Federal Register Vol. 80, No.75,

Please refer to Docket ID NRC-2015-0095 when contacting the NRC about the availability of information regarding this document. You may obtain publically-available information related to this document by any of the following methods:

• Federal Rulemaking Web site: Go to http://www.regulations.gov and search for Docket ID NRC-2015-0095.

• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at http://www.nrc.gov/reading-rm/adams.html. To begin the search, select “ADAMS Public Documents” and then select “Begin Web-based ADAMS Search.” For problems with ADAMS, please contact the NRC's Public Document Room (PDR) reference staff at 1-800-397-4209, 301-415-4737, or by email to [email protected]. The ADAMS accession number for each document referenced (if it available in ADAMS) is provided the first time that a document is referenced. The DG is electronically available in ADAMS under Accession No. ML15023A025.

• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.

Please include Docket ID NRC-2015-0095 in the subject line of your comment submission, in order to ensure that the NRC is able to make your comment submission available to the public in this docket.

The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC posts all comment submissions at http://www.regulations.gov as well as entering the comment submissions into ADAMS. The NRC does not routinely edit comment submissions to remove identifying or contact information.

If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment submissions into ADAMS.

The NRC is issuing for public comment a DG in the NRC's “Regulatory Guide” series. This series was developed to describe and make available to the public information regarding methods that are acceptable to the NRC staff for implementing specific parts of the NRC's regulations, techniques that the staff uses in evaluating specific problems or postulated accidents, and data that the staff needs in its review of applications for permits and licenses.

The DG, entitled, “Alternate Risk-Informed Approach for Addressing the Effects of Debris On Post-Accident Long-Term Core Cooling,” is a proposed new guide temporarily identified by its task number, DG-1322. This DG-1322 proposes new guidance that describes methods and procedures that the staff considers acceptable for complying with a voluntary, risk-informed alternative in a proposed revision of the NRC's regulation governing the design of ECCS, section 50.46c of Title 10 of the Code of Federal Regulations (10 CFR), “Emergency core cooling system performance during loss-of-coolant accidents (LOCA),” with respect to the effects of debris during long-term cooling.

The voluntary alternative was included in the proposed 10 CFR 50.46c rule at the direction of the Commission in the Staff Requirements Memorandum (SRM) regarding SECY-12-0093 “Closure Options for Generic Safety Issue—191, Assessment of Debris Accumulation on Pressurized-Water Reactor Sump Performance,” and in the SRM regarding SECY-12-0034 “Proposed Rulemaking—10 CFR 50.46c: Emergency Core Cooling System Performance During Loss-of-Coolant Accidents (RIN 3150-AH42).” This guide is intended to provide a consistent approach for licensees to use when performing a risk assessment of the complex phenomena associated with debris generation and transport, and the resulting effect on long-term core cooling.

This DG, if finalized, would not constitute backfitting as defined in § 50.109 (the Backfit Rule), and would not be otherwise inconsistent with the issue finality provisions in 10 CFR part 52, “Licenses, Certifications and Approvals for Nuclear Power Plants.” The NRC published a proposed revision of 10 CFR 50.46c on March 24, 2014 (79 FR 16106). The proposed rule includes the option of allowing an applicant or licensee to address the effects of debris on longterm cooling with respect to ECCS performance requirements in § 50.46c and GDC-35 using a risk-informed approach. The proposed rule would also allow applicants and licensees who select the option to use the same approach in demonstrating compliance with GDC-38 and GDC-41. This DG provides guidance on one possible means for implementing that option. The proposed guidance does not exceed the scope of the proposed rule. Therefore, the backfitting and issue finality discussion for the proposed rule applies to this DG, and further consideration and discussion of backfitting and issue finality for the DG is not necessary.

The Equal Employment Opportunity Commission (“EEOC” or “Commission”) is issuing a proposed rule that would amend the regulations and interpretive guidance implementing Title I of the Americans with Disabilities Act (ADA) as they relate to employer wellness programs. Congress enacted the ADA in 1990 to prohibit discrimination against individuals with disabilities. The EEOC issued implementing regulations in 1991 to provide additional guidance on the law's requirements and prohibited practices with respect to employment.1 This proposed rule provides guidance on the extent to which the ADA permits employers to offer incentives to employees to promote participation in wellness programs that are employee health programs.2 It does not apply to similar types of programs that may be provided by entities other than those subject to Title I of the ADA, such as social service agencies covered under Title II of the ADA, 42 U.S.C. 12131 et seq., or places of public accommodation subject to Title III of the ADA, 42 U.S.C. 12181 et seq., who may provide similar programs to individuals who are considered volunteers.3

A wellness program may be part of a group health plan or may be offered outside of a group health plan.4 The references in the proposed rule regarding the requirement to provide a notice and the use of incentives, and changes to the corresponding section of the interpretive guidance, apply only to wellness programs that are part of or provided by a group health plan or by a health insurance issuer offering group health insurance in connection with a group health plan.5 The term “group health plan” includes both insured and self-insured group health plans and is used interchangeably with the term “health plan” throughout the preamble. All of the other proposed changes to the regulations apply to all “health programs,” which include wellness programs whether or not they are offered as part of or outside of a group health plan or group health insurance coverage. The term “incentives” includes both financial and in-kind incentives, such as time-off awards, prizes, or other items of value.

As a means of attempting to improve employees' health and reduce health care costs, many employers that provide health coverage also offer employee health programs and activities to promote healthier lifestyles or prevent disease.6 Commonly referred to as workplace wellness programs, these programs may include, for example: nutrition classes, onsite exercise facilities, weight loss and smoking cessation programs, and/or coaching to help employees meet health goals. Wellness programs also may incorporate health risk assessments and biometric screenings that measure an employee's health risk factors, such as body weight and cholesterol, blood glucose, and blood pressure levels.7 Some employers offer incentives to encourage employees simply to participate in a wellness program, while others offer incentives based on whether employees achieve certain health outcomes.8 Incentives can be framed as rewards or penalties and often take the form of prizes, cash, or a reduction or increase in health care premiums or cost sharing. Of the employers who offer incentives to complete wellness programs, the majority use incentives totaling less than $500 per year.9

Employee health programs offered by employers must comply with laws enforced by the EEOC, including Title I of the Americans with Disabilities Act (ADA) which restricts the medical information employers may obtain from applicants and employees and makes it illegal to discriminate against individuals based on disability.10 They also must comply with other laws EEOC enforces that prohibit discrimination based on race, color, sex (including pregnancy), national origin, religion, compensation, age, or genetic information.11 Additionally, wellness programs that are part of group health plans must comply with the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Patient Protection and Affordable Care Act (“Affordable Care Act”)12 —set forth in regulations jointly issued by the Department of Labor (DOL), Department of the Treasury, and Department of Health and Human Services (HHS)—that generally prohibit discrimination in group health plans based on any health factor.13

The laws relevant to this proposed rule are discussed below.

HIPAA's nondiscrimination provisions, as amended by the Affordable Care Act, generally prohibit group health plans and health insurance issuers offering group health insurance in connection with a group health plan from discriminating against participants and beneficiaries in premiums, benefits, or eligibility based on a health factor.14 An exception to the general rule allows premium discounts or rebates or modification to otherwise applicable cost sharing (including copayments, deductibles, or coinsurance) in return for adherence to certain programs of health promotion and disease prevention.15

HIPAA's nondiscrimination provisions, as amended by the Affordable Care Act, and the 2013 final regulations issued by the Departments of Labor, Treasury, and HHS, discuss two types of wellness programs: Participatory and health-contingent. Participatory wellness programs either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard related to a health factor. Examples in the final regulations include: A program that reimburses employees for all or part of the cost for membership in a fitness center; a program that reimburses employees for the costs of participating, or that otherwise provides a reward for participating, in a smoking cessation program without regard to whether the employee quits smoking; and a program that provides a reward to employees who complete a health risk assessment (HRA) regarding current health status, without any further action (educational or otherwise) required by the employee with regard to the health issues identified as part of the assessment. The 2013 final regulations state that participatory wellness programs are permissible under the HIPAA nondiscrimination requirements provided they are made available to all similarly situated individuals.

Health-contingent wellness programs, which may be either activity-only or outcome-based, require individuals to satisfy a standard related to a health factor to obtain a reward (or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward). Activity-only programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, but do not require an individual to attain or maintain a specific health outcome. Outcome-based programs require individuals to attain or maintain a specific health outcome (such as not smoking or attaining certain results on biometric screenings) in order to obtain a reward.

There are five requirements for health-contingent wellness programs under the Public Health Service (PHS) Act section 2705 and the 2013 final regulations.16 First, all individuals eligible for a health-contingent wellness program must be given the opportunity to qualify for the reward at least once per year. Second, the total reward offered to an individual under all health-contingent wellness programs with respect to a plan cannot exceed 30 percent of the total cost of employee-only coverage under the plan, including both employee and employer contributions towards the cost of coverage (or 50 percent to the extent that the additional percentage is attributed to tobacco prevention or reduction). Third, health-contingent wellness programs must be reasonably designed to promote health or prevent disease. Fourth, the full reward under a health-contingent wellness program must be available to all similarly situated individuals. For this purpose, an activity-only program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom, for that period, it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard, and for any individual for whom, for that period, it is medically inadvisable to attempt to satisfy the otherwise applicable standard. An outcome-based program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward to any individual who does not meet the initial standard based on a measurement, test, or screening. Fifth, plans and issuers must disclose the availability of a reasonable alternative standard to qualify for the reward in all plan materials describing the terms of a health-contingent wellness program and in any disclosure that an individual did not satisfy an initial outcome-based standard.

The 2013 final regulations recognize that compliance with HIPAA nondiscrimination rules (as amended by the Affordable Care Act), including the wellness program requirements, is not determinative of compliance with any other provision of any other state or federal law, including, but not limited to, the ADA, Title VII of the Civil Rights Act of 1964 (Title VII), and the Genetic Information Nondiscrimination Act (GINA).17

Title I of the ADA prohibits discrimination against individuals on the basis of disability “in regard to . . . employment compensation . . . and other terms, conditions, and privileges of employment,” including “fringe benefits available by virtue of employment, whether or not administered by the covered entity.” 18 The ADA also requires employers to provide reasonable accommodations (modifications or adjustments) to enable individuals with disabilities to have equal access to the fringe benefits offered to individuals without disabilities.19 Additionally, the ADA restricts employers from obtaining medical information from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations.20 The statute, however, provides an exception to this rule by stating that “[a] covered entity may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site.” 21 Employee health programs include workplace wellness programs. In previous guidance on disability-related inquiries and medical examinations under the ADA, EEOC stated that: “A wellness program is `voluntary' as long as an employer neither requires participation nor penalizes employees who do not participate.” 22 However, neither the statute nor EEOC's regulations address the extent to which incentives might affect the voluntary nature of a wellness program.

The Commission's interpretation of the term “voluntary” in the ADA's disability-related inquiries and medical examinations provision is central to the interaction between the ADA and HIPAA's wellness program provisions, as amended by the Affordable Care Act. A plausible reading of “voluntary” in isolation is that covered entities can only offer de minimis rewards or penalties to employees for their participation (or nonparticipation) in wellness programs that include disability-related inquiries and medical examinations. That reading, however, would make many wellness program incentives tied to the disclosure of health information or the completion of medical examinations expressly permitted by HIPAA impermissible under the ADA. Although it is clear that compliance with the standards in HIPAA is not determinative of compliance with the ADA,23 the Commission believes that it has a responsibility to interpret the ADA in a manner that reflects both the ADA's goal of limiting employer access to medical information and HIPAA's and the Affordable Care Act's provisions promoting wellness programs.

Accordingly, the Commission concludes that allowing certain incentives related to wellness programs, while limiting them to prevent economic coercion that could render provision of medical information involuntary, is the best way to effectuate the purposes of the wellness program provisions of both laws.24 One purpose of the ADA's provision applicable to employee health programs is to allow such programs access to medical information where employees voluntarily provide that information.25 One purpose of HIPAA's nondiscrimination provisions governing wellness programs is to ensure that wellness programs do not offer incentives so large as to have the effect of denying coverage or creating too heavy a financial penalty for individuals who do not meet certain health standards.26 HIPAA's nondiscrimination provisions governing wellness programs, however, do not include provisions like those in the ADA that limit the kinds of medical information employers may ask employees to provide through disability-related inquiries or medical examinations.

The proposed rule explains what an employee health program is, what it means for an employee health program to be voluntary, what incentives employers may offer as part of a voluntary employee health program, and what requirements apply concerning notice and confidentiality of medical information obtained as part of voluntary employee health programs. In addition, the proposed rule explains that compliance with rules concerning voluntary employee health programs does not ensure compliance with all the antidiscrimination laws EEOC enforces.

The proposed rule clarifies that an employer may offer limited incentives up to a maximum of 30 percent of the total cost of employee-only coverage, whether in the form of a reward or penalty, to promote an employee's participation in a wellness program that includes disability-related inquiries or medical examinations as long as participation is voluntary. As noted below, EEOC seeks comment on whether additional protections for low-income employees are needed. Voluntary means that a covered entity: (1) Does not require employees to participate; (2) does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation or limit the extent of such coverage (except pursuant to allowed incentives); and (3) does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of Section 503 of the ADA, at 42 U.S.C. 12203.

Further, to ensure that participation in a wellness program that includes disability-related inquiries and/or medical examinations, and that is part of a group health plan, is truly voluntary, an employer must provide a notice that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure, and the methods the covered entity will employ to prevent improper disclosure of the medical information. Finally, the proposed rule allows the disclosure of medical information obtained by wellness programs to employers only in aggregate form, except as needed to administer the health plan. The proposed rule does not implicate disability-related inquiries or medical examinations outside the context of a voluntary wellness program.

The proposed rule re-asserts the Commission's position, based on the language of the ADA, that employee health programs that include disability-related inquiries or medical examinations (including inquiries or medical examinations that are part of a HRA or medical history) must be voluntary and clarifies the application of that rule in light of the amendments made to HIPAA by the Affordable Care Act.

Proposed section 1630.14(d)(1) says that an employee health program, including any disability-related inquiries and medical examinations that are part of such a program, must be reasonably designed to promote health or prevent disease. This standard is similar to the standard under the tri-agency regulations applicable to health-contingent wellness programs.27 In order to meet the standard, the program must have a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease. The interpretive guidance offers examples of programs that would and would not meet this standard.

Section 1630.14(d)(2)(i)-(iii) explains that, for a program to be considered voluntary, a covered entity may not require an employee to participate in such a program and may not deny coverage under any of its group health plans or particular benefits packages within a group health plan, generally may not limit the extent of such coverage, and may not take any other adverse action against employees who refuse to participate in an employee health program or fail to achieve certain health outcomes. Additionally, an employer may not retaliate against, interfere with, coerce, intimidate, or threaten employees in violation of Section 503 of the ADA, at 42 U.S.C. 12203 (e.g., by coercing an employee to participate in an employee health program or threatening to discipline an employee who does not participate).

Section 1630.14(d)(2)(iv) says that for an employee's participation in a wellness program that is part of a group health plan to be deemed voluntary, a covered entity must provide a notice clearly explaining what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure of medical information.

Section 1630.14(d)(3) clarifies that the offer of limited incentives to participate in wellness programs that are part of a group health plan and that include disability-related inquiries and/or medical examinations, will not render the program involuntary. However, the total allowable incentive available under all programs (both participatory programs and health-contingent programs) may not exceed 30 percent of the total cost of employee-only coverage, which generally is the maximum allowable incentive available under HIPAA and the Affordable Care Act for health-contingent wellness programs.28

The EEOC proposes to extend the 30 percent limit set under HIPAA and the Affordable Care Act to include participatory wellness programs that ask an employee to respond to a disability-related inquiry or undergo a medical examination. HIPAA and Affordable Care Act wellness program provisions are limited to regulating what constitutes discrimination based on a health factor. As long as an incentive for a participatory wellness program is available to all similarly situated employees, regardless of any health factor, the incentive will not violate HIPAA and the Affordable Care Act. By contrast, the ADA rules concerning disability-related inquiries and medical examinations of employees limit the circumstances under which employers may obtain medical information from employees and the type of information that may be sought. For this reason, EEOC has determined that placing limits on the rewards employers may offer for employee participation (or penalties for non-participation) where participation requires employees to answer disability-related inquiries or take medical examinations promotes the ADA's interest in ensuring that incentive limits are not so high as to make participation in the program involuntary. At the same time, these limits comport with HIPAA and the Affordable Care Act wellness program provisions.

