additional 
constitutional or statutory protections or requirements that may 
apply.'' See E.O. 13279, 67 FR 77141 (December 12, 2002), as amended by 
E.O. 13831, 83 FR 20715 (May 8, 2018); principles 9-15, 19, and 20 of 
the Attorney General's Memorandum on Religious Liberty, 82 FR 49668 
(October 26, 2017).
g. Proposed Section 87.3(g)
    The Department proposes to revise Sec.  87.3(g) to use language 
consistent with that used in the rest of part 87 and to avoid 
discriminating against certain non-profit organizations that maintain 
sincerely held religious beliefs against registering as Sec.  501(c)(3) 
entities. Specifically, for the reasons described above, the Department 
proposes to use the term ``faith-based organization'' instead of 
``faith-based or religious organization'' in Sec.  87.3(g). The 
Department also proposes to recognize that organizations that can 
establish that they would otherwise qualify as a nonprofit organization 
but that abstain from applying for a determination as tax-exempt under 
section 501(c)(3) of the Internal Revenue Code for religious reasons 
are nevertheless entitled to participate in programs that are limited 
to nonprofit organizations. The Department proposes to do this by 
adding Sec.  87.3(g)(5) to provide that, if an HHS program requires an 
applicant to establish that it is a nonprofit organization, it is 
permissible to submit, ``[f]or 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 under any of paragraphs (g)(1) through (g)(4) of 
this section.''
h. Proposed Deletion of Current Section 87.3(i)
    The Department proposes to delete Sec.  87.3(i), which requires 
that faith-based organizations--and only faith-based organizations--
provide written notice to beneficiaries and potential beneficiaries of 
various rights, including nondiscrimination based on religion, the 
requirement that participation in any religious activities must be 
voluntary and that they must be provided separately from the Federally 
funded activities, and that beneficiaries may report violations. The 
Department proposes to delete section 87.3(i) to comport with the new 
direction of Executive Order 13831 and to avoid violating the First 
Amendment to the U.S. Constitution. See 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); E.O. 13279, 67 FR 77141 (December 12, 2002), as 
amended by E.O. 13559, 75 FR 71319 (November 17, 2010), and E.O. 13831, 
83 FR 20715 (May 8, 2018).
    Present sections 87.3(j) and (k) require faith-based recipients of 
domestic direct social service program assistance to undertake 
reasonable efforts to identify an alternative provider if a beneficiary 
or prospective beneficiary objects to the religious character of the 
faith-based organization and, if such an alternative provider is 
available, to refer the beneficiary to an identified alternative 
provider and to make a record of the referral. If an alternative 
provider is not available, the faith-based organization must so notify 
the recipient or the HHS awarding agency. The Department proposes to 
delete sections 87.3(j) and (k) to comport with the new direction of 
Executive Order 13831 and to avoid violating the First Amendment to the 
U.S. Constitution. See 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); E.O. 13279, 67 FR 77141 (December 12, 2002), as amended by E.O. 
13559, 75 FR 71319 (November 17, 2010), and E.O. 13831, 83 FR 20715 
(May 8, 2018).
i. Proposed Section 87.3(i)
    The Department proposes to renumber Sec.  87.3(l) as Sec.  87.3(i) 
and to revise Sec.  87.3(i) as newly redesignated by clarifying that it 
applies to direct Federal financial assistance and by rearranging the 
clauses for better clarity.
j. Proposed Section 87.3(j)
    The Department proposes to add a new Sec.  87.3(j) to ensure that 
all faith-based organizations are treated equally, regardless of 
whether they are affiliated with a historic or well-established 
denomination or are not affiliated with such a denomination. 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). New Sec.  87.3(j) would provide that ``[n]either the HHS 
awarding agency nor any State or local government or other pass-through 
entity receiving funds under any HHS 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.''
3. Appendix A and Appendix B to Part 87
    The Department proposes to add a new Appendix A and Appendix B to 
provide language that all HHS awarding agencies would include in their 
notices or announcements of award opportunities (Appendix A) and in 
their notices of awards or contracts (Appendix B). The texts of these 
appendices are intended to provide notices to faith-based organizations 
of their legal protections and obligations with respect to their 
application for and receipt of HHS awards.

