[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


   EVALUATING THE PAPERWORK REDUCTION ACT: ARE BURDENS BEING REDUCED?

=======================================================================

                                 HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 29, 2017

                               __________

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            Small Business Committee Document Number 115-012
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                          DON BACON, Nebraska
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                                 VACANT
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

                   Kevin Fitzpatrick, Staff Director
          Jan Oliver, Deputy Staff Director and Chief Counsel
                Adam Minehardt, Minority Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Mr. Sam Batkins, Director of Regulatory Policy, American Action 
  Forum, Washington, DC..........................................     4
Ms. Leah F. Pilconis, Environmental Law & Policy Advisor, 
  Associated General Contractors of America, Arlington, VA.......     6
Mr. Frank Cania, Founder & President, driven HR, Pittsford, NY, 
  testifying on behalf of the Society for Human Resource 
  Management.....................................................     8
Ms. Sally Katzen, Professor of Practice and Distinguished Scholar 
  in Residence, New York University School of Law, Senior 
  Advisor, Podesta Group, Washington, DC.........................     9

                                APPENDIX

Prepared Statements:
    Mr. Sam Batkins, Director of Regulatory Policy, American 
      Action Forum, Washington, DC...............................    27
    Ms. Leah F. Pilconis, Environmental Law & Policy Advisor, 
      Associated General Contractors of America, Arlington, VA...    37
    Mr. Frank Cania, Founder & President, driven HR, Pittsford, 
      NY, testifying on behalf of the Society for Human Resource 
      Management.................................................    51
    Ms. Sally Katzen, Professor of Practice and Distinguished 
      Scholar in Residence, New York University School of Law, 
      Senior Advisor, Podesta Group, Washington, DC..............    60
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    NADA - National Automobile Dealers Association...............    66

 
   EVALUATING THE PAPERWORK REDUCTION ACT: ARE BURDENS BEING REDUCED?

                              ----------                              


                       WEDNESDAY, MARCH 29, 2017

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Luetkemeyer, Brat, 
Radewagen, Knight, Kelly, Blum, Bacon, Velazquez, Evans, 
Lawson, Adams, and Schneider.
    Chairman CHABOT. Good morning. I call this hearing to 
order.
    While the burden of federal paperwork is felt year-round by 
individuals and small businesses, there is no more relevant 
time to discuss federal paperwork than in the weeks leading up 
to Tax Day. Right now, individuals and businesses are pouring 
over tax forms and mind-numbingly complex instructions to make 
sure they get things right. The Paperwork Reduction Act, or 
PRA, was enacted back in 1980 and amended and reauthorized in 
1995. It was aimed at minimizing the burden of federal 
paperwork, as well as maximizing the usefulness of the 
information collected. Congress recognized that requests for 
information imposed significant burdens on the public and that 
if information was not used efficiently, it reduced the 
government's effectiveness as well.
    Before requesting or acquiring information from the public, 
the PRA requires federal agencies to seek public comment. Then 
agencies must submit the proposed collections of information to 
the Office of Information and Regulatory Affairs, or OIRA, 
under the Office of Management and Budget for review and 
approval. As part of that process, agencies must determine 
whether the information collection is needed, estimate its 
burden, and certify that it meets specific requirements. I 
actually practiced that OIRA last night and I still cannot get 
it right for some reason. I have a mental block to that word. 
We will change the name of that agency, I guess.
    Although the PRA has been on the books for a number of 
years and Presidents of both parties have directed federal 
agencies to find ways to reduce and streamline federal 
paperwork, the overall burden continues to grow. Currently, 
federal paperwork is estimated to annually take $11.6 billion--
yes, with a B--hours to respond to or comply with and cost 
nearly $1.9 trillion. Yes, with a T. However, the burden may be 
higher as OIRA and others have raised concerns about the 
accuracy of agency burden estimates.
    While nearly 75 percent of the overall federal paperwork 
burden is generated by Treasury, onerous requests from other 
agencies contribute as well. Examples of these include Census 
surveys, OSHA reporting, and recordkeeping requirements, and 
third-party or public disclosures, such as food labeling 
requirements. Laws enacted in recent years, like Obamacare and 
the Dodd-Frank Act have added hundreds of millions of hours to 
the total. Today, we will be discussing how effective the PRA 
has been in reducing the federal paperwork burden on small 
businesses and issues that require additional attention or 
perhaps legislative action to resolve.
    I want to thank all the witnesses for being here today, and 
we look very much forward to your testimony which we will be 
getting around to very shortly.
    And I now yield to the ranking member, Ms. Velazquez, for 
her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    The federal paperwork burden continues to grow for small 
firms. In fiscal year 2015, the public spent an estimated 9.78 
billion hours responding to federal information collections. 
This total represents a net increase of 350 million burden 
hours, or about 3.7 percent from the estimated 9.43 billion 
hours that the public spent responding to federal information 
collections in fiscal year 2014.
    For small firms, paperwork requirements are particularly 
burdensome. Due to economies of scale and a lack of in-house 
lawyers and experts, paperwork compliance can be especially 
costly.
    The Paperwork Reduction Act was created in 1980 and amended 
in 1995 with the intent of curtailing the growth of paperwork, 
but, unfortunately, it has not done so. One question the 
committee seeks to address today is whether current law 
provides OMB with the right tools to limit this growth or if 
changes must be made to the PRA to improve its effectiveness.
    At today's hearing, it is my hope that our witnesses can 
talk about the underlying weaknesses of the law and whether 
agencies have adequate resources to comply with it. While OIRA 
has a difficult task, small businesses deserve to know exactly 
why their paperwork burden continues to grow.
    However, we must also remember that data collection exists 
for a reason. Agencies rely on data to make informed decisions 
achieving important policy outcomes. These goals include 
ensuring worker safety, preserving clean air and water, and 
safeguarding taxpayer dollars and benefit programs.
    Ensuring that agencies are considering the economic impact 
of their regulations and paperwork requirements on small firms 
is critical. However, it is also important that regulations 
adequately protect the public interest. That is why it is so 
crucial our agencies receive adequate funding. Without proper 
resources, it is impossible for them to evaluate and streamline 
paperwork burdens or provide the necessary compliance 
assistance to level the playing field for small firms.
    In today's testimony, we will surely hear about both the 
successes of OIRA and the obstacles that are preventing the 
office from reducing paperwork requirements for small 
businesses. The PRA should not serve to discourage agencies 
from conducting proper regulatory flexibility analysis. All too 
often we see agencies implementing regulations that ignore or 
understate economic impacts on small businesses. In many 
instances, this is because of a lack of communication between 
the agencies and the small business community.
    I hope today's panel offers insight into what type of 
reforms may be needed to improve this communication. I also 
hope to hear about the role new technology and electronic 
filing can play in reducing regulatory burden.
    Finally, I will note that these mechanisms were designed 
principally to reduce the burden on small businesses. Just as 
we work to ensure these processes are helping small firms, we 
must also be vigilant that these programs are not hijacked to 
benefit large corporations at the expense of their smaller 
competitors.
    I look forward to working with Mr. Chabot to ensure this 
important law is meeting its full potential for small 
businesses, and I want to take this opportunity to thank all 
the witnesses for being here today.
    Chairman CHABOT. Thank you very much. And I would be remiss 
if I did not mention that yesterday was a big day on Capitol 
Hill and in New York City because it was Ranking Member 
Velazquez's birthday yesterday. So we hope she had a good one. 
There we go. [Applause.]
    I always say this is a very bipartisan Committee, so.
    And if Committee members have an opening statement 
prepared, I would ask that they submit them for the record.
    And I will take just a moment to explain our timing rules 
here which is pretty simple. We operate by the 5 minute rule as 
other Committees do. Each witness gets 5 minutes. There is a 
lighting system to assist you in that. The green light will be 
on for 4 minutes. The yellow light will come on when you have 
got a minute to wrap up and then the red light will come on, 
and we would ask you to kind of stay within that time if at all 
possible. And then we are also restricted to 5 minutes 
ourselves as well.
    And I would now like to introduce our very distinguished 
panel here today. Our first witness is Sam Batkins, the 
director of regulatory policy for the American Action Forum 
here in D.C. His research focuses on examining the rulemaking 
efforts of administrative agencies, and he has testified before 
Congress and state legislatures on his findings in the past. 
Before joining the American Action Forum, Mr. Batkins worked at 
the U.S. Chamber of Commerce and the National Taxpayers Union. 
He received his bachelor of arts in political science from 
Sewanee: The University of the South, and his juris doctorate 
from the Columbus School of Law at Catholic University of 
America. Mr. Batkins is a member of the Maryland Bar.
    Our next witness is Ms. Leah Pilconis, the environmental 
law and policy advisor for the Associated General Contractors 
of America, AGC, in Arlington, Virginia. She spent the last 16 
years establishing and directing the environmental program at 
AGC which represents general contractors and specialty 
contracting firms in the construction industry. In her role, 
Ms. Pilconis monitors and regularly comments on federal 
legislation and serves as the liaison in the Environmental 
Protection Agency and other agencies. She also develops 
compliance tools for construction contractors and participates 
in government advisory panels. Ms. Pilconis holds a bachelor of 
science in biology from Gettysburg College and a law degree 
from the Dickinson School of Law at Pennsylvania State 
University. She is admitted to practice law in Pennsylvania. We 
welcome you as well.
    And our third witness is Frank Cania, president of driven 
HR, a human resources consulting firm based in Pittsford, New 
York. He has been a business and HR professional for more than 
30 years, and his primary focus is helping business owners, 
managers, and other HR professionals navigate state and federal 
regulatory compliance
    Mr. Cania is certified by the HR Certification Institute as 
a senior professional in human resources and by the Society for 
Human Resource Management as a senior certified professional. 
He graduated from the Shepard Broad College of Law at NOVA 
Southeastern University with a master's degree in employment 
law.
    In addition, Mr. Cania volunteers his time as a team 
captain for a national legislative advocacy team for the 
Society of Human Resource Management. He is testifying on 
behalf of that organization today and we welcome you as well.
    And I would now like to yield to the Ranking Member to 
introduce our fourth witness.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    It is my pleasure to introduce our distinguished witness, 
Ms. Sally Katzen, a senior advisor at the Podesta Group and a 
professor of practice and distinguished scholar in residence at 
New York University Law School. She has served as Administrator 
of the Office of Information and Regulatory Affairs in the 
Office of Management and Budget and as the Deputy Director for 
Management at OMB.
    Before joining the Clinton administration, Ms. Katzen was a 
partner in the Washington, D.C., law firm of Wilmer Cutler and 
Pickering, specializing in regulatory and legislative matters. 
She has also served in leadership roles in the American Bar 
Association and as President of the Women's Legal Defense Fund.
    She graduated from Smith College and the University of 
Michigan Law School where she was the first woman editor-in-
chief of the Law Review. Welcome, and thank you for being here.
    Chairman CHABOT. Thank you very much.
    And Mr. Batkins, you are recognized for 5 minutes.