The EEOC has not changed any of the exceptions to confidentiality set out in section 1630.14(d). The Commission, however, proposes to add a new subsection, 1630.14(d)(6), concerning the confidentiality and use of medical information gathered in the course of providing voluntary health services to employees, including information collected as part of an employee's participation in an employee health program. This subsection states that medical information collected through an employee health program only may be provided to a covered entity under the ADA in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of specific individuals, except as needed to administer the health plan and except as permitted under 1630.14(d)(4). The interpretive guidance explains that both employers that sponsor wellness programs and administrators of wellness programs acting as agents of employers have obligations to ensure compliance with this provision.

Further, the interpretive guidance explains that where a wellness program is part of a group health plan, the individually identifiable health information collected from or created about participants as part of the wellness program is protected health information under the HIPAA Privacy, Security, and Breach Notification Rules. See 45 CFR part 160 and Part 164. The HIPAA Privacy, Security, and Breach Notification Rules apply to HIPAA covered entities, which include group health plans, and generally protect the individually identifiable health information maintained by or on behalf of such entities. Accordingly, the interpretative guidance provides that where a wellness program is part of a group health plan and required to comply with HIPAA, its obligation to comply with section 1630.14(d)(6) generally may be satisfied by adhering to the HIPAA Privacy Rule. Thus, when an employer that is a health plan sponsor performing plan administration receives individually identifiable health information from or on behalf of the group health plan, as permitted by HIPAA, it generally satisfies its requirement to comply with section 1630.14(d)(6) by certifying to the group health plan, as provided by 45 CFR 164.504(f)(2)(ii), that it will not use or disclose the information for purposes not permitted by its group health plan documents and the HIPAA Privacy Rule and abiding by that certification. If an employer is not performing plan administration on behalf of the group health plan, then the aggregate information that the employer may receive from the wellness program under section 1630.14(d)(6) must be de-identified in accordance with the HIPAA Privacy Rule. Further, other disclosures of protected health information from the wellness program may only be made in accordance with the Privacy Rule. Thus, certain disclosures that are otherwise permitted under 1630.14(d)(4) for employee health programs generally may not be permissible under the Privacy Rule for wellness programs that are part of a group health plan without the written authorization of the individual.

Section 1630.14(d)(7) clarifies that compliance with paragraph (d) of this section, including the proposed limit on incentives under the ADA, does not relieve a covered entity of its obligation to comply with other employment nondiscrimination laws. Thus, for example, as the interpretive guidance accompanying the proposed rule explains, even if an employer's wellness program complies with the incentive limits set forth in the ADA regulations, the employer would violate Title VII or the Age Discrimination in Employment Act (ADEA) if that program discriminates on the basis of race, sex, national origin, or age, or any other grounds prohibited by those statutes.

Employee health programs that do not include disability-related inquiries or medical examinations, such as those that provide employees with general health information and education programs are not subject to the incentive rules discussed here. Like other benefit programs offered by covered entities, however, these programs must not discriminate against employees with disabilities. This nondiscrimination requirement includes providing reasonable accommodations that enable employees with disabilities to fully participate in employee health programs and earn any reward or avoid any penalty offered as part of those programs.29

This revision will require renumbering 29 CFR 1630.14(d).

The Commission invites written comments from members of the public on any issues related to this proposed rule, including general comments about wellness programs or about particular practices that might violate the ADA or other laws enforced by the EEOC. In addition, the Commission specifically requests comments on several issues:

(1) Whether the way in which the Commission reconciles the ADA's “voluntary” requirement with the wellness program provisions in the Affordable Care Act is appropriate given the intent behind both provisions. Specifically, the Commission seeks comment on:

(a) Whether to be “voluntary” under the ADA, entities that offer incentives to encourage employees to disclose medical information must also offer similar incentives to persons who choose not to disclose such information, but who instead provide certification from a medical professional stating that the employee is under the care of a physician and that any medical risks identified by that physician are under active treatment.

(b) Whether to be considered “voluntary” under the ADA, the incentives provided in a wellness program that asks employees to respond to disability-related inquiries and/or undergo medical examinations may not be so large as to render health insurance coverage unaffordable under the Affordable Care Act and therefore in effect coercive for an employee. Specifically, the Commission seeks input on whether it would be appropriate for the Commission to provide that the incentives employers offer to employees to promote participation in wellness programs must not render the cost of health insurance unaffordable to employees within the meaning of 26 U.S.C. 36B (c)(2)(C) as implemented by 26 CFR 54.4980H-5(e). Generally, the cost of health insurance is affordable within the meaning of 26 U.S.C. 36B(c)(2)(C) if the portion an employee would have to pay for employee-only coverage would not exceed a specified percent of household income (9.56 percent in 2015). Where such incentives would render a plan unaffordable for an individual, it would be deemed coercive and involuntary to require that individual to answer disability-related inquiries and/or submit to medical examinations connected with the wellness program at issue.

(c) Whether there are any methods other than those mentioned in the proposed regulation and the questions above by which the Commission can effectuate the intent of both the “voluntary” requirement in the ADA and the provisions in the Affordable Care Act intended to encourage workplace health promotion and disease prevention.

(2) Should the proposed notice requirements of this rule, at section 1630.14(d)(2)(iv), also include a requirement that employees participating in wellness programs that include disability-related inquiries and/or medical examinations, and that are part of a group health plan, provide prior, written, and knowing confirmation that their participation is voluntary? If so, what form should such an authorization take? Are principles of informed consent in the medical context helpful in fashioning an appropriate authorization? Are there existing forms that could provide adequate protections, such as forms developed under HIPAA, forms employers already use in connection with wellness programs, or forms employers use to comply with Title II of GINA? What costs would be associated with developing an appropriate authorization form and/or collecting and maintaining authorization forms for employees who decide to participate in wellness programs?

(3) Should the proposed notice requirement apply only to wellness programs that offer more than de minimis rewards or penalties to employees who participate (or decline to participate) in wellness programs that ask them to respond to disability-related inquiries and/or undergo medical examinations? If so, how should the Commission define “de minimis”?

(4) Which best practices ensure that wellness programs are designed to promote health and do not operate to shift costs to employees with health impairments or stigmatized conditions?

(5) Whether employers offer (or are likely to offer in the future) wellness programs outside of a group health plan or group health insurance coverage that use incentives to promote participation in such programs or to encourage employees to achieve certain health outcomes and the extent to which the ADA regulations should limit incentives provided as part of such programs.

(6) What will be the practical effect of adopting the specific incentive limit set forth in the proposed rule (rather than expressly referencing and incorporating the wellness-program incentive limits as they are defined by the Secretaries of Labor, Treasury, and Health and Human Services pursuant to the Affordable Care Act)? Specifically, what, if any, will be the impact of the proposed rule's 30-percent limit on incentives offered with respect to wellness programs intended to prevent or reduce tobacco use where such programs ask employees to respond to disability-related inquiries and/or undergo medical examinations?

Pursuant to Executive Order 12866, EEOC has coordinated this proposed rule with the Office of Management and Budget. Under section 3(f)(1) of Executive Order 12866, EEOC has determined that the proposed regulation will not have an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal governments or communities.

Although a detailed cost-benefit analysis of the proposed regulation is not required, the Commission recognizes that providing some information on potential costs and benefits of the rule may be helpful in assisting members of the public in better understanding the potential impact of the proposed rule. The Commission notes that the rule will significantly aid compliance with the ADA and with HIPAA, as amended by the Affordable Care Act, by employers and group health plans that offer wellness programs. Currently, employers face uncertainty as to whether providing incentives permitted by HIPAA will subject them to liability under the ADA. This rule will clarify that the ADA does permit employers to offer incentives to promote participation in wellness programs that include disability-related inquiries and/or medical examinations. We believe that a potential benefit of this rule is that it will enable employers to adopt wellness programs that include incentives with certainty about their obligations under the ADA. The Commission does not believe the costs associated with the rule are significant. Employers covered by the ADA are already required to comply with wellness program incentive limits for health-contingent wellness programs. EEOC's proposed rule differs from HIPAA's wellness program incentives only in that it extends the 30 percent limit on incentives under health-contingent wellness programs to participatory wellness programs. HIPAA, as amended by the Affordable Care Act, places no limits on incentives for participatory wellness programs. As the incentives offered by the vast majority of employers currently fall below the limit of 30 percent of the cost of self-only coverage, the Commission does not believe the rule will negatively affect the ability of employers to offer incentives sufficient to promote meaningful participation in wellness programs.

The only other potential cost is associated with the requirement that employers provide a notice to employees informing them what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure. For the reasons set forth in the Paperwork Reduction Act analysis that follows, the Commission concludes that approximately 299,115 employers will need to develop such a notice. The Commission estimates the time required to develop the notice to be four hours, for a total of 1,196,460 hours. According to data from the Bureau of Labor Statistics, the average hourly compensation for employees in “management, professional, and related” occupations was $55.56 as of December 2014, and the average hourly compensation for employees working in “office and administrative support” was $23.98. See Bureau of Labor Statistics, Employer Costs for Employee Compensation—December 2014 (March 11, 2015), available at www.bls.gov/news.release/pdf/ecec.pdf. Assuming that 50 percent of the time required to develop an appropriate notice is attributable to employees working in management, professional, and related occupations and that 50 percent of the time is attributable to employees working in office and administrative support, the Commission estimates that the total cost of developing a notice that complies with the requirements of the proposed rule would be $42,583,000. We note that some employers and group health plans may already have notices that comply with these requirements, and that those that do not will incur only a one-time cost to develop an appropriate notice. The Commission seeks comments on these cost estimates.

Other requirements in the rule will result in no costs, since they simply restate basic principles of nondiscrimination under the ADA. Even in the absence of this rule, employers are prohibited from requiring employees to participate in employee health programs that include disability-related inquiries and/or medical examinations; denying employees health insurance (or any other benefit of employment) if they do not participate in wellness programs; retaliating against employees who file charges claiming that a wellness program violates the ADA; and attempting to induce participation in employee health programs through interference with their ADA rights, coercion, intimidation, and threats. Employers are also required to provide reasonable accommodations to enable employees to enjoy equal benefits and privileges of employment, which would include participation in employee health programs. To the extent confidentiality of medical information acquired in the course of providing an employee health program is required, the proposed rule will result in no additional costs. The ADA already requires employers to keep medical information about applicants and employees confidential.

To the extent the proposed rule can be read to impose additional confidentiality obligations, the interpretive guidance to the rule makes clear that a wellness program that is part of a group health plan may generally satisfy its obligation to comply with proposed section 1630.14(d)(6) by adhering to the HIPAA Privacy Rule. See 45 CFR part 160 and Part 164, Subparts A and E. An employer that is a health plan sponsor and receives individually identifiable health information from or on behalf of the group health plan, as permitted by HIPAA when the plan sponsor is administering aspects of the plan, may generally comply with the proposed rule by certifying to the group health plan, also pursuant to the HIPAA Privacy Rule, that it will not use or disclose the information for purposes not permitted by its plan documents and the Privacy Rule, such as for employment purposes, and abiding by that certification. Further, if an employer is not performing plan administration functions on behalf of the group health plan, then the employer may receive aggregate information from the wellness program under section 1630.14(d)(6) only so long as it is de-identified in accordance with the HIPAA Privacy Rule.

These proposed additions to EEOC's regulations contain an information collection requirement subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act. As required by the Paperwork Reduction Act, the EEOC is submitting to OMB a request for approval of the information collection requirement under section 3507(d) of the Act. Organizations or individuals desiring to submit comments for consideration by OMB on the information collection requirement should address them to Chad Lallemand in the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Room 10235, New Executive Office Building, Washington, DC 20503, or by email to [email protected].

Copies of comments should also be sent to Bernadette Wilson, Acting Executive Officer, Executive Secretariat, Equal Employment Opportunity Commission, 131 M Street NE., Washington, DC 20507. As a convenience to commenters, the Executive Secretariat will accept comments totaling six or fewer pages via FAX transmittal. This limitation is necessary to assure access to the equipment. The telephone number of the fax receiver is (202) 663-4114. (This is not a toll-free number.) Receipt of FAX transmittals will not be acknowledged, except that the sender may request confirmation of receipt by calling the Executive Secretariat staff at (202) 663-4070 (voice) or (202) 663-4074 (TTY). (These are not toll-free numbers.) Instead of sending written comments to EEOC, you may submit comments and attachments electronically at http://www.regulations.gov, which is the Federal eRulemaking Portal. Follow the instructions online for submitting comments. All comments received through this portal will be posted without change, including any personal information you provide. Copies of comments submitted by the public to EEOC directly or through the Federal eRulemaking Portal will be available for review at the Commission's library between the hours of 9:00 a.m. and 5:00 p.m. Eastern Time or can be reviewed at http://www.regulations.gov.

Collection Title: Notice requirement under Title I of the ADA, 29 CFR 1630.14(d)(2)(iv).

OMB number: 3046-xxxx.

Description of affected public: Employers with 15 or more employees that are subject to Title I of the ADA and offer wellness programs as part of group health plans.

Number of respondents: 299,115.

Initial one-time hour burden: 1,196,460.

Annual hour burden: None.

Number of forms: None.

Federal cost: None.

Abstract: The proposed rule says that a wellness program that includes disability-related inquiries or medical examinations and that is part of a group health plan must meet several requirements to be deemed voluntary, including providing a notice to employees informing them what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure.

Burden Statement: We estimate that there are approximately 782,000 employers with 15 or more employees subject to the ADA and, of that number, one half to two thirds (391,000 to 586,500) offer some type of wellness program.30 Of those employers, 32 percent to 51 percent require employees to complete a health risk assessment (HRA) that likely contains disability-related questions.31 Using the highest estimates, we assume that 299,115 (51 percent of 586,500 employers) will be covered by this requirement.

Some employers and group health plans may already use forms that comply with the proposed notice requirement; therefore, the burden only will be on employers and group health plans that will incur a one-time burden to develop an appropriate notice to ensure that employees who provide medical information pursuant to a wellness program do so voluntarily. This notice may be included on or attached to any HRA employees are asked to complete and should explain what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure. Assuming that creation of such a document would take four hours, and assuming that 299,115 employers would be covered by the proposed regulation, this one-time burden would be 1,196,460 hours. Because employers do not have to develop a new form unless they collect medical information for a different purpose, they will be able to annually redistribute the same notice to all relevant employees.

For those wishing to comment on the above information collection, OMB is particularly interested in comments which:

(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the Commission's functions, including whether the information will have practical utility;

(2) Evaluate the accuracy of the Commission's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to be collected; and

(4) Minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

Title I of the ADA applies to approximately 782,000 employers with 15 or more employees subject to the ADA, approximately 764,233 of which are small firms (entities with 15-500 employees) according to data provided by the Small Business Administration Office of Advocacy. See Firm Size Data at http://www.sba.gov/advocacy/849/12162.

The Commission certifies under 5 U.S.C. 605(b) that this proposed rule will not have a significant economic impact on a substantial number of small entities because it imposes no reporting burdens and only minimal costs on such firms. The proposed rule clarifies that, in most respects, employers who offer wellness programs that are part of their health plans may offer incentives to employees consistent with HIPAA and the Affordable Care Act without violating the ADA. The amount of an incentive offered for participation (alone or in combination with incentives offered for health-contingent wellness programs) in a wellness program will not render a program involuntary under the ADA as long as the incentive does not exceed 30 percent of the total cost of employee-only coverage.

