[Federal Register Volume 85, Number 30 (Thursday, February 13, 2020)]
[Proposed Rules]
[Pages 8215-8225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02495]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 92 and 578

[Docket No FR-6130-P-01]
RIN 2501-AD91


Equal Participation of Faith-Based Organizations in HUD Programs 
and Activities: Implementation of Executive Order 13831

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend U.S. Department of Housing and 
Urban Development (HUD) regulations to implement Executive Order 13831 
(Establishment of a White House Faith and Opportunity Initiative). 
Among other changes, this rule proposes to provide clarity regarding 
the rights and obligations of faith-based organizations participating 
in HUD's programs. This proposed rulemaking aligns with HUD's goal of 
implementing its programs and activities consistent with the First 
Amendment to the Constitution and the requirements of Federal law, 
including the Religious Freedom Restoration Act.

DATES: Comment Due Date: April 13, 2020.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule. Communications must refer to the above docket 
number and title. There are two methods for submitting public comments. 
All submissions must refer to the above docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, U.S. 
Department of Housing and Urban Development, 451 7th Street SW, Room 
10276, Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov website can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.


[[Page 8216]]


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

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m., weekdays, at 
the above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay, toll-free, 
at 800-877-8339. Copies of all comments submitted are available for 
inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Richard Youngblood, Director, Center 
for Faith-Based and Neighborhood Partnerships, U.S. Department of 
Housing and Urban Development, 451 7th Street SW, Room 6230, 
Washington, DC 20410; telephone number 202-402-5958 (this is not a 
toll-free number). Individuals with hearing- and speech-impairments may 
access this number through TTY by calling the Federal Relay, toll-free, 
at 800-877-8339.

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.'' \1\ That Executive order 
sought to ensure that ``private and charitable groups, including 
religious ones . . . have the fullest opportunity permitted by law to 
compete on a level playing field'' in the delivery of social services. 
To do so, it created the White House Office of Faith-Based and 
Community Initiatives, with the 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.''
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    \1\ Executive Order 13199 was signed by President Bush on 
January 29, 2001, and subsequently published in the Federal Register 
on January 31, 2001, at 66 FR 8499.
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    On December 12, 2002, President Bush signed Executive Order 13279, 
``Equal Protection of the Laws for Faith-Based and Community 
Organizations.'' \2\ Executive Order 13279 set forth the principles and 
policymaking criteria to guide Federal agencies in formulating and 
implementing policies with implications for faith-based organizations 
and other community organizations, to ensure equal protection of the 
laws for faith-based and community organizations and to expand 
opportunities for, and strengthen the capacity of, faith-based and 
other community organizations to meet social needs in America's 
communities. In addition, Executive Order 13279 directed specified 
agency heads, including the Secretary of HUD, to review and evaluate 
existing policies that created barriers to faith-based organizations 
participating equally compared to other community organizations in 
programs receiving Federal financial assistance and, where appropriate, 
to implement new policies that were consistent with and necessary to 
further the fundamental principles and policymaking criteria 
articulated in the order. Consistent with Executive Order 13279, HUD 
promulgated regulations at 24 CFR part 5.
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    \2\ Executive Order 13279 was published in the Federal Register 
on December 16, 2002, at 67 FR 77141.
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    HUD undertook three rulemakings to implement Executive Order 13279. 
HUD undertook a comprehensive review of its program requirements and 
regulations, particularly those that would be expected to attract 
interest and participation by nonprofit organizations. HUD identified 
regulations for eight programs administered by HUD's Office of 
Community Planning and Development that imposed (or appeared to impose) 
barriers to participation of faith-based organizations in these 
programs. On September 30, 2003, HUD issued a final rule entitled 
``Participation in HUD Programs by Faith-Based Organizations; Providing 
for Equal Treatment of All HUD Program Participants.'' \3\ The final 
rule eliminated the regulatory program barriers identified by HUD, to 
ensure that these programs were open to all qualified organizations 
regardless of their religious character.
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    \3\ 68 FR 56395.
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    On July 9, 2004, HUD published a second final rule entitled, 
``Equal Participation of Faith-Based Organizations.'' \4\ The July 9, 
2004, final rule added a new Sec.  5.109 to HUD's regulations in 24 CFR 
part 5 containing the requirements generally applicable to all of HUD's 
programs and activities. The new Sec.  5.109 clarified that faith-based 
organizations are eligible, on the same basis as any other 
organization, to participate in HUD's programs and activities. By 
codifying the policy in those HUD regulations that contain across-the-
board requirements, HUD ensured the broadest application of the faith-
based requirements of Executive Order 13279.
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    \4\ 69 FR 41711.
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    The July 9, 2004, final rule, however, did not apply to HUD's 
Native American housing programs. HUD determined that making the 
policies and procedures contained in the final rule applicable to its 
Native American programs required prior consultation with tribal 
governments, in accordance with Executive Order 13175.\5\ Executive 
Order 13175 requires Federal departments and agencies, to the extent 
practicable and permitted by law, to consult with tribal governments 
prior to taking actions that have substantial direct effects on 
federally recognized tribal governments. HUD consulted with tribal 
governments and undertook separate rulemaking to address the 
applicability of the regulatory changes. HUD's final rule addressing 
equal participation of faith-based organizations in Native American 
programs, entitled ``Participation in HUD's Native American Programs by 
Religious Organizations; Providing for Equal Treatment of All Program 
Participants,'' was published on October 22, 2004.\6\
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    \5\ Executive Order 13175 was signed on November 6, 2000, and is 
entitled ``Consultation and Coordination with Indian Tribal 
Governments.'' It was subsequently published in the Federal Register 
on November 9, 2000, at 65 FR 67249.
    \6\ 69 FR 62163.
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    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.'' \7\ Among other things, 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 created an Advisory Council that 
subsequently submitted a report of recommendations to President Obama, 
including recommendations concerning partnerships between the

