[Federal Register Volume 88, Number 133 (Thursday, July 13, 2023)]
[Proposed Rules]
[Pages 44750-44760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14600]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 75

RIN 0945-AA19


Health and Human Services Grants Regulation

AGENCY: Office for Civil Rights (OCR), Office of the Assistant 
Secretary for Financial Resources (ASFR), Department of Health and 
Human Services (HHS).

ACTION:  Notice of proposed rulemaking.

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SUMMARY:  This is a notice of proposed rulemaking (NPRM) to 
repromulgate and revise certain regulatory provisions of the HHS, 
Uniform Administrative Rule Requirements, Cost Principles, and Audit 
Requirements for HHS Awards, previously set forth in a final rule 
published in the Federal Register.

DATES: Comments: Submit comments on or before September 11, 2023.

ADDRESSES: You may submit comments, identified by the Regulation 
Identifier Number (RIN) 0945-AA19, by any of the following methods. 
Please do not submit duplicate comments.
    Federal Rulemaking Portal: You may submit electronic comments at 
https://regulations.gov by searching for the Docket ID number HHS-OCR-
2023-0011. Follow the instructions for submitting electronic comments. 
If you are submitting comments electronically, the Department strongly 
encourages you to submit any comments or attachments in Microsoft Word 
format. If you must submit a comment in Adobe Portable Document Format 
(PDF), the Department strongly encourages you to convert the PDF to 
``print-to-PDF'' format, or to use some other commonly used searchable 
text format. Please do not submit the PDF in scanned format. Using a 
print-to-PDF allows the Department to electronically search and copy 
certain portions of your submissions to assist in the rulemaking 
process.
    Regular, Express, or Overnight Mail: You may mail written comments 
to the following address only: U.S. Department of Health and Human 
Services, Office for Civil Rights, Attention: HHS Grants Rulemaking 
(RIN-0945-AA19), Washington, DC 20201.
    All comments received by the methods and due date specified above 
may be posted without change to content to https://www.regulations.gov, 
which may include personal information provided about the

[[Page 44751]]

commenter, and such posting may occur after the closing of the comment 
period. However, the Department may redact certain non-substantive 
content from comments before posting, including threats, hate speech, 
profanity, graphic images, or individually identifiable information 
about a third-party individual other than the commenter. In addition, 
comments or material designated as confidential or not to be disclosed 
to the public will not be accepted. Comments may be redacted or 
rejected as described above without notice to the commenter, and the 
Department will not consider in rulemaking any redacted or rejected 
content that would not be made available to the public as part of the 
administrative record.
    Because of the large number of public comments normally received on 
Federal Register documents, OCR is not able to provide individual 
acknowledgements of receipt.
    Please allow sufficient time for mailed comments to be received 
timely in the event of delivery or security delays.
    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 https://www.regulations.gov and search for Docket ID 
number HHS-OCR-2023-0011.

FOR FURTHER INFORMATION CONTACT: Office for Civil Rights, Daniel Shieh, 
Associate Deputy Director, HHS Office for Civil Rights, (202) 240-3110 
or (800) 537-7697 (TDD), or via email at [email protected] for 
matters related to the HHS Grants Rulemaking.

SUPPLEMENTARY INFORMATION: This is an NPRM proposing to repromulgate 
provisions of the Uniform Administrative Requirements, 45 CFR part 75, 
set forth in the rule published in the Federal Register at 81 FR 89393 
(December 12, 2016). (2016 Rule). The 2016 Rule is currently subject to 
a Notice of Nonenforcement, 84 FR 63809 (November 19, 2019), which 
states that the Department will rely upon its enforcement discretion to 
not enforce the regulatory provisions adopted or amended by the 2016 
Rule. On the same day that the Department issued the Notice of 
Nonenforcement, it also issued an NPRM proposing revisions to the 2016 
Rule. After a 30-day comment period, during which the Department 
received over 100,000 comments, a final rule was published in January 
2021. 86 FR 2257 (January 12, 2021) (2021 Rule). The 2021 Rule was 
challenged in the U.S. District Court for the District of Columbia, 
Facing Foster Care et al. v. HHS, 21-cv-00308 (D.D.C. filed Feb. 2, 
2021). The 2021 Rule was to be effective on February 11, 2021, but the 
effective date was extended via several postponements by the court in 
Facing Foster Care under 5 U.S.C. 705. On June 29, 2022, the court 
granted the Department's motion for remand with vacatur, and ``ordered 
that those portions of the U.S. Department of Health and Human Services 
(`HHS') regulation entitled Health and Human Services Grants 
Regulation, 86 FR 2257 (Jan. 12, 2021), that amend 45 CFR 75.101(f), 
75.300(c), and 75.300(d), are hereby VACATED and REMANDED to HHS.'' \1\ 
Through this NPRM, the Department now proposes to repromulgate with 
certain exceptions and revisions those provisions of the 2021 Rule that 
were vacated and remanded to the Department.
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    \1\ See Order, Facing Foster Care et al. v. HHS, No. 21-cv-00308 
(D.D.C. June 29, 2022), ECF No. 44.
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Table of Contents

I. Background
    A. Background and Rulemaking
    B. Additional Background
    C. Summary of the Proposed Rule
    1. Applicability (45 CFR 75.101)
    2. Statutory and National Policy Requirements (45 CFR 75.300)
    3. Notification of Views Regarding Application of Federal 
Religious Freedom Laws
II. Reasons for the Proposed Rulemaking
    A. The 2016 Rule and the Scope of 5 U.S.C. 301
    B. Effect on the Notice of Nonenforcement
III. Executive Order 12866 and Related Executive Orders on 
Regulatory Review
    A. Executive Order 12866 Determination
    B. Regulatory Flexibility Analysis--Initial Small Entity 
Analysis
    C. Executive Order 13132: Federalism
    D. Executive Order 12250 on Leadership and Coordination of 
Nondiscrimination Laws
    E. Paperwork Reduction Act
IV. Request for Comment

I. Background

A. Background and Rulemaking

    On December 26, 2013, the Office of Management and Budget (OMB) 
issued the Uniform Administrative Requirements, Cost Principles, and 
Audit Requirements for Federal Awards (UAR or uniform regulations) that 
``set standard requirements for financial management of Federal awards 
across the entire federal government.'' 78 FR 78590 (Dec. 26, 2013). On 
December 19, 2014, OMB and other Federal award-making agencies, 
including the Department, issued an interim final rule to implement the 
UAR. 79 FR 75867 (Dec. 19, 2014). OMB's purpose in promulgating the 
uniform regulations was to (1) streamline guidance in making Federal 
awards to ease administrative burden and (2) strengthen financial 
oversight over Federal funds to reduce risks of fraud, waste, and 
abuse.\2\
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    \2\ 78 FR 78590 (Dec. 26, 2013); 85 FR 3766 (Jan. 22, 2020).
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    On July 13, 2016, the Department issued an NPRM proposing changes 
to its adoption of the 2014 UAR Interim Final Rule.\3\ The 2016 Rule 
was promulgated pursuant to OMB's uniform regulations that ``set 
standard requirements for financial management of Federal awards across 
the entire federal government,'' 2 CFR part 200; 5 U.S.C. 301; and the 
Chief Financial Officers Act of 1990, Public Law 101-576, now at 31 
U.S.C. 503.\4\ The NPRM, entitled the ``Health and Human Services 
Grants Rule,'' proposed changes to:
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    \3\ 81 FR 45270 (July 13, 2016).
    \4\ 78 FR 78590 (Dec. 26, 2013).
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     Section 75.102, concerning requirements related to the 
Indian Self-Determination and Education Assistance Act (ISDEAA);
     Section 75.300, concerning certain public policy 
requirements and Supreme Court cases, and Sec.  75.101, concerning the 
applicability of those provisions to the Temporary Assistance for Needy 
Families Program (Title IV-A of the Social Security Act, 42 U.S.C. 601-
19);
     Section 75.305, concerning the applicability to states of 
certain payment provisions;
     Section 75.365, concerning certain restrictions on public 
access to records;
     Section 75.414, concerning indirect cost rates for certain 
grants; and
     Section 75.477, concerning shared responsibility payments 
and payments for failure to offer health coverage to employees.
    On December 12, 2016, the Department finalized all of these 
provisions with the exception of proposed Sec.  75.102. See 81 FR 
89393.\5\ The 2016 Rule went into effect on January 11, 2017.
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    \5\ The 2016 Rule also made a technical change not set forth in 
the proposed rule, amending Sec.  75.110(a) by removing ``75.355'' 
and adding, in its place, ``75.335.''
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    On February 27, 2018, the State of South Carolina sent a letter to 
the Department's Administration for Children and Families (ACF) on 
behalf of the state's faith-based organizations, seeking a waiver from 
the 2016 Rule's religious nondiscrimination requirements. On January 
23, 2019, ACF sent South Carolina a letter approving

