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Federal Register / Vol. 86, No. 7 / Tuesday, January 12, 2021 / Rules and Regulations other information that would be exempt from disclosure under FOIA.
Section 75.414c1i through iii and f, which established limits on the amount of indirect costs allowable under certain types of grants.
Section 75.477, which established that recipients could not include, in allowable costs under HHS grants, any tax penalty/payment imposed on an individual or on the employer for failure to comply with the individual or employer shared responsibility provisions, respectively.3
These new requirements became effective January 11, 2017.

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The Departments November 2019
Notice of Exercise of Enforcement Discretion and Proposed Rule As States and other recipients and subrecipients became aware of these new regulatory requirements, some began to complain to the Department about certain elements of 75.300c and d, contending, among other things, that application of some of the requirements in those provisions 1
unlawfully interfered with certain faithbased organizations protected speech and religious exercise, in violation of the Religious Freedom Restoration Act RFRA, 42 U.S.C. 2000bb, et seq., or the U.S. Constitution, 2 exceeded the Departments statutory authority, and 3 reduced the effectiveness of programs funded by the Department by excluding certain entities from participating in those programs. These communications, requests for exemptions or deviations, and complaints 4 caused the Department to look more closely at the 2016
rulemaking by which these and other provisions in the UAR were adopted.
The Departments examination raised serious concerns about compliance with certain requirements of the Regulatory Flexibility Act, and caused the Department to decide not to enforce the provisions added by the 2016 Rule, pending repromulgation. The Department issued that Notice of Exercise of Enforcement Discretion on November 1, 2019. See https
3 The Department had proposed, but did not finalize, a revision to 75.102, relating to requirements related to the Indian Self Determination and Education Assistance Act. Apart from this provision, which generated a significant number of comments, the Department received few comments on the proposed rule.
4 In addition to those specifically mentioned in the proposed rule, the Department received communications from individuals and organizations such as Senators and Members of Congress, state legislators, religious leaders including all of the Catholic Bishops of Pennsylvania, faith-based charities and charities operated by churches and religious orders, and public interest groups.

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www.hhs.gov/about/news/2019/11/01/
hhs-issues-proposed-rule-to-aligngrants-regulation.html issuance of proposed rule follows same-day issuance of a Notice of Nonenforcement of certain regulatory provisions; it was published in the Federal Register on November 19, 2019. Notice of Exercise of Enforcement Discretion, 84 FR 63809
Nov. 19, 2019.5
The Notice of Proposed Rulemaking The Department simultaneously published a proposed rule to repromulgate or revise the provisions of the UAR that had been adopted through the 2016 Rule. It proposed to repromulgate, without change, 75.305a, 75.365, and 75.414c1i iii and f. With respect to 75.477, the Department proposed to repromulgate only the exclusion from allowable costs of any employer payments for failure to offer health coverage to employees as required by 26 U.S.C. 4980H; it did not propose to repromulgate the provision with respect to shared responsibility payments for individuals because such tax penalty had been reduced to zero.
The Department proposed to amend 75.300 because it had received communication and complaints, requests for exceptions under 45 CFR
75.102, and lawsuits concerning 75.300c and d. It noted that it was preliminarily enjoined from enforcing 75.300c in the State of Michigan as to a particular subgrantees protected religious exercise. Buck v. Gordon, 429
F. Supp. 3d 447 W.D. Mich. 2019. It also described concerns expressed by some non-federal entities that requiring compliance with certain nonstatutory requirements of those paragraphs violates the Religious Freedom Restoration Act RFRA, 42 U.S.C.
2000bb, et seq., or the U.S. Constitution, exceeds the Departments statutory authority, or reduces the effectiveness of programs, for example, by reducing foster care placements in the Title IV
E program of HHSs Administration for Children and Families. The Department explained that these complaints and legal actions indicated that 75.300c and d imposed regulatory burden and created a lack of predictability and stability for both the Department and stakeholders with respect to these 5 The Department received several comments on the enforcement discretion notice. These comments primarily criticized the Department for ignoring the statements of Regulatory Flexibility Act compliance within the 2016 rule, and for not engaging in notice and comment prior to amending the rule. As this notice responds to comments and finalizes the proposed rule, those concerns are no longer at issue.

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provisions viability and enforcement.6
The Department also noted that some federal grantees had stated that they would require their subgrantees to comply with 75.300c and d, even if it meant some subgrantees with religious objections would leave the programs and cease providing services.
Such grantees and subgrantees provide a substantial percentage of services in some Department-funded programs and are effective partners of federal and state governments in providing such services.
As noted in the proposed rule, the Department believes that the departure of such grantees and subgrantees from Department-funded programs could likely reduce the effectiveness of those programs.
Accordingly, as an exercise of its discretion to establish requirements for its grant programs and to establish enforcement priorities for those programs, the Department proposed to amend 75.300c and d. It proposed to amend 75.300c to require compliance with all applicable statutory nondiscrimination requirements. It also proposed to amend 75.300d to specify its commitment to complying with all applicable Supreme Court decisions in administering its award programs, instead of singling out two specific Supreme Court decisions.
As the Department noted in the proposed rule, it had received several requests for exceptions from 75.300c and d under 45 CFR 75.102b allowing exceptions to part 75
requirements on a case-by-case basis. In January of 2019, the Department granted the State of South Carolina an exception from the provision in 75.300c that required the State to prohibit subgrantees from selecting among prospective foster parents on the basis of religion, to the extent that such prohibition conflicts with a subgrantees religious exercise, conditioned on the referral of potential foster parents who do not adhere to the subgrantees religious beliefs to other subgrantees, or to the South Carolina foster care program. The States request for a deviation or waiver from 75.300c and d noted that the child placing agencies working with South Carolina comply with the requirements of Social Security Act Title IVE, including the provision that they may not deny a person the right to become an adoptive or foster 6 In response to a request for information in 2017, some members of the public submitted comments to the Department citing possible burdens created by paragraphs c and d as they were included in the 2016 Rule. See https www.regulations.gov/
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