II. Regulatory Impact Analysis

    The Department has examined the impacts of the proposed rule as 
required by Executive Order 12866 on Regulatory Planning and Review, 58 
FR 51735 (Oct. 4, 1993); Executive Order 13563 on Improving Regulation 
and Regulatory Review, 76 FR 3821 (Jan. 21, 2011); Executive Order 
13132 on Federalism, 64 FR 43255 (Aug. 4, 1999); Executive Order 13175 
on Tribal Consultation, 65 FR 67249 (Nov. 6, 2000); Executive Order 
13771 on Reducing Regulation and Controlling Costs, 82 FR 9339 (Jan. 
30, 2017); the Congressional Review Act, Public Law 104-121, sec. 251, 
110 Stat. 847 (Mar. 29, 1996); the Unfunded Mandates Reform Act of 
1995, Public Law 104-4, 109 Stat. 48 (Mar. 22, 1995); the Regulatory 
Flexibility Act, Public Law, 96-354, 94 Stat. 1164 (Sept. 19, 1980); 
Executive Order 13272 on Proper Consideration of Small Entities in 
Agency Rulemaking, 67 FR 53461 (Aug. 16, 2002); Executive Order 12250, 
Leadership and Coordination of Nondiscrimination Laws, 45 FR 72995 
(Nov. 2, 1980), the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et 
seq.; and the Plain Writing Act, Public Law 111-274, 124 Stat. 2861 
(Oct. 13, 2010).

A. Executive Order 12866--Regulatory Planning and Review

    Under Executive Order 12866, the Office of Information and 
Regulatory Affairs (OIRA) must determine whether this regulatory action 
is ``significant'' and, therefore, subject to the requirements of the 
Executive Order and subject to review by the Office of Management and 
Budget (OMB). Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action''

[[Page 2983]]

as an action likely to result in a regulation that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or communities 
(also referred to as an ``economically significant'' regulation);
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in 
Executive Order 12866.
    OIRA has determined that this proposed rule is a significant, but 
not economically significant, regulatory action subject to review by 
OMB under section 3(f) of Executive Order 12866. Accordingly, OMB has 
reviewed this proposed rule.

B. Executive Order 13563--Improving Regulation and Review

    In accordance with section 1(b) of Executive Order 13563, the 
Department has (1) determined that the benefits of the proposed rule 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailored this proposed rule to impose the 
least burden on society, consistent with obtaining regulatory 
objectives, and taking into account--among other things and to the 
extent practicable--the costs of cumulative regulations; (3) selected, 
among alternative regulatory approaches, the approach that maximizes 
net benefits (including potential economic, environmental, public 
health and safety, and other advantages; distributive impacts; and 
equity); (4) specified performance objectives, rather than the behavior 
or manner of compliance that regulated entities must adopt, to the 
extent feasible; and (5) identified and assessed available alternatives 
to direct regulation, including providing economic incentives--such as 
user fees or marketable permits--to encourage the desired behavior, or 
providing information that enables the public to make choices.
1. Assessment of Benefits and Burdens
    The Department estimates that the proposed rule's overall economic 
impact will be de minimis. This proposed action would eliminate minor 
costs that have been incurred by faith-based organizations as they 
complied with the requirements of section 2(b) of Executive Order 
13559, while not adding any other requirements on those organizations. 
The rule would also generate non-quantifiable benefits by adding 
clarity to part 87's requirements and by alleviating inconsistencies 
between the current part 87 and controlling case law and agency 
guidance.
    The 2016 rule imposed various requirements solely on faith-based 
and religious organizations. Those requirements included the obligation 
to (1) give beneficiaries written notice information of their 
protections when seeking or obtaining services provided by a faith-
based or religious organization and supported by directed HHS financial 
assistance,\2\ (2) at the beneficiary's request, make reasonable 
efforts to identify and refer the beneficiary to an alternative 
provider to which the beneficiary has no objection,\3\ (3) document 
such action,\4\ and (4) in the event that the provider is unable to 
provide such a referral, notify the prime recipient entity from which 
the provider receives funds.\5\ Less than two months after the 
effective date of the 2016 rule, the Supreme Court clarified in Trinity 
Lutheran that ``[t]he 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.''' (quoting Church of Lukumi Babalu 
Aye, Inc. v. Hialeah, 508 U.S. 520, 533 (internal quotation marks 
omitted)). The Attorney General issued a Memorandum on Religious 
Liberty in 2017 reaffirming this principle, noting, inter alia, that 
``Government may not target religious individuals or entities for 
special disabilities based on their religion.''
---------------------------------------------------------------------------