   STATEMENTS OF SAM BATKINS, DIRECTOR OF REGULATORY POLICY, 
AMERICAN ACTION FORUM; LEAH F. PILCONIS, ENVIRONMENTAL LAW AND 
  POLICY ADVISOR, ASSOCIATED GENERAL CONTRACTORS OF AMERICA; 
 FRANK CANIA, FOUNDER AND PRESIDENT, DRIVEN HR; SALLY KATZEN, 
 PROFESSOR OF PRACTICE AND DISTINGUISHED SCHOLAR IN RESIDENCE, 
  NEW YORK UNIVERSITY SCHOOL OF LAW; SENIOR ADVISOR, PODESTA 
                             GROUP

                    STATEMENT OF SAM BATKINS

    Mr. BATKINS. Thank you so much, Chairman Chabot, Ranking 
Member Velazquez.
    As we have already mentioned, I think the short answer to 
the title of this hearing is, no, paperwork burdens have not 
been reduced. As of this morning, as we mentioned, it stood at 
11.6 billion hours of paperwork, which is up from 7 billion 
hours of paperwork roughly 17 years ago. To put 11.6 billion 
hours into some context for this incredibly large figure, it is 
roughly 35 hours for every person in the United States. That is 
35 hours, a week's worth of compliance for every man, woman, 
and child in the U.S. And small businesses are particularly 
affected.
    There was a 2013 Minneapolis Federal Reserve study which 
found that hiring two additional compliance officers could 
reduce profitability of small banks by 45 basis points and 
cause one-third of those small banks to become unprofitable.
    Now, the vast majority of these burdens as we have 
mentioned are within Treasury and IRS, but due to passage of 
recent legislation, a lot of non-Treasury burdens have also 
increased. Since 2006, the non-Treasury burden has increased 
roughly 93 percent. That is non-Treasury burdens.
    Now, we have heard a lot of figures on 11.6 billion hours 
and I think the big question whenever you are talking about 
cost-benefit analysis is, are these figures reliable? And I 
know talking to former OIRA officials, they say maybe the PRA 
is not the top priority. And according to Professor Stuart 
Shapiro of Rutgers University, in his interviews we found 
phrases like ``unreliable,'' ``pseudoscience,'' and random 
numbers at best describing paperwork estimates, which is 
generally not encouraging, I think.
    And I will just give you two examples of that. The National 
Credit Union Administration somewhat recently estimated that a 
routine truth in savings form was going to impose 43 billion 
hours of paperwork. They arrived at that figure by multiplying 
several numbers together. They should have added them, 
apparently. The actual total was less than 10 million hours.
    Likewise, IRS once estimated that its summary of benefits 
coverage under the Affordable Care Act was going to cost $1.7 
trillion. Now, I have no doubt that the coverage requirements 
cost something, but I do not think it was the GDP of Canada. 
Later, they revised those figures downward as well to less than 
$10 million in compliance costs.
    Beyond those estimates there are also problems with just 
monetizing general paperwork hours. Sometimes agencies will 
state that several hundred thousand or a million hours does not 
contain any monetizable cost, which I find somewhat difficult 
to believe. And sometimes agencies will go through the work of 
monetizing the cost and go through the work of benefit-cost 
analysis, and they will publish in the Federal Register. You 
will see it online at the back end of OIRA's website, but those 
totals will not be reported in the agency's subtotals, and they 
will not be reported for the typical information collection.
    There is also the question of management under the PRA. 
Now, last fiscal year, according to the information collection 
budget, there were 283 violations of the Paperwork Reduction 
Act specifically by Federal agencies. That is up 58 violations 
from the previous fiscal year. And because these violations 
happen all the time, maybe that is not too surprising. Maybe 
that number is not too shocking. But one thing that strikes me 
is that, for some reason, every year two agencies lead the list 
of paperwork violations and it is Health and Human Services and 
Department of Defense. And every year, for basically the last 4 
or 5 years, HHS and DOD have led the pack and there really has 
not been a change. And from what I can tell, there has not been 
any reform needed to address HHS and DOD.
    Finally, on the reform front, I think reform could greatly 
benefit small businesses because paperwork compliance generally 
imposes fixed costs that as a percentage of overall revenues 
burdens small businesses the most and they are acutely affected 
by paperwork costs.
    As we have mentioned, I think in terms of reform, agencies 
could do a better job of monetizing paperwork burden hours and 
OIRA could do a better job of reporting the effort the agencies 
go through to actually monetize those hours. Like the reforms 
from 1996, I think Congress could also examine maybe setting 
reduction targets for cumulative paperwork burden hours. The 
enforcement there is tricky. But just for perspective, if 
Congress shaves 10 percent off the cumulative paperwork figure, 
that is going to save a billion hours of paperwork and, 
conservatively, $38 billion a year in compliance costs.
    Online modernization is also another reform option. There 
are roughly 2,000 OMB control numbers that contain forms that 
cannot be submitted online. It is the year 2017. I am not sure 
why there are so many forms that just cannot be submitted or 
obtained online.
    And finally, increasing public participation with major 
collections I think could be a key point. Those collections 
with over a million hours of paperwork, maybe moving them from 
notices to proposed and final rule status to increase 
transparency I think would be key. Thank you so much.
    Chairman CHABOT. Thank you very much.
    Ms. Pilconis, you are recognized for 5 minutes.

                 STATEMENT OF LEAH F. PILCONIS

    Ms. PILCONIS. Thank you. Chairman Chabot, Ranking Member 
Velazquez, and members of the Committee, thank you for inviting 
the Associated General Contractors of America to testify today. 
AGC represents more than 26,000 construction contractors, 
material suppliers, and related firms. These members build 
everything but single-family homes.
    My name is Leah Pilconis, and I am AGC's environmental law 
and policy advisor. I maintain liaison with the U.S. 
Environmental Protection Agency and other regulatory agencies, 
and I help our members comply and understand environmental 
rules and requirements.
    Ninety-one percent of today's construction firms are small 
businesses. The U.S. Environmental Protection Agency is an 
information-based agency. The agency constantly requires the 
collection or generation of data in developing and implementing 
its programs. AGC members will tell you that the paperwork 
associated with the environmental requirements has become a 
huge and growing burden and responsibility, delaying, if not 
threatening, construction projects and greatly increasing the 
cost of doing business.
    Both EPA's National Pollutant Discharge Elimination System 
Stormwater program under the Clean Water Act, which is a permit 
program, and the Spill Prevention Control and Countermeasure 
program under the Oil Pollution Act, impose duplicate paperwork 
requirements on construction site operators to develop written 
plans for managing oil storage and oil spills. The list of 
overlapping documentation requirements includes site maps and 
diagrams, inspection and maintenance logs, training, 
notification and response obligations, and recordkeeping. If a 
construction site has a site-specific stormwater plan that 
addresses oil storage and spill control containment and 
cleanup, then EPA should allow that plan to also satisfy the 
agency's Oil Pollution Act requirements.
    Another area of overlap imposing duplicate paperwork 
requirements is the regulation of lead paint dust during 
construction work. On every single job where any detectable 
trace of lead coatings is present, OSHA's lead and construction 
standard requires air monitoring, training, and a compliance 
plan to keep all services free as practicable of lead, which 
includes comprehensive recordkeeping requirements. Yet, EPA has 
a separate program that also entails extensive recordkeeping 
requirements. Moreover, EPA is looking to expand the reach of 
these requirements.
    EPA should recognize that OSHA rules adequately protect the 
spread of lead paint dust during all construction and terminate 
its efforts to expand current regulations. EPA should also 
explore revisions to its current program to minimize 
duplication with the OSHA rules.
    The number and cost of environmental regulations, which 
invariably involve recordkeeping components and the penalties 
associated therewith, are at an all-time high. Many 
environmental fines are being levied against construction firms 
for relatively minor paperwork violations, not for 
environmental harm or contamination.
    EPA has terminated industry partnership programs and 
defunded compliance assistance online centers. Congress should 
enact a right-to-cure process for paperwork violations with no 
threat of penalty and also provide relief to small business 
contractors who inspect and promptly correct compliance 
problems.
    I would also like to discuss the fundamental policy shift 
at EPA to require the regulated community to electronically 
report their paperwork, to demonstrate compliance, and to make 
that information readily available and searchable by the 
public. Online public access to data introduces new burdens on 
industry related to privacy, data quality, security, and 
competition. There is also the cost to monitor company feeds 
for errors and to consult with government to ensure that the 
information provided includes proper context. These lifecycle 
costs were not factors in the paperwork burden analysis of 
EPA's 2015 nationwide rule that shifts its entire NPDS permit 
program to electronic reporting. Congress should reconsider how 
the electronic management of information should be factored 
into burden estimates as it explores the future of using web-
based technologies for information collection. Thank you.
    Chairman CHABOT. Thank you very much.
    Mr. Cania, you are recognized for 5 minutes. Am I 
pronouncing that right?
    Mr. CANIA. Yes, that is correct, Cania.
    Chairman CHABOT. Okay. Thank you.
    Mr. CANIA. Thank you.