[[Page 8217]]

Federal Government and religious and other nongovernmental 
organizations.
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    \7\ President Obama signed Executive Order 13498 on February 5, 
2009, and it was subsequently published in the Federal Register on 
February 9, 2009, at 74 FR 6533.
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    On November 17, 2010, President Obama signed Executive Order 13559, 
``Fundamental Principles and Policymaking Criteria for Partnerships 
with Faith-Based and Other Neighborhood Organizations''.\8\ Executive 
Order 13559 made various changes to Executive Order 13279, which 
included: (1) Making minor and substantive textual changes to the 
fundamental principles; (2) adding a provision requiring that any 
religious social service program provider supported with Federal 
financial assistance refer beneficiaries or prospective beneficiaries 
to an alternative provider if the beneficiaries object to the 
provider's religious character; (3) adding a provision requiring that 
the faith-based provider give notice of potential referral to potential 
beneficiaries; and (4) adding a provision that awards must be free of 
political interference and not be based on religious affiliation of a 
recipient organization or lack thereof. This Executive order also 
established an interagency working group tasked with developing model 
changes to regulations and guidance to implement Executive Order 13279 
as amended by Executive Order 13559, including provisions that 
clarified the prohibited uses of direct Federal financial assistance, 
allowed religious social service providers to maintain their religious 
identities, and distinguished between direct and indirect Federal 
financial assistance. These efforts eventually resulted in amendments 
to agency regulations, including HUD's 24 CFR part 5. The revised 
regulations defined ``indirect Federal financial 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.\9\
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    \8\ Executive Order 13559 was published in the Federal Register 
on November 22, 2010, at 75 FR 71319.
    \9\ 24 CFR 5.109(b).
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    To implement the directives of Executive Order 13559, on August 6, 
2015, HUD issued a proposed rule entitled, ``Equal Participation of 
Faith-Based Organizations in HUD Programs: Implementation of E.O. 
13559.'' \10\ The proposed rule was made final through an interagency 
final rule entitled, ``Federal Agency Final Regulations Implementing 
Executive Order 13559: Fundamental Principles and Policymaking Criteria 
for Partnerships With Faith-Based and Other Neighborhood 
Organizations'' published on April 4, 2016.\11\ In addition to HUD, 
eight other Federal departments and agencies joined in the final rule 
to amend or establish their regulations implementing Executive Order 
13559. This final rule required not only that faith-based providers 
give the notice of the right to an alternative provider specified in 
Executive Order 13559, but also required faith-based providers, but not 
other providers, to give written notice to beneficiaries and potential 
beneficiaries of programs funded with direct Federal financial 
assistance of various rights, including nondiscrimination based on 
religion, the requirement that participation in any religious activity 
must be voluntary and that they must be provided separately from the 
federally funded activity, and that beneficiaries may report 
violations.
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    \10\ 80 FR 47301.
    \11\ 81 FR 19353.
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    President Trump has given new direction to the policy established 
by President Bush and continued by President Obama. On May 4, 2017, 
President Trump issued Executive Order 13798, ``Promoting Free Speech 
and Religious Liberty.'' \12\ 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.''
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    \12\ Executive Order 13798 was subsequently published in the 
Federal Register on May 9, 2017, at 82 FR 21675.
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    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,'' (Attorney General's 
Memorandum on Religious Liberty).\13\ 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 ``[g]overnment 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.'' \14\
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    \13\ 82 FR 49668.
    \14\ Id. at page 2.
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    On May 3, 2018, President Trump signed Executive Order 13831, 
entitled ``Establishment of a White House Faith and Opportunity 
Initiative.'' \15\ 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 in 
Executive Order 13559 described above.
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    \15\ Executive Order 13831 was subsequently published in the 
Federal Register on May 8, 2018, at 83 FR 20715.
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    Finally, recent Supreme Court decisions have addressed the freedoms 
and anti-discrimination protections that must be afforded religion-
exercising organizations and individuals under the U.S. Constitution 
and Federal law. See, e.g., Masterpiece Cakeshop, Ltd. v. Colo. Civil 
Rights Comm'n, 138 S. Ct. 1719, 1731 (2018) (Government violates the 
Free Exercise Clause of the First Amendment when its decisions are 
based on hostility to religion or a religious viewpoint); Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012, 2022 
(2017) (Government violates the Free Exercise Clause of the First 
Amendment when it conditions a generally available public benefit on an 
entity's giving up its religious character, unless that condition 
withstands the strictest scrutiny); Burwell v. Hobby Lobby Stores, 
Inc., 134 S. Ct. 2751, 2775 (2014) (the Religious Freedom Restoration 
Act applies to Federal regulation of the activities of for-profit 
closely held corporations); Hosanna-Tabor Evangelical Lutheran Church & 
Sch. v. EEOC, 565 U.S. 171, 196 (2012) (the ministerial exception, 
grounded in the Establishment and Free Exercise Clauses of the First 
Amendment, bars an employment-discrimination suit brought on behalf of 
a minister against the religious school for which she worked). While 
these decisions are not specific to HUD, they have reminded the Federal 
Government of its duty to protect religious exercise--and not to impede 
it.

