Purchasing and Property Management

Issuing agencies

Abstract

This proposed rule revises the Legal Services Corporation's (LSC) definition of "capital improvement" by removing the threshold amount of LSC funds that must be expended on an improvement to real estate for the expenditure to qualify as a capital improvement. The proposed amendment would distinguish the definition of a capital improvement from the monetary thresholds required for prior approval; promote consistent tracking and oversight of LSC funds used for capital improvements; and strengthen accountability for LSC funds invested in recipients' real property.

Full Text

<html>
<head>
<title>Federal Register, Volume 91 Issue 213 (Thursday, November 5, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 213 (Thursday, November 5, 2026)]
[Proposed Rules]
[Pages 69766-69768]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22650]


=======================================================================
-----------------------------------------------------------------------

LEGAL SERVICES CORPORATION

45 CFR Part 1631


Purchasing and Property Management

AGENCY: Legal Services Corporation.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This proposed rule revises the Legal Services Corporation's 
(LSC) definition of ``capital improvement'' by removing the threshold 
amount of LSC funds that must be expended on an improvement to real 
estate for the expenditure to qualify as a capital improvement. The 
proposed amendment would distinguish the definition of a capital 
improvement from the monetary thresholds required for prior approval; 
promote consistent tracking and oversight of LSC funds used for capital 
improvements; and strengthen accountability for LSC funds invested in 
recipients' real property.

DATES: Comments must be submitted by 11:59 p.m. Eastern on December 21, 
2026.

ADDRESSES: You may submit comments by any of the following methods:
    [ssquf] Email: <a href="/cdn-cgi/l/email-protection#dfb3acbcadaab3bab2beb4b6b1b89fb3acbcf1b8b0a9"><span class="__cf_email__" data-cfemail="b5d9c6d6c7c0d9d0d8d4dedcdbd2f5d9c6d69bd2dac3">[email&#160;protected]</span></a>. Include ``Comments on 
Revision to Part 1631'' in the subject line of the message.
    [ssquf] Mail: Brittany Sims Nwankwoala, Assistant General Counsel, 
Legal Services Corporation, 1825 I St. NW, Ste. 800, Washington, DC 
20006, ATTN: Part 1631 Rulemaking.

[[Page 69767]]

    [ssquf] Hand Delivery/Courier: Brittany Sims Nwankwoala, Assistant 
General Counsel, Legal Services Corporation, 1825 I St. NW, Ste. 800, 
Washington, DC 20006, ATTN: Part 1631 Rulemaking.
    Instructions: Electronic submissions are preferred via email with 
attachments in Acrobat PDF format. LSC will not consider written 
comments sent to any other address or received after the end of the 
comment period.

FOR FURTHER INFORMATION CONTACT: Brittany Sims Nwankwoala, Assistant 
General Counsel, Legal Services Corporation, 1825 I St. NW, Ste. 800, 
Washington, DC 20006; (202) 295-1599 (phone), or <a href="/cdn-cgi/l/email-protection#82ecf5e3ece9f5ede3eee3e0c2eef1e1ace5edf4"><span class="__cf_email__" data-cfemail="3d534a5c53564a525c515c5f7d514e5e135a524b">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    The Legal Services Corporation Act of 1974 authorizes LSC to 
establish regulations governing the use of grant funds and to ensure 
appropriate stewardship of Federal resources. See 42 U.S.C. 2996g(e). 
LSC sets forth its procurement and property management requirements in 
45 CFR part 1631.
    In 2017, LSC revised parts 1630, pertaining to cost standards, and 
1631 to increase the prior approval threshold from $10,000 to $25,000 
to account for inflation and reduce unnecessary administrative burdens 
on recipients. This change also established $25,000 as the applicable 
threshold in all provisions governing prior approval, property, and 
procurement requirements. In 2022, LSC conducted a retrospective review 
of all regulations. It identified several additional areas within parts 
1630 and 1631 that recipients and LSC staff found difficult to 
administer consistently or that lacked sufficient clarity for grantees 
and oversight staff. In 2026, LSC initiated rulemaking to resolve those 
inconsistencies and increase the $25,000 prior approval threshold to 
$50,000 in Sec. Sec.  1630.3, 1630.6, 1631.8, and 1631.15. See 91 FR 
23228 (Apr. 30, 2026).
    During the 2026 rulemaking, however, LSC did not propose increasing 
the threshold in the definition of ``capital improvement'' in Sec.  
1631.2(a). Although LSC increased the threshold for obtaining prior 
approval for certain expenditures from $25,000 to $50,000, that 
amendment would not address which expenditures constitute capital 
improvements for purposes of part 1631. Rather, through subsequent 
conversations with the Office of Compliance Enforcement (OCE), LSC 
found that removing the threshold amount altogether would enhance LSC's 
ability to identify and account for all LSC funds used to improve real 
property. Currently, expenditures below the threshold may nevertheless 
constitute capital improvements and, when repeatedly made over time, 
could represent a significant investment of LSC funds in a recipient's 
real property. The $50,000 threshold for determining when prior 
approval is required remains separate from the definition of ``capital 
improvement.''

