Tuesday, September 30, 2003

Part IV

Department of Housing and Urban Development 24 CFR Part 92 et al. Participation in HUD Programs by Faith- Based Organizations; Providing for Equal Treatment of all HUD Program Participants; Final Rule

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\30SER3.SGM 30SER3 56396 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

DEPARTMENT OF HOUSING AND Programs, (202) 708–4300. (These 4. Housing Opportunities for Persons URBAN DEVELOPMENT numbers are not toll-free numbers.) With AIDS (HOPWA) (24 CFR part 574); Hearing- or speech-impaired individuals 5. Emergency Shelter Grants (ESG) (24 24 CFR Parts 92, 570, 572, 574, 576, may access these telephone numbers CFR part 576); 582, 583, and 585 through TTY by calling the toll-free 6. Shelter Plus Care (24 CFR part 582); 7. Supportive Housing (24 CFR part [Docket No. FR–4782–F–02] Federal Information Relay Service at 1– 800–877–8339. 583); and RIN 2501–AC89 SUPPLEMENTARY INFORMATION: 8. Youthbuild (24 CFR part 585). The January 6, 2003, rule proposed to Participation in HUD Programs by I. Background—The January 6, 2003, amend each set of program regulations Faith-Based Organizations; Providing Proposed Rule to achieve the following objectives: for Equal Treatment of all HUD On January 6, 2003 (68 FR 648), HUD 1. Clarify that organizations are Program Participants published a proposed rule to amend eligible to participate in HUD programs without regard to their religious AGENCY: Office of the Secretary, HUD. certain HUD regulations that imposed (or appeared to impose) unwarranted character or affiliation. The proposed ACTION: Final rule. barriers to the participation of faith- amendments clarified that faith-based SUMMARY: This final rule revises HUD based organizations in HUD programs. organizations are eligible to compete for regulations to remove barriers to the HUD recognizes that faith-based funding on the same basis and under the participation of faith-based organizations are an important part of same eligibility requirements as all organizations in certain HUD programs. the social services network of the other nonprofit organizations. The fact In general, no group of applicants United States, offering a multitude of that an organization is a faith-based competing for HUD funds should be social services to those in need. These organization is not a basis for exclusion subject, as a matter of HUD’s discretion, organizations frequently have the from a competition for HUD funds. The to greater or fewer requirements than experience that HUD seeks to Federal government, as well as State other organizations solely because of administer social services to and local governments administering their religious character or affiliation, or beneficiaries under HUD programs. funds under HUD programs, are absence of religious character or Consistent with the President’s prohibited from discriminating against affiliation. Applicants for HUD funds Executive Order 13198 (Agency organizations on the basis of religion or and those applicants selected to receive Responsibilities with Respect to Faith- their religious character. HUD funding should generally be Based and Community Initiatives), 2. Clearly delineate eligible and subject to the same requirements. The issued January 31, 2001 (66 FR 8497), ineligible uses of HUD funds for all purpose of the revisions made by this HUD undertook a comprehensive program participants. The proposed rule is to ensure that faith-based review of its program requirements and rule provided that eligible and ineligible organizations are able to compete on an regulations, particularly those that uses of HUD funds are applicable to all equal footing with other organizations would be expected to attract interest recipients of HUD funds. The proposed for HUD funding. This final rule follows and participation by nonprofit rule provided that a recipient publication of a January 6, 2003, organizations. Executive Order 13198 organization may not use direct HUD proposed rule and takes into directed five agencies, including HUD, funds to support inherently religious consideration the public comments to undertake this review and to take activities, such as worship, religious received on the proposed rule. steps to ensure that Federal policy and instruction, or proselytization. If the participating organization engages in DATES: Effective Date: October 30, 2003. programs are fully open to faith-based community groups in a manner that is these activities, the activities must be FOR FURTHER INFORMATION CONTACT: offered separately, in time or location, Ryan Streeter, Director, Center for Faith- consistent with the Constitution. In response to the directive of the from the programs or services directly Based and Community Initiatives, President’s Executive Order, HUD funded with HUD assistance, and Department of Housing and Urban identified regulations for eight programs participation must be voluntary for the Development, Room 10184, 451 Seventh administered by HUD’s Office of beneficiaries of the HUD-funded Street, SW., Washington, DC 20410, Community Planning and Development programs or services. This requirement telephone: (202) 708–2404 (this is not a that imposed (or appeared to impose) ensures that HUD funds provided toll-free number). Hearing- or speech- barriers to participation of faith-based directly to any recipient are not used to impaired individuals may access this organizations in these programs. HUD’s support inherently religious activities. telephone number through TTY by proposed rule of January 6, 2003, was This restriction does not mean that an calling the toll-free Federal Information designed to eliminate these barriers and organization that receives HUD funds Relay Service at 1–800–877–8339. to ensure that these HUD programs are cannot engage in inherently religious For program specific information, open to all qualified organizations, activities. It means that an organization contact the following offices in HUD’s regardless of their religious character. cannot pay for these activities with Office of Community Planning and The January 6, 2003, rule proposed to direct HUD funds. Development: For the HOME Program amend the regulations for the following 3. Clarify that faith-based and the HOPE for Homeownership of HUD programs: organizations will retain their Single Family Homes (HOPE 3) 1. HOME Investment Partnerships (24 independence. The proposed rule Program, Virginia Sardone, Director, CFR part 92); clarified that a faith-based organization Program Policy Division, Office of 2. Community Development Block that participates in HUD programs will Affordable Housing Programs, (202) Grants (CDBG) (24 CFR part 570); 708–2864; for the Community 3. Hope for Homeownership of Single remain in place to provide regulatory guidance to Development Block Grants Program, Family Homes (HOPE 3) (24 CFR part existing HOPE 3 grantees. The regulations in part Robert Duncan, Office of Block Grant 1 572 are included within the scope of this rule to 572) reflect the regulatory revisions applicable to faith- Assistance, (202) 708–3587; and for the based participation and ensure their consistency remaining programs, John Garrity, 1 Funds are no longer being appropriated for the with the similar regulations in the other parts Office of Special Needs Assistance HOPE 3 program; however, the part 572 regulations covered by this final rule.