                    STATEMENT OF FRANK CANIA

    Mr. CANIA. Good morning, Chairman Chabot, Ranking Member 
Velazquez, and members of the Committee. I am Frank Cania, 
founder and president of Driven HR, a Pittsford, New York, 
based human resource consulting firm, and we provide HR 
services to small businesses. I am also a proud fourth-
generation entrepreneur.
    I appear before you today on behalf of the 285,000-member 
Society for Human Resource Management, SHRM, where I have been 
a member for over 20 years. Thank you for holding this hearing 
on the Paperwork Reduction Act, designed to reduce the total 
paperwork burden imposed by the Federal Government on employers 
of all sizes.
    The PRA dramatically impacts small businesses, who 
typically do not have an HR person or department equipped to 
handle all of the filing requirements, Federal and State. Let 
me explain some of those challenges.
    Mr. Chairman, under the ACA, employers with 50 or more 
employees are required to provide coverage to those working at 
least 30 hours per week, as defined by the ACA, or face a fine. 
To avoid IRS fines, employers need to provide their employees 
with one of two forms. Form 1095B is provided by self-insured 
employers with less than 50 employees, while Form 1095C is 
provided by those with more than 50 employees. Both forms 
present challenges.
    Take, for example, the form's reporting requirement 
regarding health coverage for the 95 percent of employees 
working an average of 130 hours or more per month. Small 
businesses often fall into the trap of thinking the reporting 
requirement is an annual average rather than a monthly average. 
This commonly made and honest mistake required one of our 
clients to reissue every employee's form, to avoid potential 
IRS fines.
    Another Driven HR client who converted to self-funded 
coverage, and relied on their payroll service provider to 
produce their 1095C forms, did not realize that they were 
required to provide information regarding employee dependents 
on the form. Again, this honest mistake required our client to 
reissue new forms to avoid potential IRS fines.
    Although these may seem like nominal costs, they add up 
quickly. Each client paid an initial setup fee of $250, and an 
annual $600 service fee, as well as a $5 per form fee. Not 
including administrative costs, a client with 50 employees will 
pay a minimum of $1,100 to properly file. Compounded over 
multiple forms, you quickly see how these costs eat into a 
small business's operating margin.
    In addition, the government requires this complex form, yet 
employees are not required to submit it with their individual 
tax returns. This begs the question, what purpose does this 
form serve if the employee and the IRS already have the 
information?
    Now I would like to transition to USCIS Workplace 
Immigration Form I-9. Every employer, regardless of size, is 
required to complete an I-9 for every employee. However, 
employers acting in good faith to properly verify their 
workforce often are faced with unwarranted liability due to the 
current I-9, and its confounding instructions.
    For example, Mr. Chairman, the current I-9 restricts an 
employer's ability to provide commonsense guidance to 
employees, while still acting in good faith. Employers may not 
suggest which documents an employee may present to establish 
employment authorization and identity. Employers even risk 
liability when explaining which documents are most commonly 
presented, even when new employees request that information.
    The process becomes even more complicated if the employee 
selects ``alien authorized to work'' status. Here, the employer 
is required to track the expiration dates of the work 
authorization, both in sections 1 and 2 on the I-9. Yet, an 
employer is prevented from asking to see the documents used in 
section 1 to verify that information. Further, an employer 
tracking the wrong dates may be accused of failing to complete 
a timely reverification.
    I-9 challenges are compounded for employers with multiple 
locations. One client, for example, owns a chain of 24/7 
businesses. He has trained multiple employees at each location 
to properly complete the I-9, even paying a bonus for error-
free forms. Despite this, most have missing information or some 
other error. He then required managers to travel to various 
locations to complete I-9s. This was cost-prohibitive, time-
consuming, and it took them away from their primary 
responsibilities.
    While the cost of compliance is high, the cost of simple 
paperwork errors is often higher. The penalty for even a single 
mistake on the I-9 ranges from $216, to $2,126 per form. The 
current PRA estimates the paper I-9 takes 35 minutes to 
complete, and 26 minutes for the computer form. These estimates 
have not changed, even though the I-9 instructions more than 
doubled with the most recent update.
    Mr. Chairman, my testimony today only scratches the surface 
of regulatory and reporting burdens for small businesses, and 
for every Federal requirement there is often a State 
requirement with corresponding fines and penalties for 
paperwork violations. Even for honest mistakes. In my 
experience, small business owners are struggling to comply, and 
this damages their ability to grow their businesses and reward 
their employees.
    Thank you for the opportunity to testify, and I am happy to 
answer any questions.
    Chairman CHABOT. Thank you very much.
    Ms. Katzen, you are recognized for 5 minutes.