[[Page 44752]]

the state's waiver request from the religious nondiscrimination 
requirement of 45 CFR 75.300(c).
    On November 19, 2019, the Department issued a Notice of 
Nonenforcement, 84 FR 63809, which stated that the Department would 
rely upon its enforcement discretion to not enforce the regulatory 
provisions adopted or amended by the 2016 Rule. The Department stated 
that such nonenforcement was due to issues regarding the 2016 Rule's 
compliance with the requirements of the Regulatory Flexibility Act, 5 
U.S.C. 601-12 (RFA). The 2019 Notice of Nonenforcement stated that the 
Department was concerned over whether the 2016 Rule provided a 
sufficient rationale and certification that the rule would not have a 
significant economic impact on a substantial number of small entities, 
or a sufficient final regulatory flexibility analysis at the time of 
publication. The 2019 Notice of Nonenforcement was challenged in the 
U.S. District Court for the Southern District of New York in Family 
Equality v. Azar, 20-cv-02403 (S.D.N.Y. filed Mar. 19, 2020); the suit 
was dismissed on March 30, 2022, for lack of subject-matter 
jurisdiction.\6\ The case is on appeal in the Second Circuit, while the 
2019 Notice of Nonenforcement remains in effect.\7\
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    \6\ See Order, Family Equality v. Azar, No. 20-cv-02403 
(S.D.N.Y. Mar. 30, 2022), ECF No. 62.
    \7\ Family Equality v. Becerra, No. 22-1174 (2d Cir. filed May 
27, 2022).
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    On March 5, 2020, in response to a lawsuit filed by the State of 
Texas against the Department challenging the 2016 Rule, Texas v. Azar, 
3:19-cv-00365 (S.D. Tex. Oct. 31, 2019), OCR sent a letter informing 
Texas of OCR's conclusion that the Religious Freedom Restoration Act of 
1993 (RFRA), 42 U.S.C. 2000bb et seq., prohibited the Department from 
applying 45 CFR 75.300(c) and (d) against Texas with respect to the 
Archdiocese of Galveston-Houston, a religious foster-care service 
provider, and ``other similarly situated entities.''
    On November 3, 2020, in response to a separate lawsuit filed 
against the Department, Buck v. Gordon, 1:19-cv-00286 (W.D. Mich. Apr. 
15, 2019), OCR sent the Michigan Department of Health and Human 
Services a letter informing them of OCR's conclusion that RFRA likewise 
prohibited the Department from applying 45 CFR 75.300(c) against 
Michigan with respect to the St. Vincent Catholic Charities, a 
religious foster-care service provider, and ``other similarly situated 
entities.''
    On the same day the Department issued the 2019 Notice of 
Nonenforcement, it published an NPRM proposing to ``repromulgate some 
of the provisions of the [2016] Final Rule, not to repromulgate others, 
and to replace or modify certain provisions that were included in the 
Final Rule with other provisions.'' 84 FR 63831 (Nov. 19, 2019). After 
a 30-day comment period and receipt of over 100,000 comments, on 
January 12, 2021, the Department repromulgated portions of and issued 
amendments to the 2016 Rule, 86 FR 2257 (2021 Rule). Specifically, from 
the 2016 Rule, the 2021 Rule repromulgated provisions of 45 CFR part 75 
and made amendments to 45 CFR 75.300(c) and (d). Section 75.300(c) 
previously prohibited discrimination in the administration of programs 
supported by HHS awards ``based on non-merit factors such as age, 
disability, sex, race, color, national origin, religion, gender 
identity, or sexual orientation.'' The 2021 Rule amended Sec.  
75.300(c) to prohibit discrimination in these programs ``to the extent 
doing so is prohibited by federal statute.''
    Section 75.300(d) had previously stated that ``all recipients must 
treat as valid the marriages of same-sex couples'' consistent with the 
Supreme Court decisions in United States v. Windsor and Obergefell v. 
Hodges. The 2021 Rule amended Sec.  75.300(d) to state that ``HHS will 
follow all applicable Supreme Court decisions.''
    Shortly after the 2021 Rule's issuance, portions of the amendments 
to Sec.  75.300 and a conforming amendment at Sec.  75.101(f) were 
challenged in the U.S. District Court for the District of Columbia. 
Facing Foster Care v. HHS, 21-cv-00308 (D.D.C. Feb. 2, 2021). On June 
17, 2022, the Department filed a motion for remand with vacatur the 
challenged portions of the 2021 Rule. The Department noted that because 
HHS had ``reviewed only a small fraction of the non-duplicative 
comments, did not employ a sampling methodology likely to produce an 
adequate sample of the comment received, and did not explain its use of 
sampling in the final rule, Defendants have concluded, in the 
circumstances of this case, that the 2021 Rule was promulgated in 
violation of the [Administrative Procedure Act].'' \8\ On June 29, 
2022, the court ordered that the challenged portions of 45 CFR 
75.101(f), 75.300(c), and 75.300(d) be vacated and remanded to HHS.\9\
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    \8\ Facing Foster Care et al. v. HHS, No. 21-cv-00308 (D.D.C. 
June 17, 2022), ECF No. 41.
    \9\ See id., Order (June 29, 2022), ECF No. 44. Because they 
were not subject to the order of vacatur, certain provisions 
previously adopted in the 2021 Rule remain in effect. These 
provisions are: 45 CFR 75.305, 75.365, 75.414, and 75.417.
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    On November 18, 2021, HHS issued letters to South Carolina, 
Michigan, and Texas with respect to previously granted waivers under 
RFRA for participation in the Title IV-E program (the HHS-administered 
adoption and foster care program). The letters noted that because HHS 
had issued the 2019 Notification of Nonenforcement, which stated that 
HHS would not enforce the non-discrimination requirements under the 
2016 Rule, the RFRA waivers were unnecessary, and thus, rescinded. The 
letters further explained that the previously granted waivers had 
misapplied the applicable RFRA standards and were therefore withdrawn.

B. Additional Background

    On June 15, 2020, the U.S. Supreme Court held that Title VII of the 
Civil Rights Act of 1964, 42 U.S.C. 2000e-2(a)(1) (Title VII), 
prohibits discrimination on the basis of sex, which includes 
discrimination based on sexual orientation and gender identity. Bostock 
v. Clayton County, 140 S. Ct. 1731 (2020). Bostock concluded that the 
plain meaning of ``because of . . . sex'' in Title VII necessarily 
included discrimination because of sexual orientation and gender 
identity. Id. at 1753-54. After Bostock, circuit courts concluded that 
the plain language of the Title IX of the Education Amendments of 1972, 
20 U.S.C. 1681(a), prohibition on sex discrimination must be read 
similarly. See Grimm v. Gloucester Cty. Sch. Bd., 972 F.3d 586 (4th 
Cir. 2020), cert. denied, 141 S. Ct. 2878 (2021); see also Doe v. 
Snyder, 28 F.4th 103, 114 (9th Cir. 2022) (applying Bostock's reasoning 
to the prohibitions on sex discrimination in Title IX and Section 1557 
of the Affordable Care Act, 42 U.S.C. 18116). But cf. Adams v. School 
Bd. of St. Johns Co., 57 F.4th 791, 811-15 (11th Cir. 2022) (en banc) 
(recognizing that Bostock instructs that the exclusion of a transgender 
student from the bathroom consistent with his gender identity was 
exclusion on the basis of ``sex,'' but that such exclusion was 
permitted by Title IX's ``express statutory and regulatory carve-outs'' 
for living and bathroom facilities).
    On January 20, 2021, President Biden issued Executive Order (E.O.) 
13988, 86 FR 7023, 7023-24, which directed Federal agencies to review 
all agency actions, including regulations, ``as necessary to fully 
implement statutes that prohibit sex discrimination,'' and determine if 
they were inconsistent with Bostock reasoning.\10\
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    \10\ In Neese v. Becerra, No. 2:21-cv-00163 (N.D. Tex., Nov. 10, 
2022), the U.S. District Court for the Northern District of Texas 
declared unlawful a May 10, 2021 notification titled, ``Notification 
of Interpretation and Enforcement of Section 1557 of the Affordable 
Care Act and Title IX of the Education Amendments of 1972,'' which 
applied Bostock to Title IX and Section 1557. On January 20, 2023, 
the Department appealed that decision to the Fifth Circuit Court of 
Appeals. That appeal is pending.

