81 FR 42245 - Participation by Religious Organizations in USAID Programs

AGENCY FOR INTERNATIONAL DEVELOPMENT

Federal Register Volume 81, Issue 125 (June 29, 2016)

This rule amends AID regulations to address provisions which are more restrictive than relevant Federal case law and relevant legal opinions issued by the United States Department of Justice with respect to the applicability of the Establishment Clause to the use of Federal funds.

[Federal Register Volume 81, Number 125 (Wednesday, June 29, 2016)]
[Rules and Regulations]
[Pages 42245-42248]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-15293]


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AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Part 205

RIN 0412-AA69


Participation by Religious Organizations in USAID Programs

AGENCY: U.S. Agency for International Development (USAID).

ACTION: Final rule.

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SUMMARY: This rule amends AID regulations to address provisions which 
are more restrictive than relevant Federal case law and relevant legal 
opinions issued by the United States Department of Justice with respect 
to the applicability of the Establishment Clause to the use of Federal 
funds.

DATES: This rule will be effective July 29, 2016.

FOR FURTHER INFORMATION CONTACT: Mark Brinkmoeller, Director, Center 
for Faith-Based and Community Initiatives, USAID, Room 6.07-023, 1300 
Pennsylvania Avenue NW., Washington, DC 20523; telephone: (202) 712-
4080 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION: 

I. Background

    On October 20, 2004, USAID published its final rule (the ``Current 
Rule'') on participation by religious organizations in USAID programs 
(69 FR 61716, codified at 22 CFR parts 202, 205, 211, and 226). The 
Current Rule implemented Executive Branch policy that, within the 
framework of Constitutional guidelines, religious organizations should 
be able to compete on an equal footing with other organizations for 
USAID funding. The Current Rule revised USAID regulations pertaining to 
grants, cooperative agreements and contracts awarded for the purpose of 
administering grant programs to ensure their compliance with this 
policy and to clarify that religious organizations are eligible to 
participate in programs on the same basis as any other organization, 
with respect to programs for which such other organizations are 
eligible.
    Among other things, the Current Rule provided that USAID funds 
could be used for the acquisition, construction, or rehabilitation of 
structures only to the extent that those structures were used for 
conducting eligible activities under the specific USAID program. Where 
a structure also is used for inherently religious activities, the 
Current Rule clarified that USAID funds could not exceed the cost of 
those portions of the acquisition, construction, or rehabilitation that 
were attributable to eligible activities. The Current Rule went on to 
state that USAID funds could not be used for acquisition, construction, 
or rehabilitation of sanctuaries, chapels, or any other room that a 
religious congregation that is a recipient or sub-recipient of USAID 
assistance uses as its principal place of worship. Since the 
implementation of the Current Rule, USAID has found that this provision 
has constricted its ability to pursue the national security and foreign 
policy interests of the United States overseas.
    The Supreme Court has not addressed whether the Establishment 
Clause applies extraterritorially. In Lamont v. Woods, 948 F.2d 825, 
834 (2d Cir. 1991), the Second Circuit concluded that the Establishment 
Clause applies to government grants to foreign religious institutions 
located abroad. In dicta in Lamont, the court said that ``domestic 
Establishment Clause jurisprudence has more than enough flexibility to 
accommodate any special circumstances created by the foreign situs of 
the expenditures, although the international dimension does . . . enter 
into the analysis.'' \1\ The Second Circuit also suggested that the 
requirements of the Establishment Clause might be relaxed in certain 
circumstances, noting that ``the fact that a particular grantee is the 
only channel for aid, or that a given country has no secular education 
system at all, may warrant overriding the usual Establishment Clause 
presumption.'' Id., at 842. Under these circumstances, the Second 
Circuit said, ``[t]he court would then scrutinize the manner in which 
the institution may use its grant in an attempt to ascertain whether, 
in reality, the grant would have the principal or primary effect of 
advancing religion.'' Id. The Second Circuit also indicated that the 
foreign policy ramifications of the case made it particularly 
inappropriate to adopt a mechanical approach to the Establishment 
Clause. The final rule will permit USAID to take these considerations 
into account, in consultation with DOJ.
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    \1\ Id. at 841.
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    In addition, the Current Rule is more restrictive than at least two 
legal opinions written by the U.S. Department of Justice's Office of 
Legal Counsel. In a September 25, 2002 Memorandum Opinion for the 
General Counsel of FEMA, Authority of FEMA to provide Disaster 
Assistance to Seattle Hebrew Academy, the Office of Legal Counsel 
concluded that FEMA could provide a disaster assistance grant to the 
Seattle Hebrew Academy, for repairs to the Academy following the 
Nisqually Earthquake on February 28, 2001. The Current Rule may not 
permit USAID to provide assistance under similar circumstances to a 
religious school or other religious structure in the aftermath of a 
natural disaster overseas. In an April 30, 2003 Memorandum Opinion for 
the Solicitor of the Department of the Interior, Authority of the 
Department of the Interior to Provide Historic Preservation Grants to 
Historic Religious Properties Such as the Old North Church, the Office 
of Legal Counsel concluded that the Establishment Clause did not bar 
the award of historic preservation grants to the Old North Church or 
other active houses of worship that qualify for such assistance. The 
current rule does not permit the use of USAID funds for acquisition, 
construction, or rehabilitation of structures to the extent that those 
structures are used for inherently religious activities, and further 
does not permit the acquisition, construction, or rehabilitation of 
sanctuaries, chapels, or any other room that a religious congregation 
uses as its principal place of worship, and thus likely would not