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56397

retain its independence and may that any other applicant or recipient is uses as its principal place of worship, continue to carry out its mission, required to provide. All organizations however, may qualify for such including the practice and expression of that participate in HUD programs, assistance to the extent that they are its religious beliefs, provided that it including faith-based organizations, used for eligible, HUD-funded activities. does not use direct HUD funds to must carry out eligible activities in This final rule also clarifies the rules support any inherently religious accordance with all program governing disposition of HUD-improved activities, such as worship, religious requirements and other applicable real property after the term of the grant instruction, or proselytization. Among requirements governing the conduct of and where there is a change in the use other things, faith-based organizations HUD-funded activities, including those of the property. The following provide may use space in their facilities to prohibiting the use of direct HUD funds examples of application of the revised provide HUD-funded services, without to engage in inherently religious rule: removing religious art, icons, scriptures, activities. In addition, to the extent that Example 1. A one-room church applies for or other religious symbols. In addition, HUD’s regulations may have CDBG funds to make several necessary a faith-based organization participating disqualified faith-based organizations or repairs. On Sunday morning, the church in a HUD program may retain religious indicated that faith-based organizations serves as a place for congregational worship. terms in its organization’s name, select could be disqualified from participating During weekdays, the church is used to operate a ‘‘soup kitchen’’ for homeless its board members on a religious basis, in HUD’s programs because the individuals. Accordingly, except for the few and include religious references in its organizations are motivated or hours on Sunday morning when the church organization’s mission statements and influenced by religious faith to provide holds worship services, the one-room church other governing documents. social services, the proposed rule is used for the purpose of providing meals to 4. Emphasize that participating clarified that this type of restriction is homeless individuals—a purpose that is organizations cannot discriminate in inconsistent with governing law. eligible for HUD assistance. The one-room providing assistance. The proposed rule 7. Clarify the inapplicability of church is ineligible for CDBG-funded clarified that an organization that Executive Order 11246 in the context of improvements because it is the participates in a HUD program shall not, grants. The proposed rule amended the congregation’s principal place of worship. Example 2. A synagogue with several in providing program assistance, CDBG regulations to provide that rooms applies for CDBG funds to make discriminate against a program Executive Order (E.O.) 11246 (Equal necessary repairs to its ‘‘soup kitchen,’’ beneficiary or prospective program Employment Opportunity), regarding which is operated from two rooms located beneficiary on the basis of religion or equal employment opportunity, and the within the synagogue basement. The religious belief. Accordingly, faith-based implementing regulations issued by the congregation does not use these rooms as its organizations, in providing services Department of Labor at 41 CFR part 60, principal place of worship; they are used funded in whole or in part by HUD, may do not apply to CDBG grantees. exclusively for the ‘‘soup kitchen.’’ not discriminate against current or Accordingly, repairs to the two rooms are II. Significant Differences Between the prospective program beneficiaries on eligible for CDBG assistance. January 6, 2003, Proposed Rule and Example 3. A church applies for HUD the basis of religion or religious belief. This Final Rule funding to construct a homeless shelter, 5. Clarify that HUD funds may not be which will contain several rooms for use as used for acquisition, construction, or This final rule follows publication of a shelter as well as a one-room chapel to be rehabilitation of structures to the extent the January 6, 2003, proposed rule and used for weekly religious services and those structures are used for inherently takes into consideration the public nightly prayer meetings. With the exception religious activities. The proposed rule comments received on the proposed of the chapel, the homeless shelter will be clarified that HUD funds may be used rule. After consideration of the public used exclusively for eligible HUD-funded for the acquisition, construction, or comments, the significant changes made activities; no inherently religious activities, rehabilitation of structures only to the at the final rule stage are the following: such as worship or religious instruction, will extent that those structures are used for 1. Clarification of applicability of be conducted outside of the chapel. nondiscrimination requirements. Some Homeless individuals staying at the shelter conducting eligible activities under the will be offered the opportunity to participate specific HUD program. Where a public commenters questioned whether in the religious services, but attendance will structure is used for both eligible and the rule would reverse or supersede the be purely voluntary. HUD may assist the inherently religious activities, the applicability to program participants of construction on a prorated basis, excluding proposed rule clarified that HUD funds nondiscrimination requirements. To the the costs of the chapel. may not exceed the cost of those extent that statutory nondiscrimination Example 4. A mosque purchases an portions of the acquisition, requirements applied to participants in abandoned church and applies for HUD construction, or rehabilitation that are the HUD programs that were the subject funding to renovate it and use it as an elderly of the January 6, 2003, proposed rule, daycare center. The planned renovation will attributable to eligible activities. retain the existing exterior facade of the 6. Remove additional assurance those statutory requirements continue to former church, including the stained-glass requirements imposed only on faith- apply. They are not altered by this rule. windows. No inherently religious activities based organizations. The proposed rule 2. Clarification of when HUD funds will be conducted within the new daycare removed those provisions of HUD’s may be used for acquisition, center. Although the proposed rehabilitation regulations that required only faith- construction, or rehabilitation of real involves a building formerly used as a based organizations to provide property. The final rule clarifies that church, the entire renovation is eligible for assurances that they would conduct HUD funds may not be used for HUD funding because the building will be eligible program activities in a manner acquisition, construction, or used solely for eligible HUD activities. that is ‘‘free from religious influences.’’ rehabilitation of sanctuaries, chapels, or 3. Clarification of Applicability of HUD imposes no comparable assurance any other rooms that a religious E.O. 11246. The proposed rule’s requirements in any other context. HUD congregation that is a recipient or exclusion of E.O. 11246 from the CDBG determined that it is inappropriate to subrecipient of HUD assistance uses as regulations was intended only to reflect require that only faith-based its principal place of worship. Separate the exemption of religious organizations organizations submit additional rooms located in a structure that contain from the religious nondiscrimination assurances of compliance with program sanctuaries, chapels, or other rooms that requirements of E.O. 11246, as provided requirements above and beyond those a HUD-funded religious congregation in an amendment to E.O. 11246 by E.O.

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56398 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

13279 (Equal Protection of the Laws for The majority of the commenters experiencing participation difficulties in Faith-Based and Community expressed concern that the proposed localities, HUD should address those Organizations), issued by President regulatory changes would conflict with situations on a case-by-case basis. Bush on December 12, 2002. The final the Establishment Clause and related Another commenter suggested that the rule reinstates the reference to E.O. Supreme Court cases by authorizing rule is unnecessary because religious 11246 in the CDBG regulations, and Federal funding for churches and other institutions already receive a large includes the amendment to E.O. 11246 ‘‘pervasively sectarian organizations.’’ government subsidy through tax by E.O. 13279, thus making E.O. 11246, Other commenters expressed concerns exemption. as amended, applicable to HUD grantees about the civil rights implication of the HUD Response. HUD disagrees with to the same extent that it would proposed rule, writing that the proposed the statement that obstacles addressed otherwise apply. changes would open the door to in the proposed rule are based only on 4. Clarification regarding the discriminatory practices by faith-based anecdotal evidence or that the commingling of funds. This final rule organizations. Other commenters appropriate method to resolve obstacles clarifies that if a State or local objected to any Federal funding for is on a case-by-case basis. In its own government voluntarily contributes its faith-based organizations on policy review of its regulations, HUD found own funds to supplement federally grounds. barriers to faith-based organizations funded activities, the State or local The following sections of this partnering with HUD. For example, government has the option to segregate preamble present a more detailed under the previous rule, HOME program the Federal funds or commingle them. discussion of the most significant issues funds, which communities around the However, if the funds are commingled, and concerns raised by the public country use to construct affordable the requirements of this final rule apply commenters on the January 6, 2003, housing, may not be provided to faith- to all of the commingled funds. proposed rule and HUD’s responses to based organizations ‘‘for any activity, including secular activities’’ (See 24 III. Discussion of the Public Comments these comments. The summary of the CFR 92.257). This final rule, therefore, Received on the January 6, 2003, public comments is organized as is necessary to remove these regulatory Proposed Rule follows: Section IV of this preamble discusses barriers (whether intentional or The public comment period on the general comments on the proposed rule. unintentional when promulgated) and proposed rule closed on March 7, 2003. Section V of this preamble discusses to ensure that all organizations are able HUD received 188 public comments on the comments regarding faith-based to compete on an equal footing for the proposed rule. Comments were activities. Federal financial assistance, in a received from members of Congress, Section VI of this preamble discusses manner that is consistent with faith-based organizations, public the comments regarding the use of constitutional church-state housing agencies (PHAs) and other State religious art, icons, scriptures, and other requirements. and local community development religious symbols. Comment: Determination of legitimate agencies (as well as the national Section VII of this preamble discusses faith-based organizations. Several organizations representing PHAs and the comments regarding commenters asked how HUD would these State and local agencies), nondiscrimination in providing determine which organizations are advocates of low-income housing, assistance. legitimate faith-based organizations. The organizations concerned about First Section VIII of this preamble commenters wrote that without Amendment issues, law firms, and other discusses the comments regarding guidance or a definition of faith-based interested members of the public. Executive Order 11246 and organization, the Federal faith-based Approximately eight commenters consideration of religion in employment initiative would be a source of expressed support for the proposed rule, decisions. confusion and controversy for both without reservation or request for Section IX of this preamble discusses recipients and subrecipients. One change. The commenters commended the comments regarding structures used commenter recommended that HUD set HUD for issuing the proposed rule, for religious activities. minimum neutral standards for all writing that the changes ‘‘are long Section X of this preamble discusses eligible grantees, including faith-based overdue.’’ The commenters stated their the comments regarding the removal of organizations, such as a governing board belief that the regulatory changes the assurance requirements. requirement, a plan for public service proposed by HUD are consistent with programs approved by the governing constitutional principles, and that the IV. General Comments board, and a certification of board ‘‘proposed regulation not only Several commenters submitted responsibility for the programs that are eliminates unnecessary obstacles, but comments on the proposed rule open to the public. Another commenter retains those restrictions necessary generally, and did not raise issues or wrote that the final rule should define under the Establishment Clause.’’ One questions about a specific regulatory the terms ‘‘faith-based’’ and ‘‘religious’’ of the commenters urged HUD to change. organization based on the definition expand the scope of the proposed rule Comment: Insufficient justification for contained in the Internal Revenue Code. to include all HUD programs, and not to the proposed rule. Several commenters HUD Response. HUD declines to limit regulatory changes to the eight disagreed that there are currently adopt these suggestions. One of the community development programs barriers that prevent participation of objectives of this rule is to move away identified in the rule. faith-based organizations in HUD’s from unnecessary Federal inquiry into The majority of commenters opposed programs. The commenters wrote that the religious nature, or absence of the proposed rule or expressed strong faith-based organizations have been religious nature, of an applicant for reservations about the rule. The reasons successfully competing for HUD funds HUD funds. With respect to any for opposition or reservation varied. In for many years. Another commenter applicant for HUD funds, HUD’s focus some instances, these commenters stated that the impetus for the rule should always be that (1) the applicant supported the overall goals of the appeared to be based on anecdotal is an eligible applicant for a program, as proposed rule, but were concerned evidence. The commenter suggested that ‘‘eligible applicant’’ is defined for that about certain aspects of the proposal. if some faith-based organizations are program; (2) the applicant meets any