                   STATEMENT OF SALLY KATZEN

    Ms. KATZEN. Thank you, Mr. Chairman and Ranking Member 
Velazquez, members of the Committee. I appreciate the 
opportunity to testify today.
    As you know from my written testimony, I willingly join the 
chorus and concur with the conclusion that the paperwork burden 
has increased rather than decreased, and that small businesses 
have a legitimate concern, if for no other reason than they 
have fewer, sometimes appreciably fewer, resources and 
institutional capacity than larger companies to comply with the 
paperwork burden.
    I would like to use my limited time to offer some different 
perspectives from the other witnesses and other views about the 
situation we are facing now. First, even though the paperwork 
burden is not being reduced to the extent anyone would like, I 
believe that the PRA, and OIRA's implementation of the PRA, has 
been an important tool in restraining the Federal Government's 
appetite for data. There has been no empirical study of the 
effect of the PRA because there is no counterfactual baseline 
to compare it with, but my experience over 7 years at OIRA and 
OMB and since leads me to believe that PRA has affirmatively 
discouraged some, perhaps many, program offices in various 
agencies from proposing new ICRs unless they are statutorily 
mandated. And this is because they believe that the multiple 
steps set out in the PRA and recited in the chairman's opening 
statement is so time-consuming and labor-intensive, and the 
difficulty in negotiating with OIRA is so exhausting, that it 
is not worth their effort.
    The second point is there is only so much the agencies can 
do to reduce paperwork. Among other things, it is Congress that 
has assigned the agencies many programmatic responsibilities 
for which they need information to be able to carry out their 
tasks. It is Congress which has directed the agencies to ensure 
that participants in their programs meet specified 
qualifications and satisfy eligibility and participatory 
conditions. It is Congress that has demanded accountability for 
monies distributed to a host of recipients of Federal funds. 
Each of these requires some sort of paperwork as we know it.
    The agencies and PRA cannot change these statutory 
requirements, nor make exceptions for selected individuals or 
small businesses that get swept up in what Congress has 
specified, and I would not be surprised if, even as we sit here 
talking about trying to reduce the burden of paperwork, there 
is a hearing in some other office of the Congress now 
establishing a program which will have an accountability 
element, a reporting element, a requirement that would produce 
additional paperwork.
    Third, and critically important, if we are identifying 
potential barriers to burden reduction, perhaps the most 
significant is that burden reduction requires sustained 
funding. It was true in 2003 when the task force set up by the 
2002 amendments to the PRA issued its final report and 
specifically recommended additional funding for this purpose 
for agencies. It is even more critical now after many years of 
straight-line or decreased funding for many of the agencies in 
the executive branch.
    An agency cannot simply wish away paperwork burden. It 
takes staff time and resources, both of which are in very short 
supply in many agencies. If you are serious about doing 
something about paperwork, the agencies must be provided 
adequate resources to accomplish that task.
    I see my time is running out. I wanted to address the very 
different types of paperwork, their origins, and their 
implications for small businesses, but I will try to conclude 
by noting that I am not saying there is nothing that can be 
done to reduce paperwork. I recognize paperwork is difficult, 
particularly for small businesses. I discuss some possibly 
productive steps in my written testimony, but those are going 
to reduce paperwork burden only at the margin.
    There is no silver bullet that is going to dramatically 
change the numbers, particularly with, as the chairman noted, 
70 percent of it as a result of our Tax Code, which is not just 
the 1040s, but all of the deductions and exceptions, and 
accelerated depreciation, and oil and gas depletion allowances, 
and real estate loss carryforwards that are set by Congress and 
which business would not take advantage of if the burden of 
filling out the forms and providing the documentation were not 
substantially offset by the benefits that they receive by 
claiming these deductions.
    In any event, I hope you will try to approach this in the 
thoughtful way that this Committee has traditionally approached 
these types of issues, and I greatly appreciate your attention.
    Chairman CHABOT. Thank you very much. We appreciate the 
testimony of all the witnesses. And we will go to the 
questioning now. And Mr. Batkins, I will go to you first, and I 
recognize myself for 5 minutes.
    Should small businesses receive a waiver for first-time 
nonharmful paperwork violations if they promptly correct the 
problem?
    Mr. BATKINS. From my perspective, the goal of regulation 
generally is to correct market failures when they happen and to 
protect health and safety. So if you have an instance where it 
is a routine paperwork collection and it is simply a reporting 
or recordkeeping instance where you do not have a repeat 
pattern of violations by a particular industry who is trying to 
flout Federal law, then I do not think that agencies should 
initially take punitive steps because of an error or two that 
happens to pop up in PRA.
    Chairman CHABOT. Thank you very much. And that is, I think, 
I will go to you next, Ms. Pilconis, and that was something you 
were talking about there in some detail. Would you want to 
expand upon that in any way?
    Ms. PILCONIS. I would just add that particularly in the 
environmental area with the rules that U.S. EPA writes and 
enforces, the penalties for noncompliance are extremely high 
and they are going up every year because Congress has now 
authorized the regulatory agencies every January to assess and 
potentially increase penalties, civil penalties for fines under 
the environmental statutes. So, for example, the Stormwater 
Permit program impacts nearly every single construction 
project, and penalties for a violation, potentially even a 
paperwork violation under the Stormwater Permit program could 
reach up to $52,400-plus per day per violation. So huge, huge 
penalties. I believe that, you know, a right to cure for small 
businesses, considering how much of a paperwork burden there is 
and how little compliance assistance is out there and the 
limited staff and resources that they have would be 
appropriate.
    Chairman CHABOT. And you had mentioned that 91 percent of 
folks in the construction industry are small business by 
definition, so I think----
    Ms. PILCONIS. Correct.
    Chairman CHABOT.--this is an area certainly this Committee 
would want to follow up on. So thank you. Thanks, both of you.
    Mr. Cania, I will go to you next. I would like to start 
with the I-9 forms that you had mentioned. How many pages long 
is the I-9 form currently? And also, how long are the 
instructions? You mentioned how burdensome they could be and 
the guidance book associated with it? Would you comment on 
that?
    Mr. CANIA. Sure. And I have copies with me if you would 
like to see them later.
    Chairman CHABOT. Okay.
    Mr. CANIA. The basic I-9 form is----
    Chairman CHABOT. We all want copies of them, too, and 
everybody in the audience.
    Mr. CANIA. Not a problem. And we can begin filling them out 
immediately.
    The I-9 form is two pages. Page 1, or section 1, is for the 
employee to fill out. Page 2, or section 2, is for the employer 
to fill out. There is also a third page of acceptable 
documents, a list of acceptable documents. The instructions are 
now 15 pages long for a 2-page form, and the instruction manual 
is a slim 69 pages.
    Chairman CHABOT. That is something. And you also mentioned, 
I think their estimate is 35 minutes to complete the I-9 form. 
How accurate is that currently?
    Mr. CANIA. It really depends on the business. We are asking 
employees to fill out section 1, page 1, and if they are 
employees with either English as a second language, or no 
understanding of English, and need an interpreter, it could 
take over an hour to fill out a simple one page form. So, it 
may not be that accurate.
    Chairman CHABOT. Thank you.
    Ms. Katzen, let me conclude with you if I can. You had 
mentioned the agency department that is most responsible for 
paperwork, obviously, the IRS. And I know that I used to do my 
own taxes. I do not anymore. Stopped doing that, I do not know, 
a dozen years ago or so. But I remember going to the local 
library and they had all the forms out there and you would go 
pick stuff up, et cetera. Well, as we all know nowadays you 
file electronically, and there will be a couple of forms there, 
but you have got to print them yourself at your own computer.
    What progress have we made? What could we do better to 
reduce the paperwork? It would seem that if you are doing 
things electronically now, by definition it ought to reduce the 
paperwork, but it does not seem to have done so. So would you 
comment on that?
    Ms. KATZEN. Yes, Mr. Chairman. The situation with IRS is 
particularly puzzling or difficult to solve because when you 
used to go to the library, you could also pick up the telephone 
and reach somebody, usually on the third ring, to answer a 
question about how to proceed, or to send you a form or to help 
you through the process. Given the cuts to the IRS budget that 
have been systematically supported by this Congress the last 
several years, the waiting time now for getting assistance is 
well over 2 hours, if you bother to stay on the phone. IRS does 
not have the resources to provide the kind of assistance that 
they would like to provide. It is difficult to suggest a 
solution when they are so stressed and so tight on resources 
that they have had to give up almost all of the compliance 
assistance that had been there in the past.
    The code is very complicated, as I tried to say at the end 
of my statement, and that is because of decisions that have 
been made that those types of offsets and deductions are all 
appropriate, and I think somebody has to talk to somebody and 
see that they are all on the same page. If you want the system 
to work, and maybe that is an assumption that I am making that 
others do not share, but if you do want the system to work, you 
need to give them the resources to enable it to happen.
    Chairman CHABOT. Thank you. To follow up, I would also 
suggest that if they did not spend time and effort focusing 
attention on targeting certain groups for their political 
persuasions maybe they could spend some of those resources on 
serving the public and their customers. But we try not to be 
terribly partisan on this Committee, so I will just leave it 
there.
    My time is expired, and I will now recognize the Ranking 
Member for 5 minutes.
    Ms. VELAZQUEZ. Try harder.
    Thank you, Mr. Chairman.
    Ms. Katzen, thank you so much for all of your testimony.
    So here on this committee we are trying to make sure that 
we address some of the issues that hinder small businesses and 
small business growth. So, on the one hand, we are here 
discussing paperwork reduction and how we can reduce the number 
of regulations that impact small businesses, but then you said 
we need more resources, we need more staff to be able to 
conduct evaluations and decide where we can make the paperwork 
reduction work. So how do you reconcile that with the Trump 
administration policies, like a hiring freeze and cuts to 
agency budgets, how will that impact the ability of agencies to 
evaluate and streamline paperwork burdens?
    Ms. KATZEN. Well, it does not help. It is particularly 
concerning because so many of the departures from the civil 
service are at the senior ranks, where they have experience and 
proficiency in carrying out their various responsibilities. The 
budget cuts for the domestic agencies will require them to 
abandon certain substantive programs, but will also make a 
further cut in their ability to provide the supplemental 
services that we have been talking about, including providing 
analysis of what they are doing right and what they are doing 
wrong. No company, no small business, would simply issue an 
edict about personnel without first studying the effects that 
it would have on its day-to-day operations.
    Ms. VELAZQUEZ. So given the budget cuts and the hiring 
freeze, some have suggested that to make the PRA more 
effective, the volume of requests being sent to OMB need to be 
reduced. This could be done by limiting OMB review to 
significant paperwork collections and shifting more 
responsibility to the agencies. Do you believe that delegating 
more authority to agencies on less significant information 
requests will help OIRA focus on bigger paperwork issues?
    Ms. KATZEN. That is a very interesting point because, with 
the review of regulations that is also done by OIRA, in 1993 
President Clinton signed an executive order that limited review 
to only the ``significant'' regulations so that we could focus 
on the most important ones. That approach could well translate 
to applicability in this area. Be careful what you wish for, 
though, because to the extent you remove OIRA review, you 
unleash the agencies, and those who are concerned about 
agencies running amuck and asking for too much information they 
do not need would have no restraints. So it has to be done 
carefully and judiciously.
    Ms. VELAZQUEZ. Ms. Katzen, you have expressed concern that 
it is misleading to focus on the overall burden hours of 
federal paperwork because not all of the hours are the same. 
Can you please describe the different types of paperwork 
burdens and why it will be constructive to distinguish them 
from one another?
    Ms. KATZEN. Yes. Thank you very much, Ms. Velazquez, 
because that is the heart of the issue. You have to know what 
the substance is of the paperwork burden so that you can 
address it. In addition to 70 percent being from tax 
compliance, there are--as the chairman noted--the Census Bureau 
and BLS and the Bureau of Economic Information at the 
Department of Energy. These agencies, statistical agencies, 
collect critical information because we know that good 
decision-making requires information.
    This is the information age. It requires knowledge and that 
is often in the hands of individuals or companies or State and 
local governments. That information not only aids government 
decision-making, but also, once scrubbed of personal 
identifiers, is often redistributed to the public, which finds 
that kind of information critical for making all sorts of 
business decisions.
    We also have the third party disclosures which the chairman 
mentioned, and he talked about food labeling. One can have a 
different view about the merits of that, but I will ask you to 
think about drugs and the content information, and the dosage 
information, and the counterindicator information that are on 
that packaging. That is all paperwork. That I think is all of a 
very different ilk.
    You have in the rulemaking area, information as to the 
costs and benefits, which comes from the private sector. That 
helps good decision-making. Without that you are operating on 
conjecture and speculation. And at that point, I think the 
rules that we would be promulgating would be even more 
burdensome, less effective, and less efficient, particularly on 
small businesses.
    I could go on, and in my written testimony I go through a 
variety of different types of paperwork, but to quote a famous 
author, not all animals are the same. Not all paperwork is the 
same. And you have to understand the distinctions that can be 
and should be drawn.
    Chairman CHABOT. The Ranking Member's time is expired.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Chairman CHABOT. Thank you.
    Ms. VELAZQUEZ. I yield back.
    Chairman CHABOT. Thank you.
    The gentlelady from American Samoa, Mrs. Radewagen, who is 
the Chairman of the Subcommittee on Health and Technology is 
recognized for 5 minutes.
    Mrs. RADEWAGEN. I want to thank you all for appearing and 
testifying today, and I want to thank Chairman Chabot and 
Ranking Member Velazquez for holding this hearing. Anything we 
can do to make it easier for our Nation's small businesses to 
operate is a goal I believe we can all work on.
    Professor Katzen, I found your written testimony 
fascinating. You have already talked about it a little bit 
since you have been on the opposite side of these small 
businesses, but I do think you make a fair point that many of 
these burdensome requirements are a product of decisions made 
right here in Congress.
    All of you can answer this. What would you recommend that 
we do here in Congress that can have actual enforceable impact 
on relieving these burdens? Mr. Batkins?
    Mr. BATKINS. Sure. One area that the Government 
Accountability Office has focused on is duplication, 
fragmentation, and overlap. And while I certainly think just 
from our fiscal agencies, they are vital collections so we know 
what is going on in the Nation with the census and so on, there 
are probably countless collections that do, as we have heard 
today, impose fragmentation, duplication, and overlap. And 
thankfully, with the Paperwork Reduction Act it is slightly 
different than just regulation as a whole because we know that 
there are roughly 9,500 OMB control numbers, so someone could 
sift through all of them and determine which ones actually do 
overlap.
    The second point I would make is I think retrospective 
review is pretty critical in terms of getting better estimates 
and determining if the collections are effective. And I think 
that is a point initially when agencies are calculating burden 
hours and calculating the impact of a particular collection, 
they are sort of in the dark as we heard sort of made-up 
figures or random numbers at worst was one definition.
    So I certainly think that maybe after the 3-year collection 