To the extent that employers will expend resources to train human resources staff and others on the revised rule, we note that the EEOC conducts extensive outreach and technical assistance programs, many of them at no cost to employers, to assist in the training of relevant personnel on EEO-related issues. For example, in FY 2013, the agency's outreach programs reached more than 280,000 persons through participation in more than 3,800 no-cost educational, training, and outreach events. We estimate that the typical human resources professional will need to dedicate, at most, 90 minutes to gain a satisfactory understanding of the revised regulations. We further estimate that the median hourly pay rate of a human resources professional is approximately $48.50. See Bureau of Labor Statistics, Occupational Employment and Wages, May 2013 at http://www.bls.gov/oes/current/oes113121.htm. Assuming that small entities have between one and five human resources professionals/managers, we estimate that the cost per entity of providing appropriate training will be between approximately $72.75 and $363.75.

EEOC does not believe that this cost will be significant for the impacted small entities. We urge small entities to submit comments concerning EEOC's estimates of the number of small entities affected, as well as the cost to those entities.

This proposed rule will not result in the expenditure by state, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

For the reasons set forth in the preamble, the EEOC proposes to amend 29 CFR part 1630 to read as follows:

The revisions and additions read as follows:

BOEM and BSEE published a notice of proposed rulemaking on Requirements for Exploratory Drilling on the Arctic Outer Continental Shelf (OCS) on February 24, 2015 (80 FR 9916). This proposed rule is intended to provide regulations to ensure Arctic OCS exploratory drilling operations are conducted in a safe and responsible manner that takes into account the unique conditions of Arctic OCS drilling and Alaska Natives' cultural traditions and need to access subsistence resources. The Arctic region is known for its oil and gas resource potential, its vibrant ecosystems, and the Alaska Native communities, who rely on the Arctic's resources for subsistence and cultural traditions. The region is also characterized by extreme environmental conditions, geographic remoteness, and a relative lack of fixed infrastructure and existing operations.

The proposed rule would add to, and revise existing regulations in, 30 CFR parts 250, 254, and 550 for Arctic OCS oil and gas activities. The proposed rule would focus on Arctic OCS exploratory drilling activities that use mobile offshore drilling units, and related operations during the Arctic OCS open-water drilling season.

After publication of the proposed rule, BOEM and BSEE received public comments asking BOEM and BSEE to extend the comment period on the proposed rule by 60 days. BOEM and BSEE are extending the original 60-day comment period by an additional 30 days to provide additional time for review of and comment on the Notice of Proposed Rulemaking. Accordingly, written comments must be submitted by the extended due date of May 27, 2015. BOEM and BSEE may not fully consider comments received after this date.

Table of Acronyms DHS Department of Homeland Security FR Federal Register NPRM Notice of Proposed Rulemaking A. Public Participation and Request for Comments

We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided.

If you submit a comment, please include the docket number for this rulemaking (USCG-2015-0178), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online (via http://www.regulations.gov) or by fax, mail, or hand delivery, but please use only one of these means. If you submit a comment online via http://www.regulations.gov, it will be considered received by the Coast Guard when you successfully transmit the comment. If you fax, hand deliver, or mail your comment, it will be considered as having been received by the Coast Guard when it is received at the Docket Management Facility. We recommend that you include your name and a mailing address, an email address, or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.

To submit your comment online, go to http://www.regulations.gov, type the docket number [USCG-2015-0178] in the “SEARCH” box and click “SEARCH.” Click on “Submit a Comment” on the line associated with this rulemaking.

If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 81/2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period and may change the rule based on your comments.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, type the docket number (USCG-2015-0178) in the “SEARCH” box and click “SEARCH.” Click on Open Docket Folder on the line associated with this rulemaking. You may also visit the Docket Management Facility in Room W12-140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the Federal Register (73 FR 3316).

We do not now plan to hold a public meeting. But you may submit a request for one, using one of the methods specified under ADDRESSES. Please explain why you believe a public meeting would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register.

The Coast Guard has not promulgated a rule for past iterations of this event.

The legal basis for the proposed rule is 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1, which collectively authorize the Coast Guard to define safety zones.

This rule is necessary to provide for the safety of life and navigation, for both participants and spectators involved with the Volvo Ocean Race Newport in the vicinity of Newport, RI.

The Volvo Ocean Race is a 40,000 mile, eight-month, round the world race with stops in several major international sailing ports. As part of the event, high-speed sailing vessels will participate in daily inshore races from 12-17 May, 2015, in the East Passage of Narragansett Bay in the vicinity of Newport, RI. As these races are part of a world-wide event they are expected to generate national and international media coverage, and attract spectators on a number of recreational and excursion vessels.

The Coast Guard is establishing this safety zone, in conjunction with the Volvo Ocean Race Newport, to ensure the protection of the maritime public and event participants from the hazards associated with large-scale marine events. The Coast Guard anticipates some concern with the proposed safety zone by mariners, especially commercial vessel operators, that vessel transits through the East Passage of Narragansett Bay may be restricted for a portion of each day for 6 consecutive days.

The East Passage of Narragansett Bay is the site of many marine events each year. As a result, vessel traffic, particularly recreational vessel traffic, is frequently required to utilize the West Passage of Narragansett Bay. Accordingly, the West Passage of Narragansett Bay may be a viable option for recreational vessels as well as many tug/barge combinations and smaller commercial vessels during the Volvo Ocean Race Newport.

Regardless, the Coast Guard anticipates that some commercial and/or recreational vessels may still need to transit the East Passage of Narragansett Bay for a variety of reasons, including destination, familiarity with the waterway, tide restrictions, etc. Vessels may be able to continue transits through the East Passage, even during enforcement of the safety zone, as there will be sufficient room for most recreational vessels, and some commercial vessels, to pass to the west of the safety zone. Also, the Coast Guard routinely works with the local marine pilot organization and shipping agents to coordinate vessel transits during marine events in the East Passage, and will continue to do so for the entire event to avoid major interruptions to shipping schedules.

The Coast Guard proposes to add a temporary safety zone under 33 CFR 165.T01-0178. The safety zone will extend from Newport Harbor in the vicinity of Fort Adams, across the East Passage to west of Rose Island, and will encompass the East Passage south to the vicinity of Castle Hill. The safety zone will be enforced only during times of actual sailing vessel racing.

We developed this proposed rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This proposed rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

We expect the adverse economic impact of this proposed rule to be minimal. Although this regulation may have some adverse impact on the public, the potential impact will be minimized for the following reasons: Although the safety zone will be in effect for 8 hours each day for 6 consecutive days, vessels will only be restricted from the zone in the East Passage of Narragansett Bay during those limited periods when the races are actually ongoing; during periods when there is no actual racing (e.g., racing vessels are transiting from the pier to the racing site; downtime between races, etc.) vessels may be allowed to transit through the safety zone; there is an alternate route, the West Passage of Narragansett Bay, that does not add substantial transit time, is already routinely used by mariners, and will not be affected by this safety zone; many vessels, especially recreational vessels, may transit in all portions of the affected waterway except for those areas covered by the proposed safety zone; and vessels may enter or pass through the affected waterway with the permission of the COTP or the COTP's representative.

Notification of the Volvo Ocean Race Newport and the associated safety zone will be made to mariners through the Rhode Island Port Safety Forum, local Notice to Mariners, event sponsors, and local media well in advance of the event.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule will not have a significant economic impact on a substantial number of small entities.

This proposed rule would affect the following entities, some of which might be small entities: Owners or operators of vessels intending to transit, fish, or anchor in the East Passage of Narragansett Bay, RI, during the Volvo Ocean Race Newport sailing races.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed under FOR FURTHER INFORMATION CONTACT. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule would not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This proposed rule would not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

This proposed rule is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.

This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action appears to be one of a category of actions which do not individually or cumulatively have a significant effect on the human environment.

A preliminary environmental analysis checklist supporting this determination is available in the docket where indicated under ADDRESSES. This proposed rule involves the establishment of a temporary safety zone in conjunction with the Volvo Ocean Race Newport event, a high-speed, high-performance sailing vessel racing event. It appears that this action will qualify for Coast Guard Categorical Exclusion (34)(g), as described in figure 2-1 of the Commandant Instruction.

We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows:

Background

The National Park Service (NPS) has a unique relationship with Indian tribes that is strengthened by a shared commitment to stewardship of the land and resources. This relationship is augmented by the historical, cultural, and spiritual relationships that Indian tribes have with the park lands and resources with which they are traditionally associated.

Indian tribes practiced their traditional harvests of plants and plant parts on or from lands that are now included in units of the National Park System long before the arrival of the European settlers. Much of this activity was prohibited upon the promulgation of 36 CFR part 2 in 1983. The fundamental purpose of the proposed rule is to lift this prohibition and allow for gathering and removal of traditional plants or plant parts while ensuring there is no significant adverse impact to park resources and values. The proposed rule would also provide opportunities for tribal youth, the NPS, and the public to understand tribal traditions.

The NPS is responsible for managing all units of the National Park System in such a manner and by such means as will leave them unimpaired for future generations. Park managers are given the discretion to manage public use within the parks in a manner that ensures that there is no impairment.

Managing the various areas of the National Park System in a manner that helps tribes maintain their cultural traditions and relationships with the land may contribute to the protection and stewardship of such areas. The sustainable uses envisioned by the proposed rule would approximate some part of the pre-existing, pre-European environment of the park and thus would not be considered to be consumptive use. The proposed rule would provide a recognized exception to current regulations by offering resource and location-specific agreements between the NPS and federally recognized Indian tribes to gather and remove plants or plant parts for traditional purposes.

Cooperation in the continuation of tribal traditions is at the heart of this proposed rule change. The NPS has a long history of encouraging Indian arts and crafts in national parks for the education and enjoyment of the public, and to support the continued practice of cultural traditions. The teaching and sharing of tribal traditions associated with national parks is an important part of the NPS mission. The proposed rule would provide new opportunities for the NPS and tribal governments to work together in support of the continuation of sustainable Indian cultural traditions that make up a unique and irreplaceable part of our national heritage. Limited gathering by hand of certain renewable natural resources has been allowed by the NPS for more than 50 years. See 36 CFR 1.2(c) (1960) (authorizing hand picking and eating of designated native fruits and berries). In 1966, the NPS expanded this authority for NPS recreation areas, authorizing the gathering and collection of reasonable quantities of natural, renewable products (e.g. seashells, fruits, berries, driftwood, and marine deposits of natural origin) for personal, non-commercial use. (31 FR 16651, December 29, 1966).

Existing NPS regulations at 36 CFR 2.1(c), promulgated in 1983, allow for the personal consumption of “fruits, berries, nuts, or unoccupied seashells” by the general public, subject to certain conditions. The proposed rule would be an additional form of gathering, but would be limited to only members of federally recognized Indian tribes that have traditional associations with specific park areas and resources and that wish their members to be able to gather and remove plants or plant parts within those park areas for traditional uses.

Existing NPS regulations at 36 CFR 2.1(d) do not allow tribes or tribal members to gather plants or plant parts on parklands for traditional purposes except where specific statutes or treaties grant rights to do so. However, traditional tribal gathering and removal occurred in many areas that are now part of the National Park System. The proposed rule would provide an orderly and consistent process for such gathering and removal by authorizing agreements between the NPS and federally recognized Indian tribes to gather and remove plants or plant parts for traditional purposes.

In designing the proposed rule, the NPS has applied principles used by Congress when it has addressed the issue of tribal gathering, usually in the context of establishing new units of the National Park System or establishing new management systems within existing units. For instance, the enabling legislation for El Malpais National Monument, New Mexico, states: “In recognition of the past use of portions of the monument and the conservation area by Indian people for traditional cultural and religious purposes, the Secretary shall assure nonexclusive access to the monument . . . by Indian people for traditional cultural and religious purposes, including the harvesting of pine nuts.” (Pub. L. 100-225, 101 Stat. 1548). In this and other cases, Congress has provided for gathering on parklands by traditionally associated Indian tribes for traditional purposes that predate the establishment of the park. It is, however, impractical to seek specific legislative language for each unit of the National Park System in which there were individual tribal traditional uses.

In the 20 years since Indian tribes brought the issue of gathering to the attention of NPS leadership, studies in the fields of ethnobotany, traditional plant management, and consideration of traditional ecological knowledge in scientific symposia and scholarly gatherings have increased greatly. Research has shown that traditional gathering, when done with traditional methods and in traditionally established quantities, does not impair the ability to conserve plant communities and can help to conserve them, thus supporting the NPS conclusion that cooperation with Indian tribes in the management of plant resources is consistent with the preservation of national park lands for all American people. This concept is incorporated into National Park Service Management Policies 2006 at Section 4.2.1, which directs the NPS to inventory, monitor, and research traditional knowledge and authorizes the NPS to support studies designed to “understand the ceremonial and traditional resource management practices of Native Americans. . . .” The NPS and tribal governments can draw on this research and may conduct further research to ensure that traditional tribal gathering and removal does not have a significant adverse impact on park resources and values. To the extent that it is appropriate, park visitors can learn about the cultures associated with traditional tribal gathering practices. The proposed rule would require that environmental reviews and further studies be undertaken, as needed, prior to entering into agreements that would allow gathering and removal in national park units. These environmental reviews would include consulting with other, nearby tribes, especially those tribes that may also have traditional associations with those park units.

Authority for the proposed rule is the statute commonly known as the NPS Organic Act of 1916, as amended. The NPS Organic Act created the NPS and defined its purpose by stating that the NPS shall promote and regulate the use of the National Park System by means and measures that conform to the fundamental purpose of the System units, which purpose is to conserve the scenery, natural and historic objects, and wild life in the System units and to provide for the enjoyment of the scenery, natural and historic objects, and wild life in such manner and by such means as will leave them unimpaired for the enjoyment of future generations. (54 U.S.C. 100101)

The Organic Act further authorizes the Secretary of the Interior to make “such regulations as the Secretary considers necessary or proper for the use and management of [National Park] System units.” (54 U.S.C. 100751(a)).

The proposed rule would authorize the NPS to enter into agreements with federally recognized Indian tribes to allow for the gathering and removal of plants or plant parts for traditional purposes. The proposed rule is intended to continue Indian tribal cultural traditions that are rooted in the history of specific parks.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951); Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments,” of November 6, 2000; President Obama's Executive Memorandum on Tribal Consultation of November 5, 2009; Department of the Interior Secretarial Order No. 3317 of December 1, 2011, and Department of the Interior Departmental Manual Part 512,”American Indian and Alaska Native Programs;” we have evaluated the potential effects on federally recognized Indian tribes and have determined that this proposed rule would have direct tribal implications.

Six tribal consultation meetings were held in the “Lower 48” to consult with Indian tribes on this proposed rule. Locations in or near units of the National Park System where gathering by tribal members has been discussed over the years were selected in consultation with Indian tribes and NPS regional and park staff. One hundred and fifty representatives from 50 tribes attended meetings held from May through July 2010, in Bar Harbor, Maine; Flagstaff, Arizona; Pipestone, Minnesota; Yurok, California; Suquamish, Washington; and Cherokee, North Carolina. An additional meeting was held at Pipestone, Minnesota, in September 2010. Staff in Alaska contacted more than 70 federally recognized Indian tribes traditionally associated with parks in Alaska. Consultation then occurred with those tribes that requested it. Additionally, general presentations were given at two statewide conventions: The Alaska Tribal Leaders Summit in Fairbanks during the annual meetings of the Alaska Federation of Natives in October 2010 and at the annual Bureau of Indian Affairs Providers Conference in Anchorage in December 2010. A conference call with traditional elders and tribal people not representing tribal governments was also conducted in June 2010 at the request of Arvol Looking Horse, Keeper of the Sacred White Buffalo Calf Pipe of the Lakota, Dakota, and Nakota Nation of the Sioux. Park managers and staff also attended these consultation meetings and participated in the discussions. The major concerns of representatives of tribal governments and the NPS are summarized and addressed here.