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56399

other eligibility criteria that the program are faith-based organizations. Similarly, HUD program participants must may require; and (3) the applicant if the program regulations require grant carefully manage their various sources commits to undertake only eligible recipients to comply with OMB cost of Federal funds and abide by OMB cost activities with HUD funds and abide by accounting circulars, then all grantees, accounting circulars, where applicable, all program requirements that govern including grantees that are faith-based or other cost accounting methods that those funds. organizations, must comply with these may be specified in individual program Comment: Assessment of circulars. If the program regulations, regulations. Moreover, any inherently management and fiscal capability of however, provide for other cost religious activities would be non-HUD faith-based organizations. Several accounting procedures, then the activities, so the normal monitoring commenters questioned how HUD grantees, including faith-based grantees, procedures would not require HUD to would determine the management and need comply only with the specified distinguish between religious and fiscal capability of faith-based cost accounting procedures. nonreligious ineligible activities and organizations. Some of the commenters Comment: Difficulty in overseeing and would more than suffice to address the asked whether faith-based organizations enforcing compliance with regulations commenters’ concerns. Therefore, HUD would be required to be nonprofits with by faith-based organizations. Several does not see the need for additional section 501(c)(3) status under the commenters wrote that the monitoring requirements or guidance in this area. Internal Revenue Code. These and enforcement of faith-based commenters wrote that many faith- organizations would be administratively V. Comments Regarding Inherently based organizations have secured burdensome, and raise the Religious Activities section 501(c)(3) status in order to constitutionally troubling prospect of Comment: Define the term ‘‘inherently receive government funding. The excessive government oversight of religious activities.’’ Several commenters wrote that obtaining and religious activity. The commenters commenters requested a definition of maintaining this status demonstrates a raised concerns about the enforceability ‘‘inherently religious activities.’’ The certain level of competence and fiscal of the rule as a whole, but some commenters wrote that while a accountability, and suggested that commenters focused on the provisions definition need not be exhaustive of all section 501(c)(3) status be a requirement authorizing the acquisition, possible inherently religious activities, for participation in HUD programs. One construction, and rehabilitation of the final rule should provide a list of commenter wrote that faith-based religious structures. One of these activities that are clearly ineligible. organizations should be explicitly commenters wrote: ‘‘Allowing HUD and Another commenter suggested that HUD required to comply with OMB Circulars religious organizations to split the cost should retain the current wording used A–122 and A–133 to ensure the degree of building a facility (yet barring the use in the regulations, which refers to of financial separation necessary to of such a facility for religious activity) activities being ‘‘free from religious protect the ‘‘wall’’ between church and will cause HUD and the religious influences’’ and/or ‘‘entirely for secular state. The commenter wrote that organization to enter into what is, at purposes.’’ ‘‘Federal cost principles are carefully best, unseemly negotiations as to what HUD Response. The final rule designed to preclude passing any counts as religious activity or not.’’ The specifies that inherently religious element of an unallowable cost (such as commenters urged that HUD provide activities include ‘‘worship, religious lobbying) through to the government. guidance on the monitoring and instruction, or proselytization.’’ As the These cost principles also apply to enforcement of the new requirements commenters themselves note, it would Federal grant funds (except block and consider the use of mandatory be difficult to establish an acceptable grants) that are passed through State or training sessions as part of this list of all inherently religious activities. Local governments, as well as any guidance. Inevitably, the regulatory definition matching funds raised from non- HUD Response. The enforcement of would fail to include some inherently governmental sources.’’ HUD regulations does not increase religious activities or include certain HUD Response. As noted in the because some program participants are activities that are not inherently response to the preceding comment, faith-based organizations. HUD has a religious. Rather than attempt to faith-based organizations participating responsibility to monitor all program establish an exhaustive regulatory in HUD programs must generally meet participants to ensure that HUD funds definition, this final rule retains the the same criteria as all other applicants (taxpayer funds) are used in accordance language of the proposed rule, which for HUD funds. These criteria help to with HUD program and any provides examples of the general types ensure that Federal dollars are allocated government-wide requirements. of activities that are prohibited by the only to those program providers with Inappropriate use of HUD funds or regulations. This approach is consistent sufficient administrative and financial failure to comply with HUD program with Supreme Court precedent, which controls to properly administer the requirements is not a possibility that likewise has not comprehensively Federal funds. The purpose of this rule arises only when program participants defined inherently religious activities. is to ensure that HUD is not imposing are faith-based organizations. Nonprofit For example, prayer and worship are greater requirements on faith-based organizations generally obtain funds for inherently religious, but social services organizations because they are faith- their social service purposes from do not become inherently religious based organizations. For example, if several sources, not just HUD or the merely because they are conducted by regulations for a HUD program require Federal government. Failure of a individuals who are religiously participating nonprofit organizations to nonprofit organization (or any grantee) motivated to undertake them or view have section 501(c)(3) status, then all to ensure that the Federal portion of the activities as a form of ‘‘ministry.’’ If participating organizations must have their funds is not used for non-Federal HUD determines that additional this status to receive HUD funds. If there purposes or prohibited purposes (such guidance is needed regarding specific is no section 501(c)(3) requirement as lobbying) will result in the activities that are ‘‘inherently religious,’’ imposed on nonprofit organizations by imposition of sanctions or penalties on HUD will provide this guidance. the HUD regulation, HUD is not going the organization. Violations of HUD Comment: Clarify the term to impose this requirement on faith- program requirements can be committed ‘‘separation in time or location.’’ Several based organizations simply because they by all types of program participants. All commenters requested that HUD clarify

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56400 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

the separation ‘‘in time or location’’ infused with religious doctrine. For VI. Comments Regarding Religious Art, restriction. The commenters wrote that example, case management services by Icons, Scriptures, and Other Religious the vagueness of the current language counselors could be infused with Symbols would lead to confusion among service religious teachings and doctrine. The Comment: Use of religious art or icons providers. Some commenters offered commenters wrote that the final rule should not be permitted. Several suggestions for how the language could should prohibit any services that are commenters wrote that the use of be clarified. For example, one infused with religious doctrine. religious art or icons can constitute a commenter wrote that the rule should HUD Response. HUD believes that subtle but powerful form of provide that the term ‘‘separation in existing HUD regulations and this rule proselytization or may be offensive to time or location’’ means that clients are sufficiently explicit that direct HUD some persons. The commenters must be allowed the opportunity to not funds may not be used for religious suggested that HUD prohibit the use of participate in religious activities in a proselytization. Program participants rooms or other space for providing meaningful manner such that they do cannot use supportive services directly HUD-funded services unless such items not have to hear or see the inherently funded by HUD, such as counseling, to have been removed. Two commenters religious activities. Another commenter serve as a format for proselytization. wrote that although a faith-based wrote that greater clarity could be This is a violation of program organization should not be required to provided by specifying that religious requirements, and the program remove icons from an existing chapel or activities must be separated by both participant that violates the prohibition chapel annex if they are used for time and location. Yet another on proselytization will be subject to providing HUD-funded services, the commenter wrote that the final rule applicable sanctions and penalties. No organization should not be permitted to could more clearly define ‘‘time’’ by additional regulatory changes are providing guidelines on an acceptable have religious icons in the common area required. or the individual units of a HUD-funded length of time between activities, such Comment: Ensure the availability of as 15 or 30 minutes. shelter or housing project, or other secular alternative service providers. HUD-funded space that is not also used HUD Response. HUD declines to Several commenters wrote that HUD adopt the suggestions raised by the for inherently religious activities. should clarify that beneficiaries have commenters. HUD does not believe that HUD Response. HUD declines to the right to receive services from a the separation of time or location impose this restriction on HUD program different or non-religious provider, and requirement is ambiguous and participants that are faith-based that the beneficiaries be informed of this necessitates additional regulation for organizations. A number of Federal right by the faith-based provider. Some proper adherence. HUD believes that statutes affirm the principle embodied commenters suggested that a list of existing regulations and this rule are in this rule. (See, e.g., 42 U.S.C. 290kk– alternative service providers be in place clear that faith-based organizations, 1(d)(2)(B).) For no other program and distributed to all beneficiaries or using direct Federal funds for certain participant do HUD regulations potential beneficiaries. Other activities, must separate their inherently prescribe the types of artwork, statues, religious activities from the federally commenters suggested that HUD ensure or icons that may be placed within or funded activities. HUD believes that a that funding be made available to a without the structures or rooms in common sense approach to this variety of providers within a service which HUD-funded services are regulation supported by HUD guidance, area to ensure that secular alternatives provided. A prohibition on the use of not a detailed regulatory approach, is are viable, appropriate, and available. religious icons would make it more the better one. For example, suppose The commenters wrote that without difficult for many faith-based that a community center is used for reasonable secular alternatives, organizations to participate in the adult education in the evening, and that beneficiaries might be forced to program than other organizations, and one of the organizations participating in participate in programs provided by would thus be an inappropriate and the adult education initiative provides faith-based organizations where they excessive restriction, typical of the types classes in English proficiency. The may be required to participate in of regulatory barriers that this final rule organization cannot use the English religious activity in order to receive seeks to eliminate. Consistent with language class as a means of providing essential government-funded benefits. constitutional church-state guidelines, a inherently religious instruction. The HUD Response. HUD declines to faith-based organization that religious study class has to be provided adopt the recommendations of the participates in HUD programs will in another classroom or building commenters. Under this rule, no retain its independence and may (separate in location) or at another time beneficiary served by a HUD-funded continue to carry out its mission, (if the same classroom is to be used). provider directly funded by HUD will provided that it does not use direct HUD Concerning the recommendation that be required to participate in inherently funds to support any inherently inherently religious activities be religious activities as a condition of religious activities. Accordingly, this separated from HUD-funded activities receiving services. The commenters’ final rule continues to provide that by both time and location, HUD believes recommendations run counter to the faith-based organizations may use space that this is legally unnecessary and that objectives that HUD is trying to achieve in their facilities to provide HUD- it would impose an unnecessarily harsh through this rule. HUD’s general funded services, without removing burden on small faith-based objective is to eliminate barriers to faith- religious art, icons, scriptures, or other organizations, which may have access to based organizations, to welcome their religious symbols. only one location that is suitable for the participation in HUD programs, and VII. Comments Regarding provision of HUD-funded services. most important, to ensure they are Comment: Restrict activities that are treated like other program participants. Nondiscrimination in Providing ‘‘inherently infused with religious To develop a list that highlights which Assistance doctrine.’’ Two commenters wrote that HUD program providers may be faith- Comment: Include a more explicit there might be services provided to based organizations and which are not, statement prohibiting faith-based clients that are not inherently religious would defeat the ‘‘neutrality’’ objective organizations from requiring program activities, but that are inherently sought by this rulemaking. beneficiaries to participate in religious