[[Page 8218]]

II. This Proposed Rule

A. Overview

    HUD proposes to amend its regulations governing equal participation 
of faith-based organizations to implement Executive Order 13831 and 
conform more closely to the Supreme Court's current First Amendment 
jurisprudence; relevant Federal statutes such as the Religious Freedom 
Restoration Act of 1993 (RFRA) (42 U.S.C. 2000bb et seq.); Executive 
Order 13279, as amended by Executive Orders 13559 and 13831, and the 
Attorney General's Memorandum on Religious Liberty. Consistent with 
these authorities, this proposed rule would delete the requirement in 
24 CFR 5.109(g) that faith-based social service providers that carry 
out programs and activities with direct Federal financial assistance 
provide written notice to beneficiaries and refer beneficiaries 
objecting to the organization's religious character 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 applies or requests to participate in any HUD funded 
program or activity, is assessed for eligibility in any HUD funded 
programs or activity, or actually participates in any HUD funded 
program or activity retains its autonomy, right of expression, 
religious character, and independence. It would further clarify that 
none of the guidance documents that HUD or any intermediary or 
recipient uses in administering HUD'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 apply equally to faith-
based and secular organizations.
    This proposed rule would also require that HUD's notices of funding 
availability (NOFAs), grant agreements, and cooperative agreements 
include language clarifying the rights and obligations of faith-based 
organizations that apply for and receive Federal funding. The language 
provides notice to those applying for HUD funds that, among other 
things, faith-based organizations may apply for awards on the same 
basis as any other organization; that HUD will not, in the selection of 
recipients, discriminate against an organization on the basis of the 
organization's religious exercise or affiliation; and that a faith-
based organization that applies to participate in, participates in, or 
is assessed for eligibility to participate in, a HUD program retains 
its independence from the Government and may continue to carry out its 
mission consistent with religious freedom protections in Federal law, 
including the Free Speech and Free Exercise Clauses of the First 
Amendment to the Constitution.
    This proposed rule, in the event of any conflict, will control over 
any HUD guidance document. This is intended to be consistent with 
Executive Order 13891, dated October 9, 2019, which provides that 
guidance documents lack the force of law, except as authorized by law 
or as incorporated into a contract.
    Finally, the proposed rule would directly reference the definition 
of ``religious exercise'' in the Religious Land Use and Individualized 
Persons Act of 2000, 42 U.S.C. 2000cc-5(7)(A), and would amend the 
definition of ``indirect Federal Financial assistance'' to align more 
closely with the Supreme Court's definition in Zelman v. Simmons-
Harris, 536 U.S. 639 (2002).

B. Alternative Provider 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, entitled ``Fundamental Principles,'' amended 
section 2 of Executive Order 13279 by, in pertinent part, adding a new 
subsection (h) to section 2. As amended by Executive Order 13559, 
section 2(h)(i) directed agencies to ensure that ``[i]f 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 ``receive[] written notice of the protections set 
forth in this subsection prior to enrolling in or receiving services 
from such program.''
    In revising its regulations, HUD 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. 
HUD also explained that the alternative provider provisions would 
protect religious liberty rights of social service beneficiaries. But 
the methods of providing such protections were not required by the 
Constitution or any applicable law. Indeed, the selected methods are in 
tension with more recent Supreme Court precedent regarding 
nondiscrimination against religious organizations, with the Attorney 
General's Memorandum on Religious Liberty, and with the 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): ``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.''' (quoting Church of Lukumi Babalu Aye, Inc. v. Hialeah, 508 
U.S. 520, 533 (1993) (alteration in original)). 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 (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 and not to other providers of federally funded 
social services is thus in tension with the nondiscrimination principle 
articulated in Trinity Lutheran and the Attorney General's Memorandum 
on Religious Liberty.
    In addition, the alternative provider requirement raises 
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). The World Vision OLC opinion makes clear that when 
a faith-based grant recipient carries out its social service programs, 
it may engage in an exercise of religion protected by RFRA. See 
Application of the Religious Freedom Restoration Act

[[Page 8219]]

to the Award of a Grant Pursuant to a Juvenile Justice and Delinquency 
Prevention Act, 31 O.L.C. 162, 169-71 (June 29, 2007).
    Requiring faith-based organizations to comply with certain 
conditions in receiving social service grants may substantially burden 
their religious exercise. Id. at 174-83. When imposing the alternative 
provider requirement in 2016, the agencies asserted an interest in 
informing beneficiaries of protections of their religious liberty. 81 
FR 19353, 19365. In addition, the alternative provider requirement 
could in certain circumstances raise concerns under RFRA. Under RFRA, 
where the Government substantially burdens an entity's exercise of 
religion, the Government must prove that the burden is in furtherance 
of a compelling government interest and is the least restrictive means 
of furthering that interest. 42 U.S.C. 2000bb-1(b). When a faith-based 
grant recipient carries out its social service programs, it may engage 
in an exercise of religion protected by RFRA and certain conditions on 
receiving those grants may substantially burden the religious exercise 
of the recipient. See Application of the Religious Freedom Restoration 
Act to the Award of a Grant Pursuant to a Juvenile Justice and 
Delinquency Prevention Act, 31 O.L.C. 162, 169-71, 174-83 (June 29, 
2007). Requiring faith-based organizations to comply with the 
alternative provider requirement could impose such a burden, such as in 
a case in which a faith-based organization has a religious objection to 
referring the beneficiary to an alternative provider that provided 
services in a manner that violated the organization's religious tenets. 
See Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682, 720-26 (2014). 
And it is far from clear that this requirement would meet the strict 
scrutiny that RFRA requires of laws that substantially burden religious 
practice.
    With adoption of this rule, HUD would no longer require its program 
participants to identify or refer beneficiaries to alternate providers. 
In addition, the absence of a secular alternate provider will no longer 
be a block to the application, eligibility, or participation by faith-
based entities in any HUD program or activity.
    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.