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[[Page 44753]]

C. Summary of the Proposed Rule

    Because the 2021 Rule's amendments to 45 CFR 75.101(f), 75.300(c), 
and 75.300(d) were vacated and remanded to HHS, the Department proposes 
to repromulgate some provisions from the 2016 Rule as well as other 
provisions with changes. Specifically, the Department is proposing not 
to reinstate former Sec.  75.101(f), as found in both the 2016 and 2021 
Rules; is proposing revisions to Sec.  75.300(c) and (d) from the 2016 
Rule; and is proposing to add new Sec.  75.300(e) and (f), not found in 
either the 2016 or the 2021 Rules.
1. Applicability (Sec.  75.101)
    Proposed section 75.101 provides for the applicability of the 2014 
UAR Rule. The 2016 Rule included a provision at Sec.  75.101(f) 
providing that Sec.  75.300(c) (prohibiting discrimination on a range 
of bases in the administration of programs supported by HHS awards) 
would ``not apply to the Temporary Assistance for Needy Families 
Program (title IV-A of the Social Security Act, 42 U.S.C. 601-619).'' 
This was repromulgated in the 2021 Rule and is subject to the order of 
vacatur.
    The Department does not propose to add paragraph (f) in Sec.  
75.101, which was included in the 2016 Rule to ensure that the specific 
statutory requirements of the Temporary Assistance for Needy Families 
Program (Title IV-A of the Social Security Act, 42 U.S.C. 601-619) 
(TANF) governed applicable grants. This language is not necessary under 
the proposed language of 45 CFR 75.300, because the latter is already 
limited to applicable statutory nondiscrimination requirements and the 
TANF statute, 42 U.S.C. 608(d), already identifies the 
nondiscrimination provisions that apply to TANF.
2. Statutory and National Policy Requirements (Sec.  75.300)
    Section 75.300 provides the statutory and policy requirements for 
the 2014 UAR Rule. The Department proposes to keep paragraphs (a) and 
(b) of Sec.  75.300 unchanged from the 2016 Rule, which provides: ``(a) 
The Federal awarding agency must manage and administer the Federal 
award in a manner so as to ensure that Federal funding is expended and 
associated programs are implemented in full accordance with U.S. 
statutory and public policy requirements: Including, but not limited 
to, those protecting public welfare, the environment, and prohibiting 
discrimination. The Federal awarding agency must communicate to the 
non-Federal entity all relevant public policy requirements, including 
those in general appropriations provisions, and incorporate them either 
directly or by reference in the terms and conditions of the Federal 
award. (b) The non-Federal entity is responsible for complying with all 
requirements of the Federal award. For all Federal awards, this 
includes the provisions of FFATA, which includes requirements on 
executive compensation, and also requirements implementing the Act for 
the non-Federal entity at 2 CFR part 25 and 2 CFR part 170. See also 
statutory requirements for whistleblower protections at 10 U.S.C. 2324 
and 2409, and 41 U.S.C. 4304, 4310, and 4712.''
    This NPRM proposes to repromulgate Sec.  75.300(c) from the 2021 
Rule to provide: ``It is a public policy requirement of HHS that no 
person otherwise eligible will be excluded from participation in, 
denied the benefits of, or subjected to discrimination in the 
administration of HHS programs and services, to the extent doing so is 
prohibited by federal statute.'' This revises the 2016 Rule, which 
provided at 45 CFR 75.300(c), in relevant part, ``It is a public policy 
requirement of HHS that no person otherwise eligible will be excluded 
from participation in, denied the benefits of, or subjected to 
discrimination in the administration of HHS programs and services based 
on non-merit factors such as age, disability, sex, race, color, 
national origin, religion, gender identity, or sexual orientation.'' 
The Department also proposes to repromulgate Sec.  75.300(d) from the 
2021 Rule to provide, ``HHS will follow all applicable Supreme Court 
decisions in administering its award programs.'' This revises the 2016 
Rule, which provided at 45 CFR 75.300(d), ``In accordance with the 
Supreme Court decisions in United States v. Windsor and in Obergefell 
v. Hodges, all recipients must treat as valid the marriages of same-sex 
couples. This does not apply to registered domestic partnerships, civil 
unions or similar formal relationships recognized under state law as 
something other than a marriage.'' As discussed more fully below in 
Part II, Section A, the Department's proposals reflect its 
reconsideration in light of arguments concerning the Housekeeping 
Statute, 5 U.S.C. 301, raised in litigation challenging a different HHS 
rule, and HHS's desire to provide stability and clarity in its 
programs.
    Finally, the Department proposes to add a Sec.  75.300(e), which 
clarifies the Department interpretation of the prohibition of 
discrimination on the basis of sex to include (1) discrimination on the 
basis of sexual orientation and (2) discrimination on the basis of 
gender identity, consistent with the Supreme Court's decision in 
Bostock v. Clayton County, 140 S. Ct. 1731 (2020)), and other Federal 
court precedent applying Bostock's reasoning that sex discrimination 
includes discrimination based on sexual orientation and gender 
identity.\11\ Proposed Sec.  75.300(e) applies to 13 HHS authorities 
that prohibit discrimination on the basis of sex in health and human 
services programs.
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    \11\ Bostock's reasoning applies with equal force to claims 
alleging discrimination on the basis of sex characteristics, 
including intersex traits, because discrimination based on 
anatomical or physiological sex characteristics (such as genitals, 
gonads, chromosomes, hormone function, and brain development/
anatomy) is inherently sex-based. Discrimination on the basis of 
intersex traits, therefore, is prohibited sex discrimination because 
the individual is being discriminated against based on their sex 
characteristics. If their sex characteristics were different--i.e., 
traditionally ``male'' or ``female''--the intersex person would be 
treated differently. Moreover, like gender identity and sexual 
orientation, intersex traits are ``inextricably bound up with'' sex, 
and ``cannot be stated without referencing sex.'' Bostock, 140 S. 
Ct. at 1742; see also Grimm, 972 F.3d at 608 (quoting Whitaker v. 
Kenosha Unified Sch. Dist. No. 1 Bd. of Educ., 858 F.3d 1034, 1051 
(7th Cir. 2017)).
    In addition to Bostock, the Department continues to interpret 
sex discrimination to prohibit discrimination on the basis of sex 
stereotypes, which can include stereotypes regarding sex 
characteristics and intersex traits, consistent with longstanding 
Supreme Court precedent. See Los Angeles, Dep't of Water & Power v. 
Manhart, 435 U.S. 702 (1978); Price Waterhouse v. Hopkins, 490 U.S. 
228 (1989)).
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    The Department seeks comment on whether the Department administers 
other statutes prohibiting sex discrimination that are not set forth in 
proposed Sec.  75.300(e) or whether the Department should include 
language or guidance in Sec.  75.300(e) to cover current or future laws 
that prohibit sex discrimination that are not set forth above.
    Bostock held that a plain reading of Title VII's prohibition on 
discrimination ``because of . . . sex'' encompassed discrimination 
based on sexual orientation or transgender status. According to the 
Court, a straightforward application of the terms ``discriminate,'' 
``because of,'' and ``sex'' means that ``it is impossible to 
discriminate against a person'' for being gay or transgender ``without