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56401

activities. Two commenters wrote that faith-based organizations participating Comment: HUD’s rationale for HUD should strengthen the provisions in HUD programs that are not imposed eliminating compliance with E.O. 11246 of the rule specifying that participation on all program participants. is flawed. Several comments advised by a beneficiary in religious activities Comment: Nondiscrimination that HUD’s approach to E.O. 11246 was offered by a faith-based service provider provisions fail to properly take into flawed. is voluntary, and that the faith-based account the distinction between ‘‘direct’’ HUD Response. As discussed earlier organization may not discriminate and ‘‘indirect’’ assistance appearing in this preamble, the final rule clarifies against a prospective beneficiary for elsewhere in the proposed rule. One the applicability of E.O. 11246 as refusing to participate in such activities. commenter wrote that where the amended, to the same extent that it The commenters wrote that while the assistance is indirect, a faith-based would otherwise apply. preamble to the proposed rule provides organization, consistent with the Comment: Do not permit faith-based that a religious organization may not Establishment Clause, may require organizations to consider religion in discriminate based on ‘‘refusal to beneficiaries to participate in its employment decisions. Rule should actively participate in a religious religious program. prohibit employment discrimination on service,’’ the regulatory text only HUD Response. This rule does not the basis of sexual orientation. Several prohibits discrimination on the basis of subject religious organizations that of the commenters wrote that the final ‘‘religion or religious belief.’’ The receive HUD funds as the result of a rule should expressly prohibit commenters suggested that the genuine and independent choice of a discrimination against any employee or regulatory text should be revised to beneficiary—for example, where the applicant for employment on the basis track the stronger language of the entity administering HUD funds has of religion. Other commenters wrote preamble. The commenters, however, established a voucher, coupon, that faith-based organizations and other objected to the use of the word certificate, or similar funding secular organizations may be generally ‘‘actively’’ in this preamble language mechanism—to the restrictions on able to discriminate on the basis of and urged that HUD clarify that faith- inherently religious activities that apply sexual orientation or gender identity based organizations may not to organizations directly funded by because there does not currently exist a discriminate against clients who refuse HUD. This rule does not, therefore, Federal law prohibiting this to participate in religious activities— prohibit ‘‘indirectly funded’’ discrimination. whether actively or passively. organizations from offering assistance HUD Response. The purpose of this HUD Response. HUD believes that the that integrates faith and social services rulemaking is to eliminate barriers that language in the rule prohibiting faith- and requires participation in all aspects HUD has imposed administratively to based organizations from requiring of their programs. As noted in section II the participation of faith-based program beneficiaries to participate in of the preamble to this final rule, organizations in HUD programs. The religious activities is sufficiently however, the proposed rule did not offer purpose of this rule is not to establish explicit. A prohibition on amendments to any nondiscrimination nondiscrimination requirements or to discrimination against beneficiaries on provisions of existing statutes. Thus, to alter existing nondiscrimination the basis of religion or religious belief is the extent that such statutes restrict the requirements. Current requirements of straightforward and requires no further activities of indirectly funded statute or Executive Order apply to HUD elaboration. organizations, those restrictions remain programs to the same extent that they Comment: Require fair housing in effect. Accordingly, the statute that applied under the prior rule. training for staff of HUD-funded faith- applies to each program should be Comment: Clarify that any equal based organizations. Require faith- reviewed for the scope of its employment opportunity exemption is based organizations to advertise HUD- applicability. consistent with Title VII. Several funded services in a manner that commenters suggested that HUD clarify VIII. Comments Regarding Executive welcomes all beneficiaries. Two that any exemption to the employment Order 11246 and Religion as a Factor commenters wrote that training of Fair nondiscrimination requirements in Employment Decisions Housing Act requirements is vital to contained in the rule is consistent with ensure that the employees of faith-based This final rule clarifies the the exemption provided by Title VII, organizations understand their applicability of E.O. 11246 to the CDBG and does not constitute a blanket responsibility to provide housing regulations, and includes the exemption of equal employment services free from discrimination. Two amendment of E.O. 11246 by E.O. opportunity. The commenters wrote commenters stated that the final rule 13279. E.O. 13279, issued by the that, under Title VII, religious should require faith-based organizations President on December 12, 2002, allows organizations are allowed to employ to advertise HUD-funded services in a a government contractor or individuals of a particular religion to manner that welcomes all beneficiaries, subcontractor that is a religious perform the work of the religious regardless of religious persuasion. organization, corporation, association, organization, but are not exempt with Another commenter stated that HUD’s educational institution, or society to respect to any other type of rule should prohibit organizations take religion into consideration in the discrimination. participating in HUD-funded programs employment of individuals to perform HUD Response. Again, it was not from discussing religious beliefs with work connected with the carrying on by HUD’s objective in this rulemaking to prospective beneficiaries. such corporation, association, revise program requirements imposed HUD Response. HUD believes that its educational institution, or society of its by statute. HUD’s objective in this existing regulations and this rule are activities. Such contractors and rulemaking was to identify program clear that HUD program participants subcontractors are not exempt or requirements, imposed by HUD through cannot discriminate in providing excused from complying with the other rulemaking as a matter of administrative services to beneficiaries on the basis of requirements contained in Executive discretion, that constitute unwarranted their religious belief, or the absence of Order 11246. Thus, E.O. 11246, as barriers to the participation of faith- such belief. With respect to fair housing amended, is applicable to HUD grantees based organizations in HUD programs. training and advertising standards, HUD to the same extent that it would As noted earlier in this preamble, declines to impose requirements on otherwise apply. existing nondiscrimination