Tribal representatives expressed support for the concept that only members of federally recognized Indian tribes be allowed to gather and remove park resources for traditional purposes. The proposed rule limits gathering and removal to members of an Indian tribe or Alaska Native tribe, band, nation, pueblo, village or community that the Secretary of the Interior acknowledges to exist as an Indian tribe under the Federally Recognized Tribe List Act of 1994, 25 U.S.C. 479a. This provision will limit gathering and removal to members of Indian tribes with which the United States has a government-to-government relationship. The proposed rule provides avenues for cooperative NPS-tribal government oversight of member activities on park lands to ensure that traditional gathering and removal remains sustainable with no significant adverse impacts to park resources and values, consistent with NPS Management Policies 2006, 8.2.

A central purpose of the proposed rule is to support the continuation of Indian cultural traditions on lands that are now administered as units of the National Park System. The proposed rule would apply only to those Indian tribes traditionally associated with specific park units. The concept of acknowledging and respecting the special and longstanding connections that Indian tribes have with parklands prior to the establishment of park units is specifically described in NPS Management Policies 2006, 1.11.

The NPS and tribal representatives expressed support for agreements between tribal governments and the NPS to establish the conditions for gathering in park units. These agreements would respect both tribal sovereignty and NPS authority to manage park resources. These agreements would authorize traditional tribal gathering in ways that could be administered flexibly to respond to local resource concerns. The participating tribal government would be responsible for designating which tribal members would be allowed to gather in accordance with the terms and conditions set forth in the agreement.

Tribal representatives expressed deep concern for the long-term health of park ecosystems. Reminding the NPS of their long history of productive and protective relationships with such ecosystems, they expressed willingness to accept limitations on gathering to protect park resources. The NPS and tribal representatives are interested in jointly developing park specific plant gathering management plans to ensure the long-term health of any park resource that may be gathered.

Tribal representatives stressed that each Indian tribe is unique, and that tribal agreements entered into under the proposed rule should allow for traditional cultural practices specific to each tribe.

Some national park units contain places where tribal members historically have gathered plant resources. Using a particular gathering site within a national park unit may be vital to the continuation of a cultural tradition that cannot be met at locations outside the park, or even at alternative locations within it. Thus, even though some plant materials may be available outside park lands, tribal members may still reasonably desire to gather at traditionally significant locations inside a park unit. The rationale for in-park gathering of materials available outside park boundaries needs to be documented on a case-by-case basis as outlined in § 2.6(d) of the proposed rule. The information used to make this determination may be subject to peer review by qualified specialists from both the tribal and academic communities.

Tribal representatives expressed the desire to work with the NPS to create and maintain the knowledge base needed to manage gathering and removal and to leave park resources unimpaired for future generations. This would include joint research and monitoring, training programs for tribal members and park staff, and ongoing consultation regarding park resources.

Existing NPS regulations, promulgated in 1983, prohibit “possessing, destroying, injuring, defacing, removing, digging, or disturbing from its natural state” living or dead wildlife or fish, plants, paleontological specimens, or mineral resources, or the parts or products of any of these items, except as otherwise provided in NPS regulations. The proposed rule, to be codified at 36 CFR 2.6, would be consistent with this general prohibition. It would provide a recognized exception to current regulations by authorizing resource- and location-specific agreements between the NPS and federally recognized Indian tribes to gather and remove plants or plant parts for traditional purposes.

Gathered plants or plant parts, as envisioned under this proposed rule, are not meant to be used for “benefits sharing,” which allows for commercial use of the results of research on material collected in a park area under a specimen collection permit under 36 CFR 2.5. See NPS Management Policies 2006, 4.2.4.

The proposed rule would leave in place 36 CFR 2.1(c)(1), which allows a park Superintendent to authorize gathering of designated fruits, berries, nuts, or unoccupied seashells by all park visitors, subject to certain conditions. The proposed rule would amend section 2.1(d), which currently states that 36 CFR 2.1 “shall not be construed as authorizing the taking, use or possession of fish, wildlife, or plants for ceremonial or religious purposes, except where specifically authorized by Federal statutory law, treaty rights or in accordance with § 2.2 (wildlife protection) or § 2.3 (fishing).” The proposed rule would permit the gathering and removal of plants or plant parts for traditional purposes under specific tribal agreements, but would not alter the prohibition on taking fish or wildlife for such purposes.

Title 36 CFR 13.35 regulates the gathering and collection of natural products in many of the National Park System units in Alaska, and allows for the limited gathering of a wider range of natural products than are included in the proposed rule. Except for the park areas listed in § 13.35(a), § 13.35(c) permits gathering, by hand and for personal use only, of renewable resources such as natural plant food items (e.g. fruits, berries, and mushrooms) that are not threatened or endangered species; driftwood and uninhabited seashells; and plant materials and minerals that are essential to the conduct of traditional ceremonies by Native Americans. Therefore, the proposed rule would have no discernable effect upon National Park System units in Alaska where § 13.35(c) applies. The proposed rule would apply to the park units in Alaska listed in § 13.35(a) and to parks in the contiguous United States. The proposed rule would not address subsistence issues authorized in Alaska by 36 CFR 13.400-13.495.

The proposed rule would remove the existing prohibition on the taking, use, or possession of plants or plant parts, provided such taking, use or possession was done under an agreement described in this rule. The proposed rule would have no effect on existing statutory or treaty rights, or on the taking of wildlife or fish.

The rule proposes to define the following terms for use in this section: Indian tribe, Traditional association, Traditional purpose, and Tribal official.

The proposed rule would authorize agreements allowing and regulating tribal gathering and removal of plants or plant parts for traditional purposes in park units where such gathering and removal have not been specifically authorized by Congress. The agreements would explicitly recognize the special government-to-government relationship between Indian tribes and the United States, and would be based upon mutually agreed upon terms and conditions subject to the requirements of § 2.6(d). The agreements would serve as the framework under which the NPS would allow tribal gathering and removal and would be implemented by an accompanying permit under § 1.6, which would authorize the gathering and removal activities.

The NPS would respond to a request from the appropriate tribal official expressing interest in entering into an agreement for gathering and removal based on tribal traditional association with the park unit, and on the continuation of tribal cultural traditions on park land. The tribal request would include a description of the traditional association that the Indian tribe has to the park area, a brief explanation of the traditional purposes to which the gathering and removal activities will relate, and a description of the gathering and removal activities that the Indian tribe is interested in conducting.

The NPS believes that under existing law it can protect sensitive or confidential information submitted by tribes (see e.g., 54 U.S.C. 307103).

The proposed rule would require the Superintendent to determine that the proposed gathering is a traditional use of the park area by the Indian tribe, analyze any potential impacts of the proposed gathering in accordance with the National Environmental Policy Act and other applicable laws, and document a determination that the proposed gathering and removal will not result in a significant adverse impact (i.e., make a Finding of No Significant Impact (FONSI)), and is consistent with the requirements of other applicable laws and regulations.

The proposed rule would require the NPS to deny a request to enter into an agreement if sufficient information does not exist to demonstrate the Indian tribe's traditional association or the traditional purposes for which the park resource would be gathered and removed, or if the analyses required by § 2.6(d) indicate significant adverse impacts to park resources or values.

The proposed rule outlines the required contents of agreements in detail. According to the terms of the agreement, the NPS would authorize the tribal government to manage gathering and removal by tribal members subject to the conditions of the agreement. The agreement could operate in a variety of ways, but, at a minimum, it would require that the tribal government identify who within the tribe is designated to gather and remove; how such individuals will be identified; what plants or plant parts may be gathered and removed; and limits on size, quantities, seasons, or locations where the gathering and removal may take place.

Agreements would also establish NPS-tribal protocols for monitoring park resources subject to gathering and removal operating protocols, and remedies for noncompliance in addition to those set out in the proposed rule. In the case of noncompliance by members of the tribe, the NPS would initially apply these agreed-upon remedies and, if warranted, seek prosecution of specific violators, prior to terminating the agreement. This section also provides for any special conditions unique to the park unit or tribal tradition that may be included within the scope of existing law.

The proposed rule would require the Regional Director to approve an agreement entered into under the proposed rule.

The proposed rule would provide for closures and restrictions on gathering and removal when necessary to provide for public health and safety or protect park resources and values, after providing appropriate public notice under § 1.7 (Public notice).

The proposed rule would provide for suspension or termination of an agreement where terms or conditions are violated or unanticipated or significant impacts occur. The Superintendent would be required to prepare a written determination justifying the action. A termination would be subject to the concurrence of the Regional Director. Termination of an agreement would be based on factors such as careful analysis of impacts on park resources and the effectiveness of NPS-tribal agreement administration.

Gathering and removal are prohibited, except as authorized under this regulation, or as otherwise authorized by Federal statute, treaty, or another NPS regulation. Any gathering and removal done under this regulation must be done according to the provisions of the applicable agreement and permit.

On July 31, 2014, the United States Forest Service (USFS) published a proposed rule in the Federal Register (79 FR 44327) to implement section 8105 of the Food, Conservation, and Energy Act of 2008 (Farm Bill). The USFS proposed rule would authorize Regional Foresters or designated Forest Officers to provide trees, portions of trees, or forest products to Indian tribes free of charge for noncommercial traditional and cultural purposes. The rule would require federally-recognized Indian tribes seeking products under the Farm Bill authority to submit a written request to the USFS for free use. The rule encourages tribal officials making the requests to explain their requests to the Regional Forester or designated Forest Officer, and, if necessary, how the requests fit a noncommercial traditional and cultural purpose. The comment period for the USFS rule closed on September 29, 2014.

The NPS recognizes that a federally-recognized tribe may have a traditional association with an NPS unit that is adjacent to USFS lands. This tribe may seek to gather and remove natural products from the NPS and adjacent USFS lands for the same traditional or cultural purpose. In these circumstances, tribal officials would need to enter into an agreement with the NPS and obtain an NPS permit to gather and remove plants or plant parts from the NPS lands; and submit a written request to the USFS to remove trees, portions of trees, or forest products from the adjacent USFS lands.

The NPS and USFS have distinct statutory mandates and authorities that result in separate regulations and policies that govern the resources they manage. As a result, the process for removing plants and plant parts from NPS lands will be governed by regulations that are separate from the regulations that will govern the removal of trees, portions of trees, or forest products from USFS lands. The NPS seeks comment about how the NPS and the USFS can coordinate their separate processes for requesting approval to remove natural products from the respective lands they administer, in the circumstances described above. In particular, the NPS seeks comment on ways the NPS proposed rule can better align with the USFS proposed rule—for example, how a joint or coordinated permitting process between the two agencies would impact paperwork burden and regulatory compliance.

Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget will review all significant rules. OIRA has determined that this rule is not significant.

Executive Order 13563 reaffirms the principles of Executive Order 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. Executive Order 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.

This rule will not have a significant economic effect on a substantial number of small entities under the RFA (5 U.S.C. 601 et seq.). This certification is based on information contained in the report titled, “Cost-Benefit and Regulatory Flexibility Analyses” available for review at http://www.nps.gov/tribes/proposed_rule.htm.

This rule is not a major rule under 5 U.S.C. 804(2), the SBREFA. This rule:

(a) Does not have an annual effect on the economy of $100 million or more.

(b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

(c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

This determination is based on information from “Cost-Benefit and Regulatory Flexibility Analyses” available for review at http://www.nps.gov/tribes/proposed_rule.htm.

This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local or tribal governments or the private sector. It addresses use of NPS lands only. A statement containing the information required by the UMRA (2 U.S.C. 1531 et seq.) is not required.

This rule does not effect a taking of private property or otherwise have taking implications under Executive Order 12630. A takings implication assessment is not required.

Under the criteria in Executive Order 13132, the rule does not have sufficient Federalism implications to warrant the preparation of a Federalism summary impact statement. This proposed rule only affects use of NPS administered lands. It has no outside effects on other areas. A Federalism summary impact statement is not required.

This rule complies with the requirements of Executive Order 12988. Specifically, this rule:

(a) Meets the criteria of section 3(a) requiring that all proposed rules be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and

(b) Meets the criteria of section 3(b)(2) requiring that all proposed rules be written in clear language and contain clear legal standards.

The Department of the Interior strives to strengthen its government-to-government relationship with Indian tribes through a commitment to consultation with Indian tribes and recognition of their right to self-governance and tribal sovereignty. We have evaluated this rule under the Department's consultation policy and under the criteria in Executive Order 13175, and have identified direct tribal implications.

Accordingly, we have consulted with tribes on a government-to-government basis as detailed previously in this preamble.

This proposed rule contains a collection of information that we have submitted to the Office of Management and Budget (OMB) for review and approval under the PRA of 1995 (44 U.S.C. 3501 et seq.). We may not conduct or sponsor and you are not required to respond to a collection of information unless it displays a currently valid OMB control number.

An Indian tribe that has a traditional association with a park area may request that we enter into an agreement with the tribe for gathering and removal from the park area of plants or plant parts for traditional purposes. The agreement will define the terms under which the Indian tribe may be issued permits that will designate the tribal members who may gather and remove plants or plant parts within the park area in accordance with the terms and conditions of the agreement and the permit. We collect the following information:

The request must include:

(1) An explanation of the traditional association that the Indian tribe has to the park area;

(2) An explanation of the traditional purposes to which the gathering activities will relate; and

(3) A description of the gathering and removal activities that the Indian tribe is interested in conducting.

To make determinations based upon these requests or to enter into agreements, we may need to collect information from those Indian tribes who make requests and from the specific tribal members, who are proposed to participate in the authorization, including:

(1) A description of the system to be used to administer gathering and removal, including a clear means of identifying appropriate tribal members who, under the permit, are designated by the Indian tribe to gather and remove and a means for the tribal government to keep the NPS regularly informed of which tribal members are the current gathering and removal designees of the Indian tribe;

(2) A description of the specific plants or plant parts that may be gathered and removed;

(3) Specification of the size and quantity of the plants or plant parts that may be gathered and removed;

(4) Identification of the times and locations at which the plants or plant parts may be gathered and removed;

(5) Identification of the methods that may be used for gathering and removal;

(6) Protocols for monitoring gathering and removal activities;

(7) Operating protocols and additional remedies for noncompliance with the terms of the agreement; and

(8) Key officials.

Title: Gathering of Certain Plants or Plant Parts by Federally Recognized Indian Tribes for Traditional Purposes, 36 CFR 2.

OMB Control Number: 1024-XXXX.

Service Form Number: None.

Type of Request: Request for a new OMB Control Number.

Description of Respondents: Indian tribes.

Respondent's Obligation: Required to obtain or retain a benefit.

Frequency of Collection: On occasion.

Estimated Number of Respondents: 20.

As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on any aspect of this information collection, including:

(1) Whether or not the collection of information is necessary, including whether or not the information will have practical utility;

(2) The accuracy of our estimate of the burden for this collection of information;

(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and

(4) Ways to minimize the burden of the collection of information on respondents.

This rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the NEPA 1969 is not required because the rule is covered by a categorical exclusion. The Department of the Interior Regulations for implementing NEPA at 43 CFR 46.210(i) allow for the following to be categorically excluded: Policies, directives, regulations, and guidelines that are of an administrative, financial, legal, technical, or procedural nature; or whose environmental effects are too broad, speculative, or conjectural to lend themselves to meaningful analysis and will later be subject to the NEPA process, either collectively or case-by-case.”