    \2\ 45 CFR 87.3(i)(1).
    \3\ 45 CFR 87.3(j).
    \4\ 45 CFR 87.3(k).
    \5\ Id.
---------------------------------------------------------------------------

    The requirements imposed solely on faith-based and religious social 
service providers in the current part 87 constitutes special 
disabilities on faith-based and religious social service providers 
based on their status as faith-based or religious entities that are 
impermissible under the Free Exercise Clause as interpreted in Trinity 
Lutheran and other controlling Supreme Court precedents. Accordingly, 
the Department action in this proposed rule is necessary to better 
align 45 CFR part 87 with controlling case law and agency guidance on 
the subject of religious liberty.
    Similarly, the 2016 rule implemented a definition of ``indirect 
Federal financial assistance'' that creates tension between part 87 and 
a controlling Supreme Court ruling, in a manner that is less protective 
of religious liberty than the ruling. In Zelman v. Simmons-Harris, 536 
U.S. 639 (2002), the Supreme Court specifically declined to make its 
definition of indirect aid hinge on the proportion of faith-based or 
religious providers to secular providers in a particular area. 
Nonetheless, the 2016 rule adopted as a criteria for its definition of 
``indirect Federal financial assistance'' the requirement that 
beneficiaries have ``at least one adequate secular option'' for use of 
the Federal financial assistance they receive. 45 CFR 87.1(c)(1)(iii); 
see 81 FR 19355, 19407-19426 (2016). Accordingly, the changes that 
would be made by this proposed rule are necessary to better align 45 
CFR part 87 with controlling case law in this respect as well.
    The Department is also concerned that the current part 87 does not 
provide faith-based and religious organizations with adequate clarity 
regarding the protections afforded to them by Federal law. For 
instance, the current part 87 does not adequately explain to what 
extent the government is obligated to provide accommodations for such 
organizations. Part 87 also states that HHS awarding agencies, States, 
local governments, and other pass-through entities may not discriminate 
on the basis of a faith-based organization's religious ``character,'' 
which could be read to imply, incorrectly, under the canon of 
interpretation that expressio unius est exclusio alterius, that 
discrimination on the basis of an organization's religious exercise is 
permissible to the extent such exercise is distinct from its religious 
character.
    The Department believes the only cost that could theoretically 
arise from the removal of part 87's referral requirements would be the 
opportunity cost borne by beneficiaries who request such a referral, 
but who do not receive one, of locating an alternative social service 
provider. However, nothing in this proposed rule would prevent a faith-
based social service provider from making such a referral.
    The 2016 rule estimated that 1,372 beneficiaries per year would 
request referrals from faith-based or religious social service 
providers. 81 FR 19403 (incorporating the Paperwork Reduction Act 
analysis performed in the proposed rule at 80 FR 47278). Although the 
2016 rule has been in effect since May 4, 2016, the Department is not 
aware of having received any reports of any