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56402 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

requirements are not altered by this that prohibit spending government programs prescribe the cost accounting rule. funds on structures that are not procedures that are to be followed in Comment: Faith-based organizations exclusively secular in their use. Other using HUD funds. should be required to abide by State and comments offered that, even if the With respect to structures, HUD local civil rights laws. Several proposed rule could be effectively believes that the prorated funding of commenters wrote that HUD should enforced, it would require such improvements to a structure that has a clarify that the rule will not preempt excessive monitoring as to constitute mixed use—both religious and State and local laws regarding the excessive government entanglement nonreligious—is not itself a violation of funding of faith-based organizations, with religious institutions. The the Constitution. In a neutral program in including civil rights statutes governing commenters wrote that HUD would which the government directly funds employment nondiscrimination. The need to establish effective safeguards to the capital improvements of institutions commenters wrote that some States and avoid the perceived constitutional that administer Federal social welfare localities have stringent laws regarding pitfalls. programs, the government need only put the funding of faith-based groups with Other comments stated that nothing in place safeguards to ensure that public Federal, State, and local funds, and that in the rule would prevent a faith-based money is not used to finance inherently it is unclear whether the proposed rule, organization from converting a HUD- religious activities. The proposed rule as written, would preempt these laws funded portion of a structure for satisfied this requirement by prohibiting that have been in effect for decades. religious use at some future date. The the use of HUD funds for the HUD Response. The requirements that overall concern expressed by these acquisition, construction, or govern funding under the HUD commenters was that these provisions rehabilitation of structures to the extent programs at issue in these regulations would inevitably lead to the that those structures are used for do not raise a question of preemption of unconstitutional government funding of inherently religious activities—a State or local laws. Federal funds, religion. One of the commenters wrote prohibition that is enforced by generally however, carry Federal requirements. that, under governing legal precedent, applicable cost-accounting standards No organization is required to apply for public funds may be used by religious carefully designed to ensure that HUD funding under these programs, but institutions for capital improvements monies are not used to support any organizations that apply and are only when the structures are wholly ineligible activity. Therefore, the final selected for funding must comply with limited to secular use. Other rule’s prohibition on the funding of the requirements applicable to the commenters suggested that HUD require capital improvements for sanctuaries, program funds. As noted above in this that the HUD-funded portions of a chapels, or any other rooms that a preamble, language has been added to structure be used for secular purposes religious congregation that is a recipient the rule clarifying that if a State or local for the life of the building. Several or subrecipient of HUD assistance uses government voluntarily contributes its commenters suggested that HUD as its principal place of worship simply own funds to supplement federally establish procedures for recapturing the provides extra assurance that HUD- funded activities, the State or local Federal assistance if the HUD-funded funded capital improvements will not government has the option to segregate portion of the structure is ever used for be used to support inherently religious the Federal funds or commingle them; a religious purpose. however, if the funds are commingled, HUD Response. In the preamble to activities, and HUD’s rule is well within these regulations apply to all of the this final rule, HUD previously the bounds of the Constitution. commingled funds. addressed the issue of monitoring and HUD disagrees with those who enforcement. HUD finds no basis for commented that preventing the use of IX. Comments Regarding Structures requiring greater oversight and direct HUD capital-improvement funds Used for Religious Purposes monitoring of faith-based organizations for inherently religious activities would As noted in section II of the preamble than other program participants simply necessarily fail or, in the process, to this final rule, the final rule clarifies because they are faith-based excessively entangle the government in this requirement by stating that HUD organizations. All program participants the affairs of recipients or subrecipients funds may not be used for acquisition, must be monitored for compliance with that are religious organizations. As to construction, or rehabilitation of program requirements, and no program the question whether limiting HUD sanctuaries, chapels, or any other rooms participant may use HUD funds for any funding to eligible, nonreligious that a religious congregation that is a ineligible activity, whether that activity activities is possible, it merits emphasis recipient or subrecipient of HUD is an inherently religious activity or a that HUD must generally perform the assistance uses as its principal place of nonreligious activity that is outside the very same cost-accounting functions to worship. This final rule also clarifies the scope of the program at issue. Many all organizations. Because inherently rules governing disposition of HUD- nonreligious organizations participating religious activities are non-HUD improved real property after the term of in HUD programs also receive funding activities, HUD need not distinguish the grant and where there is a change in from several sources (private sources, between program participants’ religious the use of the property. State, or local sources) to carry out and nonreligious non-HUD activities; Comment: Government funding for activities that are ineligible for funding the same mechanism by which HUD religious structures is unconstitutional. under HUD programs. In many cases, polices the line between ineligible and Several commenters objected to the use the non-eligible activities are secular eligible activities will serve to exclude of any HUD funds in the acquisition, activities but not activities eligible for inherently religious activities from construction, or rehabilitation of funding under HUD programs. All funding. This system of monitoring is religious structures. The objection to program participants receiving funding more than sufficient to address the this proposal included the comment from various sources and carrying out a commenters’ concerns, and the amount that the proposed ‘‘attribution’’ wide range of activities must ensure of oversight of religious organizations requirements would be unenforceable through proper accounting principles necessary to accomplish these purposes by State and local agencies that each set of funds is applied only to is no greater than that involved in other administering the HUD grant, and are the activities for which the funding was publicly funded programs that the contrary to Supreme Court decisions provided. The regulations for the Supreme Court has sustained.

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56403

With respect to the concern about the understand that inherently religious Counsel, Room 10276, Department of funding of capital improvements for activities cannot be undertaken with Housing and Urban Development, 451 religious structures that are later Federal funding and must remain Seventh Street, SW., Washington, DC converted to non-HUD uses, the final separate from federally funded 20410–0500. rule clarifies that disposition of HUD- activities, and no additional Impact on Small Entities improved property after the term of requirements are necessary. The grants to religious organizations, and requirements for use of funds under a The Secretary, in accordance with the changes in the use of property improved HUD program apply to, and are binding Regulatory Flexibility Act (5 U.S.C. for use by religious organizations, are on, all HUD program participants. 605(b)) has reviewed and approved this subject to government-wide regulations XI. Findings and Certifications final rule and in so doing certifies that governing real property disposition. this rule will not have a significant HUD has regulations (see 24 CFR parts Regulatory Planning and Review economic impact on a substantial 84 and 85) that address the terms under The Office of Management and Budget number of small entities. The final rule which such grantees must use the (OMB) reviewed this rule under will not impose any new costs, or property for eligible activities, and the Executive Order 12866, Regulatory modify existing costs, applicable to terms under which federally funded Planning and Review. OMB determined HUD grantees. Rather, the purpose of improvements must be ‘‘bought back’’ if that this rule is a ‘‘significant regulatory the final rule is to remove regulatory such grantees decide to discontinue action’’ as defined in section 3(f) of the prohibitions that currently restrict the their involvement in the program. Order (although not an economically equal participation of faith-based X. Comments Regarding the Removal of significant regulatory action under the organizations (large and small) in HUD’s Assurance Requirements Order). Any changes made to the rule as programs. a result of that review are identified in Comment: HUD should not remove Catalog of Federal Domestic Assistance the docket file, which is available for the assurance requirements. Several Numbers public inspection in the Regulations commenters wrote that by removing the Division, Room 10276, 451 Seventh assurance requirements, HUD is The Catalog of Federal Domestic Street, SW., Washington, DC 20410– condoning religious influences and Assistance numbers for the programs 0500. activities in HUD-funded programs. The affected by this rule are 14.218, 14.219, commenters wrote that the Federal Unfunded Mandates Reform Act 14.225, 14.227, 14.228, 14.231, 14.235, 14.237, 14.238, 14.239, 14.241, 14.243, government has rightly recognized that Title II of the Unfunded Mandates faith-based organizations are unique in 14.246, 14.248, 14.512, 14.514, and Reform Act of 1995 (2 U.S.C. 1531– 14.515. their mission and require unique 1538) establishes requirements for assurances. The commenters disagreed Federal agencies to assess the effects of List of Subjects with HUD’s rationale for removing the their regulatory actions on State, local, 24 CFR Part 92 requirements, writing that HUD requires and tribal governments and the private many certifications and assurances that sector. This final rule does not impose Administrative practice and grantees will comply with various laws any Federal mandates on any State, procedure, Grant programs—housing and regulations. The commenters wrote local, or tribal governments or the and community development, Grant that retaining this assurance would not private sector within the meaning of programs—Indians, Indians, Low and be inconsistent with requiring other Unfunded Mandates Reform Act of moderate income housing, assurances of compliance with laws and 1995. Manufactured homes, Rent subsidies, regulations. Two commenters agreed Reporting and recordkeeping that it is unfair to apply the assurance Executive Order 13132, Federalism requirements. requirement only to faith-based Executive Order 13132, Federalism, organizations, and suggested that rather requires that Federal agencies consult 24 CFR Part 570 than eliminating the requirement, HUD with State and local governments in the Administrative practice and should make it applicable to all development of regulatory policies with procedure, American Samoa, grantees. federalism implications. Consistent with HUD Response. The final rule remains Executive Order 13132, HUD Community development block grants, unchanged from the proposed rule on specifically solicited comment from Grant programs—education, Grant this matter. Additional assurances, such State and local government officials on programs—housing and community as those that are being removed by this the January 6, 2003, proposed rule, and development, Guam, Indians, Lead rule, only perpetuate, and unfairly so, a no comments from these entities were poisoning, Loan programs—housing and presumption that program requirements submitted that raised federalism community development, Low and applicable to all program participants concerns. moderate income housing, New are insufficient to bind faith-based communities, Northern Mariana Islands, organizations, and additional Environmental Impact Pacific Islands trust territory, Pockets of requirements and assurances must be A Finding of No Significant Impact poverty, Puerto Rico, Reporting and imposed on these organizations. No with respect to the environment was recordkeeping requirements, Small additional requirements are needed. made at the proposed rule stage, in cities, Student aid, Virgin Islands. In issuing this rule, HUD’s general accordance with HUD regulations at 24 24 CFR Part 572 approach is that faith-based CFR part 50, which implement section organizations are not a category of 102(2)(C) of the National Environmental Condominiums, Cooperatives, Fair applicants or program participants that Policy Act of 1969 (42 U.S.C. 4332). housing, Government property, Grant require additional requirements or That Finding remains applicable to this programs—housing and community additional oversight in order to ensure final rule and is available for public development, Low and moderate compliance with program regulations. inspection between the hours of 7:30 income housing, Nonprofit In issuing this rule, HUD’s approach is a.m. and 5:30 p.m. weekdays in the organizations, Reporting and that faith-based organizations well Regulations Division, Office of General recordkeeping requirements.

