[Federal Register Volume 87, Number 117 (Friday, June 17, 2022)]
[Proposed Rules]
[Pages 36411-36412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12736]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 87, No. 117 / Friday, June 17, 2022 / 
Proposed Rules  

[[Page 36411]]



AGENCY FOR INTERNATIONAL DEVELOPMENT

2 CFR Part 700

RIN 0412-AB01


USAID Grant Regulations; Removing the Program Income Restriction 
on For-Profit Entities

AGENCY: U.S. Agency for International Development.

ACTION: Proposed rule.

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SUMMARY: The U.S. Agency for International Development (USAID) proposes 
to amend the rules for administering Federal awards to remove a 
prohibition on for-profit entities from adding program income to a 
Federal award. This change allows any USAID assistance recipient--
whether nonprofit or for-profit--to use the ``addition method'' for 
managing program income under a Federal award. This will align USAID's 
approach to program income with other Federal agencies.

DATES: Comments must be received no later than August 16, 2022.

ADDRESSES: Submit comments, identified by the title of the action and 
Regulatory Information Number (RIN) through the Federal eRulemaking 
Portal at https://www.regulations.gov by following the instructions for 
submitting comments. Please include your name, company name (if any), 
and ``0412-AB01'' on any attachments. If your comment cannot be 
submitted using https://www.regulations.gov, please email the point of 
contact in the FOR FURTHER INFORMATION CONTACT section of this document 
for alternate instructions.

FOR FURTHER INFORMATION CONTACT: Lyudmila Bond, USAID/M/OAA/P, 202-916-
2622, [email protected].

SUPPLEMENTARY INFORMATION: 

A. Instructions

    All comments must be in writing and submitted through the method 
specified in the ADDRESSES section above. All submissions must include 
the title of the action and RIN for this rulemaking. Please include 
your name, title, organization, postal address, telephone number, and 
email address in the text of the message.
    All comments will be made available at http://www.regulations.gov 
for public review without change, including any personal information 
provided. We recommend that you do not submit information that you 
consider Confidential Business Information (CBI) or any information 
that is otherwise protected from disclosure by statute.
    USAID will only address substantive comments on the rule. USAID may 
not consider comments that are insubstantial or outside the scope of 
the proposed rule.

B. Background

    In 1995, USAID established its own program-specific assistance 
regulation prohibiting the use of the ``addition method'' by any 
recipient that is a for-profit entity. The interim final rule, 
Administration of Assistance Awards to US Non-Governmental 
Organizations, 60 FR 3744, January 19, 1995, was codified at 22 CFR 
part 226. Prior to 2013, Government-wide guidance on assistance awards 
was contained in several Office of Management and Budget (OMB) 
circulars. Agencies promulgated their own assistance award guidance in 
policy statements and regulations. In 2014, OMB consolidated and 
updated its guidance in the interim final rule, Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards (commonly referred to as the ``Uniform Guidance''), at 79 FR 
75867, December 26, 2014, and codified at 2 CFR part 200. Program 
income is defined in 2 CFR 200.1, with 2 CFR 200.307(e) describing the 
three methods for recipients to account for program income under an 
award: deduction, addition, and cost share/matching. In 2015, USAID 
published its final rule at 80 FR 55721, October 19, 2015, adopting the 
Uniform Guidance and re-codifying its own regulations in 2 CFR part 
700. At that time, OMB's instructions were that a change to agency-
specific policy must be done separately from the adoption of 2 CFR part 
200. Thus, the current USAID regulation, 2 CFR 700.13(a)(2) (Additional 
Provisions for For-Profit Entities) extended the USAID-specific 
restriction without any revisions.

C. Analysis

    The purpose of USAID's action to delete the prohibition on for-
profit recipients adding earned program income to Federal awards is to 
expand and extend the activities that USAID supports, when these 
activities are implemented by a for-profit entity. When program income 
is generated, the addition method means that recipients may add such 
income back into the award to continue supporting the activity. Section 
2 CFR 200.307(e)(2) requires that the added ``program income must be 
used for the purposes and under the conditions of the Federal award.'' 
Thus, all recipients must comply with the terms of the award regardless 
of its entity type.
    The Federal agencies that have adopted OMB's Uniform Guidance have 
not generally imposed a prohibition on the use of the addition method 
by for-profit entities, and no Federal agency appears to have imposed a 
complete prohibition on the addition method by for-profit entities. The 
Department of State, under 2 CFR parts 600 through 699, adopts the 
application of the Uniform Guidance to its assistance awards, including 
to for-profit entities, but does not impose any additional program 
income restrictions on them. As such, for-profit entities of assistance 
awards from the Department of State may apply the addition method for 
program income. Similarly, the Department of Energy, through its 
supplemental regulations under 2 CFR parts 910 through 999, adopts the 
application of the Uniform Guidance and expressly applies them to for-
profit entities, but it does not create any additional program income 
regulations. Only one Federal agency is known to maintain a 
restriction: the Department of Health and Human Services, under 45 CFR 
75.216 through 75.218, does not allow for-profit entities to use the 
addition method, except for grants for research in its Small Business 
Innovation Research and Small Business Technology Transfer Research 
programs.
    Removing this restriction from 2 CFR 700.13 will support USAID's 
Private Sector Engagement (PSE) policy by leveling the playing field 
for all recipients. In short, the result of this

[[Page 36412]]

change would be that any USAID recipient--whether non-profit or for-
profit--would be able to use the addition method for program income, 
subject to all the same regulations. Section 2 CFR 700.13 would 
continue to state that for-profit entities cannot use the addition 
method for using program income as profit.
    USAID is seeking public comments on the proposed change to 2 CFR 
700.13. This proposed change will allow program income earned by a for-
profit entity to be added to Federal awards as an option under 2 CFR 
200.307(e), when such program income is used for the purposes and under 
the conditions of the Federal award.

D. Regulatory Considerations

1. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This proposed rule is not a major 
rule under 5 U.S.C. 804.

2. Regulatory Flexibility Act

    The proposed rule will not have an impact on a substantial number 
of small entities within the meaning of the Regulatory Flexibility Act, 
5 U.S.C. 601, et seq. Therefore, an Initial Regulatory Flexibility 
Analysis has not been performed.

3. Paperwork Reduction Act

    The proposed rule does not establish a new collection of 
information that requires the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 2 CFR Part 700

    Grant programs, Grants administration.

    For the reasons discussed in the preamble, USAID proposes to amend 
2 CFR part 700 as set forth below:

PART 700--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND 
AUDIT REQUIREMENTS FOR FEDERAL AWARDS

0
1. The authority citation for 2 CFR part 700 continues to read as 
follows:

    Authority:  Sec. 621, Pub. L. 87-195, 75 Stat. 445, (22 U.S.C. 
2381) as amended; E.O. 12163, Sept. 29, 1979, 44 FR 56673; 3 CFR 
1979 Comp., p. 435.


Sec.  700.13   [Amended]

0
2. Amend Sec.  700.13 by removing and reserving paragraph (a)(2).

Mark Anthony Walther,
Chief Acquisition Officer.
[FR Doc. 2022-12736 Filed 6-16-22; 8:45 am]
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