[[Page 44754]]

discriminating against that individual based on sex.'' \12\
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    \12\ 140 S. Ct. at 1742.
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    The 13 statutes listed in proposed Sec.  75.300(e) each contain 
prohibitions on sex discrimination. None of the 13 statutes contain any 
indicia--such as statute-specific definitions, or any other criteria--
to suggest that these prohibitions on sex discrimination should be 
construed differently than Title VII's sex discrimination prohibition. 
Nor is the Department aware of reported case law requiring such a 
construction. Accordingly, this rule proposes to interpret the 
prohibition on sex discrimination by applying Bostock's reasoning that 
sex discrimination includes discrimination on the basis of sexual 
orientation and gender identity with respect to programs, activities, 
projects, assistance, and services that receive Federal financial 
assistance under these statutes which the Department administers \13\ 
and over which OCR maintains civil rights enforcement authority.\14\
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    \13\ Authorized by the Omnibus Budget Reconciliation Act of 1981 
(OBRA), Public Law 97-35.
    \14\ See 47 FR 4348-02 (January 29, 1982) (delegating to the OCR 
Director ``civil rights enforcement authority contained in the 
Health and Human Services Block Grants prescribed by the Omnibus 
Budget Reconciliation Act of 1981.'').
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    As described further below, the 13 listed statutes contain minor 
variations in the language used to prohibit sex discrimination, 
sometimes within the same statute, but the Department does not believe 
any of the variations can be reasonably understood to distinguish the 
various statutes from Bostock's reasoning.
    Nine of the statutes listed in proposed Sec.  75.300(e) prohibit 
discrimination ``on the basis of'' sex, using language identical to the 
sex discrimination prohibition in Title IX.\15\ For example, the Public 
Health Service Act, prohibits the Secretary from providing certain 
funding to nursing schools unless the school ``furnishes assurances . . 
. that it will not discriminate on the basis of sex.'' \16\ Seven of 
the statutes identified in proposed 75.300(e) prohibit discrimination 
``on the ground of . . . sex.'' \17\ For example, the Preventive Health 
and Health Services Block Grant provides that ``no person shall on the 
ground of sex . . . be excluded from participation in, or be denied the 
benefits of, or be subjected to discrimination under, any program or 
activity funded in whole or in part with funds made available under 
this part.'' \18\ One statute states that a grant or contract must 
provide that the recipient of financial assistance will not 
``discriminate . . . because of . . . sex,'' \19\ the same language 
from Title VII that the Supreme Court analyzed in Bostock. Finally, two 
of the statutes identified in proposed Sec.  75.300(e) require services 
to be provided ``without regard to . . . sex.'' \20\ For the purposes 
of this rulemaking, the Department does not believe that any of these 
variations are legally significant, or that these statutes should be 
interpreted in a way that diverges from the Court's interpretation of 
Title VII's language ``because of . . . sex'' in Bostock.\21\
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    \15\ 42 U.S.C. 290ff-1; 42 U.S.C. 290cc-33; 42 U.S.C. 295m; 42 
U.S.C. 296g; 42 U.S.C. 300w-7; 42 U.S.C. 300x-57; 42 U.S.C. 708; 42 
U.S.C. 9918; 42 U.S.C. 10406.
    \16\ 42 U.S.C. 296g.
    \17\ 42 U.S.C. 290cc-33(a)(2); 42 U.S.C. 300w-7; 42 U.S.C. 300x-
57(a)(2); 42 U.S.C. 708(a)(2); 42 U.S.C. 5151(a); 42 U.S.C. 8625; 42 
U.S.C. 10406(c)(2)(B).
    \18\ 42 U.S.C. 300w-7; see also OBRA, Public Law 97-35, 47 FR 
4348-02.
    \19\ 48 U.S.C. 9849(a).
    \20\ 42 U.S.C. 295m; 8 U.S.C. 1522.
    \21\ Five of the listed statutes contain separate provisions 
prohibiting discrimination both ``on the basis of sex under Title 
IX'' and ``on the grounds of sex.'' One statute contains separate 
provisions prohibiting discrimination ``on the basis of sex'' and 
requiring services to be provide ``without regard to . . . sex.'' 42 
U.S.C. 295m. Another statute contains separate provisions 
prohibiting discrimination ``because of . . . sex'' and ``on the 
ground of sex.'' 42 U.S.C. 9849. Another statute contains a 
provision with the heading ``Prohibition on discrimination on the 
basis of sex, religion,'' which states, ``[n]o person shall on the 
ground of sex or religion be excluded.'' 42 U.S.C. 10406(c)(2)(B).
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    Based on this statutory construction, it is logical in this context 
to apply Bostock's reasoning that sex discrimination includes 
discrimination on the basis of sexual orientation and gender identity 
to each of these independent nondiscrimination provisions. Many courts, 
including the Supreme Court, have concluded that varied verbal 
formulations in antidiscrimination statutes should be interpreted 
consistently with one another.\22\ In Bostock itself, for example, the 
Court used both ``on the basis of'' and ``because of'' throughout the 
decision to describe the unlawful discrimination at issue.\23\
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    \22\ See, e.g., Franklin v. Gwinnett Cnty. Pub. Sch., 503 U.S. 
60, 75 (1992) (Title IX imposes ``the duty not to discriminate on 
the basis of sex, and `when a supervisor sexually harasses a 
subordinate because of the subordinate's sex, that supervisor 
``discriminate[s]'' on the basis of sex' '') (quoting Meritor Sav. 
Bank, FSB v. Vinson, 477 U.S. 57, 64 (1986)) (emphases added); Grimm 
v. Gloucester Cnty. Sch. Bd., 972 F.3d 586, 616-17 (4th Cir. 2020) 
(holding that Bostock's reasoning applies to Title IX, which 
prohibits discrimination ``on the basis of sex,'' explaining that 
``[a]lthough Bostock interprets Title VII . . . , it guides our 
evaluation of claims under Title IX''); Gentry v. E. W. Partners 
Club Mgmt. Co. Inc., 816 F.3d 228, 235-36 (4th Cir. 2016) (``The ADA 
prohibits discrimination `on the basis of' disability. We see no 
`meaningful textual difference' between this language and the terms 
`because of,' `by reason of,' or `based on' ''); Lakoski v. James, 
66 F.3d 751, 757 (5th Cir. 1995) (explaining that even though Title 
IX uses the phrase ``on the basis of sex'' and Title VII uses the 
phrase ``because of . . . sex,'' ``the prohibitions of 
discrimination on the basis of sex of Title IX and Title VII are the 
same'').
    \23\ See, e.g., Bostock, 140 S. Ct. at 1738 (``on the basis of 
sex.''); id. at 1741 (``because of sex'').
---------------------------------------------------------------------------

    Discriminating against individuals in any of the programs, 
activities, projects, assistance, and services covered by the statutes 
in Sec.  75.300(e) on the basis of sexual orientation or gender 
identity necessarily involves discriminating against them on the basis 
of sex. Section 75.300(e) makes this interpretation clear to the 
public.
    The Department seeks comments on whether there is anything about 
any of the statutes referenced in proposed Sec.  75.300(e), such as 
their language, legislative history, or purpose, that would provide a 
legal basis for distinguishing them from Bostock's interpretation of 
Title VII, that sex discrimination includes discrimination on the basis 
of sexual orientation and gender identity.
3. Notification of Views Regarding Application of Federal Religious 
Freedom Laws
    The Department takes seriously its obligations to comply with 
Federal religious freedom laws, including the First Amendment and RFRA, 
and it will continue to comply with these legal obligations. The 
Department is fully committed to respecting religious freedom laws and 
to thoroughly considering any organization's assertion that the 
provisions of this rule conflict with their rights under those 
laws.\24\ In determining whether an action is ``prohibited by federal 
statute'' under proposed Sec.  75.300(c), the Department will consider 
RFRA in its analysis when applicable. This proposal is similar to the 
process laid out in the Section 1557 NPRM under proposed Sec.  92.302, 
87 FR 47885-47886, which is consistent with the Department's broader 
commitment to abiding by the First Amendment and RFRA.
---------------------------------------------------------------------------

    \24\ No religious liberty claim was before the Court in Bostock. 
The Court said the interaction of doctrines protecting religious 
liberty with statutory nondiscrimination prohibitions were 
``questions for future cases.'' 140 S. Ct. at 1754.
---------------------------------------------------------------------------

    In applying RFRA, exemptions from the nondiscrimination 
requirements of this rule would depend on application of RFRA's test, 
which provides that the government may substantially burden a person's 
exercise of religion only if it demonstrates that application of the 
burden to the person is in furtherance of a compelling governmental 
interest and is the least restrictive means of

[[Page 44755]]

furthering that compelling governmental interest. 42 U.S.C. 2000bb-
1(b). The U.S. Supreme Court has recognized that a fact-sensitive, 
case-by-case analysis of such burdens and interests is needed under 
RFRA,\25\ and the Department applies RFRA accordingly.
---------------------------------------------------------------------------

    \25\ See, e.g., Gonzales v. O Centro Esp[iacute]rita Beneficente 
Uni[atilde]o do Vegetal, 546 U.S. 418, 430-31 (2006) (when applying 
RFRA, courts look ``beyond broadly formulated interests justifying 
the general applicability of government mandates and scrutinized the 
asserted harm of granting specific exemptions to particular 
religious claimants''); cf. Ramirez v. Collier, 142 S. Ct. 1264, 
1281 (2022) (holding that the Religious Land Use and 
Institutionalized Persons Act, which applies RFRA's test for 
religious exemptions in the prison context, ``requires that courts 
take cases one at a time, considering only `the particular claimant 
whose sincere exercise of religion is being substantially burdened' 
'') (quoting Holt v. Hobbs, 574 U.S. 352, 363 (2015)).
---------------------------------------------------------------------------