The NPS has determined that the environmental effects of this rule are too broad, speculative, or conjectural for a meaningful analysis. In order to enter into an agreement for gathering of natural products under the rule, the NPS would first need to receive a request from an appropriate tribal official. While there are a number of Indian tribes that may qualify for an agreement under the rule, the NPS can only speculate at this point as to which Indian tribes will request an agreement, which park units will be affected, and what specific resources specific Indian tribes will request to collect. Because of this, the NPS has explicitly required that each agreement will undergo its own NEPA analysis, on a case-by-case basis. No collection of plants or plant parts would occur under this rule until after a site-specific NEPA analysis is completed.

The NPS has also determined that the rule does not involve any of the extraordinary circumstances listed in 43 CFR 46.215 that would require further analysis under NEPA.

This rule is not a significant energy action under the definition in Executive Order 13211. A Statement of Energy Effects is not required.

The NPS is required by Executive Orders 12866 (section 1(b)(12) and 12988 section 3(b)(1)(B)) and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(a) Be logically organized;

(b) Use the active voice to address readers directly;

(c) Use clear language rather than jargon;

(d) Be divided into short sections and sentences; and

(e) Use lists and tables wherever possible.

If you feel that we have not met these requirements, send us comments by one of the methods listed in the ADDRESSES section. To better help us revise the proposed rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that you find unclear, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

The primary authors of this proposed rule were Patricia L. Parker, Chief, American Indian Liaison Office; Frederick F. York, Regional Anthropologist, Pacific West Region; and Philip Selleck, Associate Regional Director for Operations, National Capital Region.

All submissions received must include the agency name and docket number or Regulation Identifier Number (RIN), 1024-AD84, for this rulemaking. All comments received will be posted without change to www.regulations.gov.

Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publically available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.

For access to the docket to read background documents or comments received, go to www.regulations.gov and enter 1024-AD84 in the search box.

For the reasons given in the preamble, the National Park Service proposes to amend 36 CFR part 2 as follows:

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

When submitting comments, remember to:

1. Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

2. Follow directions—EPA may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

3. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

4. Describe any assumptions and provide any technical information and/or data that you used.

5. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

6. Provide specific examples to illustrate your concerns, and suggest alternatives.

7. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

8. Make sure to submit your comments by the comment period deadline identified.

Regional haze is visibility impairment that is caused by the cumulative emissions of fine particles (PM2.5) (e.g., sulfates, nitrates, organic carbon, elemental carbon and dust) and its precursors (sulfur dioxide (SO2), nitrogen oxides (NOX), and in some cases ammonia and volatile organic compounds) from numerous sources over a wide geographic area. Fine particulate precursors react in the atmosphere to form PM2.5. Aerosol PM2.5 reduces the clarity and distance one can see by scattering and absorbing light.

The visibility protection program under sections 169A, 169B, and 110(a)(2)(J) of the CAA is designed to protect visibility in national parks and wilderness areas (Class I areas). On December 2, 1980, EPA promulgated regulations, known as “reasonably attributable visibility impairment (RAVI), to address visibility impairment in Class I areas that is reasonably attributable to a single source or small group of sources. On July 1, 1999, EPA promulgated the Regional Haze Rule which revised existing visibility regulations to incorporate provisions addressing regional haze impairment. EPA's Regional Haze Rule, as codified in Title 40 Code of Federal Regulations Part 51.308 (40 CFR 51.308), requires states to submit regional haze SIPs. Among other things, the regional haze SIPs must include provisions requiring certain sources install and operate best available retrofit technology (BART).

At 40 CFR 51.308(e)(2), the regional haze rule allows states to meet BART requirements by mandating alternative measures in lieu of mandating source-specific BART, so long as the alternative measures provide better visibility protection. Given the regional nature of visibility impairment, an alternative that results in lower emissions of SO2 and NOX will generally provide better visibility protection. Thus, in the absence of a difference in the spatial distribution of emissions, a modeling analysis is generally not necessary to be able to conclude that an alternative strategy with lower SO2 and NOX emissions provides better visibility protection.

On June 24, 2011, Illinois submitted a plan to address the requirements of the Regional Haze Rule, as codified at 40 CFR 51.308. EPA approved Illinois' regional haze SIP on July 6, 2012 (77 FR 39943). In its approval, EPA determined that the emission reductions from sources included in the Illinois plan are significantly greater than even conservative definitions of BART applied to BART subject units (77 FR 39945). EPA also addressed whether the Illinois plan, achieving greater emission reductions overall than the application of BART on BART-subject units, can also be expected to achieve greater visibility protection than application of BART on BART-subject units. Given that, in general, the Illinois power plants are substantial distances from any Class I area, and given that the averaging in Illinois' plan is only authorized within the somewhat limited region within which each utility's plants are located, EPA determined that a reallocation of emission reductions from one plant to another is unlikely to change the visibility impact of those emission reductions significantly. Consequently, EPA concluded that the significantly greater emission reductions that Illinois required in its regional haze SIP will yield greater progress toward visibility protection as compared to the benefits of a conservative estimate of BART.

One of the rules approved in that action to meet BART requirements is 35 Illinois Administrative Code (Ill. Adm. Code) rule 225.233 Multi-Pollutant Standard (MPS), specifically subsections (a), (b), (e), and (g). Section 225.233(e)(3)(C) contains the sulfur dioxide (SO2) emission standards applicable to the Ameren MPS Group. Section 225.233(e)(3)(C)(i) establishes an overall SO2 annual emission rate for EGUs in the Ameren MPS group of 0.50 pounds per million Btu (lb/mmBtu) for calendar years 2010 through 2013. Section 225.233(e)(3)(C)(ii) establishes an overall SO2 annual emission rate for EGUs in the Ameren MPS group of 0.43 lb/mmBtu for calendar year 2014. Section 225.233(e)(3)(C)(iii) establishes an overall SO2 annual emission rate for EGUs in the Ameren MPS group of 0.25 lb/mmBtu for calendar years 2015 and 2016. Section 225.233(e)(3)(C)(iv) establishes an overall SO2 annual emission rate for EGUs in the Ameren MPS group of 0.23 lb/mmBtu beginning in calendar year 2017 and continuing each calendar year thereafter.

On November 21, 2013, the Illinois Pollution Control Board (IPCB) granted IPH and Medina Valley a variance from the applicable requirements of Section 225.233(e)(3)(C)(iii) for a period beginning January 1, 2015, through December 31, 2019, and Section 225.233(e)(3)(C)(iv) for a period beginning January 1, 2017, through December 31, 2019, subject to certain conditions. IEPA submitted the variance as a revisions to the Illinois Regional Haze SIP on September 3, 2014. The IPH facilities included in the Ameren MPS group and subject to the variance include: Coffeen Energy Center (Montgomery County), Duck Creek Energy Center (Fulton County), E.D. Edwards Energy Center (Peoria County), Joppa Energy Center (Massac County), and Newton Energy Center (Jasper County). The two Medina Valley facilities included in the Ameren MPS group and subject to the variance are the Meredosia Energy Center (Morgan County) and the Hutsonville Energy Center (Crawford County).

As stated above, the IPCB granted IPH and Medina Valley a variance from the requirement of Section 225.233(e)(3)(C)(iii) to comply with an overall SO2 annual emission rate of 0.25 lb/mmBtu in 2015 and 2016 for the time period from January 1, 2015, through December 31, 2019, and from the requirement of Section 225.233(e)(3)(C)(iv) to comply with an overall SO2 annual emission rate of 0.23 lb/mmBtu for the time period from January 1, 2017 through December 31, 2019. This variance was granted subject to numerous conditions including, but not limited to, the following:

In evaluating the variance submitted by Illinois, EPA assessed the effect the variance would have on the emissions reductions expected under the MPS as currently approved into the Regional Haze SIP. Under the conditions of the currently approved Regional Haze SIP, the Ameren MPS group would be expected to emit 335,774 tons of SO2 for the 2013-2020 time period. Under the variance, the Ameren MPS group is limited to 327,996 tons of SO2 over that same time period; 7,778 tons less than would be expected under the current SIP.

In addition, EPA evaluated the variance to ensure that the alternative measures contained in the variance continue to provide better visibility protection than the application of BART on BART-subject units. Because the deadline for implementation of BART level controls in Illinois is 2017 (within 5 years of approval of Illinois' SIP), EPA compared the 2017 emissions under the variance to the application of typical Best Available Control Technology (BACT) control levels to the BART subject units in the Ameren MPS group. BACT limits are imposed on new units or units undergoing major modifications. Therefore, BART limits, which by definition apply to relatively old existing units, are unlikely to be lower than the limits that would apply to a new unit and would in many cases be significantly higher.

Table 1 shows SO2 emissions reductions of 74,348 tons in 2017 if typical BACT limits were applied to BART subject sources in the Ameren MPS group. With the variance, Table 1 shows SO2 emissions reductions of 119,833 tons in 2017. More reductions are required in 2017 under the variance than would be required by the application of typical BACT limits to BART subject sources. Even assuming that the 22,360 MMBtu generated at the Hudsonville and Meredosia units would be shifted to other units in the group, applying the 0.35 pound/MBtu group average results in an additional 3,913 tons of emissions under the variance in 2017, or a total of 54,188 tons of SO2. This would result in 2017 SO2 emissions reductions under the variance of 115,920 tons, which remains 41,572 tons greater than emissions reductions under the application of BACT at BART subject sources. In addition, for the reasons set forth in EPA's approval of the Illinois regional haze sip (77 FR 39946) and summarized above, EPA continues to conclude that the significantly greater emission reductions required under the variance will yield greater progress toward visibility protection as compared to the benefits of a conservative estimate of BART. Therefore, EPA concludes that the revised limits under the variance continue to satisfy BART requirements for the Ameren MPS Group sources.

In evaluating the approvability of the variance, EPA must also consider whether the SIP revision meets the requirements of section 110(l) of the CAA, 42 U.S.C. 7410(l). To be approved, a SIP revision must not interfere with any applicable requirement concerning attainment, reasonable further progress, or any other applicable requirement of the CAA. Currently, the SIP establishes overall annual SO2 emissions rates for the Ameren MPS Group, beginning in 2010. The SIP allows flexibility in achieving these overall emissions rates, not requiring reductions at any particular source. It should be noted that none of the Ameren MPS Group sources are located in a PM2.5 nonattainment area and the only source located in an SO2 nonattainment area is the E.D. Edwards facility in Peoria County. The variance adds specific conditions applicable to this facility, including the requirement that the E.D. Edwards, Joppa, and Newton Energy Centers continue to burn low sulfur coal through December 31, 2019, and that E.D. Edwards permanently retire Unit 1 as soon as allowed by the Midcontinent Independent Transmission System Operator, Inc. The variance will not result in any increase in SO2 emissions, but rather will result in fewer SO2 emissions over the 2013-2020 time period. In addition, the measures contained in the variance provide better visibility protection than the application of BART on BART-subject units. Therefore, the variance will not interfere with attainment, reasonable further progress, or any other applicable requirement of the CAA.

EPA is proposing to approve the IPH and Medina Valley variance, submitted by IEPA on September 3, 2014, as a revision to the Illinois Regional Haze SIP.

In this rule, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference Illinois Pollution Control Board Order PCB 14-10, effective November, 21, 2013. The EPA has made, and will continue to make, these documents generally available electronically through www.regulations.gov and/or in hard copy at the appropriate EPA office (see the ADDRESSES section of this preamble for more information).

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.);

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

This rule is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

When submitting comments, remember to:

1. Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

2. Follow directions—EPA may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

3. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

4. Describe any assumptions and provide any technical information and/or data that you used.

5. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

6. Provide specific examples to illustrate your concerns, and suggest alternatives.

7. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

8. Make sure to submit your comments by the comment period deadline identified.

This rulemaking addresses June 20, 2013, submissions and a January 28, 2015, clarification from the Wisconsin Department of Natural Resources (WDNR) intended to address all applicable infrastructure requirements for the 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS.

Under section 110(a)(1) and (2) of the CAA, states are required to submit infrastructure SIPs to ensure that their SIPs provide for implementation, maintenance, and enforcement of the NAAQS, including the 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS. These submissions must contain any revisions needed for meeting the applicable SIP requirements of section 110(a)(2), or certifications that their existing SIPs for the NAAQS already meet those requirements.

EPA highlighted this statutory requirement in an October 2, 2007, guidance document entitled “Guidance on SIP Elements Required Under Sections 110(a)(1) and (2) for the 1997 8-hour Ozone and PM2.5 1 National Ambient Air Quality Standards” (2007 Guidance) and has issued additional guidance documents, the most recent on September 13, 2013, entitled “Guidance on Infrastructure State Implementation Plan (SIP) Elements under CAA Sections 110(a)(1) and (2)” (2013 Guidance). The SIP submissions referenced in this rulemaking pertain to the applicable requirements of section 110(a)(1) and (2), and address the 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS.

EPA is acting upon the SIP submissions from Wisconsin that address the infrastructure requirements of CAA section 110(a)(1) and (2) for the 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS. The requirement for states to make SIP submissions of this type arises out of CAA section 110(a)(1), which states that states must make SIP submissions “within 3 years (or such shorter period as the Administrator may prescribe) after the promulgation of a national primary ambient air quality standard (or any revision thereof),” and these SIP submissions are to provide for the “implementation, maintenance, and enforcement” of such NAAQS. The statute directly imposes on states the duty to make these SIP submissions, and the requirement to make the submissions is not conditioned upon EPA's taking any action other than promulgating a new or revised NAAQS. Section 110(a)(2) includes a list of specific elements that “[e]ach such plan” submission must address.

EPA has historically referred to these SIP submissions made for the purpose of satisfying the requirements of CAA section 110(a)(1) and (2) as “infrastructure SIP” submissions. Although the term “infrastructure SIP” does not appear in the CAA, EPA uses the term to distinguish this particular type of SIP submission from submissions that are intended to satisfy other SIP requirements under the CAA, such as SIP submissions that address the nonattainment planning requirements of part D and the Prevention of Significant Deterioration (PSD) requirements of part C of title I of the CAA, and “regional haze SIP” submissions required to address the visibility protection requirements of CAA section 169A.

This rulemaking will not cover three substantive areas that are not integral to acting on a state's infrastructure SIP submissions: (i) Existing provisions related to excess emissions during periods of start-up, shutdown, or malfunction (“SSM”) at sources, that may be contrary to the CAA and EPA's policies addressing such excess emissions; (ii) existing provisions related to “director's variance” or “director's discretion” that purport to permit revisions to SIP approved emissions limits with limited public notice or without requiring further approval by EPA, that may be contrary to the CAA; and, (iii) existing provisions for PSD programs that may be inconsistent with current requirements of EPA's “Final NSR Improvement Rule,” 67 FR 80186 (December 31, 2002), as amended by 72 FR 32526 (June 13, 2007) (“NSR Reform”). Instead, EPA has the authority to address each one of these substantive areas in separate rulemakings. A detailed history, interpretation, and rationale as they relate to infrastructure SIP requirements can be found in EPA's May 13, 2014, proposed rule entitled, “Infrastructure SIP Requirements for the 2008 Lead NAAQS” in the section, “What is the scope of this rulemaking?” (see 79 FR 27241 at 27242-27245).

EPA's guidance for these infrastructure SIP submissions is embodied in the 2007 Guidance referenced above. Specifically, attachment A of the 2007 Guidance (Required Section 110 SIP Elements) identifies the statutory elements that states need to submit in order to satisfy the requirements for an infrastructure SIP submission. As discussed above, EPA issued additional guidance, the most recent being the 2013 Guidance that further clarifies aspects of infrastructure SIPs that are not NAAQS specific.

Pursuant to section 110(a), states must provide reasonable notice and opportunity for public hearing for all infrastructure SIP submissions. WDNR provided notice of a public comment period on May 1, 2013, held a public hearing at WDNR State Headquarters on June 10, 2013, and closed the public comment period on June 14, 2013. Two comments were received, expressing support for improved environmental protection and air quality.

Wisconsin provided a detailed synopsis of how various components of its SIP meet each of the applicable requirements in section 110(a)(2) for the 2008 ozone, 2010 NO2, and 2010 SO2 NAAQS, as applicable. The following review evaluates the state's submissions.