[[Page 42246]]

permit USAID to provide similar historic preservation assistance to 
religious structures overseas.
    Because the Current Rule is more restrictive than the Office of 
Legal Counsel opinions in Seattle Hebrew Academy and Old North Church, 
and because it does not afford USAID the flexibility to evaluate the 
validity and scope of the Lamont considerations in specific contexts, 
USAID has concluded that the Current Rule unnecessarily limits its 
ability to effectively implement the foreign assistance programs of the 
United States. In carrying out its statutory mission, USAID should not 
unnecessarily adhere to a regulation that is more restrictive than the 
Establishment Clause requires. Accordingly, USAID is publishing this 
Final Rule so that part 205 will not prohibit USAID funds from being 
used for activities that are consistent with the Establishment Clause. 
The goal of USAID in promulgating this Final Rule is to ensure 
compliance with the Establishment Clause. This Final Rule does not 
include changes in response to Executive Order 13559; USAID, as part of 
a larger interagency effort, issued a Final Rule incorporating changes 
required by this Executive Order on April 4, 2016 in coordination with 
other agencies similarly updating their rules.

II. Rulemaking History

    On March 25, 2011, USAID published a proposed rule (the ``Proposed 
Rule'') in the Federal Register (76 FR 16712) that would amend part 205 
to more accurately reflect current Establishment Clause jurisprudence 
with respect to the use of Federal funds. Interested parties were given 
45 days to comment on the Proposed Rule. During the 45-day comment 
period, USAID received comments from 9 respondents. These comments are 
discussed below by topic.
    Comment: One commenter stated that the Proposed Rule did not differ 
very much from the Current Rule and questioned whether the proposed 
changes would lessen or alleviate the restrictions placed on USAID by 
the Current Rule.
    USAID Response: The Current Rule prohibits the use of USAID funds 
for the acquisition, construction, or rehabilitation of structures to 
the extent that those structures are used for inherently religious 
activities. Thus, for example, under the Current Rule USAID might be 
prohibited from constructing or rehabilitating public schools in 
Afghanistan, since all schools in the public education system in 
Afghanistan require at least one course in Islamic education. However, 
under the Final Rule promulgated today, USAID would be permitted to pay 
the full costs for the construction or rehabilitation of public schools 
in Afghanistan if funding conformed to the requirements of the 
Establishment Clause. Similarly, under the Current Rule USAID might be 
prohibited from constructing or rehabilitating religious schools that 
have suffered damage as a result of a manmade or natural disaster 
overseas. However, under the Final Rule, consistent with the 
Establishment Clause, USAID may be permitted to pay such costs, when 
such assistance is consistent with the Establishment Clause.
    Comment: A number of comments expressed concern that the Proposed 
Rule was contrary to Establishment Clause jurisprudence in that it 
proposed a ``new, untried, expansive standard'' and, as a result, would 
permit the use of direct aid for inherently religious activities or 
programs. In particular, concern was expressed that under the Proposed 
Rule USAID would use funds ``to acquire or construct houses of worship 
and other religious structures'' or would ``make grants to . . . 
congregations to cover the entire cost of constructing church 
buildings, synagogues, temples, and mosques.'' Concerns also were 
expressed because the Proposed Rule did not state whether it would 
