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Federal Register / Vol. 86, No. 7 / Tuesday, January 12, 2021 / Rules and Regulations
constitute a substantial burden on their exercise of religion that is not the least restrictive means of furthering a compelling government interest and, likely, constitute a violation of RFRA.
With respect to the Title IVE foster care and adoption program, the Department has determined in two contexts that this was the case, and a federal district court similarly issued a preliminary injunction against the Departments enforcement of such provisions in the case of a faith-based organization that participates in Michigans foster care and adoption program. The Department believes that this final rule constitutes the best way to avoid such burdens on religious exercise.
To appropriately focus on compliance with applicable Supreme Court decisions. The 2016 Rule made two specific Supreme Court decisions applicable to all recipients of the Departments grants, although those decisions only apply to state actors. The Department is committed to complying not just with those decisions, but all applicable Supreme Court decisions, which is what this final rule provides.
To limit uncertainty that would decrease the effectiveness of the Departments programs. Section 75.300c and d have raised questions about whether the Department exceeded its authority, disrupted the balance of nondiscrimination requirements adopted by Congress, generated requests for deviations or exceptions and lawsuits challenging the provisions, and sowed uncertainty for grant applicants, recipients, and subrecipients that could deter participation in Departmentfunded programs and, over time, undermine the effectiveness of those programs. The Department is under no legal obligation to impose such requirements and, accordingly, believes that it is appropriate to remove them in order to avoid such impacts to the Departments programs.
To remove an exclusion from allowable indirect costs to the extent that is no longer necessary. The 2016
Rule excludes from allowable indirect costs any tax penalty imposed on individuals for failure to maintain minimum essential coverage under the ACA. That tax penalty has since been reduced to zero, but individuals may still be paying such tax penalties.
Accordingly, the final rule limits the exclusion to tax penalties assessed for failure to maintain such coverage prior to January 1, 2019, when the penalty was reduced to zero.
Thus, as discussed in more detail elsewhere in the preamble, this final rule would
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Require recipients to comply with applicable federal statutory nondiscrimination provisions.34
Provide that HHS complies with applicable Supreme Court decisions in administering its award programs.
Not repromulgate the exclusion from allowable costs of the tax penalty, now reduced to zero, imposed on individuals for failure to maintain minimum essential coverage, except for tax penalties associated with failure to maintain minimum essential coverage prior to January 1, 2019, when the tax penalty was reduced to zero.
Repromulgate without change a provision which established that recipients could not include, in allowable costs under HHS grants, any tax penalty imposed on an employer for failure to comply with the employer mandate under the ACA.
Repromulgate without change a provision which addressed the applicability of certain payment provisions to states.
Repromulgate without change a provision which authorized the grant agency both to require recipients to permit public access to various materials produced under a grant and to place restrictions on recipients ability to make public any personally identifiable information or other information that would be exempt from disclosure under FOIA.
Repromulgate, with certain technical changes, a provision which established limits on the amount of indirect costs allowable under certain types of grants.
Alternatives Considered The Department carefully considered several alternatives, but rejected the potential alternatives for a number of reasons:
Alternative 1: Not make any changes to the previously issued regulatory provisions at issue. The Department concluded that this alternative would likely lead to additional legal challenges. Moreover, because of the RFRA issues presented by application of certain provisions in the section to certain faith-based organizations that participate in or seek to participate in Department-funded programs or activities, the Department would continue to be faced with either litigation over the Departments compliance with RFRA, or additional requests for exceptions or deviations from the provisions, both of which 34 The final rule would remove the provision which exempted the Temporary Assistance for Needy Families program from this provision because the changes to the provision render the exemption unnecessary.

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would require the expenditure of departmental resources to address, as well as the expenditure of resources by such faith-based organizations that participate in, or seek to participate in, Department-funded programs or activities consistent with their religious beliefs. Finally, the current requirements, if enforced, could have led to the exclusion of certain faithbased organizations from participating in the Departments programs as recipients or subrecipients and would likely have a negative impact on the effectiveness of such programs.
Alternative 2: Not make any changes to the regulatory provisions at issue, but promulgate a regulatory exemption for faith-based organizations whose religious exercise would be substantially burdened by the application of 75.300c and d in their current form. This would address the RFRA issues presented by application of certain provisions in the section to certain faith-based organizations that participate in or seek to participate in Department-funded programs or activities. However, this approach would not adhere to the balance struck by Congress on nondiscrimination provisions applicable to Department grant programs and, thus, would raise competing concerns that might require careful balancing.
Alternative 3: Revise 75.300c and d to enumerate all applicable nondiscrimination provisions and the programs and recipients/subrecipients to which the nondiscrimination provisions would apply. This alternative would require the Department to update the provision every time Congress created a new program for the Department to implement, adopted new nondiscrimination provisions, or revised existing nondiscrimination provisions. Moreover, since 75.300a already requires the grantmaking agency to communicate to awardees all relevant public policy requirements, including specifically all nondiscrimination requirements and incorporate them either directly or by reference in the terms and conditions of the Federal award, this alternative would provide no new benefits to the recipients of grants from the Departments grantmaking agencies.
Expected Benefits and Costs of the Final Rule The Department expects several benefits from this final rule. The final rule will better align the regulation to the statutory requirements adopted by Congress. This provides covered entities
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