II 112th CONGRESS 1st Session S. 474 IN THE SENATE OF THE UNITED STATES March 3, 2011 Ms. Snowe (for herself, Mr. Coburn, Ms. Ayotte, Mr. Enzi, and Mr. Brown of Massachusetts) introduced the following bill; which was read twice and referred to the Committee on Homeland Security and Governmental Affairs A BILL To reform the regulatory process to ensure that small businesses are free to compete and to create jobs, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Small Business Regulatory Freedom Act of 2011. (b)

Table of contents

The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Findings. Sec. 3. Including indirect economic impact in small entity analyses. Sec. 4. Judicial review to allow small entities to challenge proposed regulations. Sec. 5. Periodic review and sunset of existing rules. Sec. 6. Requiring small business review panels for all agencies. Sec. 7. Expanding the Regulatory Flexibility Act to agency guidance documents. Sec. 8. Requiring the Internal Revenue Service to consider small entity impact. Sec. 9. Mitigating penalties on small entities. Sec. 10. Requiring more detailed small entity analyses. Sec. 11. Ensuring that agencies consider small entity impact during the rulemaking process. Sec. 12. Qualifications of the Chief Counsel for Advocacy and authority for the Office of Advocacy . Sec. 13. Technical and conforming amendments.

2.

Findings

Congress finds the following: (1)A vibrant and growing small business sector is critical to the recovery of the economy of the United States. (2)Regulations designed for application to large-scale entities have been applied uniformly to small businesses and other small entities, sometimes inhibiting the ability of small entities to create new jobs. (3)Uniform Federal regulatory and reporting requirements in many instances have imposed on small businesses and other small entities unnecessary and disproportionately burdensome demands, including legal, accounting, and consulting costs, thereby threatening the viability of small entities and the ability of small entities to compete and create new jobs in a global marketplace. (4)Since 1980, Federal agencies have been required to recognize and take account of the differences in the scale and resources of regulated entities, but in many instances have failed to do so. (5)In 2009, there were nearly 70,000 pages in the Federal Register, and, according to research by the Office of Advocacy of the Small Business Administration, the annual cost of Federal regulations totals $1,750,000,000,000. Small firms bear a disproportionate burden, paying approximately 36 percent more per employee than larger firms in annual regulatory compliance costs. (6)All agencies in the Federal Government should fully consider the costs, including indirect economic impacts and the potential for job creation and job loss, of proposed rules, periodically review existing regulations to determine their impact on small entities, and repeal regulations that are unnecessarily duplicative or have outlived their stated purpose. (7)It is the intention of Congress to amend chapter 6 of title 5, United States Code, to ensure that all impacts, including foreseeable indirect effects, of proposed and final rules are considered by agencies during the rulemaking process and that the agencies assess a full range of alternatives that will limit adverse economic consequences, enhance economic benefits, and fully address potential job creation or job loss.

3.

Including indirect economic impact in small entity analyses

Section 601 of title 5, United States Code, is amended by adding at the end the following: (9)the term economic impact means, with respect to a proposed or final rule— (A)any direct economic effect of the rule on small entities; and (B)any indirect economic effect on small entities, including potential job creation or job loss, that is reasonably foreseeable and that results from the rule, without regard to whether small entities are directly regulated by the rule. .

4.

Judicial review to allow small entities to challenge proposed regulations

Section 611(a) of title 5, United States Code, is amended— (1)in paragraph (1), by inserting 603, after 601,; (2)in paragraph (2), by inserting 603, after 601,; (3)by striking paragraph (3) and inserting the following: (3)A small entity may seek such review during the 1-year period beginning on the date of final agency action, except that— (A)if a provision of law requires that an action challenging a final agency action be commenced before the expiration of 1 year, the lesser period shall apply to an action for judicial review under this section; and (B)in the case of noncompliance with section 603 or 605(b), a small entity may seek judicial review of agency compliance with such section before the close of the public comment period. ; and (4)in paragraph (4)— (A)in subparagraph (A), by striking , and and inserting a semicolon; (B)in subparagraph (B), by striking the period and inserting ; or; and (C)by adding at the end the following: (C)issuing an injunction prohibiting an agency from taking any agency action with respect to a rulemaking until that agency is in compliance with the requirements of section 603 or 605. .

5.

Periodic review and sunset of existing rules

Section 610 of title 5, United States Code, is amended to read as follows:

610.

Periodic review of rules

(a)(1)Not later than 180 days after the date of enactment of the Small Business Regulatory Freedom Act of 2011, each agency shall establish a plan for the periodic review of— (A)each rule issued by the agency that the head of the agency determines has a significant economic impact on a substantial number of small entities, without regard to whether the agency performed an analysis under section 604 with respect to the rule; and (B)any small entity compliance guide required to be published by the agency under section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 601 note). (2)In reviewing rules and small entity compliance guides under paragraph (1), the agency shall determine whether the rules and guides should— (A)be amended or rescinded, consistent with the stated objectives of applicable statutes, to minimize any significant adverse economic impacts on a substantial number of small entities (including an estimate of any adverse impacts on job creation and employment by small entities); or (B)continue in effect without change. (3)Each agency shall publish the plan established under paragraph (1) in the Federal Register and on the Web site of the agency. (4)An agency may amend the plan established under paragraph (1) at any time by publishing the amendment in the Federal Register and on the Web site of the agency. (b)(1)Each plan established under subsection (a) shall provide for— (A)the review of each rule and small entity compliance guide described in subsection (a)(1) in effect on the date of enactment of the Small Business Regulatory Freedom Act of 2011— (i)not later than 8 years after the date of publication of the plan in the Federal Register; and (ii)every 8 years thereafter; and (B)the review of each rule adopted and small entity compliance guide described in subsection (a)(1) that is published after the date of enactment of the Small Business Regulatory Freedom Act of 2011— (i)not later than 8 years after the publication of the final rule in the Federal Register; and (ii)every 8 years thereafter. (2)(A)If an agency determines that the review of the rules and guides described in paragraph (1)(A) cannot be completed before the date described in paragraph (1)(A)(i), the agency— (i)shall publish a statement in the Federal Register certifying that the review cannot be completed; and (ii)may extend the period for the review of the rules and guides described in paragraph (1)(A) for a period of not more than 2 years, if the agency publishes notice of the extension in the Federal Register. (B)An agency shall transmit to the Chief Counsel for Advocacy of the Small Business Administration and Congress notice of any statement or notice described in subparagraph (A). (c)In reviewing rules under the plan required under subsection (a), the agency shall consider— (1)the continued need for the rule; (2)the nature of complaints received by the agency from small entities concerning the rule; (3)comments by the Regulatory Enforcement Ombudsman and the Chief Counsel for Advocacy of the Small Business Administration; (4)the complexity of the rule; (5)the extent to which the rule overlaps, duplicates, or conflicts with other Federal rules and, unless the head of the agency determines it to be infeasible, State and local rules; (6)the contribution of the rule to the cumulative economic impact of all Federal rules on the class of small entities affected by the rule, unless the head of the agency determines that such a calculation cannot be made; (7)the length of time since the rule has been evaluated, or the degree to which technology, economic conditions, or other factors have changed in the area affected by the rule; and (8)the impact of the rule, including— (A)the estimated number of small entities to which the rule will apply; (B)the estimated number of small entity jobs that will be lost or created due to the rule; and (C)the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including— (i)an estimate of the classes of small entities that will be subject to the requirement; and (ii)the type of professional skills necessary for preparation of the report or record. (d)(1)Each agency shall submit an annual report regarding the results of the review required under subsection (a) to— (A)Congress; and (B)in the case of an agency that is not an independent regulatory agency (as defined in section 3502(5) of title 44), the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget. (2)Each report required under paragraph (1) shall include a description of any rule or guide with respect to which the agency made a determination of infeasibility under paragraph (5) or (6) of subsection (c), together with a detailed explanation of the reasons for the determination. (e)Each agency shall publish in the Federal Register and on the Web site of the agency a list of the rules and small entity compliance guides to be reviewed under the plan required under subsection (a) that includes— (1)a brief description of each rule or guide; (2)for each rule, the reason why the head of the agency determined that the rule has a significant economic impact on a substantial number of small entities (without regard to whether the agency had prepared a final regulatory flexibility analysis for the rule); and (3)a request for comments from the public, the Chief Counsel for Advocacy of the Small Business Administration, and the Regulatory Enforcement Ombudsman concerning the enforcement of the rules or publication of the guides. (f)(1)With respect to each agency, not later than 6 months after each date described in subsection (b)(1), the Chief Counsel for Advocacy of the Small Business Administration shall determine whether the agency has completed the review required under subsection (b). (2)If, after a review under paragraph (1), the Chief Counsel for Advocacy of the Small Business Administration determines that an agency has failed to complete the review required under subsection (b), each rule issued by the agency that the head of the agency determined under subsection (a) has a significant economic impact on a substantial number of small entities shall immediately cease to have effect.

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6.

Requiring small business review panels for all agencies

(a)

Agencies

Section 609 of title 5, United States Code, is amended— (1)in subsection (b), by striking a covered agency each place it appears and inserting an agency; and (2)in subsection (e)(1), by striking the covered agency and inserting the agency. (b)

Technical and conforming amendments

(1)

Section 609

Section 609 of title 5, United States Code, is amended— (A)by striking subsection (d), as amended by section 1100G(a) of Public Law 111–203 (124 Stat. 2112); and (B)by redesignating subsection (e) as subsection (d). (2)

Section 603

Section 603(d) of title 5, United States Code, as added by section 1100G(b) of Public Law 111–203 (124 Stat. 2112), is amended— (A)in paragraph (1), by striking a covered agency, as defined in section 609(d)(2) and inserting the Bureau of Consumer Financial Protection; and (B)in paragraph (2), by striking A covered agency, as defined in section 609(d)(2), and inserting The Bureau of Consumer Financial Protection. (3)

Section 604

Section 604(a) of title 5, United States Code, is amended— (A)by redesignating the second paragraph designated as paragraph (6) (relating to covered agencies), as added by section 1100G(c)(3) of Public Law 111–203 (124 Stat. 2113), as paragraph (7); and (B)in paragraph (7), as so redesignated— (i)by striking a covered agency, as defined in section 609(d)(2) and inserting the Bureau of Consumer Financial Protection; and (ii)by striking the agency and inserting the Bureau. (4)

Effective date

The amendments made by this subsection shall take effect on the date of enactment of this Act and apply on and after the designated transfer date established under section 1062 of Public Law 111–203 (12 U.S.C. 5582).

7.

Expanding the Regulatory Flexibility Act to agency guidance documents

Section 601(2) of title 5, United States Code, is amended by inserting after public comment the following: and any significant guidance document, as defined in the Office of Management and Budget Final Bulletin for Agency Good Guidance Procedures (72 Fed. Reg. 3432; January 25, 2007).

8.

Requiring the Internal Revenue Service to consider small entity impact

(a)

In general

Section 603(a) of title 5, United States Code, is amended, in the fifth sentence, by striking but only and all that follows through the period at the end and inserting but only to the extent that such interpretative rules, or the statutes upon which such rules are based, impose on small entities a collection of information requirement or a recordkeeping requirement.. (b)

Definitions

Section 601 of title 5, United States Code, as amended by section 3 of this Act, is amended— (1)in paragraph (6), by striking and at the end; and (2)by striking paragraphs (7) and (8) and inserting the following: (7)the term collection of information has the meaning given that term in section 3502(3) of title 44; (8)the term recordkeeping requirement has the meaning given that term in section 3502(13) of title 44; and .

9.

Mitigating penalties on small entities

Section 223 of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104–121; 110 Stat. 862) is amended by adding at the end the following: (d)

Review of policies and programs

(1)

Review required

Not later than 6 months after the date of enactment of this subsection, and every 2 years thereafter, each agency regulating the activities of small entities shall review the policy or program established by the agency under subsection (a) and make any modifications to the policy or program necessary to comply with the requirements under this section. (2)

Report

Not later than 6 months after the date of enactment of this subsection, and every 2 years thereafter, each agency described in paragraph (1) shall submit a report on the review and modifications required under paragraph (1) to— (A)the Committee on Small Business and Entrepreneurship and the Committee on Homeland Security and Governmental Affairs of the Senate; and (B)the Committee on Small Business and the Committee on the Judiciary of the House of Representatives. .

10.

Requiring more detailed small entity analyses

(a)

Initial regulatory flexibility analysis

Section 603 of title 5, United States Code, as amended by section 1100G(b) of Public Law 111–203 (124 Stat. 2112), is amended— (1)by striking subsection (b) and inserting the following: (b)Each initial regulatory flexibility analysis required under this section shall contain a detailed statement— (1)describing the reasons why action by the agency is being considered; (2)describing the objectives of, and legal basis for, the proposed rule; (3)estimating the number and type of small entities to which the proposed rule will apply; (4)describing the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report and record; (5)describing all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule, or the reasons why such a description could not be provided; and (6)estimating the additional cumulative economic impact of the proposed rule on small entities, including job creation and employment by small entities, beyond that already imposed on the class of small entities by the agency, or the reasons why such an estimate is not available. ; and (2)by adding at the end the following: (e)An agency shall notify the Chief Counsel for Advocacy of the Small Business Administration of any draft rules that may have a significant economic impact on a substantial number of small entities— (1)when the agency submits a draft rule to the Office of Information and Regulatory Affairs of the Office of Management and Budget under Executive Order 12866, if that order requires the submission; or (2)if no submission to the Office of Information and Regulatory Affairs is required— (A)a reasonable period before publication of the rule by the agency; and (B)in any event, not later than 3 months before the date on which the agency publishes the rule. . (b)

Final regulatory flexibility analysis

(1)