has expired and OMB and the agencies have the available data, 
that they can go back and determine if the collection was 
successful, if their data is correct. That is the point that 
President Obama made when he issued the Executive Order 13610. 
So I think retrospective review could be an important 
component.
    Mrs. RADEWAGEN. Thank you.
    Ms. Pilconis? My time is short.
    Ms. PILCONIS. Okay. Thank you.
    So I concur with what Mr. Batkins said regarding seeing 
where there is duplication and overlap. I would also add that 
it would be helpful to require agencies to respond in writing 
to serious objections from the Small Business Administration 
Office of Advocacy where they perceive there to be an impact on 
small businesses.
    Also, as Ms. Katzen said, talking about OIRA's involvement 
being a powerful tool to discourage some of the program offices 
from proposing too many new ICRs, I reference in my written 
statement some concerns that we have about the generic ICRs 
where everything is just being kind of lumped together into one 
ICR. This has been done with EPA's NPDS permit program, where 
in that case you are really not truly looking at the burden of 
putting new requirements into these stormwater permits that do 
apply to all, like for the construction program, all sites, and 
really are impacting small businesses. So it is a concern with 
the generic ICFs and the fast-tracking permits that you are not 
really looking at the burdens.
    Mrs. RADEWAGEN. Mr. Cania?
    Mr. CANIA. Well, although one of my employees would not 
agree, I think I am relatively tech savvy, and I am sure the 
people in my office are laughing right now because of that 
statement. But, I think if we could use technology to more 
effectively work with small businesses, especially in gathering 
and reporting of information, that would decrease the time 
necessary, and also increase the effectiveness of the data-
gathering programs.
    Mrs. RADEWAGEN. Thank you.
    Professor Katzen?
    Ms. KATZEN. I would concur with Mr. Batkins' suggestion 
that this be wrapped into the retrospective review that the 
agencies try to undertake. Again, they need resources to be 
able to devote their attention to that subject, but that is, I 
think, one of the most important things.
    As to consolidation and standardization and enhanced use of 
electronic reporting, which is required by statute now, I would 
just refer you to the report of the task force that was set up 
in 2002, which set forth in great detail some of the real traps 
to moving in that direction. But that, too, is something that I 
think should be nibbled at around the edges.
    Mrs. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
    Chairman CHABOT. The gentlelady yields back.
    The gentlelady from North Carolina, Ms. Adams, who is the 
Ranking Member of the Subcommittee on Investigations, 
Oversight, and Regulations, is recognized for 5 minutes.
    Ms. ADAMS. Thank you very much, Mr. Chair and Ranking 
Member Velazquez. Thank you as well for hosting the hearing and 
thank you very much to all the witnesses for your testimony.
    Reducing the paperwork burden for our Nation's small 
businesses is certainly important, so we still need to maintain 
a sufficient level of data reporting that would allow us to 
gather important information on small businesses.
    Ms. Katzen, one of my initial questions you already 
addressed, so I want to ask you about after the OMB receives a 
package of materials to review pursuant to the Paperwork 
Reduction Act it is required that they provide for an 
additional 30-day period for public comments. And I am a big 
supporter of transparency and public participation in the 
rulemaking process. So how many people are commenting on 
information collection requests during this period, and how do 
you believe we can encourage more participation during the 
comment periods?
    Ms. KATZEN. The amount of people who comment will vary 
considerably depending upon the particular information 
collection request at issue. Some generate a lot of comments, 
some very few.
    The second--if I can call it the second comment period, 
because the agencies have already had their own comment 
period--was originally designed because of the suspicion that 
some regulated entities would not want to speak truth to power; 
they would not want to tell their regulating agency, this is 
stupid. And so, instead, they said, well, then OMB will have a 
separate process whereby they can gather the information. I 
think that that should be reviewed and consider cutting back to 
some extent in certain circumstances.
    I think the major kind, the big, the significant paperwork 
should retain a second comment period for OIRA, but I think 
some of the less significant ones could well do with just one.
    Ms. ADAMS. Okay. Thank you very much.
    So the Paperwork Reduction Act requires OMB to provide 
direction and to oversee the privacy, the confidentiality, 
security, disclosure, and sharing information, and in the past 
few years there has been some troubling data breaches of 
personal information held by the Federal Government. So what is 
OMB doing to ensure that information collected from the public 
is secure?
    Ms. KATZEN. This has been one of the very difficult hurdles 
for full-out electronic reporting which some of my copanelists 
have called for. We used to be afraid of Big Brother. Now we 
are afraid of hacking, with good reason. And this is something 
which was in a separate office that was established under 
President Obama. I do not know if it will continue under 
President Trump--to try to minimize the government's 
vulnerability--but it is a real risk. And to harden the system 
to preclude those kinds of hacks, you are going to have to, 
again, devote resources, which the agencies may or may not 
have.
    Ms. ADAMS. Okay. So when an agency experiences a breach, 
does OMB help them implement more effective data security 
measures?
    Ms. KATZEN. Yes. Part of OMB reports through the deputy 
director for management, a position in which I served for a 
year and a half. And that is designed to be a troubleshooter, a 
helper in troubleshooting with agency issues. And I know the 
deputy director for management under President Obama was 
extraordinarily proficient in this regard, Beth Cobert. No 
nominee has yet been named by President Trump, but I look 
forward to having that individual be of assistance in this 
regard.
    Ms. ADAMS. All right. Thank you very much.
    Mr. Chair, I yield back.
    Chairman CHABOT. The gentlelady yields back.
    The gentleman from California, Mr. Knight, who is Chairman 
of the Subcommittee on Contracting and the Workforce, is 
recognized for 5 minutes.
    Mr. KNIGHT. Thank you, Mr. Chair. I thoroughly enjoyed 
these four comments and their discussion. There were a couple 
that hit me. One was on the stormwater from Ms. Pilconis. If 
you know anything about California, we have done extensive 
regulations on stormwater so that if there is a storm, you have 
to collect all that water, period. It cannot leave your sight 
if you are under certain industries, a lot of industries in my 
district, like aerospace. It makes it very difficult.
    So I guess my first question would be to you. How much 
discussion is there at the Federal level with States? And I am 
not going to go over State lines here because States can do 
what they want to, but if a Federal regulation is doing what we 
are trying to get done, is there any discussion between the 
Federal Government and that state who is trying to implement 
something that is duplicative? Is there ever any discussion 
like that?
    And I will do a follow-up question here real quick. Go 
ahead.
    Ms. PILCONIS. Okay. So with regard to the stormwater 
program specifically?
    Mr. KNIGHT. Well, specifically, I used that just because 
that one is an overreach.
    Ms. PILCONIS. With the stormwater, and with the stormwater 
program, though, the regulations have established the program, 
and then EPA has authorized States to actually implement the 
program instead of the agency. So in California, your State 
environmental agency has written the permit and is implementing 
the permit. EPA still has oversight. So in that case, the 
overlap is really with regard to enforcement, but the industry 
is applying for the State permit, not the Federal permit.
    Mr. KNIGHT. Okay. So when this starts, this is kind of a 
good discussion when we talk about States like me that have 
kind of an overreach sometimes, and there is already a law on 
the books. There is a regulation that kind of goes down this 
road, correct?
    Ms. PILCONIS. Yes. The Federal regulations set the minimum 
standards, and there is actually a minimum stormwater 
management standard in the Code of Federal Regulations that say 
this is the minimum technology requirements that need to be in 
all stormwater permits across the Nation, all State permits. 
And then States can take it farther. So California has taken it 
very far.
    Mr. KNIGHT. Yes, we have.
    Ms. PILCONIS. For construction, the most stringent permit 
in the Nation. And actually, in my written statement, if you 
look online, because California posts all stormwater permit 
violations online for the public to view, if you do a search of 
those violations you can see that the vast majority of them, 
they are almost all paperwork violations. And less than 1 
percent are actually labeled as any kind of environmental 
discharge.
    Mr. KNIGHT. I was in the legislature when that sterling 
legislature was coming down the line.
    Ms. Katzen, to you, I enjoyed your passion and your emotion 
about Congress. I agree with you. I do. I think that there 
should be an aggressive agenda, especially coming out of small 
business, to alleviate some of these problems that small 
business has to go through. I know when people talk about the 
hours, the hours are money or lost revenue for that small 
business. That is exactly what an hour is. It is not that I am 
pulling someone off the line or pulling them out; it is that I 
am not making money because that person is not working.
    And so I guess my question to you is if we do have a little 
bit more of an agenda that we are trying to pull away from 
budget items, and I know you brought up the IRS and lowering 
the amount of money that IRS is getting, then it is harder for 
them to do what they are supposed to do, and part of that is to 
look at businesses and their forms. Would we not then, if we 
are going to lower the budget, lower the regulations, lower the 
amount of work that small businesses have to go through? Would 
that be a smart way of going about this? Or, and I am putting 
this very simply, but would that not be the follow-on?
    Ms. KATZEN. I do not think so because regulations, like 
paperwork, are not the same. They do not have the same purposes 
and they do not have the same effects. And just trying to 
reduce something could lead to unintended consequences and 
pernicious results.
    Mr. KNIGHT. Understand. Understood. But if we do alleviate 
business of certain regulations that are out there that are 
paperwork, then we are taking some of the burden away from the 
bureaucracy, taking away some of the man-hours of the 
bureaucracy. We are also allowing business to now work.
    Ms. KATZEN. And that would occur, but there might also be a 
reduction in information that leads to either government 
decision-making or individual decision-making. There might also 
be a reduction in protections--the hardhats required, third-
party disclosures--and those are choices. And you can choose to 
make those choices, and you will make those choices as you 
will.
    Mr. KNIGHT. Absolutely. And I am sure in 15 years, after 
more regulations are put on, people will go, how did we live in 
2017 without these regulations that we are trying to take off 
now in 2035? But, at some point, we do have to look and say 
business is overburdened. We have to do some maybe pullback in 
certain areas.
    Ms. KATZEN. And I think that is the basis for President 
Obama's very aggressive retrospective review that Mr. Batkins 
talked about and that I suspect will be forthcoming with the 
new administration as well.
    Mr. KNIGHT. Thank you very much.
    Mr. Chairman, my time is expired.
    Chairman CHABOT. Thank you. The gentleman yields back.
    The gentleman from Pennsylvania, Mr. Evans, who is Ranking 
Member of the Subcommittee on Economic Growth, Tax, and Capital 
Access, is recognized for 5 minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    Ms. Katzen, I want to follow up on something. It looked 
like you were running out of time. You were pointing directly 
at Congress, and I want to spend some time on you, giving you a 
little bit more time to tell me exactly those points you were 
getting ready to make about where the responsibility is. 
Because I think in any of these hearings we need to be very 
honest and put it on the table. I mean, this does not just 
magically happen. Somebody is responsible for it. So let us go 
into a little bit more when you say about what Congress is 
responsible for.
    Ms. KATZEN. One of the areas that I did not mention that I 
feel very passionately about is that, when Congress establishes 
a program, be it a grant or a benefit-type subsidy, it 
legitimately demands accountability. It wants to make sure that 
the agency is providing those funds, which are taxpayer funds, 
to the recipients, only to those recipients who are eligible 
and qualified. And so even with small business loans, you do 
not just get a small business loan by calling up SBA and say, 
please send me the following amount of money. You have to fill 
out a form. You have to demonstrate you are a small business 
and you have to explain how this is going to advance the 
overall objectives of the agency. That is accountability, which 
both sides of the aisle have subscribed to, appropriately so. 
That, I think, is a very important aspect of our government. It 
goes beyond what Congress is doing. It goes to the issue of a 
democracy and decision-making in a democracy and Congress' role 
in setting up those kinds of requirements, which have to be 
held to account through paperwork.
    The other type of thing that I am particularly familiar 
with is the role of paperwork in rulemaking. We hear a lot 
about rules. They need to be data-based. They need to be based 
on what we have information about, and that kind of information 
often has to come from the public. Congress has taken several 
steps to insist that agencies base their decisions on sound, 
best reasonably available data. They have to get it. Where are 
they going to get it from?
    And so I think, again, Congress has the right ideas and the 
right objectives, but it does add to the paperwork burden every 
time.
    Mr. EVANS. So then do I hear you saying that Congress is 
the problem? I am listening to you very clearly. I am just 
asking, I mean, you know, this is your chance. Say it if you 
think that is what it is. I am just curious.
    Ms. KATZEN. I would rather say, sir, that Congress is part 
of the solution.
    Mr. EVANS. Okay. Okay. Okay. Okay.
    Ms. KATZEN. I borrowed that from one of the Republican 
presidents. I am just turning it a little bit to my advantage 
here.
    Mr. EVANS. Okay. I just want to understand.
    Ms. KATZEN. But I think awareness--and that is what this 
Committee is bringing, awareness--of the consequences of making 
decisions. And yes, Congress is participating in this venture.
    Mr. EVANS. Okay. A little complicit in some ways, huh?
    Ms. KATZEN. Yes, sir.
    Mr. EVANS. Okay. Just thought I would ask. I thank you and 
yield back the balance of the time.
    Chairman CHABOT. I thank the gentleman for yielding. I 
would just note that that is the case whether the Republicans 
are in control or the Democrats are in control. So thank you.
    And seeing no one on this side yet, we will go to Mr. 
Lawson from Florida, who is the Ranking Member of the 
Subcommittee on Health and Technology. You are recognized for 5 
minutes.
    Mr. LAWSON. Thank you, Mr. Chairman. I just realized that I 
was in a very peculiar position today. And what I mean by that 
is because all of my adult life I have been in business, and I 
hated a lot of the paperwork required from the government. And 
so now I am in a peculiar position, you know. And Mr. Chairman, 
I want to thank you for putting me in this position. And what I 
mean by being in a peculiar position is that now I am not too 
sure what I am doing, but I know my opposition to a lot of 
paperwork because I hated it. And so I guess this question will 
go to Ms. Pilconis.
    Someone who has been as a small business owner and operated 
most of my life, I understand the burden that small businesses 
have. Can you answer the simple question, do you believe that 
the Federal Government has met the first purpose listed in the 
1995 act to minimize the paperwork burden for individuals; 
small businesses; education and nonprofit institutions; Federal 
contractors; State, local, and Tribal governments; and other 
persons resulting from the collection of information by or from 
the Federal Government?
    That is the question that I do not know whether I could 
answer, so I want to see what comes from the other party 
because I have been opposed to all of it.
    Ms. PILCONIS. I think the procedures that are in place are 
moving in the direction of evaluating the burden. I do not 
think that the burden is always accurately evaluated. I think 
that very often, particularly with my involvement with the 
Environmental Protection Agency, the numbers that they are 
coming up with when they are trying to say how much is this 
going to cost industry, how many hours is it going to take 
industry to comply, the numbers are always very, very low. In 
actuality, it is going to cost a lot more. It is going to take 
a lot more time. So I do not think that the outreach and the 
information to the true actual small business owners who are 
going to be having to implement these requirements is as great 
as what it should be to get true burden estimates. I think that 
the goal of reducing the paperwork hours has not been 
accomplished.
    I think the goal of trying to assess the burden, there have 
been steps in that direction. I think more can be done.
    Mr. LAWSON. Mr. Chairman, with no disrespect to many of my 
colleagues who might not have been in business, I resent the 
fact that small businesses have to pay CPAs and other people to 
do all of this paperwork that is required. And I used to often 
have the conversation with my CPA, you know, why should I have 
to pay for all of this? You know, because it is probably going 
and sitting on a shelf that is just there. But you have got to 
pay to have it done or you will not be in compliance.
    And so if anyone else cares to comment on that, Ms. Katzen, 
it would be helpful to me. I understood your remarks a few 
minutes ago, but from Congressman Evans here saying is the 
Federal Government at fault? You know, I think they are and I 
probably put the words in your mouth even though you might come 
from a different angle.
    Ms. KATZEN. Well, I would agree in part with the 
observation that information which is requested but is not used 
should not be requested in the first instance. I have no 
problems with that. And, in fact, one of the things that I did 
when I was the administrator of OIRA was to institute a policy 
in which, when an information collection request expired--3 
years, which is its term--and was resubmitted to OIRA, we would 
ask the agencies to document how that information had been 
used. If they cannot show it has been used, it should not be 
renewed. That was my approach. And I think that that is a 
philosophy that underlies the Paperwork Reduction Act. Where 
the information is used, however, then I think it is a 
different judgment.
    The question here is: Is that something which is 
appropriate to ask for and useful in making the government 
better at doing what it is required to do? That is the test 
there. And so I think discriminating views and reviews of these 
issues would be salutary.
    Chairman CHABOT. The gentleman's time is expired.
    The Chairman would note for the gentleman from Florida that 
there is a famous quote from a cartoon that used to appear in 
the newspaper. I am thinking like 50 years ago, Pogo. I do not 
think they are around anymore. And the quote was, ``We have met 
the enemy and he is us.'' So Mr. Sherman is nodding down there 
because he is familiar with that quote, too.
    I was trying to remember the quote and I came up with, you 
know, ``I have met the enemy and it is me,'' and I knew that 
was not right, so Viktoria here checked it out. Google, you can 
find anything nowadays, but that is what it was.
    So in any event, the gentleman's time is expired. The 
gentleman from Illinois, Mr. Schneider, who is the Subcommittee 
Ranking Member of Agriculture, Energy, and Trade, is recognized 
for 5 minutes.
    Mr. SCHNEIDER. Thank you. And as always, I want to thank 
the witnesses for making your time available for us. We cannot 
do what we need to do without hearing from you. Your 
experiences and insights are greatly appreciated. And I 
apologize if I am repeating what others have said. As the 
chairman will understand, we are balancing three Committees 
meeting all at the same time. So if anyone has figured out how 
not only to reduce paperwork, but to be in three places at the 
same time, I would be very grateful.
    Chairman CHABOT. The chair would note that the member is at 
the most important of those Committees.
    Mr. SCHNEIDER. Yes, absolutely.
    But I do have one quick question for Mr. Batkins. In your 
submitted testimony, you have a graph on ``Non-Treasury Cabinet 
Agency Paperwork.'' And having looked at a lot of these graphs 
in business, it kind of has a hockey stick aspect to it, but in 
2015, 2016, there is a dramatic spike in hours. You may have 
explained this earlier, but what was driving that one spike? Is 
there any key information from that line?
    Mr. BATKINS. Sure. Well, as we mentioned, a lot of these 
are programmatic changes from Congress, and from what we can 
tell, the largest gain in paperwork was from the Department of 
Health and Human Services. They went from roughly 400 million 
hours, still number two behind Treasury, and now they are up 
over a billion hours in paperwork. So a lot of that was driven 
by HHS.
    Mr. SCHNEIDER. Okay. Thank you.
    I want to turn to Ms. Katzen and something you have said 
and talked about also in your testimony. But as we all know, I 
was the poster child of hating paperwork when I was in business 
and knew that it was not the best use of my time, would always 
outsource it to somebody else. So while there is a burden, 
there is also a benefit that you touched on of the data that 
comes from some of that paperwork, and data being turned into 
information that in my business life we also utilized to some 
extent.
    How would it be best to go about balancing the demands of 
collecting information, knowing the information is accurate, 
that a small business is a small business, that an applicant 
for a loan is qualified for the applicant? How do we manage the 
burden and the benefit and what are some potential 
opportunities, perhaps for this Committee, as we look for ways 
to reduce that burden?
    Ms. KATZEN. Well, thank you for the question. I think the 
short answer is ``carefully'' to try to balance those things. 
There is not a ``one size fits all.'' There is not, as I 
mentioned earlier, a magic bullet that can be used. It has to 
be done agency by agency, program by program. And as I stressed 
in my opening comments, to do that the agencies need the 
capacity and the funding. And absent that, they are working 
with both hands tied behind their backs.
    We have heard repeatedly that the estimates of burden hours 
are not always accurate. How do you test the estimates? You 
have a focus group or you do a trial run. The agencies do not 
have the funds to do that. And so they calculate what they 
think is the right answer, and then, as Mr. Batkins was saying, 
you have an opportunity during the renewal stage for people to 
say, ``I filled out the form and it did not take 45 minutes; it 
took 3 hours and 45 minutes.'' It is a process of development. 
Unless the resources are given to the agencies, though, you 
will not make much progress.
    Mr. SCHNEIDER. Thank you. I appreciate that in making sure 
that as we are designing these structures that we include in 
that the trial and error and learning aspect of it. I say that 
as not just a businessman, but as an engineer. That is the only 
way you get it done. If you do not learn from what you do, if 
you are not smarter, you are not moving forward.
    I like what you said. You talked about when you were at 
OIRA you had the rule, show us how the data is used. Is there 
any way, because obviously you are no longer at OIRA, are there 
things that we can do to institutionalize or enforce that kind 
of review?
    Ms. KATZEN. I am always reluctant to urge legislation 
because I think the kind of work that I did is called 
management, and it is very difficult to legislate good 
management. And therefore, I am reluctant to say you should 
codify something in some statute. But a little comment from 
this Committee to OIRA about working in that direction--
thinking about these kinds of things--could well go a long way. 
Government agencies are responsive to communications from 
Congress, and sometimes you can have them think about what the 
nature of the problem is, and work with them to come up with a 
solution, which is a lot better than simply dictating the 
outcome.
    Mr. SCHNEIDER. I agree. I am out of time. I would add the 
one thing, I think our role in Oversight and the question we 
ask in Oversight can play an important role in that as well, 
making sure that we continue to work to ease the burden on all 
businesses, but in particular small business here in our 
country. Thank you very much. I yield back.
    Chairman CHABOT. Thank you.
    We are going to go into a second round. I am going to ask 
just one question here, and if any other members, I mentioned 
it to the Ranking Member as well, it will not necessarily be 5 
minutes. But first of all, just by clarification, Mr. Batkins, 
I think you said the couple hundred thousand hours going up to 
a billion hours in HHS, I think at the end you said, of course, 
that was because of HHS. I think you meant because of ACA, 
right?
    Mr. BATKINS. Well, the ACA certainly drove a lot of those 
burdens, correct. I think we have pegged something like 170 
million hours from the ACA, which if you take a step back I 
think makes sense given the scope of the law overall. But it 
was not all ACA-driven, but a significant portion was ACA.
    Chairman CHABOT. And for those dozens of people who might 
be watching this at home, the ACA is the Affordable Care Act, 
or Obamacare in some terminology.
    My question is for Ms. Pilconis and Mr. Batkins. If an 
agency wants to pay people to respond to an information 
request, the PRA requires agencies to explain that decision. 
What problems could result from paying people to respond to 
government requests? Either one can go first.
    Mr. BATKINS. Sure. I mean, if you talk to some 
statisticians, you might run into the problem of getting 
perhaps a nonrepresentative sample if you are paying people, 
incentivizing people who really need or who really want that 
$50, even though it is a somewhat nominal amount to comply. But 
I know from the agency's perspective, for some of the surveys 
they will claim that it is really difficult to get a 
representative sample at all, so we have to sort of 
incentivize. Obviously, through Congress' perspective, you 
know, this is money going out the door. I am not sure if there 
is a total catalogue of all the money that is spent on paying 
representatives to answer these Federal forms.
    Chairman CHABOT. Okay. Ms. Pilconis?
    Ms. PILCONIS. I do not have anything specific to add to 
that except to share an example of where I know that EPA is 
offering to pay people who respond to a survey, and that is 
with the agency's efforts to expand its lead paint program and 
in continuing to try to look for some sort of justification to 
show that there is a need for more rules. And there is a survey 
out there now. There is concern that they are not going to get 
enough response and so they are offering the $50 payment. So it 
is an area where we have recognized there is already overlap; 
have stated many, many times that it does not warrant EPA 
expanding the program. But yet now we are in a situation where 
we are surveying industry and paying industry, which is costly 
and taking time on the part of the government. I think it is 
important to evaluate when you are offering money and spending 
those resources.
    Chairman CHABOT. Thank you very much. And I will yield my 
time back. I took about 2-1/2 minutes.
    The ranking member is welcome to take as much time as she 
wants.
    Ms. VELAZQUEZ. Sure. Thank you, Mr. Chairman.
    Mr. Batkins, you mentioned that there is not much public 
participation. Any suggestion as to how we, the federal 
government, can increase public participation?
    Mr. BATKINS. Sure. I have noticed this before when you look 
at the dockets on RegInfo and you will see maybe one or two 
comments total. I think part of it, this is just from my 
perspective of someone who visits the Federal Register every 
day, the second-most important website that we visit, but from 
my perspective it is sort of proposed rules, final rules, which 
is a relatively small sample. If you wanted to see what was 
going on in the Federal Government, you could see what EPA was 
doing with directives.
    And then there is an entire class of notices, and usually 
there are hundreds of them. And that is usually where all the 
PRA requests are. And just one idea is putting maybe these 
major collections, I am not sure what hourly threshold you 
would want or how you would define a major collection of 
information, maybe upgrading that to sort of a proposed and 
final rule status. So it is with all of the other significant 
regulations that come out. And also, significant revisions to 
existing collections, elevating those as well might be one way 
to increase public participation.
    It is also my understanding that most of the comments are 
generally directed when the proposed and final rule are coming 
out, and after the PRA, the ink is sort of already dry on the 
regulation and there tends to be less interest once the rule is 
already finalized. Obviously, all the lobbying is sort of 
initially and then it sort of tails off.
    Any other suggestions?
    Ms. PILCONIS. Well, I just wanted to add that in talking 
with our members, it is confusing when the information 
collection request is kind of buried in the proposed rule and 
it is not really called out. I know it is supposed to be, but 
it is not always called out as a paperwork request, and it is 
not always identified as an issue or flagged as an area where 
the government is really soliciting feedback on the time and 
the burden and the cost.
    So in that respect, where it is not like a true ICR, it is 
often, I think, an area that kind of gets meshed into the 300-
page Federal Register notice and there is not enough attention 
drawn, particularly to small businesses, which is why I was 
suggesting maybe getting SBA more involved where there is a 
concern with small businesses, having the agencies respond to 
that, because it seems that it is kind of, in that regard, 
getting lumped in.
    Ms. VELAZQUEZ. Do you have any suggestions?
    Mr. CANIA. Yes. I would say if the agencies worked with 
organizations like SHRM, and put out a request through SHRM for 
information, I know that whenever there is an issue that is up 
for debate, and SHRM puts out a legislative notice asking 
whatever your view is, please notify your member of Congress, 
your Senators, the response is very healthy. And so I think 
having some type of a partnership like that with the various 
organizations, you could increase the participation of the 
responses, probably dramatically.
    Ms. VELAZQUEZ. Do you have any?
    Ms. KATZEN. I think I have said enough today. But if I come 
up with something, I will let you know.
    Ms. VELAZQUEZ. Thank you. Thank you, Mr. Chairman.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    And the gentleman from California I think had a final 
question.
    Mr. KNIGHT. Thank you, Mr. Chair. I am happy to know that 
there might be as many as 36 people watching.
    Just a quick question. I went on to reginfo.gov. It is a 
difficult site. I am happy that people go on every day and look 
at that stuff.
    My first question is just other websites, you know, over 
the last 15 years, it seems like everything has gone to the 
Internet and we do not go down to the library, even though that 
was easier than trying to do your taxes on line, I can tell you 
that. Is it better now? Or is it just another kind of hurdle 
that we are jumping through and then we have got to fill out 
the paperwork anyway or we have got to sign something anyway?
    And I do that because I look on a lot of these government 
sites. The VA was the first one we looked at and it was 
difficult for my folks back home to get through the VA, so we 
made our own VA site of local things that were happening in the 
VA, and it helped out our veterans tremendously. But I know you 
cannot do that all over the country. You have got to have one 
main site. But is RegInfo helpful? I am not going to ask Mr. 
Batkins because he is on it every day, but Mr. Cania?
    Mr. CANIA. I would say it has gotten better. I have 
developed relationships with members of a number of different 
agencies, both Federal and State. And so when I need 
information I will generally try to reach them first, but then 
going onto RegInfo is helpful. I was on there actually this 
morning and I noticed that they recently added a mobile app, 
which, again, is helpful for folks in trying to get 
information. The more we can put out there in a user-friendly 
manner, the better off everyone is going to be.
    Mr. KNIGHT. And I always say if you cannot get there in two 
clicks, you are going to lose a lot of people. And some of 
these sites, it is like five clicks in before you get to where 
you need to. And by that time I have lost interest or I am 
calling somebody.
    Mr. CANIA. Sure. Sure. And the other way to look at it, 
also, is if you have to scroll very far.
    Mr. KNIGHT. That is true, too.
    Mr. CANIA. You are not going to get----
    Mr. KNIGHT. As politicians, if you are not above the fold 
on the first page, people are not reading.
    Mr. CANIA. The same goes with information on a website. 
People do not want to scroll.
    Mr. KNIGHT. And I have got a question just for you. Beta 
testing new forms before they are proposed by an agency, would 
that help reduce paperwork for small business or the burden?
    Mr. CANIA. I think it could help tremendously. And again, 
working with organizations like SHRM to put the form out there. 
SHRM could develop teams of HR folks, again, you know, being 
our expertise, to use the forms and go through, and not only 
point out where some of the redundancies might be with other 
forms, but also working to show areas that are more likely to 
cause mistakes or issues, errors for small businesses. I think 
any time you can involve the ultimate final user in a beta 
process, you are going to wind up with a much better final 
product.
    Mr. KNIGHT. Thank you, Mr. Chair. I yield.
    Chairman CHABOT. Thank you. The gentleman yields back.
    And we would like to thank the panel for their very 
excellent testimony here really this morning. You have provided 
thoughtful recommendations on improving compliance, as well as 
specific suggestions on minimizing federal paperwork and red 
tape. Hopefully, this information is going to be helpful to 
this Committee as it continues its oversight work and considers 
what should be done in attempting to meaningfully reduce 
federal paperwork burdens. So thank you very much for 
contributing to that.
    And I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record. Without objection, so ordered.
    If there is no further business to come before the 
Committee, we are adjourned. Thank you very much.
    [Whereupon, at 12:33 p.m., the Committee was adjourned.]
                            A P P E N D I X


