On April 17, the Department of Health and Human Services (HHS) published a notice of proposed rulemaking that seeks public comments on special requirements for organizations that receive HIV/AIDS funding from HHS. The rule would require "legal, financial, and organizational" separation between a grantee and any affiliate organization that does not adopt mandatory language opposing prostitution and sex trafficking. This "pledge requirement" is being challenged in court by groups that say the policy might stigmatize and alienate the people in need of HIV/AIDS prevention services and violates First Amendment rights because it applies to other programs that are not federally funded. Comments on the proposed regulation are due May 19.

In 2003, Congress passed the United States Leadership Against HIV/AIDS, Tuberculosis and Malaria Act (the "Leadership Act"), which authorized the President's Emergency Plan for AIDS Relief or PEPFAR. The act mandates that "no funds made available to carry out the Act … be used to provide assistance to any group or organization that does not have a policy explicitly opposing prostitution and sex trafficking." Therefore, all organizations receiving PEPFAR funds are required to adopt an organization-wide policy opposing prostitution. The law is now up for congressional reauthorization (H.R. 5501) with the "prostitution pledge" left intact.

In July 2007, the United States Agency for International Development (USAID) and HHS issued guidelines that allow recipient organizations to establish affiliates that may operate free of the pledge requirement. The proposed rule requires the grantee to have an extraordinary degree of separation between itself and the privately funded affiliate(s).

The proposed rule states, "Mere bookkeeping separation of Leadership Act funds from other funds is not sufficient. HHS will determine, on a case-by-case basis and based on the totality of the facts, whether sufficient physical and financial separation exists. The presence or absence of any one or more factors will not be determinative." Factors considered will "include but will not be limited to":

• Separate personnel, management, and governance;
• Separate accounts, accounting records, and timekeeping records;
• Degree of separation from facilities, equipment, and supplies used by the affiliated organization to conduct activities inconsistent with an anti-prostitution policy, and the extent of such activities by the affiliate;
• Extent to which there are materials that could be associated with the affiliated organization; and
• The extent to which HHS, the U.S. government, and the project name are protected from publicly being associated with the affiliated organization.

The anti-prostitution pledge requirement is being challenged in court by grantees who argue that the requirement violates their rights under the First Amendment. In Alliance for Open Society, Inc. v. USAID, the plaintiffs challenge the "pledge policy." In February 2008, Global Health Council and InterAction, which are membership organizations of international development and public health groups, were added as plaintiffs. The case is currently pending in the District Court for the Southern District of New York, which will wait to assess the policy's constitutionality until after the rulemaking process has ended.

Critics claim there are problems with vague language throughout the proposed rule. For example, as InterAction and Global Health Council point out in their motion, "The vagueness of the Policy Requirement and Guidelines is exacerbated by the particular vagueness of the factors the Defendants will consider in deciding whether recipients are 'physically and financially separate, many of which use vague terms 'the extent to which' and 'the degree of.' USAID Guidelines at 4. Recipients have no way of knowing how much of any of these factors is too much." There is also no definition of "affiliate."

The proposed HHS rule is modeled on a Legal Services Corporation (LSC) regulation, which requires legal aid programs that receive LSC funds to remain separate from other organizations that do work that cannot be paid for with federal funds. The HHS notice says the proposed criteria were "upheld as facially constitutional by the U.S. Court of Appeals for the Second Circuit in Velazquez v. Legal Services Corp., 164 F.3d 757, 767 (2d Cir. 1999), and Brooklyn Legal Services Corp. v. Legal Services Corp., 462 F.3d 219, 229-33 (2d Cir. 2006)," but does not note that the courts are still considering the constitutionality of how the LSC rule is applied.

Since 1996, LSC has placed severe restrictions how its funds can be used and extended these restrictions to private funds raised by legal services programs. In December 2001, a legal challenge against the restrictions was filed in the United States District Court for the Eastern District of New York. In 2004 the court struck down the physical separation requirement but denied the plaintiffs' challenge to the restrictions on direct LSC funding. Both parties appealed, and the U.S. Court of Appeals for the Second Circuit sent the case back to the lower court for reconsideration using a different legal standard to determine the constitutionality of the physical separation requirement.

Unlike the LSC rules, HIV/AIDS grantees operate internationally, which entails additional burdens that are not taken into account. For example, establishing a completely separate affiliate organization would require a new registration in a foreign country. Many countries may be suspicious of such activity and refuse to issue visas or work permits for more American workers. As InterAction and Global Health Council's motion stated, "The establishment of new and separate affiliates would also almost certainly cause havoc and long delays in the receipt of funds from abroad."

Written comments on the proposed rulemaking are due by May 19. They may be submitted online at regulations.gov or by e-mail to OGHA_Regulation_Comments@hhs.gov.