This section requires SIPs to include enforceable emission limits and other control measures, means or techniques, schedules for compliance, and other related matters. However, EPA has long interpreted emission limits and control measures for attaining the standards as being due when nonattainment planning requirements are due.2 In the context of an infrastructure SIP, EPA is not evaluating the existing SIP provisions for this purpose. Instead, EPA is only evaluating whether the state's SIP has basic structural provisions for the implementation of the NAAQS.

Comment Period

The EPA is extending the previously announced public-comment period. The public comment period will end on May 20, 2015, rather than April 20, 2015. This will ensure that the public has sufficient time to review and comment on all of the information available, including the proposed rule and other materials in the docket.

In the “Rules and Regulations” section of this Federal Register, EPA is authorizing these changes by a direct final rule. EPA did not make a proposal prior to the direct final rule because we believe this action is not controversial and do not expect adverse comments that oppose it. We have explained the reasons for this authorization in the preamble to the direct final rule. Unless we receive written adverse comments which oppose this authorization during the comment period, the direct final rule will become effective on the date it establishes, and we will not take further action on this proposal. If we get comments that oppose this action, we will withdraw the direct final rule and it will not take immediate effect. We will then respond to public comments in a later final rule based on this proposal. You may not have another opportunity for comment. If you want to comment on this action, you should do so at this time.

A. Part 1627. LSC initially promulgated 45 CFR part 1627 in 1983 to improve its oversight of and accountability for LSC funds transferred by recipients to third parties. 48 FR 54206, 54207, Nov. 30, 1983. Prior to the issuance of part 1627, LSC did not regulate subawards of its funds. LSC intended part 1627 to apply to all transfers of LSC funds, which it described in the rule as subgrants, fees and dues, contributions, transfers to other recipients (considered a type of subgrant), training and education activities, and payments to tax-sheltered annuities, retirement accounts, and pensions on behalf of employees. Id. at 54209. LSC did not intend the rule to govern a recipient's procurement of goods and services for its own use. 48 FR 28485, June 22, 1983; 48 FR 54206, 54209, Nov. 30, 1983.

In the proposed rule for part 1627, LSC defined the term subgrant as

In part 1627, LSC established the process by which a recipient could seek approval of a proposed subgrant, the maximum duration of a subgrant, the recipient's responsibilities for ensuring compliance with LSC's fiscal and audit requirements, and the recipient's responsibility to repay any disallowed costs. 48 FR 54206, 54209, Nov. 30, 1983. LSC also asserted its own rights to oversee subgrants to ensure the subgrantees' compliance with the LSC Act and other applicable statutes, LSC's regulations, and Corporation guidelines and instructions. Id. A separate section of the rule made these requirements applicable to subgrants from one LSC recipient to another. Id. Because a subgrant of LSC funds from one LSC recipient to another is a transfer of funds granted by the same agency, LSC established reporting, accounting, and repayment rules for these types of arrangements that reflect LSC's relationship to both parties. Id. at 54210.

LSC last revised part 1627 in 1996. LSC published an interim rule to reflect the complete prohibition on the use of LSC funds to pay fees or dues enacted as part of its fiscal year 1996 appropriations act (“FY96 appropriations act”). Sec. 505, Public Law 104-134, 110 Stat. 1321 (1996). LSC also added a requirement that recipients establish adequate recordkeeping policies to document compliance with part 1627. 61 FR 45753, 45754, Aug. 29, 1996. The subgrant provisions remained unchanged, as did the provisions prohibiting contributions of LSC funds to other organizations and allowing recipients to make payments to tax-sheltered annuity funds, retirement accounts, or pension funds on behalf of its employees. Id. at 45753. The interim rule became final with only minor, non-substantive changes in 1997. 62 FR 19417, Apr. 21, 1997.

B. Part 1610. Part 1610 implements the statutory restrictions on the use of non-LSC funds by LSC recipients. 45 CFR 1610.1. Originally promulgated in 1976, part 1610 has been revised relatively frequently due to changes in statutory restrictions and in LSC's policies regarding the application of those restrictions. As with part 1627, LSC amended part 1610 in 1996 and 1997 to implement new restrictions Congress placed on recipients' LSC and non-LSC funds through the FY96 appropriations act. Sec. 504, Public Law 104-134, 110 Stat. 1321 (1996). Relevantly, in the December 1996 final rule, LSC added § 1610.7 to govern the application of the LSC Act restrictions and the FY96 appropriations act restrictions to recipient transfers of LSC funds and non-LSC funds to third parties. 61 FR 63749, 63752, Dec. 2, 1996. Newly added § 1610.7 also established requirements for aligning a third-party's priorities for the use of transferred funds with the LSC recipient's priorities and for timekeeping on cases and matters undertaken with the transferred funds. Id.

LSC issued a new interim rule in March 1997 in which it removed transfers of non-LSC funds from § 1610.7. 62 FR 12101, Mar. 14, 1997. LSC made this change to part 1610 in response to an order issued by the United States District Court for the District of Hawaii preliminarily enjoining LSC from enforcing the application of some of the FY96 appropriations act restrictions to non-LSC funds. Id.; see also Legal Aid Society of Hawaii v. Legal Services Corporation, 961 F. Supp. 1402 (D. Haw. 1997). LSC made no other changes to § 1610.7 as it applied to transfers of LSC funds. Section 1610.7 became final with only minor, non-substantive changes. 62 FR 27695, 27699, May 21, 1997.

In 2010, LSC revised part 1610 in response to legislation that removed the FY96 appropriations act restriction on recipients' ability to claim or collect attorneys' fees. 79 FR 21506, 21508, Apr. 26, 2010. The 2010 revision did not affect § 1610.7.

A. Office of Inspector General Audit of the Technology Initiative Grant Program. In 2010, LSC's Office of Inspector General (OIG) conducted an audit of the Corporation's Technology Initiative Grant (TIG) program. Among its findings was a conclusion that LSC improperly applied part 1627 to the TIG program. Audit of Legal Services Corporation's Technology Initiative Grant Program, Report No. AU-11-01, at 41-44, Dec. 2010. In support of its finding, OIG looked to the definition of the term subrecipient, particularly the portion stating that the entity receiving the award of LSC funds “agree[s] to conduct certain activities specified by or supported by the [original] recipient related to the recipient's programmatic activities. Such activities would normally include those that might otherwise be expected to be conducted by the recipient itself[.]” Id. at 41; see also 45 CFR 1627.2(b)(1). Based on this language, OIG found that

OIG reached the same conclusion regarding the application of § 1610.7 to third-party payments of TIG funds. Id. at 50.

OIG noted in its report that

OIG recommended that LSC Management “initiate a process to amend LSC regulations to account for [unique features of TIG projects]. . . .” Id. at 44. Management responded that LSC would review the subgrant rule “to determine whether it adequately accounts for the unique features of TIGs” and to determine whether to make recommendations for revising part 1627 to the Board of Directors. Id. Management also affirmed its reading of the subgrant rule by stating that it had consulted the Office of Legal Affairs to distinguish between “programmatic subgrants” and “non-programmatic expenditures for goods and services. . . .” Id. at 45. OIG considered Management's proposal to be responsive, but noted that its own recommendation contemplated rulemaking beyond merely making changes to part 1627. Id. OIG stated that it would leave the recommendation open until “all actions are completed and the OIG is notified of the results.” Id.

B. 2012 Initiation of Rulemaking. Consistent with its response to OIG's recommendation, LSC Management presented a Rulemaking Options Paper (“ROP”) and Management recommendation to the Operations and Regulations Committee (“Committee”) of the LSC Board of Directors (“Board”) at its quarterly meeting on April 16, 2012. In the ROP, LSC staff discussed options for addressing two issues raised by OIG's report. The first set of options pertained to LSC's oversight of TIG subawards to third parties that were not considered subgrants. The second set of options related to OIG's recommendation to revise the regulations to account for the special features of TIGs.

With respect to LSC's oversight of non-subgrant awards of TIG funds, OIG was satisfied that LSC's newly adopted TIG third-party contracting policy addressed its concerns. OIG consequently closed the related recommendations. In light of this development, Management recommended against rulemaking to respond to OIG's recommendations. The Committee voted to adopt Management's recommendation.

LSC developed three options to address OIG's concern that TIG subawards were not treated properly as subgrants. LSC first proposed that the Board could choose not to engage in rulemaking on the matter and let Management continue to apply its interpretation of the subgrant rules at part 1627 and the transfer rule at part 1610. LSC's next options each contemplated rulemaking, but in opposing directions. The second option proposed initiating rulemaking to adopt Management's interpretation of part 1627: That in order to be considered a subgrant, the award to a third party must be for carrying out the recipient's overall programmatic purpose of providing legal assistance to eligible clients. The last option was to initiate rulemaking to adopt OIG's interpretation of the rule: That a subgrant is any award to a third party to carry out the programmatic purposes of the particular grant from which the award is made.

In its memo to the Committee, Management recommended that the Committee initiate rulemaking to amend parts 1610 and 1627. Management believed that both rules should be amended to reflect LSC's “longstanding reading of these rules—that is, that both rules are designed to address legal services activities.” Management explained that the transfer rule, which takes the definition of “transfer” substantially from part 1627,

Management further explained that its interpretation avoids absurd results in other contexts. For example, LSC makes disaster relief grants to recipients whose offices have been damaged or destroyed by natural disasters. Those grants may be used to hire contractors to rebuild the offices or purchase new office supplies. Under OIG's reading, Management said, the building contractor would become a subgrantee under part 1627 because the purpose of the emergency grant is to help the recipient rebuild. Under Management's interpretation of parts 1610 and 1627, it would not.

The Committee accepted Management's recommendation. On April 16, 2012, the Chairman of the Committee presented the Committee's recommendation to initiate rulemaking on parts 1610 and 1627 to the Board of Directors for a vote. Some members of the Board raised concerns that because conflicting interpretations of parts 1610 and 1627 were the impetus for the rulemaking, rulemaking was perhaps an inefficient and inappropriate vehicle for resolving the dispute. Rather than voting on the Committee's recommendation, the Board voted to return the issue to the Committee to determine whether LSC could adopt a particular interpretation of parts 1610 and 1627 through a policy document rather than through rulemaking.

In response to the Board's instruction, the Committee directed LSC and OIG staff to determine whether LSC had options other than rulemaking to resolve the ambiguity regarding which subawards were covered by part 1627. The Committee met telephonically on June 18, 2012, to discuss the results of the staff deliberations. Both OIG and Management concluded that rulemaking was necessary to ensure that part 1627 reflected Management's concept of subgrants as awards to a third party for carrying out part of an LSC recipient's grant to provide legal services to eligible clients. The Committee concurred, and voted again to recommend that the Board initiate rulemaking to revise the subgrant rule.

On July 27, 2012, the Chairman of the Committee presented the Committee's recommendation to the Board of Directors. The Board accepted the recommendation and directed LSC staff to develop a draft rule for the Board's consideration, and OIG closed the related recommendation from its report. The rulemaking, however, became a lower priority on the Committee's agenda as a result of two factors. The first was the issuance of LSC's Pro Bono Task Force Report, which led to the extensive rulemaking process to revise part 1614. The second was the need to revise parts 1613 and 1626 to accommodate legislative changes to LSC's authority to provide legal assistance to individuals facing criminal charges in tribal courts and to certain non-citizen victims of violence, respectively. LSC revived the part 1627 rulemaking as a priority item on its 2015-2016 rulemaking agenda.

On April 12, 2015, the Committee voted to recommend that the Board publish this NPRM in the Federal Register for notice and comment. On April 14, 2015, the Board accepted the Committee's recommendation and approved publication of the NPRM.

As will be discussed in more detail below, LSC proposes to revise part 1627 to adopt Management's interpretation of the rule as applying only to those subgrants awarded to third parties for the purpose of carrying out legal assistance activities authorized by the recipient's LSC grant. LSC also proposes to transfer § 1610.7, which governs the applicability of the restrictions placed upon acceptance of LSC funds by the LSC Act and § 504 of LSC's fiscal year 1996 appropriations act, to part 1627. Finally, LSC proposes to transfer existing §§ 1627.4, 1627.5, and 1627.7 from part 1627 to part 1630, which governs the allowability and allocability of costs to LSC grants. LSC seeks comments on each of the proposed changes.

§ 1627.1 Purpose. LSC proposes to revise this section to state more clearly that part 1627 establishes the requirements for subgrants of LSC funds.

§ 1627.2 Definitions. LSC proposes to alphabetize the definitions for ease of reference. Because LSC is proposing to relocate existing § 1627.4 to part 1630, LSC proposes to remove the definition of membership fees or dues currently located in paragraph (c) of this section.

§ 1627.2(a) Private attorney. LSC proposes to adopt the definition of the term private attorney established by 45 CFR part 1614.

§ 1627.2(b) Programmatic. LSC proposes to define the term programmatic to mean “activities or functions carried out for the purpose of providing legal assistance, as defined in § 1002 of the LSC Act, 42 U.S.C. 2996a(5).” Programmatic activities do not include the provision of goods or services by vendors or consultants that the recipient would not be expected to provide itself.

LSC proposes defining programmatic to explicitly reference the definition of legal assistance provided in the LSC Act to ensure that Management's interpretation of part 1627 applies. In other words, activities are programmatic only if they are conducted in furtherance of a recipient's grant to provide legal assistance to eligible clients. Activities are not programmatic if they are technical in nature, such as the provision of web development services.

§ 1627.2(c) Recipient. LSC proposes to remove recipients of grants or contracts awarded under section 1006(a)(3) of the LSC Act, 42 U.S.C. 2996e(a)(3), from the definition of recipient. Section 1006(a)(3) of the LSC Act authorizes LSC “to undertake directly, or by grant or contract, the following activities relating to the delivery of legal assistance—research . . . training and technical assistance, and [] to serve as a clearinghouse for information.” 42 U.S.C. 2996e(a)(3). LSC proposes to remove these types of awards from the scope of part 1627 because, as Congress stated, the activities funded through these awards are related to the delivery of legal assistance, but are not themselves an integral part of a recipient's delivery of legal assistance. LSC currently does not make awards under § 1006(a)(3) of the LSC Act; if LSC did, 45 CFR part 1630, LSC's cost standards and procedures, would continue to govern entities receiving such awards.

§ 1627.2(d) Subgrant. LSC proposes to revise the definition of subgrant currently in § 1627.2(b)(2). LSC proposes to adopt a definition that substantially mirrors the definition of subaward contained in the Uniform Grants Guidance (UGG), 2 CFR 200.92, which applies to Federal awards. LSC proposes to revise the definition to make clear that the purpose of the award is to carry out part of the recipient's grant to provide legal assistance and to remove the references to “pass-through entities.” LSC is not bound by the UGG, and does not intend, by adopting this definition, to obligate itself or its recipients to abide by the rules for pass-through entities and subgrantees established by the UGG.

LSC proposes to retain the exclusion from the definition of subgrant for judicare arrangements or contracts with private attorneys for the direct delivery of legal assistance to recipients' clients. LSC also seeks comment regarding the $25,000 threshold for private attorney involvement (PAI) contracts supported with LSC funds. During the rulemaking to revise part 1614 on PAI, LSC received a comment recommending that LSC increase the threshold from $25,000 to $60,000 to account for inflation since LSC established the $25,000 threshold in 1983. 70 FR 61770, 61780, Oct. 15, 2014. After consideration, LSC determined that it would benefit from receiving additional information before making any adjustments to the threshold. For this reason, LSC specifically requests comments on whether it should amend the $25,000 threshold, on what amount LSC should set as the new threshold, and providing justification for the proposed threshold.

§ 1627.2(e) Subrecipient. LSC proposes to simplify the existing definition of subrecipient currently located at § 1627.2(b)(1). LSC proposes to move relevant portions of the current definition to the definitions of programmatic and subgrant to improve clarity. The revised definition will continue to make clear that a single entity may be a subrecipient with respect to some activities, while not being a subrecipient for other activities it conducts for a recipient.