apply only to the use of USAID funds outside of the United States or 
whether it also would apply to domestic use of such funds.
    Commenters pointed out that the standard, or criteria, set forth in 
the Proposed Rule appeared to be derived from Justice Thomas' plurality 
opinion in Mitchell v. Helms, 530 U.S. 793 (2000), which is not binding 
precedent, rather than from Justice O'Connor's concurring (and 
controlling) opinion in Mitchell, which prohibits direct funding of 
religious activities. Commenters also cited the Supreme Court's 
decisions in Tilton v. Richardson, 403 U.S. 672 (1971), Hunt v. McNair, 
413 U.S. 734 (1973), and Committee for Public Education v. Nyquist, 413 
U.S. 756 (1973), for the proposition that Federal funds may not be used 
for the construction, maintenance or repair of buildings in which 
religious activities take place.
    USAID Response: First, this Final Rule is intended only to apply to 
the use of USAID funds overseas. While USAID funds are expended in the 
United States for such activities as agricultural and scientific 
research, and training and education of foreign participants, USAID 
funds are not spent domestically for the acquisition, construction, or 
rehabilitation of physical structures (other than for USAID staff).
    Second, it is not USAID's intent to acquire or construct new houses 
of worship or other, similar religious structures (as opposed to 
rehabilitating or restoring existing religious structures). USAID has 
no plans to engage in such activity nor can USAID envision a factual 
scenario under which the agency would engage in such activity.
    Third, USAID agrees that the standard, or criteria, set forth in 
the Proposed Rule did not fully reflect the analysis of Justice 
O'Connor's concurring opinion in Mitchell. USAID did not intend for 
paragraph (d) of part 205.1, as revised in the Proposed Rule, to 
constitute the entire Establishment Clause analysis. Rather, USAID 
intended to conduct a more comprehensive legal analysis including but 
not limited to the criteria set forth in revised paragraph (d). 
Nevertheless, USAID acknowledges the validity of the concerns expressed 
by the commenters, and has decided not to adopt a formulaic approach to 
addressing the permissibility of the use of funds for future, proposed 
acquisition, construction, or rehabilitation of structures overseas. 
Rather, this Final Rule eliminates an attempt to define in a regulation 
the current state of appropriate Establishment Clause analysis as it 
applies to overseas programs, and instead reiterates that USAID 
programs must conform to the requirements of the Establishment Clause.
    While USAID agrees that current Establishment Clause jurisprudence 
requires the Agency to more closely track Justice O'Connor's concurring 
opinion in Mitchell, the Agency does not agree that the decisions in 
Tilton and Nyquist would prohibit the use of USAID funds for programs 
contemplated under the Proposed Rule. In its Seattle Hebrew Academy 
opinion, the Department of Justice's Office of Legal Counsel stated 
that FEMA disaster assistance grants are ``more closely analogous to 
the provision of `general' government services'' that the Court had 
approved ``than to the construction grants at issue in Tilton and 
Nyquist which were available only to educational institutions.'' In its 
Old North Church opinion, the Office of Legal Counsel stated that `` 
`significant portions' of the reasoning in Tilton and Nyquist are 
`subject to serious question in light of more recent decisions.' '' 
USAID intends to issue guidance to its staff outlining the types of 
activities it contemplates funding and when and how staff should 
consult with USAID's legal counsel. USAID's legal counsel

[[Page 42247]]