    In proposed Sec.  75.300(f), the Department specifically addresses 
the application of Federal religious freedom protections. This proposed 
provision is new, as neither the 2016 nor 2021 Rules provided a 
specific, optional means for recipients to notify the Department of 
their views regarding the application of Federal religious freedom 
laws.\26\ Proposed Sec.  75.300(f) provides that, at any time, a 
recipient may raise with the Department, their belief that the 
application of a specific provision or provisions of this regulation as 
applied to the recipient would violate Federal religious freedom 
protections. Such laws include, but are not limited to, the First 
Amendment and RFRA. Upon receipt of a notification, the Department 
first assesses whether there is a sufficient, concrete factual basis 
for making a determination based on the request.
---------------------------------------------------------------------------

    \26\ While 45 CFR 75.102 allows for exceptions on a case-by-case 
basis to part 75, which the Department had previously used to issue 
the RFRA waivers to South Carolina, Michigan, and Texas, it is best 
read to, and has been historically used to, address requests for 
exceptions that pertain to financial and administrative management 
of federal grants, such as deviations from normal allowable costs, 
requirements applicable to for-profit subrecipients, costs requiring 
prior approval, or computation of depreciation, rather than 
providing exemptions from civil rights or anti-discrimination laws. 
See, e.g., https://www.cfo.gov/assets/files/2CFR-FrequentlyAskedQuestions_2021050321.pdf (guidance from the Office of 
Management and Budget indicating waivers under 45 CFR75.102 are 
primarily fiscal in nature); https://www.hhs.gov/conscience/religious-freedom/state-letter-to-texas-withdrawing-exception-from-non-discrimination-requirements/index.html (rescission letter of 
RFRA waiver).
---------------------------------------------------------------------------

    Proposed Sec.  75.300(f) provides that once the awarding agency, 
working jointly with ASFR or OCR (in the course of investigating a 
civil rights complaint or compliance review), receives a notification 
from a recipient seeking a religious exemption, the awarding agency, 
working jointly with either ASFR or OCR, would promptly consider the 
recipient's views that they are entitled to an exemption in (1) 
responding to any complaints or (2) otherwise determining whether to 
proceed with any investigation or enforcement activity regarding that 
recipient's compliance with the relevant provisions of this regulation, 
in legal consultation with the Office of the General Counsel (OGC).\27\ 
A recipient may also on their own initiative, before a complaint is 
filed or an investigation opened, seek an exemption based upon the 
application of a religious freedom law, and the Department would assess 
whether there is a sufficient, concrete factual basis prior to making 
any determination. Any relevant ongoing investigation or enforcement 
activity regarding the recipient would be held in abeyance until a 
determination has been made. Considering recipients' specific 
religious-based concerns in the context of an open case or a claim 
raised in the first instance by a particular recipient (i.e., when the 
Department first has cause to consider the recipient's compliance, 
whether through a complaint filed against the recipient, or through the 
recipient raising the exemption on their own initiative), would allow 
the awarding agency, working with ASFR, or OCR, in legal consultation 
with OGC, to make an informed, case-by-case decision and, where 
required by law, protect a recipient's religious freedom rights and 
minimize any harm an exemption could have on third parties. As the 
Supreme Court noted in Gonzales v. O Centro Esp[iacute]rita Beneficente 
Uni[atilde]o do Vegetal, ``[C]ourts should strike sensible balances, 
pursuant to a compelling interest test that requires the Government to 
address the particular practice at issue.'' 546 U.S. 418, 439 (2006) 
(emphasis added). The Department believes that the process set forth 
under proposed Sec.  75.300(f) properly strikes that balance. 
Similarly, holding ongoing investigations and enforcement activity in 
abeyance alleviates the burden of a recipient having to respond to an 
investigation or enforcement action until a recipient's objection has 
been considered.
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    \27\ See 86 FR 67067 (Nov. 24, 2021) (the HHS Secretary 
``delegate[s] responsibility to Department components to ensure full 
compliance with RFRA and other constitutional requirements'' and 
``Department components must consult with OGC on such matters and 
provide appropriate consideration to RFRA- or Constitution-based 
objections or requests, as well as take any actions that may be 
appropriate.'').
---------------------------------------------------------------------------

    Further, proposed Sec.  75.300(f) makes clear the awarding 
agency's, ASFR's, and OCR's discretion to determine at any time whether 
a recipient is wholly or partially exempt from certain provisions of 
this part under Federal religious liberty protections, whether: (1) 
after a complaint is raised against the recipient or (2) raised by the 
recipient before a complaint is filed (provided the Department has a 
sufficient, concrete factual basis for determining whether the 
recipient is entitled to an exemption). Proposed Sec.  75.300(f) 
requires that, in determining whether a recipient is exempt from the 
application of the specific provision or provisions raised in its 
notification, ASFR or OCR, in consultation with OGC, must assess 
whether there is a sufficient, concrete factual basis for making a 
determination and apply the applicable legal standards of the religious 
freedom statute at issue.
    Proposed Sec.  75.300(f) also provides that, upon making a 
determination regarding whether a particular recipient is exempt from--
or subject to a modified requirement under--a specific provision of 
this part, the awarding agency, working with ASFR or OCR, will 
communicate that determination to the recipient in writing. The written 
notification will clearly set forth the scope, applicable issues, 
duration, and all other relevant terms of any exemption.
    Proposed Sec.  75.300(f) provides that if the awarding agency, 
working with ASFR or OCR, in legal consultation with OGC, determines 
that a recipient is entitled to an exemption or modification of the 
application of certain provisions of this rule based on the application 
of religious liberty protections, that determination does not otherwise 
limit the application of any other Federal law to the recipient.
    HHS maintains an important civil rights interest in the proper 
application of Federal religious freedom protections. HHS is thus 
committed to complying with RFRA and all other applicable legal 
requirements. The Department believes that this proposed approach will 
assist the Department in fulfilling that commitment by providing the 
opportunity for recipients to raise concerns with the Department, such 
that the Department can determine whether an exemption or modification 
of the application of certain provisions is appropriate under the 
corresponding Federal religious freedom law. As noted above, the 
Department also maintains a strong interest in taking a case-by-case 
approach to such determinations that will allow it to account for and 
minimize any harm an exemption could

[[Page 44756]]

have on third parties \28\ and, in the context of RFRA, to consider 
whether the application of any substantial burden imposed on a person's 
exercise of religion is in furtherance of a compelling interest and is 
the least restrictive means of advancing that compelling interest.\29\
---------------------------------------------------------------------------

    \28\ See Cutter v. Wilkinson, 544 U.S. 709, 720 (2005) (in 
addressing religious accommodation requests, ``courts must take 
adequate account of the burdens a requested accommodation may impose 
on nonbeneficiaries'').
    \29\ Cf. O Centro, 546 U.S. at 439 (``[C]ourts should strike 
sensible balances, pursuant to a compelling interest test that 
requires the Government to address the particular practice at 
issue.'') (emphasis added).
---------------------------------------------------------------------------

    The Department seeks comment on this proposed approach, including 
whether such a provision should include additional procedures, the 
potential burdens of such a provision on recipients and potential third 
parties, and additional factors that the Department should take into 
account when considering the relationship between Federal statutory and 
constitutional rights to religious freedom and this rule's other civil 
rights protections. We also seek comment on what alternatives, if any, 
the Department should consider.
    Finally, proposed Sec.  75.300(g) provides that if any provision of 
this part is held to be invalid or unenforceable by its terms, or as 
applied to any person or circumstance, it shall be severable from this 
part and not affect the remainder thereof or the application of the 
provision to other persons not similarly situated or to other, 
dissimilar circumstances.