§ 1627.3 Characteristics of subgrants. LSC proposes to add a new § 1627.3 stating the factors that recipients should consider in determining whether a potential award is a subgrant and requiring recipients to support subgrants using funds, rather than goods or services. LSC proposes to add this section to provide recipients with a framework for determining whether a proposed award to a third party is a subgrant subject to the requirements of this part. This section will make clear that subgrants are awards to third parties that support a recipient's delivery of legal assistance to eligible clients, consistent with Management's interpretation of part 1627.

The first two paragraphs of proposed § 1627.3 are taken substantially from the UGG, specifically 2 CFR 200.330. Paragraph (a) adopts the language at § 200.330(c), which explains that the listed characteristics are indicative of a subgrant, but need not all be present in order for an award to be considered a subgrant. Paragraph (b) sets forth the characteristics of a subgrant from § 200.330(a), with minor revisions to make clear that the context for subgrant activities and the performance of the subrecipient is the LSC recipient's legal services work.

In considering whether an award should be a subgrant, the primary question is whether the work the subrecipient is doing essentially substitutes for the recipient's legal services work. The following examples demonstrate whether certain types of awards to third parties meet the characteristics of a subgrant.

Example 1: An LSC recipient provides an award to another legal services organization to conduct telephone intake and refer cases either to private attorneys for handling or to another organization if the caller is not eligible for LSC-funded legal assistance. This award would properly be considered a subgrant because it meets all five of the characteristics. First, the subrecipient is responsible for determining who is eligible, including whether the person's case is within the recipient's priorities, for legal assistance under the recipient's LSC grant. Second, the subrecipient's performance in referring cases to private attorneys is measured in relation to the recipient's objectives for referring cases to private attorneys in order to meet the requirements of the PAI rule. Third, the subrecipient has responsibility for programmatic decisionmaking because it determines which types of cases it will refer to private attorneys and which it will refer to another provider. Fourth, as it acknowledges in the subgrant agreement, the subrecipient is responsible for adhering to applicable LSC program requirements specified in the award. Finally, the subrecipient will use the LSC funds to carry out legal assistance activities authorized by LSC's governing statutes and regulations, as opposed to providing goods or services for the benefit of the recipient.

Example 2: An LSC recipient provides an award to a web designer to develop an online portal for clients and other stakeholders to obtain general legal information about particular areas of law, such as divorces and bankruptcies, as well as contact information for the legal services providers in the state. This award would not be a subgrant because it does not have most of the characteristics set forth in § 1627.3(b). The web designer does not determine eligibility to receive legal assistance under the recipient's LSC grant, nor does it have responsibility for programmatic decision making. The designer does not have its performance measured in relation to whether the recipient's objectives for providing legal services are met, and it is not required to adhere to the programmatic requirements set forth in the recipient's award from LSC. With respect to the fifth characteristic—that the subrecipient uses LSC funds to carry out a program for a public purpose specified in LSC's governing statutes and regulations, rather than providing goods or services for the recipient's benefit—there is room for debate about whether the web designer's work is for the public purpose of providing legal information to eligible clients, or is instead technical services provided for the benefit of the recipient. On balance, however, this type of award appears to be considered more appropriately as a procurement contract.

LSC reminds recipients that awards of LSC funds to third parties that do not meet the characteristics of subgrants, including procurements of services, must meet the applicable requirements of 45 CFR part 1630, as well as the Property Acquisition and Management Manual (PAMM).

Proposed paragraph (c) states that any award to a third party that is determined to be a subgrant based on an analysis of the factors in paragraph (b) must be supported using LSC funds. LSC has learned that some recipients have entered into agreements with other entities in which the recipients provided goods, including office space and office supplies, in exchange for the other entities' carrying out PAI activities on behalf of the recipient. The recipients in question did not seek prior approval of these agreements because they were exchanges of goods and services, rather than funds; therefore, the recipients did not consider the arrangements to be subgrants subject to the requirements of part 1627.

As an organization responsible for disbursing and ensuring accountability for the use of appropriated public funds, LSC must be able to determine that any funds it awards are spent consistent with the terms of its governing statutes and regulations. It is difficult to ensure that goods and services, which may be purchased in whole or in part with LSC funds, transferred to a third party are used in a manner consistent with LSC's governing statutes. Ensuring the accountability of LSC-supported resources is particularly crucial when the resources are provided to a third party that conducts restricted activities in addition to the activities that it is carrying out on behalf of an LSC recipient. In order to ensure the proper use of LSC funds by any entity receiving those funds or resources supported by those funds, LSC believes that any arrangement qualifying as a subgrant under § 1627.3(b) must be paid for with actual funds and not with goods or services.

§ 1627.4 Requirements for all subgrants. LSC proposes to transfer existing § 1627.4, prohibiting the use of LSC funds to pay membership fees or dues, to part 1630. LSC proposes this transfer to limit the scope of part 1627 to subgrants and to move a provision pertaining to the allowability of costs to the part of LSC's regulations governing cost standards. To accommodate the inclusion of new § 1627.3, LSC proposes to restructure existing § 1627.3 and redesignate it as § 1627.4. LSC also proposes to revise the text of certain paragraphs to reflect changes to the grant approval process and the resulting changes to the subgrant approval process.

§ 1627.4(a) Corporation approval of subgrants. LSC proposes to revise paragraph (a) to tell recipients how to submit subgrant applications for approval. The process will vary based on the type of grant—Basic Field or special—for which the recipient seeks to award a subgrant, and the time at which the recipient is seeking approval.

In paragraph (a)(1)(i), LSC proposes that recipients must submit applications for subgrants of Basic Field Grant funds at the same time as recipients submit their proposals for Basic Field Grant funding. This would consolidate the subgrant approval process with the main grant competition process. LSC also proposes to prescribe the format and substance of requests for subgrant approval annually through notice in the Federal Register. Finally, in paragraph (a)(1)(ii), LSC proposes to inform recipients of its decision to approve, disapprove, or suggest modifications to the proposed subgrants prior to or at the same time as it informs recipients of its decision whether to award Basic Field Grant funding.

In paragraph (a)(2), LSC proposes to formalize in regulation its current process for requesting and approving subgrants in its special grant programs. The application and award processes for special grants proceed on different schedules from the Basic Field Grant application and award process. LSC's special grant programs are all programs outside of Basic Field Grants—which include Basic Field-Migrant and Basic Field-Native American grants. TIG and the Pro Bono Innovation Fund (PBIF) grants are examples of special grants, as are disaster relief grants.

As described in proposed paragraph (a)(2)(i), recipients currently submit applications for approval of subgrants in special grant programs after LSC has awarded them grants. Because the special grant programs are highly competitive, LSC structured the process this way to avoid making recipients invest significant amounts of time in developing, finalizing, and executing subgrant agreements for projects that ultimately are not funded. To allow for flexibility in the form and substance of subgrant applications for the special grant programs, LSC also proposes in this paragraph to publish the requirements for subgrant applications on its Web site and in the Federal Register on an annual basis.

In paragraph (a)(2)(ii), LSC proposes to adopt existing § 1627.3(a)(2) in substantial part. LSC proposes to require recipients to submit applications for subgrant approval at least 45 days prior to the start date of the subgrant. LSC will consider and make a decision to approve, disapprove, or suggest modifications to applications for approval. Recipients may resubmit for approval applications to which LSC suggested modifications or that LSC has disapproved. LSC proposes to omit the sentence deeming subgrants approved if LSC fails to make a decision on the subgrant application within the specified period of time. LSC is committed to making timely decisions on recipient requests for subgrant approval and does not believe the current policy is consistent with its responsibility to ensure that recipients spend their LSC funds efficiently and effectively.

Finally, LSC proposes to establish in § 1627.4(a)(3) a process for the submission and approval of subgrant applications during the grant period for both Basic Field and special grants. LSC recognizes that unanticipated situations, such as the need to terminate and replace an underperforming subrecipient, may cause a recipient to need approval of a subgrant during the grant period. For mid-grant subgrant applications, LSC proposes in paragraph (a)(3)(i) that recipients should submit an application, using the format prescribed by LSC on its Web site and in the Federal Register. Finally, LSC proposes to adopt the 45-day period for submission of applications established in paragraph (a)(2)(ii) of this section.

LSC proposes conforming changes to existing § 1627.3(a)(3), which will be relocated to § 1627.4(a)(4).

LSC proposes to remove existing § 1627.3(a)(4), which authorized the extension of subgrants that were being executed at the time part 1627 became effective in 1983. This rule is obsolete and should be removed from part 1627. Finally, LSC proposes to relocate existing § 1627.3(b)(3), which requires recipients to seek Corporation approval of any substantial changes in the scope, objectives, or funding amount of a subgrant, to § 1627.4(a)(5) without change. LSC proposes this change to place all requirements for Corporation approval of subgrant proposals or substantial changes within the same paragraph.

§ 1627.4(b) Duration of subgrant. LSC proposes to revise paragraph (b) to establish the maximum length of subgrant periods. For Basic Field grants, LSC proposes to limit subgrant periods to one year and to require recipients to submit a new application for each subgrant in each year of the Basic Field grant. For special grants, including TIG and PBIF grants, LSC proposes to allow the maximum subgrant period to match the period of the recipient's special grant.

Recipients of Basic Field grants must either compete for new grants or apply for renewal of their current grants annually. This schedule supports a conclusion that recipient's subgrants should likewise be reviewed annually to ensure that the subgrants comply with LSC's statutes and regulations, and that the subgrants represent an effective and efficient use of the recipient's LSC resources.

By contrast, special grants are for discrete, time-limited projects that may require recipients to engage the subrecipient for the life of the project in order to secure the subrecipient's participation. Additionally, LSC requires special grant recipients to report more frequently about their progress toward meeting project milestones or objectives. This increased reporting allows LSC to assess whether a recipient's subgrants are performing effectively and efficiently throughout the grant period. Because reporting on the performance of a special grant, including the performance of subrecipients of special grant funds, occurs more frequently than once a year, it is not necessary for LSC to limit the maximum duration of a subgrant awarded as part of a special grant to one year.

For similar reasons, LSC proposes to treat subgrant funds remaining at the end of the grant year differently. In paragraph (b)(1), LSC proposes to retain the existing language stating that unexpended Basic Field subgrant funds will be considered part of the recipient's available LSC funds. In paragraph (b)(2), LSC proposes to require recipients to return funds remaining on a special grant program subgrant at the end of the grant term to LSC, unless the recipient requests and receives approval from the Corporation to retain such funds. This approach is consistent with the current terms of both the TIG and PBIF grant assurances, which allow recipients to ask LSC for approval to retain any funds that were awarded by LSC to carry out the project, but that were not spent because of lower costs or increased efficiencies in the operation of the project.

LSC proposes to redesignate existing § 1627.3(b)(2) as § 1627.4(b)(3) with revisions. The most substantive of the proposed revisions deletes the references to termination and denials of refunding as the exclusive events for which recipients should have procedures for the orderly termination of subgrants, and replaces them with general language that subgrants should terminate “in the event that the recipient is no longer an LSC recipient.” LSC proposes adopting the general language to reflect that a recipient's policies governing the orderly termination of subgrants should apply in any instance where the recipient ceases to be an LSC recipient, including termination by LSC, voluntary termination by the recipient, or a failure to receive funding through competition. The other changes LSC proposes are editorial.

§ 1627.4(c) Recipient responsibilities. For ease of reference, LSC proposes to restructure and consolidate the paragraphs of existing § 1627.3 governing the recipient's particular oversight and repayment obligations into a new § 1627.4(c). Proposed paragraphs (c)(1) and (2) adopt the first two sentences of existing § 1627.3(c) regarding recipients' duties to ensure that their subrecipients comply with LSC's financial and audit provisions and to ensure that their subrecipients properly spend, account for, and audit subgrant funds, respectively. LSC proposes to relocate existing § 1627.3(d), which requires a recipient to repay LSC for any disallowed expenditures of LSC funds incurred by a subrecipient, to paragraph (c)(3).

§ 1627.4(d) Accounting of funds. LSC proposes to restructure and consolidate the paragraphs of existing § 1627.3 governing the accounting of subgrant funds into a new § 1627.4(d). This paragraph states that subgrants of LSC funds are subject to the audit and financial requirements of the Audit and Accounting Guide for Recipients and Auditors. LSC proposes to delete the last two sentences in existing § 1627.3(c), which authorize recipients to enter into subgrant agreements that provide for an alternate auditing method. LSC is not aware that this provision has been used and proposes to remove it as unnecessary.

§ 1627.4(e) Oversight. LSC proposes to relocate existing § 1627.3(e) to new § 1627.4(e) with minor editorial changes.

§ 1627.5 Applicability of restrictions, timekeeping, and recipient priorities; private attorney involvement subgrants. LSC proposes to transfer existing § 1627.5, prohibiting the use of LSC funds to make contributions or gifts to other organizations or individuals, to part 1630. LSC proposes this transfer to limit the scope of part 1627 to subgrants and to move another provision pertaining to the allowability of costs to the part of LSC's regulations governing cost standards.

Additionally, because LSC has considered subgrants and transfers as functionally the same, LSC proposes to transfer 45 CFR 1610.7, the transfer rule, to part 1627 and redesignate it as § 1627.5. The restrictions listed in 45 CFR 1610.2—restrictions established by both the LSC Act and the FY96 appropriations act—will continue to apply to all subgrants. LSC proposes to make only minor edits to paragraphs (a) and (b) for clarity.

§ 1627.5(c) Timekeeping. LSC proposes to move the timekeeping requirement to its own paragraph and revise the requirement itself. Currently, § 1610.7(b)(2) requires only that recipients “maintain records of time spent on each case or matter undertaken with the funds transferred.” In the preamble to the 1997 final rule, LSC tied the timekeeping requirement to the language in Section 504(a)(10)(A) of the FY96 appropriations act, which prohibited LSC funds from being awarded to any person or entity unless “prior to receiving the financial assistance, such person or entity agrees to maintain records of time spent on each case or matter with respect to which the person or entity is engaged.” Sec. 504(a)(10)(A), Pub. L. 104-134, 110 Stat. 1321, 1321-54. LSC stated in the preamble that the rule did not require recipients “to keep time in accordance with the Corporation's timekeeping regulation, 45 CFR part 1635,” but also did not provide guidance to recipients about the level of timekeeping that would be sufficient “to ensure accountability for [the transferred] funds.” 62 FR 27695, 27697, May 21, 1997. To further confuse matters, part 1614 states that “[i]f any direct or indirect time of staff attorneys or paralegals is to be allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.” 45 CFR 1614.7(a)(1).

LSC considered multiple options for creating coherent timekeeping requirements for recipients and subrecipients alike. LSC considered leaving the current language in place and adding language describing the minimum requirements for subrecipient timekeeping. Doing so would allow recipients and subrecipients flexibility to develop timekeeping systems that would ensure accountability for expenditures of LSC funds, while minimizing the administrative burden to the subrecipient. LSC also considered making the part 1635 timekeeping requirements applicable to non-PAI subgrants and the part 1614 timekeeping requirements applicable to PAI subgrants. This option would be consistent with the way in which LSC's regulations direct recipients to document time spent on the recipients' non-PAI and PAI activities, respectively.