II. Remove the Threshold Amount in Definition of Capital Improvement

    LSC proposes to revise the definition of ``capital improvement'' in 
Sec.  1631.2(a) by removing any monetary threshold from the definition. 
Currently, Sec.  1631.2(a) defines ``capital improvement'' as spending 
more than $50,000 of LSC funds to improve real estate through 
construction or the addition of fixtures that become an integral part 
of the real estate. LSC proposes to remove the monetary threshold so 
that any improvement to real estate using LSC funds constitutes a 
capital improvement.
    LSC is undertaking this rulemaking to strengthen its oversight of 
LSC funds used to improve real property and ensure that recipients 
identify and account for such expenditures regardless of amount. The 
amendment also clarifies that an expenditure may constitute a capital 
improvement even if it does not meet the monetary threshold requiring 
LSC's prior approval. The character of an expenditure made with LSC 
funds as a capital improvement does not depend on its cost. An 
expenditure may improve real estate through construction or the 
addition of an integral fixture even when the amount of LSC funds used 
for that particular improvement is less than the applicable prior 
approval threshold.
    Removing the monetary threshold from the definition would also 
ensure that recipients identify and account for any LSC funds used for 
capital improvements regardless of the amount of the individual 
expenditure. Under the current definition, improvements costing less 
than $50,000 do not constitute ``capital improvements'' for purposes of 
part 1631. As a result, a recipient could make multiple improvements to 
the same real estate over time using LSC funds, with each individual 
improvement falling below $50,000, without those expenditures being 
treated as capital improvements under the rule. For example, a 
recipient could expend $30,000 of LSC funds on an improvement in one 
year and later expend an additional $40,000 on another improvement to 
the same property in a different year. Although the recipient would 
have invested a total of $70,000 of LSC funds in improvements to the 
property, neither expenditure would constitute a capital improvement 
under the current definition.
    This result is inconsistent with LSC's interest in ensuring that 
recipients accurately identify and account for LSC funds invested in 
real estate. Section 1631.15(c) requires recipients to maintain 
supporting documentation sufficient to accurately identify and account 
for any use of LSC funds to make capital improvements to real estate 
owned by the recipient. Removing the $50,000 threshold from the 
definition would make the definition consistent with that requirement 
and enable LSC and recipients to account for the cumulative amount of 
LSC funds invested in improvements to real estate over time.
    The proposed amendment would also clarify the distinction between 
the classification and tracking of an expenditure and the requirement 
to obtain prior approval. Removing the dollar amount from the 
definition of ``capital improvement'' would not, by itself, require 
prior approval for every capital improvement. Rather, grantees would 
need to treat and track expenditures that meet the definition as a 
capital improvement regardless of amount. Meanwhile, the applicable 
provisions governing prior approval would continue to determine when a 
recipient must obtain LSC's approval before using LSC funds for the 
improvement.
    This change would ensure that the regulatory definition accurately 
identifies the nature of the expenditure and that LSC's interest in 
real estate reflects LSC funds used for capital improvements, including 
improvements made through multiple expenditures over time.

IV. Proposed Changes

PART 1631--PURCHASING AND PROPERTY MANAGEMENT


Sec.  1631.2  Definitions

    LSC proposes to revise the definition of ``capital improvement'' in 
Sec.  1631.2(a) by removing the monetary amount of LSC funds a 
recipient may spend to improve real property through construction or 
the addition of fixtures that become an integral part of the real 
property.

List of Subjects in 45 CFR Part 1631

    Government contracts, Grant programs--law, Legal services, Real 
property acquisition.

[[Page 69768]]

    For the reasons set forth in the preamble, the Legal Services 
Corporation proposes to amend part 1631 of title 45 of the Code of 
Federal Regulations as follows:

PART 1631--PURCHASING AND PROPERTY MANAGEMENT

0
1. The authority citation for part 1631 continues to read as follows:

    Authority:  42 U.S.C. 2996g(e).

0
2. Amend Sec.  1631.2 by revising paragraph (a) to read as follows:


Sec.  1631.2.  Definitions.

    (a) Capital improvement means spending any amount of LSC funds to 
improve real estate through construction or the addition of fixtures 
that become an integral part of real estate.
* * * * *

    Dated: November 3, 2026.
Stefanie Davis
Deputy General Counsel and Ethics Officer, Legal Services Corporation.
[FR Doc. 2026-22650 Filed 11-4-26; 8:45 am]
BILLING CODE 7050-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>