C. 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, 24 CFR part 5 as 
recently amended goes further than Executive Order 13559 by requiring 
that faith-based social service providers that carry out programs and 
activities with direct Federal financial assistance from HUD provide a 
much broader notice to beneficiaries and potential beneficiaries. This 
requirement applies only to faith-based providers and not to other 
providers. In addition to the notice of the right to an alternative 
provider, the rule requires notice of nondiscrimination based on 
religion; that participation in religious activities must be voluntary 
and separate in time or space from activities funded with direct 
Federal funds; and that beneficiaries or potential beneficiaries may 
report violations.
    Separate and apart from these notice requirements, Executive Order 
13279, as amended, clearly set forth the underlying requirements of 
nondiscrimination, voluntariness, and the holding of religious 
activities separate in time or place from any federally funded 
activity. Faith-based providers of social services, like other 
providers of social services, are required to follow the law and the 
requirements of awards they receive. (See, e.g., 2 CFR part 200). 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 thus no need for prophylactic 
protections that create administrative burdens on faith-based providers 
and that are not imposed on other providers.

D. Definition of Indirect Federal Financial Assistance

    Executive Order 13559 directed its Interagency Working Group on 
Faith-Based and Other Neighborhood Partnerships (Working Group) to 
propose model regulations and guidance documents regarding, among other 
things, ``the distinction between `direct' and `indirect' Federal 
financial assistance[.]'' 75 FR 71319, 71321 (2010). Following issuance 
of the Working Group's report, the 2016 joint final rule amended 
existing regulations to make that distinction, and to clarify that 
``organizations that participate in programs funded by indirect 
financial assistance need not modify their program activities to 
accommodate beneficiaries who choose to expend the indirect aid on 
those organizations' programs,'' need not provide notices or referrals 
to beneficiaries, and need not separate their religious activities from 
supported programs. 81 FR 19355, 19358 (2016). In so doing, the final 
rule attempted to capture the definition of ``indirect'' aid that the 
U.S. Supreme Court employed in Zelman v. Simmons-Harris, 536 U.S. 639 
(2002). See 81 FR 19355, 19361-62 (2016).
    In Zelman, the Court emphasized that the government may provide 
indirect aid to a faith-based where the aid reaches the faith-based 
entity by way of ``true private choice,'' with ``no evidence that the 
State deliberately skewed incentives'' to faith-based service 
providers. 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 and 
citations 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. The 
Court found 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

[[Page 8220]]