II. Reasons for the Proposed Rulemaking

A. The 2016 Rule and the Scope of 5 U.S.C. 301

    HHS proposes to amend the language in 45 CFR 75.300(c) and (d) of 
the 2016 Rule in light of arguments raised concerning HHS's statutory 
authority under the Housekeeping Statute, 5 U.S.C. 301, and the 
financial management statutes cited in 2 CFR 200.103 and 45 CFR 75.103, 
including the Chief Financial Officer's Act, 31 U.S.C. 503; the Budget 
and Accounting Act, 31 U.S.C. 1101-1125; and the Single Audit Act, 31 
U.S.C. 6101-6106. After considering those arguments, HHS is now of the 
view that its reliance on the Housekeeping Statute to promulgate Sec.  
75.300(c) and (d) of the 2016 Rule may have resulted in uncertainty 
about Department programs. We are accordingly proposing revisions to 
those paragraphs to explain more clearly to grantees and beneficiaries 
where and how nondiscrimination protections apply.
    The Department has statutory authority to issue regulations to 
enforce certain government-wide statutory civil rights statutes, such 
as Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq. 
(prohibiting discrimination on the basis of race, color, or national 
origin in programs or activities receiving Federal financial 
assistance); Title IX of the Education Amendments of 1972, 20 U.S.C. 
1681 (prohibiting discrimination on the basis of sex in education 
programs or activities receiving Federal financial assistance), Section 
504 of the Rehabilitation Act of 1973, 29 U.S.C. 794 (prohibiting 
discrimination on the basis of disability in programs and activities 
conducted by, or receiving financial assistance from, Federal 
agencies), and the Age Discrimination Act, 42 U.S.C. 6101 et seq. 
(prohibiting discrimination on the basis of age in programs and 
activities receiving Federal financial assistance). There are also 
certain program-specific statutory nondiscrimination provisions that 
provide the Department with the authority to issue enforcement 
regulations. These include section 471(a)(18) of the Social Security 
Act (SSA), 42 U.S.C. 671(a)(18) (prohibiting discrimination on the 
basis of race, color, or national origin in Title IV-E adoption and 
foster care programs) and section 508 of the SSA, 42 U.S.C. 708 
(prohibiting discrimination on the basis of age, race, color, national 
origin, disability, sex, or religion in Maternal and Child Health 
Services Block Grant programs).\30\
---------------------------------------------------------------------------

    \30\ The Department is authorized to issue regulations for the 
efficient administration of its functions in the Social Security Act 
programs for which it is responsible. See SSA Sec.  1102(a), 42 
U.S.C. 1302(a).
---------------------------------------------------------------------------

    Section 75.300(c) and (d) in the 2016 Rule, however, were 
promulgated under authority granted by the Housekeeping Statute, 5 
U.S.C. 301. The Housekeeping Statute provides in relevant part: ``The 
head of an Executive department or military department may prescribe 
regulations for the government of his department, the conduct of its 
employees, the distribution and performance of its business, and the 
custody, use, and preservation of its records, papers, and property.''
    Section 75.300(c) and (d) were issued to provide uniformity in 
Departmental non-discrimination requirements by ``codif[ying] for all 
HHS service grants what is already applicable for all HHS service 
contracts, as required by the HHS Acquisition Regulation (HHSAR) 
352.237-74'' and which ``makes explicit HHS's non-discrimination policy 
when obligating appropriations for solicitations, contracts and orders 
that deliver service under HHS's programs directly to the public.'' 81 
FR 45271.
    The Supreme Court has explained that the Housekeeping Statute is 
``a grant of authority to the agency to regulate its own affairs . . . 
authorizing what the [Administrative Procedure Act] terms `rules of 
agency organization, procedure or practice' as opposed to `substantive 
rules.''' Chrysler Corp. v. Brown, 441 U.S. 281, 309-10 (1979). In 
2019, a Federal district court vacated a different regulation the 
Department had promulgated, in part, under the Housekeeping Statute. 
see New York v. HHS, 414 F. Supp. 3d 475 (S.D.N.Y. 2019) (vacating 
``Protecting Statutory Conscience Rights in Health Care; Delegations of 
Authority,'' 84 FR 23170 (May 21, 2019) (codified at 45 CFR pt. 88)). 
That regulation interpreted and implemented Federal statutory 
provisions that ``recognize[d] the right of an individual or entity to 
abstain from participation in medical procedures, programs, services, 
or research activities on account of a religious or moral objection.'' 
Id. at 496. The court vacated the rule because it was substantive 
rather than a housekeeping measure, noting that ``[a] rule that 
announces new rights and imposes new duties--one that shapes the 
primary conduct of regulated entities--is substantive.'' Id. at 522.
    After considering the arguments raised in New York concerning the 
Department's authority under 5 U.S.C. 301 and how they might apply 
here, the Department has reconsidered Sec.  75.300(c) and (d) of the 
2016 Rule. Pursuant to, and consistent with, its authority under 5 
U.S.C. 301, the Department proposes to revise Sec.  75.300(c) to 
recognize the public policy requirement that otherwise eligible persons 
not be excluded from participation in, denied the benefits of, or 
subjected to discrimination in the administration of programs, 
activities, projects, assistance, and services where such actions are 
prohibited by Federal statute. The Department considers the proposed 
language for paragraph (c) appropriate because it affirms that HHS 
grants programs will be administered consistent with the Federal 
statutes that govern the programs, including the nondiscrimination 
statutes that Congress has adopted and made applicable to the 
Department's programs. The adoption of regulatory language that makes 
compliance simpler and more predictable for Federal grant recipients is 
generally consistent with

[[Page 44757]]

the concept of controlling regulatory costs and relieving regulatory 
burdens.
    The Department also proposes to revise Sec.  75.300(d) to state 
that the Department will follow all applicable Supreme Court decisions 
in the administration of the Department's award programs. Section 
75.300(d) notes that HHS will comply with Supreme Court decisions 
generally, rather than referencing specific Supreme Court cases. This 
approach simplifies compliance for federal grant recipients.
    The Department believes the proposed language of Sec.  75.300(c) 
and (d) confirms that its programs must comply with all applicable laws 
and Supreme Court decisions, and allows its programs to minimize 
disputes and litigation, provide greater stability and certainty, and 
to remove regulatory barriers. OMB's UAR at 2 CFR 200.300 does not 
impose specific public policy requirements beyond federal statutory 
requirements. The Department considers it appropriate for Sec.  
75.300(c) to similarly focus on statutory requirements and for Sec.  
75.300(d) to inform grant recipients that the Department complies with 
applicable Supreme Court decisions in administering its grant programs.
    The Department also proposes to add paragraph (e) to 45 CFR 75.300 
to clarify the Department interprets preexisting prohibition against 
discrimination on the basis of sex to include discrimination on the 
basis of sexual orientation and gender identity. The Department 
believes that absent contrary statutory text, legislative history, or 
Supreme Court case law, the best way to understand statutory sex 
discrimination prohibitions is to apply the Supreme Court's reasoning 
in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), which issued 
after the 2021 rulemaking was already underway. Section 75.300(e) 
provides regulatory clarity to the public and helps facilitate the 
efficient and equitable administration of HHS grants.
    The Department proposes to add paragraph (f) to 45 CFR 75.300 to 
state that it will comply with all federal religious freedom laws, 
including RFRA and the First Amendment. As explained above, the 
Department is fully committed to respecting religious freedom laws when 
applying this rule, including when an organization asserts that the 
application of the provisions of this rule conflict with their rights 
under those laws. Further, the Department proposes a workable exemption 
process, described above, that will assist the Department in fulfilling 
that commitment by providing the opportunity for recipients to raise 
recipient-specific concerns with the Department; allowing the 
Department to evaluate exemption requests on a case-by-case basis while 
accounting for third party harms; and providing written notification to 
provide a recipient certainty in its receipt of HHS grants.
    Finally, as noted above, the Department proposes to add paragraph 
(g) to 45 CFR 75.300 to evidence the Department's intent that, should 
any of the provisions of this rule as finalized by invalidated, the 
rest remain intact.

B. Effect on the Notice of Nonenforcement

    While this rulemaking process is ongoing, the 2019 Notice of 
Nonenforcement remains in effect.