[[Page 2984]]

providers' inability to provide referrals to beneficiaries.
    One possible explanation for the lack of such reports is that 
Department's estimate of 1,372 requests for referrals was accurate, yet 
all requested referrals were provided successfully, so no such report 
was ever necessary. However, the Department believes this is unlikely 
to be the case.
    It is instructive to consider the Department's experience with the 
referral reporting requirements in the Charitable Choice regulations 
governing the substance abuse service programs funded by the Substance 
Abuse and Mental Health Services Administration (SAMHSA) under titles V 
and XIX of the Public Health Service Act, 42 U.S.C. 290aa et seq. and 
42 U.S.C. 300x-21 et seq.\6\ Those regulations require recipients of 
assistance from SAMHSA to provide notice to beneficiaries of their 
ability under statute to request an alternative service provider, and 
to report all referrals--not just referrals that are requested, but 
that the provider cannot provide--to the appropriate Federal, State, or 
local government agency that administers the SAMHSA program.\7\ To 
date, SAMHSA has not received any reports of referral by recipients or 
subrecipients. The Department concludes, based on the absence of such 
reports, that few if any referrals have been requested.
---------------------------------------------------------------------------

    \6\ 42 CFR 54, 54a.
    \7\ 42 CFR 54.8(c)(4), 54a.8(c)(iv).
---------------------------------------------------------------------------

    SAMHSA's grants for substance abuse service programs fund 670 
providers per year. The Department is unaware of any reason that the 
proportion of faith-based or religious organizations receiving such 
grants from SAMHSA would be materially different from the proportion of 
faith-based organizations receiving funds subject to this rulemaking. 
Using the 2016 rule's estimate that 10% of providers subject to this 
rulemaking are faith-based or religious organizations, the Department 
estimates that 67 of SAMHSA-funded providers are faith-based in nature. 
The Department does not believe that any differences between the nature 
of SAMHSA's substance abuse service programs and the social service 
programs subject to this rulemaking could generate a material 
difference in the frequency of requests for referrals to alternative 
providers.
    In light of the absence of any reports under the 2016 rule of 
inability to provide referrals to alternative providers, and the 
absence of any reports of any referrals at all under the SAMHSA 
Charitable Choice regulations since their issuance in 2003, the 
Department believes that the 2016 rule dramatically overestimated the 
number of requests by beneficiaries for referrals from faith-based 
social service providers. The Department believes, instead, that such 
requests are very rare, if in fact they occur at all. This conclusion 
is also supported by the lack of any evidence cited in the 2016 rule to 
indicate that beneficiaries were in fact requesting such referrals. To 
the extent such requests do occur, the Department assumes that some 
percentage of faith-based social service providers will nonetheless 
provide them, even if not required to do so by law or regulation. The 
Department accordingly estimates that the total costs this proposed 
rule will impose on beneficiaries are de minimis, and possibly zero.
    The Department requests comment on the assumptions and methods of 
its estimate of the costs of the proposed rule, including any data, 
studies, or reports that may assist the Department in quantifying the 
proposed rule's costs.
    Consistent with the Department's reasoning that the proposed rule's 
elimination of the 2016 rule's referral requirements would, at most, 
generate only de minimis costs on beneficiaries, the Department 
estimates that the removal of the referral requirements would, at most, 
generate only de minimis benefits for faith-based social service 
providers.
    The Department notes a quantifiable cost savings of the proposed 
removal of the notice requirements, which the Department previously 
estimated as imposing a cost of no more than $100 per organization per 
year for the notices. See 80 FR 47277; 81 FR 19402. The Department 
invites comment on any data by which it could assess the actual 
implementation costs of the notice 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.
    The primary benefit expected from the proposed rule is a non-
quantifiable benefit to religious liberty that comes from removing 
requirements imposed solely on faith-based organizations, in tension 
with the Constitution, the principles of free exercise articulated in 
Trinity Lutheran, and the Attorney General's Memorandum on Religious 
Liberty. The Department also recognizes a non-quantifiable 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.
2. Cost-Effective Design
    The Department has concluded that the proposed rule utilizes the 
most cost-effective means of achieving the proposed rule's objectives.
3. Objectives
    The Department has concluded that the proposed rule cannot feasibly 
set performance objectives.
4. Regulatory Alternatives
    The Department carefully considered alternatives to this proposed 
rule, including making no or more limited changes, but concluded that 
the proposed approach is the best means of achieving the primary goals 
of the rule--protecting religious liberty, and reconciling the tensions 
between the current part 87, on the one hand, and the constitutional 
protection of religious exercise, as set forth in Trinity Lutheran and 
the Attorney General's Memorandum on Religious Liberty, on the other.
    The crux of the Department's concern with the current part 87 is 
that it places special obligations on faith-based and religious 
organizations based solely on their faith-based or religious character. 
The proposed rule corrects this problem by removing such obligations. 
The clearest alternative approach would have been to place the same 
obligations on secular social service providers as well. However, as 
demonstrated above, the Department is unaware of any evidence that the 
notice and referral requirements of the current part 87 serve any 
actual need or desire of the beneficiaries of the programs subject to 
part 87. Therefore, the Department determined that it would be 
inappropriate to apply those requirements to more entities.
    The Department also considered whether to require the prime 
recipients of funds subject to part 87 to ensure that beneficiaries are 
informed of their options for alternative providers. However, for the 
same reason--the apparent lack of any significant desire for such 
information among beneficiaries--the Department determined that the 
imposition of such a regulatory burden could not be justified.
    The Department invites comment on its proposed approach, as well as 
other approaches to ensure that the Department's funding of social 
service programs respects religious freedom, while serving the needs of 
beneficiaries of those programs.