beneficiaries have ``at least one adequate secular option'' for use of 
the Federal financial assistance. See 81 FR 19355, 19407-19426 (2016). 
In other words, the rule amended regulations to make the definition of 
``indirect'' aid hinge on the availability of secular providers. A 
regulation defining ``indirect Federal financial assistance'' to 
require the actual availability of ``one adequate secular option'' 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.
Explanations for the Proposed Amendments
    HUD proposes to revise Sec.  [thinsp]5.109 entitled, ``Equal 
participation of faith-based organizations in HUD programs and 
activities,'' consistent with Executive Order 13831, 83 Fed. 20715 (May 
8, 2018). Specifically, the definition in Sec.  [thinsp]5.109(b) of 
``Indirect Federal financial assistance'' is proposed to be changed in 
order to align the text more closely with the First Amendment as 
described in II(D) above. See, e.g., Zelman v. Simmons-Harris, 536 U.S. 
639 (2002); Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. 
Ct. 2012 (2017).
    Section 5.109(b) would also be revised to add a definition of 
``Religious exercise'' in order to align the text more closely with the 
definitions used in the Religious Freedom Restoration Act of 1993 
(RFRA), 42 U.S.C. 2000bb et seq., and with the Religious Land Use and 
Individualized Persons Act of 2000 (RLUIPA), 42 U.S.C. 2000cc-5(7)(A). 
See, e.g., principles 10-15 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017).
    Section 5.109(c) would also be revised by adding clarifying 
language and to align it more closely with RFRA. The language would 
clarify that religious organizations may be eligible for religious 
accommodations appropriate under the Constitution or other provisions 
of federal law, including but not limited to 42 U.S.C. 2000bb et seq., 
42 U.S.C. 238n, 42 U.S.C. 18113, 42 U.S.C. 2000e-1(a) and 2000e-2(e), 
42 U.S.C. 12113(d), and the Weldon Amendment. It would also require 
notices of funding availability, grant agreements, and cooperative 
agreements to include Appendix A, which clarifies the rights of 
religious applicants. 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).
    Appendix A adds language to all Notices of Funding Availability 
that clarifies the rights of faith-based organizations applying for the 
relevant award, including rights that spring from the First Amendment 
and RFRA See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002); 
Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 
(2017); principles 2, 3, 6-7, 9-17, 19, and 20 of the Attorney 
General's Memorandum on Religious Liberty, 82 FR 49668 (October 26, 
2017); Exec. Order No. 13279, 67 FR 77141 (December 12, 2002), as 
amended by Exec. Order No. 13559, 75 FR 71319 (November 17, 2010), and 
Exec. Order No. 13831, 83 FR 20715 (May 8, 2018).
    HUD also proposes to revise Sec.  5.109(d) to eliminate extraneous 
language relating to direct Federal financial assistance that is 
covered in Sec.  5.109(e) and provide language to align it more closely 
with the First Amendment and with RFRA. This language clarifies the 
scope of the independence that faith-based organizations receive when 
they apply for or participate in a HUD program, and that they do not 
lose any protections of law highlighted by the Attorney General's 
Memorandum on Religious Liberty merely by applying for or participating 
in such programs. See, e.g., Exec. Order No. 13279, 67 FR 77141 
(December 12, 2002), as amended by Exec. Order No. 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).
    Section 5.109(e) would be revised to bring consistency with 
Executive Order No. 13559, 75 FR 71319 (November 22, 2010), by further 
clarifying that the restrictions in Sec.  5.109(e) do not apply to the 
use of indirect Federal financial assistance.
    As discussed in II(B)-(C) above, Sec.  5.109(g) would be deleted in 
accordance with Executive Order 13831. These changes would also align 
the text more closely with the First Amendment and with RFRA. See, 
e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002), Trinity Lutheran 
Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017); principles 
2, 3, 6-7, 9-17, 19, and 20 of the Attorney General's Memorandum on 
Religious Liberty, 82 FR 49668 (October 26, 2017); Exec. Order No. 
13279, 67 FR 77141 (December 12, 2002), as amended by Exec. Order No. 
13559, 75 FR 71319 (November 17, 2010), and Exec. Order No. 13831, 83 
FR 20715 (May 8, 2018).
    Section 5.109(g) ``Nondiscrimination requirements,'' as 
redesignated, is proposed to be changed in order to align the text more 
closely with the First Amendment and with RFRA by clarifying that 
organizations receiving indirect financial aid may require attendance 
to fundamentally important programmatic activities. This follows the 
definition of indirect financial assistance as discussed in II(D) 
above. See, e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002)); 
principles 10-15 of the Attorney General's Memorandum on Religious 
Liberty, 82 FR 49668 (October 26, 2017).
    HUD proposes to add a new Sec.  5.109(h) in order to clarify the 
text and align it more closely with the First Amendment and with RFRA. 
This section prevents HUD or intermediaries from targeting faith-based 
organizations by asking them to provide additional assurances that 
similarly situated secular organizations do not have to provide. See, 
e.g., Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 
2012 (2017)); principles 6, 7, and 10-15 of the Attorney General's 
Memorandum on Religious Liberty, 82 FR 49668 (October 26, 2017).
    Section 5.109(l) is proposed to be added in order to align more 
closely with RFRA. This clarifies HUD's treatment of tax-exempt 
organizations including for entities that sincerely believe that they 
cannot register for tax exemption. See, e.g., principles 10-15 of the 
Attorney General's Memorandum on Religious Liberty, 82 FR 49668 
(October 26, 2017).
    Section 5.109(m) is proposed to be added in order to align the text 
more closely with the First Amendment by providing a rule of 
construction to interpret these provisions in a way that does not favor 
or disfavor religious organizations. 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).

III. Tribal Consultation

    HUD's policy is to consult with Indian tribes early in the process 
on matters that have tribal implications. Accordingly, on July 16, 
2019, HUD sent letters to all tribal leaders participating in HUD 
programs, informing them of the nature of this forthcoming rulemaking. 
HUD received one comment in response to those letters, regarding the 
ability of faith-based organizations to access funds designated for 
Indian tribes under

[[Page 8221]]

the Indian Community Development Block Grant program. Tribal leaders 
are welcome to provide public comments on this proposed rule.