III. Executive Order 12866 and Related Executive Orders on Regulatory 
Review

A. Executive Order 12866 Determination

    We have examined the impacts of the proposed rule under Executive 
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4). Executive Orders 12866 and 13563 direct us to assess all costs 
and benefits of available regulatory alternatives and, when regulation 
is necessary, to select regulatory approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity). 
The proposed rule states that grant recipients may not discriminate to 
the extent prohibited by federal statutory nondiscrimination 
provisions, would provide that HHS complies with applicable Supreme 
Court decisions in administering its grant programs, and codifies in 
regulation Supreme Court precedent related to sex discrimination. We 
believe that this proposed rule is unlikely to result in economic 
impacts that exceed the threshold for significant effects as defined in 
section 3(1)(f) of Executive Order 12866, as amended by Executive Order 
14094, because it does not impose new requirements but rather adds 
clarity for regulated entities.
    The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires 
the Department to prepare a written statement, which includes an 
assessment of anticipated costs and benefits, before proposing ``any 
rule that includes any Federal mandate that may result in the 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100,000,000 or more (adjusted annually 
for inflation) in any one year.'' The current threshold after 
adjustment for inflation is $177 million, using the most current (2022) 
Implicit Price Deflator for the Gross Domestic Product. This proposed 
rule would not result in an expenditure in any year that meets or 
exceeds this amount.
1. Alternatives Considered
    The Department carefully considered several alternatives, but 
rejected them for the reasons explained below. The first alternative 
considered was to make no changes to the 2016 Rule. The Department 
concluded that this alternative would potentially lead to legal 
challenges, in part over the scope of the Department's authority under 
5 U.S.C. 301, as discussed above. The second alternative considered was 
to maintain the text of the 2016 Rule, but also promulgate a regulatory 
exemption for faith-based organizations as provided under proposed 
75.300(f). This alternative could address the religious exemption 
issues raised by the 2016 Rule's application to certain faith-based 
organizations that participate in, or seek to participate in, 
Department-funded programs or activities. However, the provisions of 
the 2016 Rule would be subject to the same legal challenges under 5 
U.S.C. 301. The third alternative considered was to enumerate 
applicable nondiscrimination provisions and the programs and 
recipients/subrecipients to which the nondiscrimination provisions 
would apply, as set forth in 75.300(e) without including a religious 
exemption process. However, Federal religious freedom laws, such as the 
First Amendment and RFRA, generally apply to these nondiscrimination 
provisions, and providing a process by which such claims can be raised 
by recipients on a case-by-case basis helps ensure that the Department 
complies with its obligations under all these authorities.
2. Benefits
    The benefits of the proposed rule help ensure that HHS grants 
programs will be administered fairly and consistently with Supreme 
Court precedent, Federal statutes that govern the programs covered in 
this rule, including the nondiscrimination statutes that Congress has 
adopted and made applicable to the Department's programs, and the U.S. 
Constitution. Proposed 45 CFR 75.300(c) makes compliance simpler and 
more predictable for federal grant recipients. Likewise, proposed 45 
CFR 75.300(d) notes that HHS will comply with Supreme Court decisions, 
which also simplifies compliance for federal grant recipients. Proposed 
45 CFR 75.300(e)

[[Page 44758]]

clarifies the Department's interpretation of prohibition of 
discrimination on the basis of sex includes discrimination on the basis 
of sexual orientation and gender identity, consistent with Bostock v. 
Clayton County, 140 S. Ct. 1731 (2020), which provides additional 
regulatory clarity to the public and helps facilitate the efficient and 
equitable administration of HHS grants. This also provides the benefit 
of ensuring that individuals are not discriminated against on the basis 
of sexual orientation or gender identity, which while difficult to 
quantify, is of considerable value. Finally, proposed 45 CFR 75.300(f) 
states that the Department will comply with all federal religious 
freedom laws, including RFRA and the First Amendment, which will assist 
the Department in fulfilling that commitment by providing the 
opportunity for recipients to raise concerns with the Department and 
for those concerns to be evaluated on a case-by-case basis. These 
benefits for the fair and nondiscriminatory enforcement of the programs 
covered by this rule are not quantified.
3. Costs
    Consistent with the 2021 Rule, OCR identifies potential costs 
associated with grantees becoming familiar with this proposed rule, and 
follows the analytic approach contained in its analysis. The Department 
issues many grants on an annual basis, and many recipients receive 
multiple grants. Based on information in the Department's Tracking 
Accountability in Government Grant Spending (TAGGS) system, the 
Department estimates that it has a total of 12,202 grantees.\31\ 
Depending on the grantee, the task of familiarization could potentially 
fall to the following occupation categories: (1) lawyers, with a $65.26 
median hourly wage; (2) general and operations managers, with a $47.16 
median hourly wage; (3) medical and health services managers, with a 
$50.40 median hourly wage; (4) compliance officers, with a $34.47 
median hourly wage; or (5) social and community service manager, with a 
$35.69 median hourly wage.\32\ Across all grantees, we adopt a pre-tax 
hourly wage that is the average across the median hourly wage rates for 
these 5 categories, or $46.60 per hour. To compute the value of time 
for on the-job-activities, we adopt a fully loaded wage rate that 
accounts for wages, benefits, and other indirect costs of labor that is 
equal to 200% of the pre-tax wage rate, or $93.19 per hour. The 
Department anticipates that professional organizations, trade 
associations and other interested groups may prepare summaries of the 
proposed rule, if it is finalized. Accordingly, the Department 
estimates that it would take a typical grantee approximately one hour 
to become familiar with the proposed requirements. Thus, we expect that 
the average cost for each grantee would be $93.19. Across all 12,202 
grantees, the cost of grantee familiarization would be approximately 
$1.1 million.
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    \31\ 86 FR 2257 at 2274.
    \32\ U.S. Bureau of Labor Statistics. Occupational Employment 
and Wage Statistics. May 2022 National Occupational Employment and 
Wage Estimates. https://www.bls.gov/oes/current/oes_nat.htm. 
Accessed on June 13, 2022.
---------------------------------------------------------------------------

    OCR considered additional potential sources of costs that would be 
attributable to the proposed rule. Parts (c)-(e) of the rule codifies 
for all covered grant what is already required by law. Some covered 
entities may bear the transaction costs associated with notifying the 
Department that they are seeking an exemption under proposed 45 CFR 
75.300(f). However, there is no filing fee to seek an exemption with 
OCR, ASFR, or the awarding agency and the costs would only be those a 
covered entity chooses to expend.
    Finally, to further quantity the costs associated with this 
proposed rule, the Department has attempted to estimate whether the 
number and composition of recipients changed in response to the prior 
two rulemakings and how those costs will impact this proposed rule. The 
2016 Rule has never been enforced since it was promulgated on December 
12, 2016, 81 FR 89383. The Department also issued a Notice of 
Nonenforcement in 2019, 84 FR 63831, that it would not enforce the 2016 
Rule. And the 2021 Rule, 86 FR 2257, never went into effect. Because of 
this, the Department does not have any data with regard to whether the 
number and composition of recipients changed in response to prior 
rulemakings, as there was no change in the enforcement of these rules 
which would impact those grants.
    However, the Department believes that its recipients generally fall 
into one of the following three categories in how they have been 
impacted by the prior two rulemakings.
    The first category includes recipients that adopted the 
nondiscrimination practices prior to the 2016 Rule, whether voluntarily 
or as a result of state and/or local law. Their observance of 
nondiscrimination requirements is not the result of the 2016 Rule and 
thus, these recipients are not impacted by this proposed rule.
    The second category includes recipients that had not adopted 
nondiscrimination practices prior to the 2016 Rule, but that complied 
since the 2016 Rule, including after the 2019 Notice of Nonenforcement 
was issued, 84 FR 63831, and until now. However, because the 2016 Rule 
did not contain any procedural enforcement mechanisms such as an 
assurance of compliance or adoption of a grievance process, it is 
difficult to quantity the costs, if any, incurred by this second 
category of recipients. These recipients would likely continue to 
follow such nondiscrimination practices voluntarily or because of new 
or newly enforced state and/or local laws, given that they could have 
declined to comply with the 2016 Rule requirements after the 2019 
Notice of Nonenforcement issued, and yet have continued to comply with 
those requirements notwithstanding that notice. Thus, these recipients 
are similarly situated to the first category of recipients insofar as 
they are not impacted by whether or not the 2016 Rule is in effect.
    The third category includes recipients that had not followed, and 
continue to not follow, the 2016 Rule. However, their practice was 
likely not impacted by the 2016 Rule, as the rule was not enforced, and 
the Department issued waivers under RFRA to South Carolina, Texas, and 
Michigan in 2019 and 2020 exempting those recipients from the 2016 
Rule. Further, the Department issued the 2019 Notice of Nonenforcement 
which applied to all recipients covered by the 2016 Rule. Moreover, 
these recipients could not have relied upon the 2021 Rule, since that 
rule never went into effect. Since this proposed rule removes the 2016 
Rule's requirements, and adds a religious exemption process, the 
Department expects that these grantees will continue their current 
practice 75.300(e) does not apply to the foster care programs at issue 
in the South Carolina, Texas, and Michigan cases, though they may 
additionally seek a religious exemption under 75.300(f) of the proposed 
rule, which will not materially bear on additional costs.
    Thus, the Department believes that apart from familiarization costs 
and costs associated with filing a religious exemption request, there 
will be little to no economic impact associated with Sec.  75.300(c) 
through(f). The Department solicits comments and additional data on the 
estimated costs of compliance.
3. Comparison of Costs and Benefits
    In summary, the Department expects the benefits of regulatory 
clarity will simplify compliance and ensure fair and nondiscriminatory 
administration of covered programs under this rule. Costs associated 
with implementing this administrative change include costs for

[[Page 44759]]

some covered entities who may seek an exemption. The Department 
solicits comments regarding this assessment of impacts.