LSC ultimately chose to propose a requirement that all subrecipients comply with the part 1635 timekeeping requirements for all LSC-funded subgrant activities. LSC chose this option for three reasons. First, LSC learned that some recipients have interpreted § 1610.7(b)(2) as not requiring subrecipients to keep time records. This interpretation is incorrect. Section 1610.7(b)(2) clearly states that subrecipients “are required to maintain records of time spent on each case or matter undertaken” with LSC funds, although LSC also stated in the preamble to the 1997 final rule for part 1610 that subrecipients did not have “to keep time in accordance with the Corporation's timekeeping regulation, 45 CFR part 1635.” 62 FR 27695, 27697, May 21, 1997. Second, LSC's experience overseeing subgrants over the eighteen years since LSC revised § 1610.7 has given LSC reason to believe that clear timekeeping requirements for subgrants will lead to increased accountability for the use of LSC funds by subrecipients. Finally, LSC believes that having three distinct timekeeping requirements creates unnecessary confusion about which requirements apply to which uses of LSC funds. LSC's proposal will make the timekeeping provisions of parts 1627 and 1635 consistent and will reflect the methods that recipients use to document time charged to their LSC grants.

LSC understands that some subrecipients may be small organizations that currently do not have, or may find it difficult to develop, the capacity to maintain timekeeping records that comply with part 1635. For that reason, LSC specifically seeks comment on the proposal to require all subrecipients to comply with the timekeeping requirements of part 1635.

§ 1627.5(d) PAI subgrants. LSC proposes to redesignate existing § 1610.7(c) as § 1627.5(d) and to make editorial changes to the paragraph for clarity. LSC also proposes to adopt a new paragraph (d)(2) stating that, with respect to PAI subgrants, all funds that a recipient uses to support the subgrant are deemed to be LSC funds for purposes of the restrictions listed in 45 CFR 1610.2. LSC requires its recipients to expend an amount equal to at least 12.5% of its LSC grant to PAI activities. See 45 CFR 1614.1(a). This language gives recipients discretion about whether they spend entirely LSC funds, entirely non-LSC funds, or some combination of the two, on PAI activities. The reason for the proposed paragraph is to put in the regulation the analysis reflected in AO-2009-1004 that activities carried out as part of a recipient's PAI program, regardless of the source of funds, must be consistent with LSC's governing statutes and regulations. See Advisory Opinion AO-2009-1004, at 3-4, June 19, 2009.

§ 1627.6 Subgrants to other recipients. LSC proposes to make only non-substantive editorial changes to this section.

§ 1627.7 Recipient policies, procedures, and recordkeeping. LSC proposes to transfer existing § 1627.7, regarding recipient payments to tax-sheltered annuities, retirement accounts, and pensions, to part 1630. LSC proposes this transfer to limit the scope of part 1627 to subgrants and to move the final provision in part 1627 pertaining to the allowability of costs to the part of LSC's regulations governing cost standards. LSC proposes to redesignate existing § 1627.8 as § 1627.7 without revision.

§ 1610.2 Definitions. LSC proposes to eliminate the term transfer and replace it with the term subgrant, as defined in § 1627.2(d). LSC intended the current definition of transfer to mirror the definition of subgrant, but it does not. The slight differences between the two definitions have caused confusion about whether the terms are coextensive. LSC has treated the terms as functionally equivalent since it enacted § 1610.7 in 1997. LSC's proposed change will eliminate ambiguity by combining the two concepts into one term. The proposed change will not affect the current order of definitions in § 1610.2. If this change becomes final, LSC will need to amend § 1610.8(a)(2) to conform with the change.

§ 1610.7 Transfers of LSC funds. As described more fully above, LSC proposes to transfer this section to part 1627 because it governs the application of the LSC Act and FY96 appropriations act restrictions listed in § 1610.2 to a subrecipient's LSC and non-LSC funds. LSC believes that because § 1610.7 effectively applies to subgrants, it should be located in part 1627 with the rest of the subgrant rules. Should this proposed change become final, LSC will need to redesignate existing §§ 1610.8 and 1610.9 to reflect the removal of § 1610.7.

In the interest of making its regulations easier to use, LSC proposes to limit the scope of part 1627 to provisions applicable to subgrants. Three provisions of part 1627 are not related to subgrants, but instead proscribe the use of LSC funds to pay membership fees or dues (§ 1627.4) or to make contributions to other entities or individuals (§ 1627.5), or allow recipients to make certain benefits contributions on behalf of its employees (§ 1627.7). LSC proposes to transfer these three provisions to part 1630, which establishes LSC's cost standards. LSC proposes to redesignate these provisions as §§ 1630.14-16. LSC does not propose to revise the text of these provisions at this time.

For the reasons stated in the preamble, the Legal Services Corporation proposes to amend 45 CFR chapter XVI as follows:

LSC issued its first instruction on recipient fund balances in 1983 to implement what is now the Corporation's longstanding objective of ensuring the timely expenditure of LSC funds for the effective and economical provision of high quality legal assistance to eligible clients. 48 FR 560, 561, Jan. 5, 1983. Later that year, LSC published a redrafted version titled Instruction 83-4, Recipient Fund Balances (“Instruction”). 48 FR 49710, 49711, Oct. 27, 1983. The Instruction limited the ability of recipients to carry over LSC funds that remained unused at the end of the fiscal year. Id. Specifically, the Instruction provided that, in the absence of a waiver granted by the Corporation, a recipient's end-of-year fund balance in excess of 10% of its total annual LSC support must be repaid to LSC. Id. The Instruction also prohibited a recipient from ever retaining a fund balance in excess of 25% of its annual support, thereby limiting the Corporation's waiver granting authority to fund balance amounts of 25% or less of a recipient's annual support. Id.

In 1984, LSC substantially adopted the Instruction in a regulation published at 45 CFR part 1628. 49 FR 21331, May 21, 1984. Part 1628 remained unchanged until 2000, when LSC promulgated revisions in response to public comments and staff advice indicating that the rule was “more strict” than the fund balance requirements of most federal agencies. 65 FR 66637, 66638, Nov. 7, 2000. The revisions provided the Corporation with more discretion to grant a recipient's request for a waiver to retain a fund balance of up to 25% of its annual support. Id. at 66637. In addition, for the first time, the rule authorized the Corporation to exercise its discretion to grant a recipient's request for a waiver to retain a fund balance in excess of 25% of its annual support. Id. The Corporation reasoned that, by allowing for waivers to retain that amount, “[t]he recipient can better plan and find the best use for the funds, rather than being forced into a hasty expenditure simply to avoid the limitation on the carryover of fund balances.” Id. at 66640. The rule, however, limited the situations justifying a recipient's request to retain more than 25% of its annual support to “three specific circumstances when extraordinary and compelling reasons exist for such a waiver,” currently listed in § 1628.3(c). Id. at 66638. These extraordinary and compelling circumstances were restricted to the following situations when a recipient received income derived from its use of LSC funds: “(1) An insurance reimbursement; (2) the sale of real property; and (3) the receipt of monies from a lawsuit in which the recipient was a party.” Id. at 66639. Although the Operations and Regulations Committee (Committee) “considered using a standard of `extraordinary and compelling' for these waivers with the three specific circumstances discussed as examples,” it ultimately decided “that more guidance was required to avoid erosion of the standard,” and the three circumstances became exclusive limitations, not mere examples. Id. at 66640. The LSC Board of Directors (Board) adopted the revisions to part 1628 on November 20, 1999, and the revised rule has been in effect since December 7, 2000. Id. at 66637-38.

On April 12, 2015, the Committee voted to recommend that the Board publish this NPRM in the Federal Register for notice and comment. On April 14, 2015, the Board accepted the Committee's recommendation and voted to approve publication of this NPRM.

During the nearly 15-year period since part 1628 was last revised, LSC grantees have experienced various unexpected occurrences outside of those listed in § 1628.3(c) that caused them to accrue fund balances in excess of 25% of their annual support. These occurrences have included an end-of-year transfer of assets from a former grantee to a current grantee, a natural disaster that resulted in a significant infusion of use-or-lose disaster relief funds from non-LSC sources, and receipt of a large attorneys' fees award in an LSC-funded case near the end of the fiscal year. In each of these situations, LSC determined that part 1628 currently prevents some recipients with legitimate reasons for having fund balances exceeding 25% of their annual LSC support from seeking and obtaining needed waivers.

On January 22, 2015, LSC staff presented the Committee with a proposal to consider revising part 1628 to address the difficulties faced by recipients that encounter these types of occurrences, yet are unable to justify a waiver request to retain a balance in excess of 25% of their annual support under the current standards. The Committee authorized LSC management to add the matter to the Committee's rulemaking agenda so that it may address this issue. In addition, the Committee requested that LSC consider whether the rule's 10% and 25% caps on fund balance carryovers are still appropriate in light of the most recently available data on recipient waiver requests.

LSC first considered revising part 1628 to allow recipients to request, and the Corporation to grant, waivers to retain fund balances in excess of 25% of annual support in extraordinary and compelling circumstances not covered by the current rule. Current § 1628.3(c) is limited to three circumstances where a recipient receives an infusion of derivative income, or income derived from the recipient's use of LSC funds. As discussed above, however, recent situations have included the sudden infusion of non-derivative, use-or-lose income under other circumstances that significantly disrupted grantee expenditure plans. As a result, LSC staff determined that the list of extraordinary and compelling circumstances in § 1628.3(c) should be illustrative, rather than limited, so that recipients that encounter truly unforeseeable scenarios can avoid having to make the difficult choice between returning large portions of unused balances and hurriedly spending funds before the end of the fiscal year. LSC staff similarly determined that such circumstances should include situations where a grantee is incapable of expending its existing LSC funds as originally planned due to a natural disaster or other catastrophic event, as opposed to only situations where new income is received. Therefore, the Corporation proposes providing an illustrative list of extraordinary and compelling circumstances justifying waivers to retain a fund balance in excess of 25% of a recipient's annual support. LSC believes that this proposed revision will allow grantees to devise more organized and efficient spending plans when faced with unexpected events that are not listed in current § 1628.3(c). Providing recipients with sufficient time to plan for the expenditure of unused funds in excess of 25% of their annual support would also advance the Corporation's policy of ensuring effective and economical provision of high quality legal assistance to eligible clients.

LSC next considered revising part 1628 to provide that a recipient may submit a waiver request prior to submitting its annual audited financial statements. Section 1628.4(a) currently provides that a recipient may request a waiver within 30 days of the submission of its annual audited financial statements. The preamble to the 2000 rule, however, states that “[t]his rule does not preclude the recipient's request for a Corporation action on a waiver prior to the close of the fiscal year, it simply does not require the Corporation to provide for advance approval.” 65 FR 66637, 66640, Nov. 7, 2000. LSC staff determined that incorporating the current preamble language on permitting waiver requests prior to the close of the fiscal year into the regulatory text of part 1628 would benefit grantees by allowing them to seek assurance that they will not have to return or spend a large portion of excess LSC funds by the end of the fiscal year, thereby enabling them to plan for the following fiscal year with greater certainty.

LSC staff also found that limiting early approvals to requests for waivers to retain balances in excess of 25% of annual support would be proper in light of the unique and significant burdens on financial planning faced by recipients that experience extraordinary and compelling circumstances. In addition, because a recipient's estimate of the fund balance it anticipates accruing by the end of the fiscal year may end up being higher or lower than the recipient's actual fund balance at the time it submits its audited financial statements, LSC staff determined that recipients that receive approval of a waiver request prior to submitting their audited financial statements must submit updated information consistent with the requirements of § 1628.4(a) after the submission of their audited financial statements. Accordingly, an advance approval would be, in effect, an approval of the reasons for a waiver and of the proposed amount to be retained, but the recipient must later provide confirmation of the actual amount of excess funds it has accrued. LSC therefore proposes revising the rule to provide that recipients that face extraordinary and compelling circumstances may submit a waiver request to retain a fund balance in excess of 25% of their annual support prior to the submission of their annual audited financial statements, and that the Corporation may, in its discretion, grant approval of such requests pending confirmation of the actual amount to be retained once the audited financial statements are finalized.

The Corporation also considered revising part 1628 to require LSC management to provide notice to the Board of any decision to grant a waiver in excess of 25% of a recipient's annual support. LSC is retaining the “extraordinary and compelling circumstances” standard for granting such waivers, and anticipates that recipients will continue to seek such waivers only in circumstances where they experience extreme events that prevent them from expending more than 25% of their annual LSC support. Furthermore, the granting of LSC funding and exercising discretion with regard to carryover, suspension or termination of such funding has been and should remain a management, not a Board, function. The Corporation will continue to exercise its discretion with the same good faith and fidelity to the objective of ensuring the timely expenditure of LSC funds as it has done since part 1628 was last revised in 2000. Therefore, LSC proposes to retain its current policy of leaving discretion to grant waivers to retain excess recipient fund balances with LSC management.

Finally, pursuant to the Committee's request, LSC considered whether the rule's 10% and 25% caps on fund balance carryover amounts should be adjusted in accordance with recent trends in waiver requests. LSC's Office of Compliance and Enforcement (OCE) provided LSC staff with statistics on all waiver requests that have been submitted to the Corporation over the last six years. After analyzing the data, LSC decided as a policy matter that the respective percentage caps are set at the appropriate levels. According to the statistics, the average annual number of waiver requests to retain a fund balance that exceeds 10% of a recipient's LSC support is easily manageable by OCE. Furthermore, waiver requests to retain a balance in excess of 25% of LSC support are exceedingly rare, and the Corporation does not expect a significantly greater number of such requests if the proposed revisions to part 1628 are adopted. LSC believes that the current percentage caps on carryover amounts are necessary to ensure that recipients are spending their grants on providing legal services, while offering an appropriate amount of flexibility to retain unused fund balances. The Corporation therefore proposes retaining the current percentage cap amounts, but requests comments on whether to change them.

LSC proposes to revise § 1628.3(c) to eliminate the language limiting the extraordinary and compelling circumstances in which LSC may grant a recipient's request for a waiver to retain a fund balance that exceeds 25% of its annual LSC support. Whereas existing § 1628.3(c) is limited to three circumstances where a recipient receives a sudden infusion of income, the proposed section expands the types of situations that the Corporation, in its discretion, may consider to be extraordinary and compelling circumstances. The proposed section adds the example of a natural disaster to illustrate a situation where a recipient would be unable to expend its current LSC grant for reasons other than the receipt of new funds. The proposed section also adds the example of “a payment from an LSC-funded lawsuit, regardless of whether the recipient was a party to the lawsuit.” This revision makes clear that a recipient may request a waiver to retain a fund balance in excess of 25% of its annual support when it receives an award as the result of a court decision in an LSC-funded case, even if the recipient was not named as a party to the action.

LSC also proposes to make a minor revision to § 1628.3(d) to reflect the proposed redesignation of certain paragraphs in § 1628.4.

LSC proposes to add a new § 1628.4(d) to expressly allow recipients that face extraordinary and compelling circumstances to submit a waiver request to retain a fund balance in excess of 25% of their annual support prior to the submission of their annual audited financial statements. This addition will require existing § 1628.4(d), (e), (f), and (g) to be redesignated to § 1628.4(e), (f), (g), and (h).

The proposed new § 1628.4(d) will list the written requirements for a waiver request to retain a fund balance in excess of 25% of annual support. These requirements vary from the ones listed in § 1628.4(a), which apply only to requests made within 30 days after the submission of a recipient's annual audited financial statements. There are two reasons for the variation. First, because the annual audited financial statement of a recipient requesting an early waiver approval would not yet be available to the Corporation, recipients can provide only an estimate of the fund balance they anticipate to accrue by the time their statements are submitted. Second, because a recipient may submit a waiver request either before or after the close of the fiscal year, the proposed section will require recipients to provide a “plan for disposing of the excess fund balance,” as opposed to a plan for the “current fiscal year” as required by § 1628.4(a). Additionally, proposed § 1628.4(d) requires recipients receiving approval to later submit updated information consistent with the requirements of paragraph (a) to confirm the actual fund balance amount to be retained by the recipient, as determined by reference to its annual audited financial statements.

Finally, LSC proposes to revise the introductory text of paragraph (a), as well as paragraphs (a)(2) and (3), for clarity and readability.

For the reasons set forth in the preamble, the Legal Services Corporation proposes to revise 45 CFR part 1628 as follows:

The revisions and additions read as follows: