(a) Application. This section applies to programs or activities that receive Federal financial assistance from the Department and to recipients that operate such programs or activities.

(b) Discriminatory action prohibited. A recipient shall administer a program or activity in the most integrated setting appropriate to the needs of a qualified person with a disability.

(c) Segregated setting. Segregated settings include but are not limited to congregate settings that are populated exclusively or primarily with individuals with disabilities and may be characterized by regimentation in daily activities; lack of privacy or autonomy; or policies or practices limiting visitors or limiting individuals' ability to engage freely in community activities and to manage their own activities of daily living.

(d) Specific prohibitions. The general prohibition in paragraph (b) of this section includes but is not limited to the following specific prohibitions, to the extent that such action results in unnecessary segregation, or serious risk of such segregation, of persons with disabilities.

(1) Establishing or applying policies or practices that limit or condition individuals with disabilities' access to the most integrated setting appropriate to their needs;

(2) Providing greater benefits or benefits under more favorable terms in segregated settings than in integrated settings;

(3) Establishing or applying more restrictive rules and requirements for qualified individuals with disabilities in integrated settings than for individuals with disabilities in segregated settings; or

(4) Failure to provide community-based services that results in institutionalization or serious risk of institutionalization. This paragraph (d)(4) includes, but is not limited to planning, service system design, funding, or service implementation practices that result in institutionalization or serious risk of institutionalization. Qualified individuals with disabilities need not wait until the harm of institutionalization or segregation occurs to assert their right to avoid unnecessary segregation.

(e) Fundamental alteration. A recipient may establish a defense to the application of this section if it can demonstrate that a requested modification would fundamentally alter the nature of its program or activity.