may in turn consult with the Department of Justice when appropriate.
    Comment: Some commenters stated that the Proposed Rule was 
inconsistent with President Obama's November 17, 2010 Executive Order 
on Fundamental Principles and Policymaking Criteria for Partnerships 
With Faith-Based and Other Neighborhood Organizations (Executive Order 
13559). In particular, concern was expressed that the Proposed Rule 
would authorize religious organizations to use USAID funds for the 
acquisition or construction of houses of worship or other structures 
used for inherently or explicitly religious activity. Direct support 
for such structures, according to comments received, would contravene 
Executive Order 13559, thereby conflicting with Administration policy. 
It also was pointed out that the Proposed Rule referred to ``inherently 
religious activities,'' while Executive Order 13559, in response to 
recommendations made by President Obama's Advisory Council on Faith-
Based and Neighborhood Partnerships, uses the term ``explicitly 
religious activities'' instead.
    USAID Response: It is not USAID's intention to permit recipients to 
use Federal funds for inherently religious activities, as such term is 
used in the Current Rule or for ``explicitly religious activities'' in 
contravention of Executive Order 13559. The Agency does not believe the 
Proposed Rule suggested otherwise. Nevertheless, with this Final Rule, 
USAID makes clear that its programs must conform to the requirements of 
the Establishment Clause.
    USAID is aware of the changes, or amendments, made to Executive 
Order 13279 (issued by President Bush on December 12, 2002) by 
Executive Order 13559 (issued by President Obama on November 17, 2010), 
and began procedures to effect those changes through further amendment 
to part 205. In that regard, USAID was an active member in an 
interagency working group, established pursuant to section 3 of 
Executive Order 13559, to review and evaluate existing agency 
regulations, guidance documents and policies that have implications for 
faith-based and other neighborhood organizations. The working group 
issued its report in April 2012. In August 2013, OMB issued guidance 
reconvening the Working Group to develop a plan for agency 
implementation of the Executive Order. USAID participated in that 
Working Group's development of a plan and issued a Notice of Proposed 
Rulemaking (NPRM) on August 6, 2015. Following the Working Group's 
review and analysis of comments received pursuant to that NPRM, USAID 
published a Joint Final Rule on that topic in conjunction with the 
other relevant agencies on April 4, 2016. This Final Rule does not 
affect the changes made by the April 4, 2016 Joint Final Rule.
    Comment: One commenter suggested that the Proposed Rule had been 
published without benefit or review by the Office of Management and 
Budget's Office of Information and Regulatory Affairs (OIRA).
    USAID Response: This is not correct. The Proposed Rule was indeed 
shared with OIRA prior to publication. The proposed rule was not deemed 
a significant regulatory action under Executive Order 12866. This Rule 
was submitted to OIRA for review prior to its publication in the 
Federal Register, and was deemed a significant regulatory action by 
OIRA.
    Comment: One commenter asserted that the Proposed Rule would create 
non-uniform rules across the U.S. Government. This would be 
inconsistent, according to the commenter, with Executive Order 13559 
which calls for ``uniformity in agencies' policies.''
    USAID Response: The quoted language in Executive Order 13559 refers 
to the purpose for which the President ordered the establishment of an 
Interagency Working Group on Faith-Based and Other Neighborhood 
Partnerships. The Executive Order does not address the issue of 
acquisition, construction, or rehabilitation of physical structures.
    Comment: Some comments expressed the view that the activities 
described in the Proposed Rule reflected unwise policy or that they 
violated fundamental, or core, principles of religious freedom and, 
therefore, should be rejected. Recognizing that the Constitution 
guarantees free exercise of religion, the commenters contended that the 
Constitution's prohibition on establishment of religion would preclude 
USAID from using taxpayer funds to construct and maintain houses of 
worship.
    USAID Response: As has been stated above, it is not USAID's intent 
to use funds to acquire or construct new houses of worship or other, 
similar religious structures (as opposed to rehabilitation or 
restoration of existing religious structures under certain 
circumstances) that are dedicated to religious activities. Thus, many 
of the concerns expressed should be alleviated. In addition, it should 
be noted that USAID would fund programs under this Final Rule for 
reasons that are neutral with respect to religion and do not take 
account of the religious or non-religious nature of the activities that 
might take place within the structure.
    USAID implements programs in countries where the principle of 
separation of church and state is not embraced, where there may be 
state-sponsored religion (e.g., there may be a Ministry of Religion), 
where there is only a religious school system, where the judicial 
system may be based upon or strongly influenced by state religion, and 
where there may be little religious diversity. Consequently, even 
guided by purely secular, developmental and foreign policy 
considerations, USAID may fund such programs as temporary structures 
used by Catholic parochial schools following an earthquake, or 
restoration of Buddhist temples as part of cultural and historical 
preservation programs. In none of these instances would USAID take 
action based on religious considerations. In none of these instances 
would USAID take action whose purpose was to support the explicitly 
religious activities conducted in these structures. Under such 
circumstances, USAID does not believe that funding of these programs 
would infringe the Constitution's principles of religious freedom, nor 
does USAID believe that such funding would promote the 
``establishment'' of religion in these foreign countries. See the 
Memorandum Opinions of the Department of Justice's Office of Legal 
Counsel in Seattle Hebrew Academy and Old North Church.
    Under the Final Rule, USAID may identify circumstances where, when 
considering implementing a program involving the acquisition, 
construction, or rehabilitation of structures that are used for 
explicitly religious activities in a country with an environment such 
as that described above, it might believe it necessary to go beyond the 
parameters set forth in the OLC opinions in Seattle Hebrew Academy and 
the Old North Church cases. In such cases, USAID would only implement 
such a program after consultation with the Department of Justice. To 
promote transparency, USAID commits to publishing a description of any 
specific program involving the acquisition, construction, or 
rehabilitation of structures it implements following such consultation 
on its Web site. USAID expects this to occur only on rare occasions. 
This Final Rule makes this consultation and publication commitment 
clear with additional text in section (d).
    Comment: One commenter referred to USAID's regulations on branding 
and marking and expressed concern that a house of worship or religious 
school