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Introduction

    Chairman Chabot, Ranking Member Velazquez, thank you for 
the opportunity to provide my assessment of the Paperwork 
Reduction Act's (PRA's) effectiveness in reducing the paperwork 
burden on small businesses, as well as encourage all federal 
agencies to ``beta'' test all new form requirements. I am Frank 
Cania, founder and president of driven HR, a Pittsford, New 
York-based human resource (HR) consulting firm. I have more 
than 30 years of combined experience in human resource 
administration, management, employment law, and teaching. In 
addition, I am proud to have carried on my family's rich 
history of small-business ownership dating back more than three 
generations.

    My human resource consulting firm, driven HR, provides a 
variety of human resource-related services to small businesses, 
primarily in New York state. The services we offer relevant to 
this hearing include human resource risk assessments (e.g., HR 
audits); United States Citizenship and Immigration Services 
(USCIS) Form I-9 (I-9) preparation, reviews, and compliance; 
Occupational Safety and Health Administration (OSHA) compliance 
and reporting; Equal Employment Opportunity EEO-1 Report 
preparation; Internal Revenue Service (IRS) Form 1095-B (Health 
Coverage) and Form 1095-C (Employer-Provided Health Insurance 
Offer and Coverage) preparation; Family and Medical Leave Act 
(FMLA) leave eligibility determination, compliance, and 
tracking; Americans with Disabilities Act (ADA) compliance; as 
well as a number of other compliance-related activities. I 
appear before you today on behalf of the Society for Human 
Resource Management (SHRM), where I have been an active member 
for 20 years and currently serve on SHRM's Advocacy Team and 
Labor Relations Special Expertise Panel.

    SHRM is the world's largest HR professional society. For 
nearly seven decades, the Society has been the leading provider 
of resources to, and dedicated to serving the needs of, HR 
professionals, in support of our goal of continuously advancing 
both the HR professional and the human resource profession. 
Currently, SHRM represents 285,000 members who are affiliated 
with more than 575 chapters in the United States, along with 
subsidiary offices in China, India, and United Arab Emirates.

    In the interest of time and mindful that there are hundreds 
of forms under the PRA we can discuss, my testimony will 
address the challenges associated with IRS forms 1095-B and 
1095-C preparation, USCIS Form I-9 preparation, conflicting and 
overlapping federal and state regulations, and the benefits of 
gaining stakeholder involvement through comments to proposed 
regulations, roundtables and other types of engagement.

    Ambiguity Involving Tax Form 1095

    The Affordable Care Act (ACA) includes both an individual 
mandate and the employer mandate for health care coverage. The 
employer mandate requires employers with 50 or more full-time, 
and/or full-time equivalent employees, to offer health care 
coverage to their full-time employees working more than 30 
hours a week--as it is defined in the Act--or face a fine. To 
avoid IRS finds, employers must provide their employees with 
either Form 1095-B or 1095-C, depending on the number of 
employees an employer has and whether employers offer self-
funded health coverage. Form 1095-B is provided by self-insured 
employers with fewer than 50 employees. Form 1095-C is provided 
by applicable large employers (ALEs) with 50 or more employees.

    One of the challenges for ALEs in the completion of Form 
1095-C is the requirement that 95 percent of full-time 
employees, and full-time equivalents working an average of 130 
hours or more per month, be offered qualifying health coverage. 
More times than not, small businesses fail to understand that 
the percentage is not arrived at through an annual average. The 
requirement is for 95 percent of these employees to be covered 
each month. One client did not understand that he was required 
to report ``employee offer of health coverage'' on a month-to-
month basis. He also failed to properly identify and code the 
months prior to an employee's date of hire and the months 
following an employee's date of termination. In order to avoid 
federal government penalties for incorrect forms, we worked 
with the client to correct and reissue the forms.

    In another example, a client who relied on its payroll 
service provider to produce its 1095-C forms had converted to a 
self-funded health insurance plan at the beginning of the year. 
The client did not understand that it was required to include 
not only employee coverage but also employee dependent coverage 
on the 1095-C form. In the first year of the self-funded plan, 
the employer supplied the payroll service provider with the 
updated insurance rates, as well as employee enrollments and 
waivers. However, the employer failed to provide the required 
information regarding employee dependents. As a result, the 
1095-C forms initially produced by the payroll service provider 
did not contain any of the required dependent coverage 
information. This mistake was only uncovered when some of the 
30 affected employees questioned the employer about why their 
dependents were not listed on their 1095-C forms.

    Although on its face the issuance of corrected forms does 
not sound burdensome, the costs add up quickly. The clients 
referenced above each paid an initial set-up of $250, a service 
fee of $600 annually for the secure maintenance of their 
employee information, and $5 per 1095-C produced. Not including 
administrative costs, an ALE with 50 employees using this 
service will pay a minimum of $1,100 to produce the annual 
returns for all 50 employees. While these costs may seem 
insignificant to some, small employers often have small 
operating margins, making $1,100 a significant expense for many 
small businesses.

    One point many small-business employers find especially 
maddening is that, although they are required to issue 1095 
forms to their employees, the employees are not required to 
attach a copy of the 1095 to their individual tax return, 
whether they are filing paper returns or electronically. For 
example, an employee working for one company with health care 
coverage for the entire year can simply check a box on his or 
her income tax return indicating that he or she maintained 
coverage all year. Similarly, if an employee changed jobs 
during the year, but maintained coverage both under their 
former and new employers without a gap, he or she can also 
check a box on the income tax return indicating that he or she 
maintained coverage all year. This prompts the questions of if 
these forms are really necessary and what new information do 
the forms provide that the employee and IRS do not already 
have? It appears that the 1095 form does little more than 
increase both the paperwork burden and potential liability of 
small businesses, without any resulting benefit.

    Challenges Associated with the USCIS Form I-9

    Employers are required to properly complete and maintain a 
USCIS Form I-9 for every worker they employ. SHRM represents 
many of the people who complete the employment verification 
process at workplaces across all industries and sizes. 
Employers, including SHRM members, need the best possible tools 
to verify that their employees are authorized to work in the 
United States.

    Employers who act in good faith to properly verify their 
workforce should not be subject to unwarranted liability, yet 
the current Form I-9 restricts an employer's ability to provide 
commonsense guidance to employees while still acting in good 
faith. The I-9 instructions clearly state, ``Employers CANNOT 
specify which document(s) the employee may present to establish 
employment authorization and identity.'' Based on my many years 
of experience, and through discussions with several attorneys 
specializing in employment and immigration matters, this 
statement is broadly interpreted to mean not only that 
employers CANNOT require employees to provide certain 
documents, but that employers CANNOT even suggest or explain 
which documents are most commonly presented. As part of their 
onboarding process, however, many small employers provide new 
hires with a checklist of items and documents necessary on the 
first day of work. Very often, these checklists suggest that 
the employee bring documents such as a passport, or a driver's 
license and Social Security card or birth certificate--all 
acceptable documents for completing the Form I-9. Although most 
employees appreciate this information, the I-9 instructions 
prohibit an employer from providing this information, and doing 
so could lead to penalties for the employer. Even in instances 
where an employee asks which document(s) he or she should 
provide, or which are most commonly provided, the employer is 
best advised to reiterate that the employee should review the 
``Lists of Acceptable Documents'' and provide one document from 
List A (documents that establish both identity and employment 
authorization) OR one document from List B (documents that 
establish identity) and one document from List C (documents 
that authorize employment).