IV. Findings and Certifications

Executive Order 12866 and 13563--Regulatory Planning and Review

    This proposed rule has been drafted in accordance with Executive 
Order 13563, ``Improving Regulation and Regulatory Review,'' of January 
18, 2011, 76 FR 3821, and Executive Order 12866, ``Regulatory Planning 
and Review,'' of September 30, 1993, 58 FR 51735. Executive Order 13563 
directs agencies, to the extent permitted by law, to propose or adopt a 
regulation only upon a reasoned determination that its benefits justify 
its costs; tailor the regulation to impose the least burden on society, 
consistent with obtaining the regulatory objectives; and, in choosing 
among alternative regulatory approaches, select those approaches that 
maximize net benefits. Executive Order 13563 recognizes that some 
benefits and costs are difficult to quantify and provides that, where 
appropriate and permitted by law, agencies may consider and discuss 
qualitatively values that are difficult or impossible to quantify, 
including equity, human dignity, fairness, and distributive impacts.
    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'' 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 
regulatory action 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 rule.
    HUD has also reviewed these regulations under Executive Order 
13563, which supplements and reaffirms the principles, structures, and 
definitions governing regulatory review established in Executive Order 
12866. To the extent permitted by law, section 1(b) of Executive Order 
13563 requires that an agency: (1) Propose or adopt regulations only 
upon a reasoned determination that their benefits justify their costs 
(recognizing that some benefits and costs are difficult to quantify); 
(2) tailor its regulations 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) in choosing among alternative regulatory 
approaches, select those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity); (4) to the 
extent feasible, specify performance objectives, rather than the 
behavior or manner of compliance that regulated entities must adopt; 
and (5) identify and assess 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. 76 FR 3821, 3821 
(Jan. 21, 2011). Section 1(c) of Executive Order 13563 also requires an 
agency ``to use the best available techniques to quantify anticipated 
present and future benefits and costs as accurately as possible.'' Id. 
OIRA has emphasized that these techniques may include ``identifying 
changing future compliance costs that might result from technological 
innovation or anticipated behavioral changes.'' Memorandum for the 
Heads of Executive Departments and Agencies, and of Independent 
Regulatory Agencies, from Cass R. Sunstein, Administrator, Office of 
Information and Regulatory Affairs, Re: Executive Order 13563, 
``Improving Regulation and Regulatory Review'', at 1 (Feb. 2, 2011), 
available at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2011/m11-10.pdf.
    HUD is issuing these proposed regulations upon a reasoned 
determination that their benefits justify their costs. In choosing 
among alternative regulatory approaches, HUD selected those approaches 
that maximize net benefits. Based on the analysis that follows, HUD 
believes that this proposed regulation is consistent with the 
principles in Executive Order 13563. It is the reasoned determination 
of HUD that this proposed action would, to a significant degree, 
eliminate 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 for those organizations. 
HUD also has determined that this regulatory action does not unduly 
interfere with State, local, or tribal governments in the exercise of 
their governmental functions.
    In accordance with Executive Orders 12866 and 13563, HUD has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The potential costs and cost 
savings associated with this regulatory action are those resulting from 
the removal of the notification and referral requirements of Executive 
Order 13279, as amended by Executive Order 13559 and further amended by 
Executive Order 13831. HUD recognizes that the removal of the notice 
and referral requirements could impose some costs on beneficiaries who 
may now need to investigate alternative providers on their own if they 
object to the religious character of a potential provider. HUD invites 
comment on any information that it could use to quantify this potential 
cost. HUD also notes a quantifiable cost savings of the removal of the 
notice requirements. HUD estimates this cost savings as $656,128. HUD 
invites comment on any data by which it could assess the actual 
implementation costs of the notice and referral requirement--including 
any estimates of staff time spent on compliance with the requirement, 
in addition to the printing costs for the notices referenced above--and 
thereby accurately quantify the cost savings of removing these 
requirements.
    In terms of benefits, HUD recognizes a benefit to religious liberty 
that comes from removing requirements imposed solely on faith-based 
organizations in tension with the principles of free exercise 
articulated in Trinity Lutheran. HUD also recognizes a benefit to grant 
recipients and beneficiaries alike that comes from increased clarity in 
the regulatory requirements that apply to faith-based organizations' 
operating programs and activities funded by the Federal Government. 
Beneficiaries will also benefit from the increased capacity of faith-
based social-service providers to provide services, both because these 
providers will be able to shift resources

[[Page 8222]]

otherwise spent fulfilling the notice and referral requirements to 
provision of services, and because more faith-based social service 
providers may participate in the marketplace once reassured that the 
government will not impose burdensome obligations based on their 
religious character.

Executive Order 13771, Reducing Regulation and Controlling Regulatory 
Costs

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 (82 FR 
9339, February 3, 2017). Section 2(a) of Executive Order 13771 requires 
an agency, unless prohibited by law, to identify at least two existing 
regulations to be repealed when the agency publicly proposes for notice 
and comment, or otherwise promulgates, a new regulation. In furtherance 
of this requirement, section 2(c) of Executive Order 13771 requires 
that the new incremental costs associated with new regulations shall, 
to the extent permitted by law, be offset by the elimination of 
existing costs associated with at least two prior regulations. This 
proposed rule is expected to be an E.O. 13771 deregulatory action.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. HUD has determined that this rule will not 
have a significant economic impact on a substantial number of small 
entities. Consequently, HUD has not prepared a regulatory flexibility 
analysis.

Executive Order 12988: Civil Justice Reform

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, ``Civil Justice Reform'' (61 FR 4729, February 6, 1996). 
The provisions of this proposed rule will not have preemptive effect 
with respect to any State or local laws, regulations, or policies that 
conflict with such provision or which otherwise impede their full 
implementation. The rule will not have retroactive effect.

Executive Order 13132: Federalism

    Executive Order 13132 (64 FR 43255, August 4, 1999) directs that, 
to the extent practicable and permitted by law, an agency shall not 
promulgate any regulation that has federalism implications, that 
imposes substantial direct compliance costs on State and local 
governments, that is not required by statute, or that preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. Because each change proposed by 
this rule does not have federalism implications as defined in the 
Executive Order, does not impose direct compliance costs on State and 
local governments, is required by statute, and does not preempt State 
law within the meaning of the Executive Order, HUD has concluded that 
compliance with the requirements of section 6 is not necessary.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act, an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information, unless the collection displays a currently 
valid OMB control number. The current collection for this rule is 
approved as OMB control number 2535-0122. HUD previously estimated a 
cost of no more than 2 burden hours and $100 annual materials cost for 
the notices and 2 burden hours per referral. 81 FR 19389. The overall 
reporting and recordkeeping burden will be removed if this rule is 
finalized as proposed and the hours reduced by 25,620 and costs of 
$656,128. The change to the information collection will be as follows:

----------------------------------------------------------------------------------------------------------------
                                                   Frequency of
     Information collection          Number of     response per     Burden hour    Annual burden    New burden
                                    respondents        annum       per response        hours           hours
----------------------------------------------------------------------------------------------------------------
5.109(g) (Written Notice of              726,053               1           .0333          24,178               0
 Rights)........................
5.109(g) (Referral).............             726               1               2           1,452               0
                                 -------------------------------------------------------------------------------
    Total Savings...............  ..............  ..............  ..............          25,620               0
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning the 
information collection requirements in the proposed rule regarding:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information;
    (3) Whether the proposed collection of information enhances the 
quality, utility, and clarity of the information to be collected; and
    (4) Whether the proposed information collection minimizes the 
burden of the collection of information on those who are to respond; 
including through the use of appropriate automated collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. The proposed 
information collection requirements in this rule have been submitted to 
OMB for review under section 3507(d) of the Paperwork Reduction Act. 
Under the provisions of 5 CFR part 1320, OMB is required to make a 
decision concerning this collection of information between 30 and 60 
days after the publication date. Therefore, a comment on the 
information collection requirements is best assured of having its full 
effect if OMB receives the comment within 30 days of the publication. 
This time frame does not affect the deadline for comments to the agency 
on the proposed rule, however. Comments must refer to the proposed rule 
by name and docket number (FR-6085) and must be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: 202-395-6947.
    and
Colette Pollard, HUD Reports Liaison Officer, Department of Housing and 
Urban Development, 451 7th Street SW, Room 2204, Washington, DC 20410.