[[Page 42248]]

constructed with USAID funds would have a durable sign, plaque or other 
marking installed, thereby reflecting USAID (and U.S. Government) 
support for the religion observed in the house of worship or school.
    USAID Response: As previously stated, USAID has no intent to use 
funds to acquire or construct new houses of worship or other, similar 
religious structures (as opposed to rehabilitation or restoration of 
existing religious structures) that are dedicated to religious 
activities. Also, as previously stated, the likelihood that USAID would 
find circumstances where it would finance the construction of such 
structures is slim. In any event, USAID's regulations governing 
branding and marking include waiver provisions based on ``compelling 
political concerns.'' Should USAID funds be used for rehabilitation or 
restoration of existing religious structures, such as following a 
natural disaster overseas, the agency would avail itself of this waiver 
authority and would not install any type of sign, plaque or other 
marking identifying the structure with the U.S. Government.

III. Findings and Certifications or Impact Assessment

Regulatory Planning and Review

    This is a significant regulatory action and, therefore, is subject 
to review under section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is not a major 
rule under 5 U.S.C. 804. USAID has concluded that the current rule goes 
beyond the requirements of the Establishment Clause and other Federal 
law, and unnecessarily and unduly constrict USAID's ability to pursue 
the national security and foreign policy interests of the United States 
overseas. The changes do not, however, pose any new paperwork or 
reporting requirements, nor would they represent an increase in costs 
to either applicants for USAID funding or to USAID itself.

Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.), USAID has considered the economic 
impact of the proposed rule and has determined that its provisions 
would not have a significant economic impact on a substantial number of 
small entities.

List of Subjects in 22 CFR Part 205

    Foreign aid, Grant programs, Nonprofit organizations.

    For the reasons stated in the preamble, USAID amends chapter II of 
title 22 of the Code of Federal Regulations as follows:

PART 205--PARTICIPATION BY RELIGIOUS ORGANIZATIONS IN USAID 
PROGRAMS

0
1. The authority citation for part 205 continues to read as follows:

    Authority:  22 U.S.C. 2381(a).


0
2. Amend Sec.  205.1 as follows:
0
a. Revise paragraph (d).
0
b. Redesignate paragraphs (j) and (i) as paragraphs (i) and (k) 
respectively.
0
c. Add a new paragraph (j).
    The revision and addition read as follows:


Sec.  205.1  Grants and cooperative agreements.

* * * * *
    (d) USAID must implement its programs in accordance with the 
Establishment Clause. Nothing in this part shall be construed as 
authorizing the use of USAID funds for activities that are not 
permitted by Establishment Clause jurisprudence or otherwise by law. 
USAID will consult with the U.S. Department of Justice if, in 
implementing a specific program involving overseas acquisition, 
rehabilitation, or construction of structures used for explicitly 
religious activities, there is any question about whether such funding 
is consistent with the Establishment Clause. USAID will describe any 
program implemented after such consultation on its Web site.
* * * * *
    (j) Nothing in this part shall be construed as authorizing the use 
of USAID funds for the acquisition, construction, or rehabilitation of 
religious structures inside the United States.

Mark Brinkmoeller,
Director, Center for Faith-Based and Community Initiatives.
[FR Doc. 2016-15293 Filed 6-28-16; 8:45 am]
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