[[Page 2985]]

C. Executive Order 13771--Reducing Regulation and Controlling 
Regulatory Costs

    This proposed rule is expected to be an E.O. 13771 deregulatory 
action.

D. Executive Order 13132--Federalism

    This proposed rule is deregulatory in nature--the purpose of the 
rule is to remove Federal restrictions and requirements, not to impose 
them. If, however, a state has enacted restrictions or requirements 
similar to those previously mandated by the Federal government, this 
rule does not preempt them, nor does it prohibit their enforcement. The 
Department has determined that each change proposed by this rule would 
not have federalism implications, impose substantial direct compliance 
costs on State or local governments that are not required by statute, 
or preempt State law, within the meaning of the Executive Order 13132.

E. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments

    The Department has assessed the impact of this proposed rule on 
Indian tribes and determined that this proposed rule would not 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. In accordance with E.O. 13563, the 
Department also has determined that this proposed (de)regulatory action 
would not unduly interfere with State, local, or tribal governments in 
the exercise of their governmental functions.

F. Executive Order 12988--Civil Justice Reform

    The provisions of this proposed rule would 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. If finalized as proposed, the rule would not 
have retroactive effect.

G. Regulatory Flexibility Act

    The Department has determined that this rule would not have a 
significant economic impact on a substantial number of small entities. 
Although the Department assumes that most, if not all, of the entities 
affected by this proposed rule meet the definition of a small entity, 
the Department estimates the proposed rule's effects on any particular 
entity's revenue would be a $100 cost savings per year, based on the 
proposed elimination of the notice requirement. (As discussed above, 
the Department estimates the effects of the proposed rule's elimination 
of the referral requirement would be de minimis and possibly zero.) The 
Department considers a rule to have a significant impact on a 
substantial number of small entities if it has at least a three percent 
impact of revenue on at least five percent of small entities. This 
estimated impact of $100 in cost savings per year per entity is well 
below the threshold for a significant impact on a small entity's 
revenue--the impact would only meet this threshold for entities with 
revenues of less than $3,334 per year; and, in any event, the impact is 
positive rather than negative.
    Accordingly, the Secretary certifies that the rule would not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. Pursuant to the Regulatory Flexibility Act, this 
certification has been provided to the Chief Counsel for Advocacy of 
the Small Business Administration.