In general

Section 604(a) of title 5, United States Code, is amended— (A)by inserting detailed before description each place it appears; (B)in paragraph (2)— (i)by inserting detailed before statement each place it appears; and (ii)by inserting (or certification of the proposed rule under section 605(b)) after initial regulatory flexibility analysis; (C)in paragraph (4), by striking an explanation and inserting a detailed explanation; and (D)in paragraph (6) (relating to a description of steps taken to minimize significant economic impact), as added by section 1601 of the Small Business Jobs Act of 2010 (Public Law 111–240; 124 Stat. 2251), by inserting detailed before statement. (2)

Publication of analysis on web site, etc

Section 604(b) of title 5, United States Code, is amended to read as follows: (b)The agency shall— (1)make copies of the final regulatory flexibility analysis available to the public, including by publishing the entire final regulatory flexibility analysis on the Web site of the agency; and (2)publish in the Federal Register the final regulatory flexibility analysis, or a summary of the analysis that includes the telephone number, mailing address, and address of the Web site where the complete final regulatory flexibility analysis may be obtained. . (c)

Cross-References to other analyses

Section 605(a) of title 5, United States Code, is amended to read as follows: (a)A Federal agency shall be deemed to have satisfied a requirement regarding the content of a regulatory flexibility agenda or regulatory flexibility analysis under section 602, 603, or 604, if the Federal agency provides in the agenda or regulatory flexibility analysis a cross-reference to the specific portion of an agenda or analysis that is required by another law and that satisfies the requirement under section 602, 603, or 604. . (d)

Certifications

Section 605(b) of title 5, United States Code, is amended, in the second sentence, by striking statement providing the factual and inserting detailed statement providing the factual and legal. (e)

Quantification requirements

Section 607 of title 5, United States Code, is amended to read as follows:

607.

Quantification requirements

In complying with sections 603 and 604, an agency shall provide— (1)a quantifiable or numerical description of the effects of the proposed or final rule, including an estimate of the potential for job creation or job loss, and alternatives to the proposed or final rule; or (2)a more general descriptive statement regarding the potential for job creation or job loss and a detailed statement explaining why quantification under paragraph (1) is not practicable or reliable.

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11.

Ensuring that agencies consider small entity impact during the rulemaking process

Section 605(b) of title 5, United States Code, is amended— (1)by inserting (1) after (b); and (2)by adding at the end the following: (2)If, after publication of the certification required under paragraph (1), the head of the agency determines that there will be a significant economic impact on a substantial number of small entities, the agency shall comply with the requirements of section 603 before the publication of the final rule, by— (A)publishing an initial regulatory flexibility analysis for public comment; or (B)re-proposing the rule with an initial regulatory flexibility analysis. (3)The head of an agency may not make a certification relating to a rule under this subsection, unless the head of the agency has determined— (A)the average cost of the rule for small entities affected or reasonably presumed to be affected by the rule; (B)the number of small entities affected or reasonably presumed to be affected by the rule; and (C)the number of affected small entities for which that cost will be significant. (4)Before publishing a certification and a statement providing the factual basis for the certification under paragraph (1), the head of an agency shall— (A)transmit a copy of the certification and statement to the Chief Counsel for Advocacy of the Small Business Administration; and (B)consult with the Chief Counsel for Advocacy of the Small Business Administration on the accuracy of the certification and statement. .

12.

Qualifications of the Chief Counsel for Advocacy and authority for the Office of Advocacy

(a)

Qualifications of Chief Counsel for Advocacy

Section 201 of Public Law 94–305 (15 U.S.C. 634a) is amended by adding at the end the following: The Chief Counsel for Advocacy shall be an attorney with business experience and expertise in or knowledge of the regulatory process.. (b)

Additional powers of Office of Advocacy

Section 203 of Public Law 94–305 (15 U.S.C. 634c) is amended— (1)in paragraph (5), by striking and at the end; (2)in paragraph (6), by striking the period at the end and inserting ; and; and (3)by inserting after paragraph (6) the following: (7)at the discretion of the Chief Counsel for Advocacy, comment on regulatory action by an agency that affects small businesses, without regard to whether the agency is required to file a notice of proposed rulemaking under section 553 of title 5, United States Code, with respect to the action. .

13.

Technical and conforming amendments

(a)

Heading

Section 605 of title 5, United States Code, is amended in the section heading by striking Avoidance and all that follows and inserting the following: Incorporations by reference and certification.. (b)

Table of sections

The table of sections for chapter 6 of title 5, United States Code, is amended— (1)by striking the item relating to section 605 and inserting the following: 605. Incorporations by reference and certifications. ; and(2)by striking the item relating to section 607 inserting the following: 607. Quantification requirements. .