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56404 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

24 CFR Part 574 activities, the activities must be offered the State or local government has the AIDS/HIV, Community facilities, separately, in time or location, from the option to segregate the Federal funds or Disabled, Grant programs—health assistance funded under this part, and commingle them. However, if the funds programs, Grant programs—housing and participation must be voluntary for the are commingled, this section applies to community development, Grant beneficiaries of the assistance provided. all of the commingled funds. (c) A religious organization that programs—social programs, Homeless, participates in the HOME program will § 92.504 [Amended] Housing, Low and moderate income retain its independence from Federal, ■ 3. In § 92.504, remove paragraph housing, Nonprofit organizations, Rent State, and local governments, and may subsidies, Reporting and recordkeeping (c)(3)(x) and redesignate paragraph continue to carry out its mission, (c)(3)(xi) as paragraph (c)(3)(x). requirements, Technical assistance. including the definition, practice, and 24 CFR Part 576 expression of its religious beliefs, PART 570—COMMUNITY provided that it does not use direct DEVELOPMENT BLOCK GRANTS Community facilities, Emergency HOME funds to support any inherently shelter grants, Grant programs—housing ■ 4. The authority citation for 24 CFR religious activities, such as worship, and community development, Grant part 570 continues to read as follows: religious instruction, or proselytization. programs—social programs, Homeless, Among other things, faith-based Authority: 42 U.S.C. 3535(d) and 5301– Reporting and recordkeeping organizations may use space in their 5320. requirements. facilities, without removing religious ■ 5. Revise § 570.200(j) to read as 24 CFR Part 582 art, icons, scriptures, or other religious follows: symbols. In addition, a HOME-funded Homeless, Rent subsidies, Reporting § 570.200 General policies. religious organization retains its and recordkeeping requirements. authority over its internal governance, * * * * * 24 CFR Part 583 and it may retain religious terms in its (j) Faith-based activities. (1) organization’s name, select its board Organizations that are religious or faith- Homeless, Rent subsidies, Reporting based are eligible, on the same basis as and recordkeeping requirements. members on a religious basis, and include religious references in its any other organization, to participate in 24 CFR Part 585 organization’s mission statements and the CDBG program. Neither the Federal government nor a State or local Grant programs—housing and other governing documents. (d) An organization that participates government receiving funds under community development, Homeless, CDBG programs shall discriminate Low and very low-income families, in the HOME program shall not, in providing program assistance, against an organization on the basis of Reporting and recordkeeping discriminate against a program the organization’s religious character or requirements, Homeless, Housing, Low beneficiary or prospective program affiliation. and moderate income housing, beneficiary on the basis of religion or (2) Organizations that are directly Nonprofit organizations, Rent subsidies, religious belief. funded under the CDBG program may Reporting and recordkeeping (e) HOME funds may not be used for not engage in inherently religious requirements, Technical assistance. the acquisition, construction, or activities, such as worship, religious ■ For the reasons stated in the preamble, rehabilitation of structures to the extent instruction, or proselytization, as part of HUD amends title 24 of the Code of that those structures are used for the programs or services funded under Federal Regulations as follows: inherently religious activities. HOME this part. If an organization conducts funds may be used for the acquisition, such activities, the activities must be PART 92—HOME INVESTMENT construction, or rehabilitation of offered separately, in time or location, PARTNERSHIPS PROGRAM structures only to the extent that those from the programs or services funded ■ 1. The authority citation for 24 CFR structures are used for conducting under this part, and participation must part 92 continues to read as follows: eligible activities under this part. Where be voluntary for the beneficiaries of the a structure is used for both eligible and HUD-funded programs or services. Authority: 42 U.S.C. 3535(d) and 12701– inherently religious activities, HOME (3) A religious organization that 12839. funds may not exceed the cost of those participates in the CDBG program will ■ 2. Revise § 92.257 to read as follows: portions of the acquisition, retain its independence from Federal, construction, or rehabilitation that are State, and local governments, and may § 92.257 Faith-based activities. attributable to eligible activities in continue to carry out its mission, (a) Organizations that are religious or accordance with the cost accounting including the definition, practice, and faith-based are eligible, on the same requirements applicable to HOME funds expression of its religious beliefs, basis as any other organization, to in this part. Sanctuaries, chapels, or provided that it does not use direct participate in the HOME program. other rooms that a HOME-funded CDBG funds to support any inherently Neither the Federal government nor a religious congregation uses as its religious activities, such as worship, State or local government receiving principal place of worship, however, are religious instruction, or proselytization. funds under HOME programs shall ineligible for HOME-funded Among other things, faith-based discriminate against an organization on improvements. Disposition of real organizations may use space in their the basis of the organization’s religious property after the term of the grant, or facilities to provide CDBG-funded character or affiliation. any change in use of the property during services, without removing religious art, (b) Organizations that are directly the term of the grant, is subject to icons, scriptures, or other religious funded under the HOME program may government-wide regulations governing symbols. In addition, a CDBG-funded not engage in inherently religious real property disposition (see 24 CFR religious organization retains its activities, such as worship, religious parts 84 and 85). authority over its internal governance, instruction, or proselytization, as part of (f) If a state or local government and it may retain religious terms in its the assistance funded under this part. If voluntarily contributes its own funds to organization’s name, select its board an organization conducts such supplement federally funded activities, members on a religious basis, and