H. Paperwork Reduction Act

    This proposed rule does not contain any new or revised 
``collection[s] of information'' as defined by the Paperwork Reduction 
Act of 1995. 44 U.S.C. 3501 et seq.

I. Unfunded Mandates Reform Act

    The Department concludes that the requirements of the Unfunded 
Mandates Reform Act of 1995 are not triggered by this proposed rule, 
because, if finalized, this proposed rule would not result in an 
expenditure by State, local, and tribal governments in any year that 
meets or exceeds that, in the aggregate, or by the private sector, of 
$100,000,000 or more (adjusted annually for inflation). Furthermore, 
the Unfunded Mandates Reform Act does not apply to proposed rules 
enforcing laws prohibiting discrimination on the basis of religion. 2 
U.S.C. 1503(2).

J. Plain Writing Act

    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. The Department seeks any comments on 
whether the rule could be revised to give full effect to issues of 
legal interpretation with language that is simple, straightforward, 
transparent, and clear.

List of Subjects

45 CFR Part 87

    Administrative practice and procedure, Claims, Courts, Government 
employees, Religious discrimination.

45 CFR Part 1050

    Grant programs--social programs.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR parts 87 and 1050 as 
follows:

PART 87--EQUAL TREATMENT FOR FAITH-BASED ORGANIZATIONS

0
1. The authority citation for part 87 continues to read as follows:

    Authority: 5 U.S.C. 301.

0
2. Revise Sec.  87.1 to read as follows:


Sec.  87.1  Definitions.

    The following definitions apply for the purposes of this part.
    (a) Direct Federal financial assistance, Federal financial 
assistance provided directly, or direct funding means financial 
assistance received by an entity selected by the government or a pass-
through entity (as defined in 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) Directly funded means funded by means of Direct Federal 
financial assistance.
    (c) 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 
rendered 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.
    (d) Federal financial assistance does not include a tax credit, 
deduction, exemption, guaranty contract, or the use of any assistance 
by any individual who is the ultimate beneficiary under any such 
program.
    (e) 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

[[Page 2986]]

grantee and distributes that assistance to other organizations that, in 
turn, provide government funded social services.
    (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).
0
3. Revise Sec.  87.3 to read as follows:


Sec.  87.3  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 HHS awarding agency program or service for which 
they are otherwise eligible. The HHS awarding agency program or service 
shall provide such accommodation as is consistent with federal law, the 
Attorney General's Memorandum of October 6, 2017 (Federal Law 
Protections for Religious Liberty), and the Religion Clauses of the 
First Amendment to the U.S. Constitution. Neither the HHS awarding 
agency nor any State or local government or other pass-through entity 
receiving funds under any HHS awarding agency program or service shall, 
in the selection of service providers, discriminate against an 
organization on the basis of the organization's religious affiliation 
or exercise. Notices or announcements of award opportunities and 
notices of award or contracts shall include language substantially 
similar to that in Appendix A and B of this part.
    (b) Organizations that receive direct financial assistance from an 
HHS 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 HHS 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 HHS 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 HHS'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 HHS awarding-
agency funded programs or services 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 may use space in its 
facilities to provide programs or services funded with financial 
assistance from the HHS awarding agency without concealing, removing, 
or altering religious art, icons, scriptures, or other religious 
symbols. 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. In addition, a faith-based organization that receives 
financial assistance from the HHS awarding agency does not lose the 
protections of law.
    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, whether faith-based or not, that receives 
Federal financial assistance shall not, with respect to services or 
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, a 
faith-based organization receiving indirect Federal financial 
assistance need not modify any religious components or integration with 
respect to 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) No grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation used by an HHS awarding agency or 
a State or local government in administering Federal financial 
assistance from the HHS 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, whether faith-based or not, that 
participate in HHS awarding agency programs or services must carry out 
eligible activities in accordance with all program requirements (except 
where modified or exempted by any required or appropriate religious 
accommodations) including those prohibiting the use of direct Federal 
financial assistance to engage in explicitly religious activities. No 
grant document, agreement, covenant, memorandum of understanding, 
policy, or regulation used by an HHS awarding agency or a State or 
local government in administering Federal financial assistance from the 
HHS awarding agency shall disqualify faith-based organizations from 
participating in the HHS 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 affiliation or 
exercise.
    (f) A faith-based organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, set 
forth in the Civil Rights Act of 1964, 42 U.S.C. 2000e-1 and 2000e-2 
and the Americans with Disabilities Act, 42 U.S.C. 12113(d)(2), is not 
forfeited when the faith-based organization receives direct or indirect 
Federal financial assistance from an HHS 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. Recipients should consult with the appropriate HHS 
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 or requirements that may apply.
    (g) In general, the HHS awarding agency does 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 HHS awarding agency programs. Many grant 
programs, however, do require an organization to be a nonprofit 
organization in order to be eligible for funding. Funding announcements 
and other grant application solicitations that require organizations to 
have nonprofit