[[Page 8223]]


    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make them 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov website can be viewed by other 
commenters and interested members of the public. Commenters should 
follow the instructions provided on that site to submit comments 
electronically.

Unfunded Mandates Reform Act

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

List of Subjects

24 CFR Part 5

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

24 CFR Part 92

    Administrative practice and procedure, Low and moderate income 
housing, Manufactured homes, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 578

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

    Accordingly, for the reasons set forth in the preamble, parts 5, 
and 92 of Title 24 of the Code of Federal Regulations is proposed to be 
amended as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

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

    Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f, 
1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 2936; Sec. 607, 
Pub. L. 109-162, 119 Stat. 3051 (42 U.S.C. 14043e et seq.); E.O. 
13279, 67 FR 77141; E.O. 13559, 75 FR 71319; E.O 13831, 83 FR 20715.

0
2. Amend Sec.  5.109 by:
0
a. Revising paragraphs (a);
0
b. In paragraph (b), revising the definition ``Indirect Federal 
financial assistance'' and adding the definition ``Religious exercise'' 
in alphabetical order;
0
c. Revising paragraphs (c) and (d);
0
d. In paragraph (e), adding a sentence at the end of the paragraph;
0
e. Removing paragraph (g);
0
f. Redesignating paragraph (h) as paragraph (g) and revising newly 
redesignated paragraph (g)''; and
0
g. Adding paragraphs (h), (l), and (m).
    The revisions and additions read as follows:


Sec.  5.109  Equal participation of faith-based organizations in HUD 
programs and activities.

    (a) Purpose. Consistent with Executive Order 13279, entitled 
``Equal Protection of the Laws for Faith-Based and Community 
Organizations,'' as amended by Executive Order 13559, entitled 
``Fundamental Principles and Policymaking Criteria for Partnerships 
With Faith-Based and Other Neighborhood Organizations,'' and as amended 
by Executive Order 13831, entitled ``Establishment of a White House 
Faith and Opportunity Initiative,'' this section describes requirements 
for ensuring the equal participation of faith-based organizations in 
HUD programs and activities. These requirements apply to all HUD 
programs and activities, including all of HUD's Native American 
Programs, except as may be otherwise noted in the respective program 
regulations in title 24 of the Code of Federal Regulations (CFR), or 
unless inconsistent with certain HUD program authorizing statutes.
    * * *
    (b) * * *
    Indirect Federal financial assistance means Federal financial 
assistance provided when the choice of the provider is placed in the 
hands of the beneficiary, and the cost of that service is paid through 
a voucher, certificate, or other similar means of Government-funded 
payment. Federal financial assistance provided to an organization is 
considered indirect when the Government program through which the 
beneficiary receives the voucher, certificate, or other similar means 
of Government-funded payment is neutral toward religion meaning that it 
is available to providers without regard to the religious or non-
religious nature of the institution and there are no program incentives 
that deliberately skew for or against religious or secular providers; 
and the organization receives the assistance as a result of a genuine, 
independent choice of the beneficiary.
* * * * *
    Religious exercise has the meaning given to the term in 42 U.S.C. 
2000cc-5(7)(A).
    (c) Equal participation of faith-based organizations in HUD 
programs and activities. Faith-based organizations are eligible, on the 
same basis as any other organization, to participate in any HUD program 
or activity, considering any permissible accommodations, particularly 
under the Religious Freedom Restoration Act. Neither the Federal 
Government, nor a State, tribal or local government, nor any other 
entity that administers any HUD program or activity, shall discriminate 
against an organization on the basis of the organization's religious 
character, affiliation, or lack thereof, or exercise. In addition, 
decisions about awards of Federal financial assistance must be free 
from political interference or even the appearance of such interference 
and must be made on the basis of merit, not based on the organization's 
religious character, affiliation, or lack thereof, or exercise. Notices 
of funding availability, grant agreements, and cooperative agreements 
shall include language substantially similar to that in Appendix A to 
this subpart, where faith-based organizations are statutorily eligible 
for such opportunities.
    (d) Independence and Identity of Faith-Based Organizations. (1) A 
faith-based organization that applies for, or participates in, a HUD 
program or activity supported with Federal financial assistance retains 
its autonomy, right of expression, religious character, authority over 
its governance, and independence, and may continue to carry out its 
mission, including the definition, development, practice, and 
expression of its religious beliefs. A faith-based organization that 
receives Federal financial assistance from HUD does not lose the 
protections of law.

    Note 1 to paragraph (d)(1):  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).