B. RFA--Initial Small Entity Analysis

    The Department has examined the economic implications of this 
proposed rule as required by the RFA (5 U.S.C. 601-612). The RFA 
requires an agency to describe the impact of a proposed rulemaking on 
small entities by providing an initial regulatory flexibility analysis 
unless the agency expects that the proposed rule will not have a 
significant impact on a substantial number of small entities, provides 
a factual basis for this determination, and proposes to certify the 
statement. 5 U.S.C. 603(a), 605(b). If an agency must provide an 
initial regulatory flexibility analysis, this analysis must address the 
consideration of regulatory options that would lessen the economic 
effect of the rule on small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
governmental jurisdictions. HHS generally considers a rule to have a 
significant impact on a substantial number of small entities if it has 
at least a three percent impact on revenue on at least five percent of 
small entities.
    As discussed, the proposed rule would:
     Require grant recipients to comply with applicable Federal 
statutory nondiscrimination provisions.
     Provide that HHS complies with applicable Supreme Court 
decisions in administering its grant programs.
    Affected small entities include all small entities which may apply 
for HHS grants; these small entities operate in a wide range of 
sections involved in the delivery of health and human services. Grant 
recipients are required to comply with applicable Federal statutory 
nondiscrimination provisions by operation of such laws and pursuant to 
45 CFR 75.300(a); HHS is required to comply with applicable Supreme 
Court decisions. Thus, there would be no additional economic impact 
associated with proposed sections 75.300(c)-(e). The Department 
anticipates that this rulemaking, if finalized, would primarily serve 
to provide information to the public. The Department anticipates that 
this information will allow affected entities to better deploy 
resources in line with established requirements for HHS grant 
recipients. As a result, HHS has determined, and the Secretary proposes 
to certify, that this proposed rule, if finalized, will not have a 
significant impact on the operations of a substantial number of small 
entities. The Department seeks comment on this analysis of the impact 
of the proposed rule on small entities, and the assumptions that 
underlie this analysis.

C. Executive Order 13132: Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule that imposes substantial 
direct requirement costs on State and local governments or has 
Federalism implications. The Department has determined that this 
proposed rule does not impose such costs or have any Federalism 
implications.

D. E.O. 12250 on Leadership and Coordination of Nondiscrimination Laws

    Pursuant to E.O. 12250, the Attorney General has the responsibility 
to ``review . . . proposed rules . . . of the Executive agencies'' 
implementing nondiscrimination statutes such as Title IX ``in order to 
identify those which are inadequate, unclear or unnecessarily 
inconsistent.'' The Attorney General has delegated that function to the 
Assistant Attorney General for the Civil Rights Division for purposes 
of reviewing and approving proposed rules. 28 CFR 0.51. The Department 
has coordinated with the Department of Justice to review and approve 
this proposed rule prior to publication in the Federal Register.

E. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
ch. 3506; 5 CFR part 1320 appendix A.1), the Department has reviewed 
this proposed rule and has determined that there are no new collections 
of information contained therein.

IV. Request for Comment

    The Department seeks comment on this proposed rule, including its 
likely impacts as compared to the 2016 Rule. As noted above, the 
Department also seeks comment on whether the Department administers 
other statutes prohibiting sex discrimination that are not set forth in 
proposed Sec.  75.300(e). Finally, the Department seeks comments from 
the public on whether there is anything about any of the statutes 
referenced in proposed Sec.  75.300(e), such as their language, 
legislative history, or purpose, that would provide a legal basis for 
distinguishing them from Bostock's reasoning for Title VII.

List of Subjects in 45 CFR Part 75

    Accounting, Administrative practice and procedure, Cost principles, 
Grant programs, Grant programs--health, Grants Administration, 
Hospitals, Nonprofit Organizations reporting and recordkeeping 
requirements, and State and local governments.

    For the reasons stated in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR part 75 as follows:

PART 75--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND 
AUDIT REQUIREMENTS FOR HHS AWARDS

0
1. The authority citation for 45 CFR part 75 continues to read as 
follows:

    Authority:  5 U.S.C. 301, 2 CFR part 200.

0
2. Amend Sec.  75.300 by revising paragraphs (c) and (d), and adding 
paragraphs (e), (f), and (g) to read as follows:


Sec.  75.300  Statutory and national policy requirements.

* * * * *
    (c) It is a public policy requirement of HHS that no person 
otherwise eligible will be excluded from participation in, denied the 
benefits of, or subjected to discrimination in the administration of 
HHS programs, activities, projects, assistance, and services, to the 
extent doing so is prohibited by federal statute.
    (d) HHS will follow all applicable Supreme Court decisions in 
administering its award programs.
    (e) In statutes that HHS administers which prohibit discrimination 
on the basis of sex, the Department interprets those provisions to 
include a prohibition against discrimination on the basis of sexual 
orientation and gender identity, consistent with the Supreme Court's 
decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), and 
other federal court precedent applying Bostock's reasoning that sex 
discrimination includes discrimination based on sexual orientation and 
gender identity. Paragraph (e) applies to the following HHS authorities 
that prohibit discrimination on the basis of sex: 8 U.S.C. 1522, 
Authorization for programs for domestic resettlement of and assistance 
to refugees; 42 U.S.C. 290cc-33, Projects for Assistance in Transition 
from Homelessness; 42 U.S.C. 290ff-1, Children with Serious Emotional 
Disturbances; 42 U.S.C. 295m, Title VII Health Workforce Programs; 42 
U.S.C. 296g. Nursing Workforce Development; 42 U.S.C. 300w-7, 
Preventive Health Services Block Grant; 42 U.S.C. 300x-57, Substance 
Abuse Treatment and Prevention Block Grant; Community Mental Health 
Services Block Grant; 42 U.S.C. 708, Maternal and Child Health Block 
Grant; 42 U.S.C. 5151, Disaster relief; 42 U.S.C. 8625, Low Income

[[Page 44760]]

Home Energy Assistance Program; 42 U.S.C. 9849, Head Start; 42 U.S.C. 
9918, Community Services Block Grant Program; and 42 U.S.C. 10406, 
Family Violence Prevention and Services.
    (f)(1) At any time, a recipient may notify the HHS awarding agency, 
the Office of the Assistant Secretary for Financial Resources (ASFR), 
or the Office for Civil Rights (OCR) of the recipient's view that it is 
exempt from, or requires modified application of, certain provisions of 
this part due to the application of a federal religious freedom law, 
including the Religious Freedom Restoration Act (RFRA) and the First 
Amendment.
    (2) Once the awarding agency, working jointly with ASFR or OCR, 
receives such notification from a particular recipient, they shall 
promptly consider those views in responding to any complaints, 
determining whether to proceed with any investigation or enforcement 
activity regarding that recipient's compliance with the relevant 
provisions of this part, or in responding to a claim raised by the 
recipient in the first instance, in legal consultation with the HHS 
Office of the General Counsel (OGC). Any relevant ongoing compliance 
activity regarding the recipient shall be held in abeyance until a 
determination has been made on whether the recipient is exempt from the 
application of certain provisions of this part, or whether modified 
application of the provision is required as applied to specific 
contexts, procedures, or services, based on a federal religious freedom 
law.
    (3) The awarding agency, working jointly with ASFR or OCR, will, in 
legal consultation with OGC, assess whether there is a sufficient, 
concrete factual basis for making a determination and will apply the 
applicable legal standards of the relevant law, and will communicate 
their determination to the recipient in writing. The written 
notification will clearly set forth the scope, applicable issues, 
duration, and all other relevant terms of the exemption request.
    (4) If the awarding agency, working jointly with ASFR or OCR, and 
in legal consultation with OGC, determines that a recipient is exempt 
from the application of certain provisions of this part or that 
modified application of certain provisions is required as applied to 
specific contexts, procedures, or services, that determination does not 
otherwise limit the application of any other provision of this part to 
the recipient or to other contexts, procedures, or services.
    (g) Any provision of this part held to be invalid or unenforceable 
by its terms, or as applied to any person or circumstance, shall be 
severable from this part and shall not affect the remainder thereof or 
the application of the provision to other persons not similarly 
situated or to other, dissimilar circumstances.

    Dated: July 6, 2023.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2023-14600 Filed 7-11-23; 11:15 am]
BILLING CODE 4153-01-P