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56405

include religious references in its Comp., p. 684; 3 CFR, 1966–1970., p. religious organization retains its organization’s mission statements and 803; 3 CFR, 1978 Comp., p. 230; 3 CFR, authority over its internal governance, other governing documents. 1978 Comp., p. 264 (Equal Employment and it may retain religious terms in its (4) An organization that participates Opportunity), and Executive Order organization’s name, select its board in the CDBG program shall not, in 13279 (Equal Protection of the Laws for members on a religious basis, and providing program assistance, Faith-Based and Community include religious references in its discriminate against a program Organizations), 67 FR 77141, 3 CFR, organization’s mission statements and beneficiary or prospective program 2002 Comp., p. 258; and the other governing documents. beneficiary on the basis of religion or implementing regulations at 41 CFR (4) An organization that participates religious belief. chapter 60; and in the HOPE 3 program shall not, in (5) CDBG funds may not be used for (b) Section 3 of the Housing and providing program assistance, the acquisition, construction, or Urban Development Act of 1968 (12 discriminate against a program rehabilitation of structures to the extent U.S.C. 1701u) and implementing beneficiary or prospective program that those structures are used for regulations at 24 CFR part 135. beneficiary on the basis of religion or inherently religious activities. CDBG religious belief. funds may be used for the acquisition, PART 572—HOPE FOR (5) HOPE 3 funds may not be used for construction, or rehabilitation of HOMEOWNERSHIP OF SINGLE the acquisition, construction, or structures only to the extent that those FAMILY HOMES PROGRAM (HOPE 3) rehabilitation of structures to the extent structures are used for conducting ■ 8. The authority citation for 24 CFR that those structures are used for eligible activities under this part. Where part 572 continues to read as follows: inherently religious activities. HOPE 3 a structure is used for both eligible and funds may be used for the acquisition, inherently religious activities, CDBG Authority: 42 U.S.C. 3535(d) and 12891. construction, or rehabilitation of funds may not exceed the cost of those ■ 9. Revise § 572.405(d) to read as structures only to the extent that those portions of the acquisition, follows: structures are used for conducting construction, or rehabilitation that are eligible activities under this part. Where § 572.405 Nondiscrimination and equal attributable to eligible activities in opportunity requirements. a structure is used for both eligible and accordance with the cost accounting inherently religious activities, HOPE 3 requirements applicable to CDBG funds * * * * * funds may not exceed the cost of those (d) Faith-based activities. (1) in this part. Sanctuaries, chapels, or portions of the acquisition, Organizations that are religious or faith- other rooms that a CDBG-funded construction, or rehabilitation that are based are eligible, on the same basis as religious congregation uses as its attributable to eligible activities in any other organization, to participate in principal place of worship, however, are accordance with the cost accounting the HOPE 3 program. Neither the ineligible for CDBG-funded requirements applicable to HOPE 3 Federal government nor a State or local improvements. Disposition of real funds in this part. Sanctuaries, chapels, government receiving funds under property after the term of the grant, or or other rooms that a HOPE 3-funded HOPE 3 programs shall discriminate any change in use of the property during religious congregation uses as its against an organization on the basis of the term of the grant, is subject to principal place of worship, however, are the organization’s religious character or government-wide regulations governing ineligible for HOPE 3-funded affiliation. improvements. Disposition of real real property disposition (see 24 CFR (2) Organizations that are directly property after the term of the grant, or parts 84 and 85). funded under the HOPE 3 program may (6) If a State or local government any change in use of the property during not engage in inherently religious voluntarily contributes its own funds to the term of the grant, is subject to activities, such as worship, religious supplement federally funded activities, government-wide regulations governing instruction, or proselytization, as part of the State or local government has the real property disposition (see 24 CFR the programs or services funded under option to segregate the Federal funds or parts 84 and 85). this part. If an organization conducts commingle them. However, if the funds (6) If a State or local government such activities, the activities must be are commingled, this section applies to voluntarily contributes its own funds to offered separately, in time or location, all of the commingled funds. supplement federally funded activities, from the programs or services funded the State or local government has the under this part, and participation must § 570.503 [Amended] option to segregate the Federal funds or be voluntary for the beneficiaries of the ■ 6. Amend § 570.503 as follows: commingle them. However, if the funds ■ HUD-funded programs or services. a. Remove paragraph (b)(6); are commingled, this section applies to ■ (3) A religious organization that b. Redesignate paragraphs (b)(7) and all of the commingled funds. (b)(8) as paragraphs (b)(6) and (b)(7), participates in the HOPE 3 program will respectively; and retain its independence from Federal, PART 574—HOUSING ■ c. In newly designated paragraph State, and local governments, and may OPPORTUNITIES FOR PERSONS WITH (b)(7)(ii), replace all references to continue to carry out its mission, AIDS ‘‘paragraph (b)(8)(i) of this section’’ with including the definition, practice, and ‘‘paragraph (b)(7)(i) of this section.’’ expression of its religious beliefs, ■ 10. The authority citation for 24 CFR ■ 7. Revise § 570.607 to read as follows: provided that it does not use direct part 574 continues to read as follows: HOPE 3 funds to support any inherently Authority: 42 U.S.C. 3535(d) and 12901– § 570.607 Employment and contracting religious activities, such as worship, 12912. opportunities. religious instruction, or proselytization. ■ 11. Revise § 574.300(c) to read as To the extent that they are otherwise Among other things, faith-based follows: applicable, grantees shall comply with: organizations may use space in their (a) Executive Order 11246, as facilities to provide HOPE 3-funded § 574.300 Eligible activities. amended by Executive Orders 11375, services, without removing religious art, * * * * * 11478, 12086, and 12107 (3 CFR 1964– icons, scriptures, or other religious (c) Faith-based activities. (1) 1965 Comp. p. 339; 3 CFR, 1966–1970 symbols. In addition, a HOPE 3-funded Organizations that are religious or faith-

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56406 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

based are eligible, on the same basis as attributable to eligible activities in does not use direct Emergency Shelter any other organization, to participate in accordance with the cost accounting Grants funds to support any inherently the HOPWA program. Neither the requirements applicable to HOPWA religious activities, such as worship, Federal government nor a State or local funds in this part. Sanctuaries, chapels, religious instruction, or proselytization. government receiving funds under or other rooms that a HOPWA-funded Among other things, faith-based HOPWA programs shall discriminate religious congregation uses as its organizations may use space in their against an organization on the basis of principal place of worship, however, are facilities to provide Emergency Shelter the organization’s religious character or ineligible for HOPWA-funded Grants-funded services, without affiliation. improvements. Disposition of real removing religious art, icons, scriptures, (2) Organizations that are directly property after the term of the grant, or or other religious symbols. In addition, funded under the HOPWA program may any change in use of the property during an Emergency Shelter Grants-funded not engage in inherently religious the term of the grant, is subject to religious organization retains its activities, such as worship, religious government-wide regulations governing authority over its internal governance, instruction, or proselytization, as part of real property disposition (see 24 CFR and it may retain religious terms in its the programs or services funded under parts 84 and 85). organization’s name, select its board this part. If an organization conducts (6) If a State or local government members on a religious basis, and such activities, the activities must be voluntarily contributes its own funds to include religious references in its offered separately, in time or location, supplement federally funded activities, organization’s mission statements and from the programs or services funded the State or local government has the other governing documents. under this part, and participation must option to segregate the Federal funds or (d) An organization that participates be voluntary for the beneficiaries of the commingle them. However, if the funds in the Emergency Shelter Grants HUD-funded programs or services. are commingled, this section applies to program shall not, in providing program (3) An organization that participates all of the commingled funds. in the HOPWA program will retain its assistance, discriminate against a independence from Federal, State, and PART 576—EMERGENCY SHELTER program beneficiary or prospective local governments, and may continue to GRANTS PROGRAM: STEWART B. program beneficiary on the basis of carry out its mission, including the McKINNEY HOMELESS ASSISTANCE religion or religious belief. definition, practice, and expression of ACT (e) Emergency shelter grants may not its religious beliefs, provided that it be used for the rehabilitation of ■ 12. The authority citation for 24 CFR does not use direct HOPWA funds to structures to the extent that those part 576 continues to read as follows: support any inherently religious structures are used for inherently activities, such as worship, religious Authority: 42 U.S.C. 3535(d) and 11376. religious activities. Emergency shelter instruction, or proselytization. Among ■ 13. Revise § 576.23 to read as follows: grants may be used for the rehabilitation other things, faith-based organizations of structures only to the extent that may use space in their facilities to § 576.23 Faith-based activities. those structures are used for conducting provide HOPWA-funded services, (a) Organizations that are religious or eligible activities under this part. Where without removing religious art, icons, faith-based are eligible, on the same a structure is used for both eligible and scriptures, or other religious symbols. In basis as any other organization, to inherently religious activities, addition, a HOPWA-funded religious participate in the Emergency Shelter emergency shelter grants may not organization retains its authority over its Grants program. Neither the Federal exceed the cost of those portions of the internal governance, and it may retain government nor a State or local rehabilitation that are attributable to religious terms in its organization’s government receiving funds under eligible activities in accordance with the name, select its board members on a Emergency Shelter Grants programs cost accounting requirements applicable religious basis, and include religious shall discriminate against an to emergency shelter grants in this part. references in its organization’s mission organization on the basis of the Sanctuaries, chapels, or other rooms statements and other governing organization’s religious character or that an Emergency Shelter Grants- documents. affiliation. funded religious congregation uses as its (4) An organization that participates (b) Organizations that are directly principal place of worship, however, are in the HOPWA program shall not, in funded under the Emergency Shelter ineligible for Emergency Shelter Grants- providing program assistance, Grants program may not engage in funded improvements. Disposition of discriminate against a program inherently religious activities, such as real property after the term of the grant, beneficiary or prospective program worship, religious instruction, or or any change in use of the property beneficiary on the basis of religion or proselytization as part of the programs during the term of the grant, is subject religious belief. or services funded under this part. If an to government-wide regulations (5) HOPWA funds may not be used for organization conducts such activities, governing real property disposition (see the acquisition, construction, or the activities must be offered separately, 24 CFR parts 84 and 85). rehabilitation of structures to the extent in time or location, from the programs (f) If a State or local government that those structures are used for or services funded under this part, and voluntarily contributes its own funds to inherently religious activities. HOPWA participation must be voluntary for the supplement federally funded activities, funds may be used for the acquisition, beneficiaries of the HUD-funded the State or local government has the construction, or rehabilitation of programs or services. option to segregate the Federal funds or structures only to the extent that those (c) A religious organization that commingle them. However, if the funds structures are used for conducting participates in the Emergency Shelter are commingled, this section applies to eligible activities under this part. Where Grants program will retain its all of the commingled funds. a structure is used for both eligible and independence from Federal, State, and inherently religious activities, HOPWA local governments, and may continue to PART 582—SHELTER PLUS CARE funds may not exceed the cost of those carry out its mission, including the portions of the acquisition, definition, practice, and expression of ■ 14. The authority citation for 24 CFR construction, or rehabilitation that are its religious beliefs, provided that it part 582 continues to read as follows:

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations 56407

Authority: 42 U.S.C. 3535(d) and 11403– are commingled, this section applies to (4) An organization that participates 11470b. all of the commingled funds. in the Supportive Housing Program ■ 15. Revise § 582.115(c) to read as * * * * * shall not, in providing program follows: assistance, discriminate against a program beneficiary or prospective § 582.115 Limitations on assistance. PART 583—SUPPORTIVE HOUSING PROGRAM program beneficiary on the basis of * * * * * religion or religious belief. (c) Faith-based activities. (1) ■ 16. The authority citation for 24 CFR (5) Program funds may not be used for Organizations that are religious or faith- part 583 continues to read as follows: the acquisition, construction, or based are eligible, on the same basis as Authority: 42 U.S.C. 11389 and 3535(d). rehabilitation of structures to the extent any other organization, to participate in ■ 17. Revise § 583.150(b) to read as that those structures are used for the S+C program. Neither the Federal follows: inherently religious activities. Program government nor a State or local funds may be used for the acquisition, government receiving funds under S+C § 583.150 Limitations on use of construction, or rehabilitation of programs shall discriminate against an assistance. structures only to the extent that those organization on the basis of the * * * * * structures are used for conducting organization’s religious character or (b) Faith-based activities. (1) eligible activities under this part. Where affiliation. Organizations that are religious or faith- a structure is used for both eligible and (2) Organizations that are directly based are eligible, on the same basis as inherently religious activities, program funded under the S+C program may not any other organization, to participate in funds may not exceed the cost of those engage in inherently religious activities, the Supportive Housing Program. portions of the acquisition, such as worship, religious instruction, Neither the Federal government nor a construction, or rehabilitation that are or proselytization as part of the State or local government receiving attributable to eligible activities in programs or services funded under this funds under Supportive Housing accordance with the cost accounting part. If an organization conducts such programs shall discriminate against an requirements applicable to Supportive activities, the activities must be offered organization on the basis of the Housing Program funds in this part. separately, in time or location, from the organization’s religious character or Sanctuaries, chapels, or other rooms programs or services funded under this affiliation. that a Supportive Housing Program- part, and participation must be (2) Organizations that are directly funded religious congregation uses as its voluntary for the beneficiaries of the funded under the Supportive Housing principal place of worship, however, are HUD-funded programs or services. Program may not engage in inherently ineligible for Supportive Housing (3) A religious organization that religious activities, such as worship, Program-funded improvements. participates in the S+C program will religious instruction, or proselytization Disposition of real property after the retain its independence from Federal, as part of the programs or services term of the grant, or any change in use State, and local governments, and may funded under this part. If an of the property during the term of the continue to carry out its mission, organization conducts such activities, grant, is subject to government-wide including the definition, practice and the activities must be offered separately, regulations governing real property expression of its religious beliefs, in time or location, from the programs disposition (see 24 CFR parts 84 and provided that it does not use direct S+C or services funded under this part, and 85). funds to support any inherently participation must be voluntary for the (6) If a State or local government religious activities, such as worship, beneficiaries of the HUD-funded voluntarily contributes its own funds to religious instruction, or proselytization. programs or services. supplement federally funded activities, (3) A religious organization that Among other things, faith-based the State or local government has the participates in the Supportive Housing organizations may use space in their option to segregate the Federal funds or Program will retain its independence facilities to provide S+C-funded commingle them. However, if the funds from Federal, State, and local services, without removing religious art, are commingled, this section applies to governments, and may continue to carry icons, scriptures, or other religious all of the commingled funds. symbols. In addition, an S+C-funded out its mission, including the definition, religious organization retains its practice, and expression of its religious PART 585—YOUTHBUILD PROGRAM authority over its internal governance, beliefs, provided that it does not use ■ and it may retain religious terms in its direct Supportive Housing Program 18. The authority citation for 24 CFR organization’s name, select its board funds to support any inherently part 585 continues to read as follows: members on a religious basis, and religious activities, such as worship, Authority: 42 U.S.C. 3535(d) and 8011. include religious references in its religious instruction, or proselytization. ■ 19. Revise § 585.406 to read as follows: organization’s mission statements and Among other things, faith-based other governing documents. organizations may use space in their § 585.406 Faith-based activities. (4) An organization that participates facilities to provide Supportive Housing (a) Organizations that are religious or in the S+C program shall not, in Program-funded services, without faith-based are eligible, on the same providing program assistance, removing religious art, icons, scriptures, basis as any other organization, to discriminate against a program or other religious symbols. In addition, participate in the Youthbuild program. beneficiary or prospective program a Supportive Housing Program-funded Neither the Federal government nor a beneficiary on the basis of religion or religious organization retains its State or local government receiving religious belief. authority over its internal governance, funds under Youthbuild programs shall (5) If a State or local government and it may retain religious terms in its discriminate against an organization on voluntarily contributes its own funds to organization’s name, select its board the basis of the organization’s religious supplement federally funded activities, members on a religious basis, and character or affiliation. the State or local government has the include religious references in its (b) Organizations that are directly option to segregate the Federal funds or organization’s mission statements and funded under the Youthbuild program commingle them. However, if the funds other governing documents. may not engage in inherently religious

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3 56408 Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / Rules and Regulations

activities, such as worship, religious governance, and it may retain religious cost accounting requirements applicable instruction, or proselytization, as part of terms in its organization’s name, select to Youthbuild funds in this part. the programs or services funded under its board members on a religious basis, Sanctuaries, chapels, or other rooms this part. If an organization conducts and include religious references in its that a Youthbuild-funded religious such activities, the activities must be organization’s mission statements and congregation uses as its principal place offered separately, in time or location, other governing documents. of worship, however, are ineligible for from the programs or services funded (d) An organization that participates Youthbuild-funded improvements. under this part, and participation must in the Youthbuild program shall not, in Disposition of real property after the providing program assistance, be voluntary for the beneficiaries of the term of the grant, or any change in use HUD-funded programs or services. discriminate against a program of the property during the term of the (c) A religious organization that beneficiary or prospective program participates in the Youthbuild Program beneficiary on the basis of religion or grant, is subject to government-wide will retain its independence from religious belief. regulations governing real property Federal, State, and local governments, (e) Youthbuild funds may not be used disposition (see 24 CFR parts 84 and and may continue to carry out its for the acquisition, construction, or 85). mission, including the definition, rehabilitation of structures to the extent (f) If a State or local government practice, and expression of its religious that those structures are used for voluntarily contributes its own funds to beliefs, provided that it does not use inherently religious activities. supplement federally funded activities, direct Youthbuild Program funds to Youthbuild funds may be used for the the State or local government has the support any inherently religious acquisition, construction, or option to segregate the Federal funds or activities, such as worship, religious rehabilitation of structures only to the commingle them. However, if the funds instruction, or proselytization. Among extent that those structures are used for are commingled, this section applies to conducting eligible activities under this other things, faith-based organizations all of the commingled funds. may use space in their facilities to part. Where a structure is used for both provide Youthbuild Program-funded eligible and inherently religious Dated: September 22, 2003. services, without removing religious art, activities, Youthbuild funds may not Mel Martinez, icons, scriptures, or other religious exceed the cost of those portions of the Secretary. symbols. In addition, a Youthbuild acquisition, construction, or [FR Doc. 03–24326 Filed 9–29–03; 8:45 am] Program-funded religious organization rehabilitation that are attributable to BILLING CODE 4210–32–P retains its authority over its internal eligible activities in accordance with the

VerDate jul<14>2003 19:12 Sep 29, 2003 Jkt 200001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\30SER3.SGM 30SER3