[[Page 8224]]


    (2) A faith-based organization that receives direct Federal 
financial assistance may use space (including a sanctuary, chapel, 
prayer hall, or other space) in its facilities (including a temple, 
synagogue, church, mosque, or other place of worship) to carry out 
activities under a HUD program without concealing, altering, or 
removing religious art, icons, scriptures, or other religious symbols. 
In addition, a faith-based organization participating in a HUD program 
or activity retains its authority over its internal governance, and may 
retain religious terms in its organization's name, select its board 
members and employees on the basis of their acceptance of or adherence 
to the religious tenets of the organization, and include religious 
references in its organization's mission statements and other governing 
documents.
    (e) * * * The use of indirect Federal financial assistance is not 
subject to this restriction. Nothing in this part restricts HUD's 
authority under applicable Federal law to fund activities, that can be 
directly funded by the Government consistent with the Establishment 
Clause of the U.S. Constitution.
* * * * *
    (g) Nondiscrimination requirements. Any organization that receives 
Federal financial assistance under a HUD program or activity shall not, 
in providing services with such assistance or carrying out activities 
with such assistance, discriminate against a beneficiary or prospective 
beneficiary on the basis of religion, religious belief, a refusal to 
hold a religious belief, or a refusal to attend or participate in a 
religious practice. However, this section does not require any 
organization that only receives indirect Federal financial assistance 
to modify its program or activities to accommodate a beneficiary that 
selects the organization to receive indirect aid or prohibit such 
organization from requiring attendance at all activities that are 
fundamental to the program.
    (h) No additional assurances from faith-based organizations. A 
faith-based organization is not rendered ineligible by its religious 
nature to access and participate in HUD programs. No notice of funding 
availability, grant agreement, cooperative agreement, covenant, 
memorandum of understanding, policy, or regulation that is used by HUD 
or a recipient or intermediary in administering Federal financial 
assistance from HUD shall require otherwise eligible faith-based 
organizations to provide assurances or notices where they are not 
required of similarly situated secular organizations. All organizations 
that participate in HUD programs or activities, including organizations 
with religious character or affiliations, must carry out eligible 
activities in accordance with all program requirements, subject to any 
required or appropriate accommodation, particularly under the Religious 
Freedom Restoration Act, and other applicable requirements governing 
the conduct of HUD-funded activities, including those prohibiting the 
use of direct financial assistance to engage in explicitly religious 
activities. No notice of funding availability, grant agreement, 
cooperative agreement, covenant, memorandum of understanding, policy, 
or regulation that is used by HUD or a recipient or intermediary in 
administering financial assistance from HUD shall disqualify otherwise 
eligible faith-based organizations from participating in HUD's programs 
or activities because such organization is motivated or influenced by 
religious faith to provide such programs and activities, or because of 
its religious exercise or affiliation.
* * * * *
    (l) Tax exempt organizations. In general, HUD 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 HUD programs. Many grant programs, however, 
do require an organization to be a nonprofit organization in order to 
be eligible for funding. Notices of funding availability that require 
organizations to have nonprofit status will specifically so indicate in 
the eligibility section of the notice of funding availability. In 
addition, if any notice of funding availability requires an 
organization to maintain tax-exempt status, it will expressly state the 
statutory authority for requiring such status. Applicants should 
consult with the appropriate HUD program office to determine the scope 
of any applicable requirements. In HUD programs in which an applicant 
must show that it is a nonprofit organization but this is not 
statutorily defined, 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 (l)(1) through (l)(3) of this 
section, if that item applies to a State or national parent 
organization, together with a statement by the state or parent 
organization that the applicant is a local nonprofit affiliate; or
    (5) For an entity that holds a sincerely-held religious belief that 
it cannot apply for a determination as an entity that is tax-exempt 
under section 501(c)(3) of the Internal Revenue Code, evidence 
sufficient to establish that the entity would otherwise qualify as a 
nonprofit organization under paragraphs (l)(1) through (l)(4) of this 
section.
    (m) Rule of construction. Neither HUD nor any recipient or other 
intermediary receiving funds under any HUD program or activity 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.
0
3. Add Appendix A to Subpart A of Part 5 to read as follows:

Appendix A to Subpart A of Part 5--Notice of Funding Availability

    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 42 U.S.C. 2000bb et seq., HUD will 
not, in the selection of recipients, discriminate against an 
organization on the basis of the organization's religious exercise 
or affiliation.
    A faith-based organization that participates in this program 
will retain its independence, and may continue to carry out its 
mission consistent with religious freedom protections in Federal 
law, including the Free Speech and Free Exercise clauses of the 
Constitution, 42 U.S.C. 2000bb et seq., 42 U.S.C. 238n, 42 U.S.C. 
18113, 42 U.S.C. 2000e-1(a) and 2000e-2(e), 42 U.S.C. 12113(d), and 
the Weldon Amendment, among others. Religious accommodations may 
also be sought under many of these religious freedom protection 
laws, particularly under the Religious Freedom Restoration Act.
    A faith-based organization may not use direct financial 
assistance from HUD to support or engage in any explicitly religious 
activities except where consistent with the Establishment Clause and 
any other applicable requirements. Such an organization also may 
not, in providing services funded by HUD, discriminate against a 
program beneficiary or prospective program

[[Page 8225]]

beneficiary on the basis of a refusal to hold a religious belief, or 
a refusal to attend or participate in a religious practice.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
4. The authority citation for part 92 continues to read as follows:

    Authority:  42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.


Sec.  92.508   [Amended]

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5. Amend Sec.  92.508 by removing paragraph (a)(2)(xiii).

    Dated: January 2, 2020.
Benjamin S. Carson, Sr.,
Secretary.
[FR Doc. 2020-02495 Filed 2-12-20; 8:45 am]
 BILLING CODE 4210-67-P