[[Page 2987]]

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 HHS awarding agency program office to 
determine the scope of any applicable requirements. In HHS 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 (g)(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 any of paragraphs (g)(1) 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 HHS 
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 provisions of this part 
shall apply to all of the commingled funds in the same manner, and to 
the same extent, as the provisions apply to the Federal funds. 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 direct 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 HHS awarding agency nor any State or local 
government or other pass-through entity receiving funds under any HHS 
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 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.
0
6. Add Appendix A and Appendix B to Part 87 to read as follows:

Appendix A to Part 87--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 87 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 affiliation or exercise.
    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 of the U.S. Constitution, the Religious 
Freedom Restoration Act (42 U.S.C. 2000bb et seq.), the Coats-Snowe 
Amendment (42 U.S.C. 238n), Title VII of the Civil Rights Act of 
1964 (42 U.S.C. 2000e-1(a) and 2000e-2(e)), the Americans with 
Disabilities Act, 42 U.S.C. 12113(d)(2), Section 1553 of the Patient 
Protection and Affordable Care Act (42 U.S.C. 18113), the Weldon 
Amendment (e.g., Consolidated Appropriations Act, 2019, Pub. L. 115-
245, Div. B, sec. 507(d)), or any related, successor, or similar 
Federal laws or regulations. 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 engage in any explicitly religious 
activities (including activities that involve overt religious 
content such as worship, religious instruction, or proselytization). 
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 87--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 First Amendment of the U.S. Constitution, the Religious 
Freedom Restoration Act (42 U.S.C. 2000bb et seq.), the Coats-Snowe 
Amendment (42 U.S.C. 238n), Title VII of the Civil Rights Act of 
1964 (42 U.S.C. 2000e-1(a) and 2000e-2(e)), the Americans with 
Disabilities Act, 42 U.S.C. 12113(d)(2), Section 1553 of the Patient 
Protection and Affordable Care Act (42 U.S.C. 18113), the Weldon 
Amendment (e.g., Consolidated Appropriations Act, 2019, Pub. L. 115-
245, Div. B, sec. 507(d)), or any related, successor, or similar 
Federal laws or regulations. 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 engage in any explicitly religious 
activities (including activities that involve overt religious 
content such as worship, religious instruction, or proselytization). 
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 1050--CHARITABLE CHOICE UNDER THE COMMUNITY SERVICES BLOCK 
GRANT ACT PROGRAMS

0
7. The authority citation for part 1050 continues to read as follows:

    Authority: 42 U.S.C. 9901 et seq.

0
8. In Sec.  1050.3, amend paragraph (h) by removing ``87.3(i) through 
(l)'' and adding in its place ``87.3(i) through (j)''.

    Dated: December 9, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-26923 Filed 1-16-20; 8:45 am]
 BILLING CODE 4150-27-P