    The I-9 verification process becomes exponentially more 
complicated if the employee is not a citizen, national, or 
lawful permanent resident of the U.S. According to the 
instructions, if the employee selects the ``alien authorized to 
work'' status, he or she is required to provide an alien 
registration number/USCIS number OR Form I-94 admission number 
OR foreign passport number and country of origin, as well as 
the date his or her work authorization expires, unless it 
doesn't expire. The instructions go on to explain, ``Refugees, 
asylees, and certain citizens of the Federated States of 
Micronesia, the Republic of the Marshall Islands, or Palau, and 
other aliens whose employment authorization does not have an 
expiration date should enter N/A in the Expiration Date field. 
In some cases, such as if you have Temporary Protected Status, 
your employment authorization may have been automatically 
extended; in these cases, you should enter the expiration date 
of the automatic extension in this space.'' Despite the 
potential confusion this section of the I-9 creates, employers 
are not allowed to verify any of the information by asking to 
see the documents. The instructions inform the employee that, 
``Your employer may not ask you to present the document from 
which you supplied this information.''

    To further complicate matters where the employee is an 
alien authorized to work in the U.S., the employer is required 
to track the expiration date(s) of the employee's work 
authorization--both the date the employee entered in Section 1, 
as well as the expiration date of the document provided by the 
employee from either List A or List C of the ``List of 
Acceptable Documents'' as further proof of work authorization 
in Section 2. The employer is also urged to remind the employee 
of the approaching expiration date and his or her need to 
provide additional documentation for reverification of his or 
her work authorization, at least 90 days prior to the 
expiration date. However, according to the USCIS, ``The 
employment authorization expiration date provided by your 
employee in Section 1 may not match the document expiration 
date recorded by you under List or List C in Section 2. The 
earlier date should be used to determine when reverification is 
necessary.''\1\ This requirement presents a dangerous trap. An 
employer tracking the wrong date may be accused of failing to 
complete a timely reverification, which is all but certain to 
be construed as knowingly continuing the employment of an alien 
who lacks authorization to work. Such a finding often leads to 
costly fines that I will describe shortly.
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    \1\ U.S. Citizenship and Immigration Services. (2016, February 25). 
Completing section 3, reverification and rehires. Retrieved from 
https://www.uscis.gov/i-9-central/complete-correct-form-i-9/completing-
section-3-reverifcation-and-hires

    Small businesses with diverse geographic footprints can 
also face significant difficulties when attempting to properly 
complete I-9 forms and, more specifically, when attempting to 
verify the authenticity of the documents provided by the 
employee during the completion of Section 2. Here the 
instructions clearly state, ``the employer or authorized 
representative must physically examine, in the employee's 
physical presence, the unexpired document(s) the employee 
presents from the `Lists of Acceptable Documents' to complete 
the Documents fields in Section 2.'' There is often a difficult 
balance between following this requirement and risking 
potential errors for companies that have multiple shifts, 
multiple locations, remote employees, etc., since several 
different employer representatives must be trained to examine 
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those documents.

    Take for example, compliance challenges faced by one of my 
clients who owns a chain of 24/7 business locations. My client 
has attempted several methods to comply, including training 
multiple employees at each location on how to complete Section 
2 and requiring a trained manager to be present whenever a new 
employee starts work. Employees trained to correctly complete 
Section 2 were paid a bonus for each form submitted with no 
errors. Yet most were submitted with information missing or 
some other error. Requiring managers to travel to the various 
locations to complete the I-9 forms in the required timeframe 
took them away from other important responsibilities and 
ultimately was cost-prohibitive.

    Another client has a workforce primarily composed of 
remote, home-based employees in several states. With no 
business need to bring any of these employees to the main 
office at any point, the only reasonable solution is to attempt 
to identify someone located near the employee's home who is 
willing to act as an authorized representative--preferably 
someone with at least a basic understanding of how to properly 
complete Section 2.

    I have personally spent more than 25 hours over a 15-month 
period contacting HR consultants, attorneys, and other 
professionals in various locations on the client's behalf. Most 
of the people I've contacted have refused to even entertain the 
idea of serving as an authorized representative, with many 
completely unaware of the ``physical presence'' requirement and 
questioning why I would go to such trouble for one form.

    As small businesses contend with these compliance 
challenges, they need to be mindful of the detrimental impact 
that honest mistakes may have on their bottom line. Although 
most small-business employers make a good-faith effort to 
properly complete the I-9 form, and few are unlawfully 
employing undocumented immigrants, they still face potentially 
catastrophic fines when paperwork errors are made. For 
instance, it is easy for newly hired employees and their 
employers to be confused by, or misinterpret, the information 
on the Form I-9 and/or its accompanying 15 pages of 
instructions, plus the 69-page M-274 guidance handbook that is 
intended to, among other things, provide detailed instructions 
and examples for both the common and more complex situations 
and documents an employer may encounter when completing the I-9 
form, verifying an individual's identity and employment 
eligibility, and reverifying employment eligibility.

    In my experience, the average error rate on I-9 forms by 
small-business employers exceeds 75 percent. That means three 
out of every four I-9 forms my company has reviewed contain at 
least one error. Depending on the circumstances, and based on 
the most recent fine schedule for Technical/Substantive errors, 
the penalty for even a single mistake on the Form I-9 ranges 
from $216 to $2,126 per form. Penalties are normally assessed 
based on the percentage of I-9s with Technical/Substantive 
errors, including the failure to prepare an I-9 for an 
employee. For example, consider an employer presenting 100 I-9 
forms for audit. With a relatively low error rate of 9 percent, 
the minimum fine likely to be assessed adds up to $1,944 (9 x 
$216); with an error rate of 50 percent, penalties may total 
$106,300 (50 x $2,126); and an error rate of 75 percent would 
result in fines of $159,450 (75 x $2,126) or more. It's also 
important to note that employers making a good-faith effort to 
correct errors on their I-9 forms--but failing to follow the 
prescribed method for doing so--face additional fines. 
Similarly, employers who don't follow the prescribed retention 
schedule, ``either 3 years after the date of hire (i.e., first 
day of work for pay) or 1 year after the date employment ended, 
whichever is later,'' also face additional fines. It is 
counter-productive that a business making a good-faith effort 
to complete a two-page form should face such catastrophic 
repercussions.

    Small businesses that contract with the federal government, 
and those in states that require the use of E-Verify, face 
another level of complexity regarding the I-9. The federal 
government uses E-Verify to enhance enforcement of federal 
immigration law and makes its use mandatory for federal 
contractors through the required Federal Acquisition Regulation 
(FAR) E-Verify clause. E-Verify allows employers to 
electronically verify the employment eligibility of their newly 
hired employees. Small businesses sometimes mistakenly view E-
Verify as a safe harbor against worksite enforcement. The fact 
is, employers using the E-Verify system have the same 
requirements for properly completing, maintaining, and 
retaining paper I-9 forms for all employees as do nonusers. 
Employers who erroneously believe they have satisfied the I-9's 
requirements once an employees eligibility to work has been 
confirmed by E-Verify may face significant liability.

    The current Paperwork Reduction Act estimate for completing 
the Form I-9, as reported on the last page of instructions, is 
35 minutes to complete the form manually or 26 minutes when 
using a computer to aid in the completion of the form, despite 
that using the computer lengthens the forms' instructions and 
data collection fields. The 35-minute estimate is unchanged 
from the previous version. The 26-minute estimate is new and 
based on the use of an electronically fillable form that USCIS 
provided for the first time. Nonetheless, the instructions for 
both types of the I-9 form are 15 pages long (compared to the 
six pages of instructions for the previous version). By more 
than doubling the instructions, it is logical to conclude that 
it will take both the employee and employer more than twice as 
long to read and understand the instructions and complete the 
form manually. Therefore, at a minimum, the estimate for 
completing the I-9 form should be increased proportionately due 
to any increased length of the form or its instructions.

    The Burden Continues for Small Business

    Although I've limited my testimony today to the IRS Forms 
1095-B and 1095-C, and USCIS Form I-9, there are countless 
other federal and state paperwork requirements that burden 
small businesses. In my home state of New York, when most small 
business employers hire a new employee, the necessary forms 
necessary for completion include, but are not limited to the I-
9, the New Health Insurance Marketplace Coverage Options and 
Your Health Coverage (ACA Model Notice), IRS Form W-4, Employee 
Withholding Allowance Certificate (federal income tax), New 
York State Department of Taxation IT-2104 Employee's 
Withholding Allowance Certificate (NY income tax), and New York 
State Notice and Acknowledgement of Pay Rate and Payday Under 
Section 195.1 of the New York State Labor Law (LS-54, LS-55, 
LS-56, LS-57, LS-58, or LS-59 depending on the type of 
employee). These are in addition to the various health 
insurance and other benefits applications and/or waiver forms 
that must be completed at the time of hire.

    Other paperwork requirements include Occupational Safety 
and Health Administration (OSHA) Forms 300, 300A, and 301 
regarding workplace illnesses and injuries; and Family and 
Medical Leave Act (FMLA) forms WH-380E, WH-380F, WH-381, WH-
382, WH-384, WH-385, and WH-385V, and additional forms that 
will be required in implementing the recently announced New 
York Paid Family Leave law, which covers all New York employers 
regardless of size.

    From the perspective of a small business, there seem to be 
a new federal or state form or paperwork requirements each 
month, often with corresponding fines and penalties for 
paperwork violations, even honest mistakes. While the growing 
paperwork requirements of employers is difficult for virtually 
all businesses to manage, the burden falls especially hard on 
small businesses. Large employers often have staffs of 
accountants, attorneys, and other trained professionals 
dedicated to complying with government paperwork and reporting 
requirements. Small businesses, on the other hand, particularly 
those of 15 or less employees simply cannot afford to do that. 
Thus, the burden falls on either the owner or, if they have 
one, the HR manager to spend hours outside of the normal 
workday to do paperwork. And when it comes to HR, that's in 
addition to their normal duties of finding and hiring new 
employees, administering benefits and payroll, general employee 
relations and discipline, and being responsive to the needs of 
their organization's management, as well as employees. These 
are the people that need your help reducing the paperwork 
burdens we're here to discuss today.

    User Input Prior to Implementation

    In today's economy, employers of all sizes utilize field, 
or ``beta,'' testing for new software, technology, and products 
and services before making them available to the public. This 
is most often done to ensure a successful user interface. As a 
small-business employer and consultant, I see the obstacles 
that employers, especially small employers, face when 
attempting to comply with government regulations. Federal 
agencies creating the forms and processes I've discussed today, 
as well as literally thousands more, often overlook the user 
experience as they seek to set standards and processes for data 
collection. In my experience, seeing only one side of any issue 
rarely, if ever, results in the most effective or efficient 
solutions. For example, when someone on my team creates a new 
form and/or process for a client, he or she never does so in a 
vacuum. Once we've completed our internal work, we ask the 
client to test and comment on what we've developed. Without 
exception, this extra step has increased our ability to better 
meet the reporting and data-gathering needs of our clients.

    Often the federal agency comments process is not enough--
employers need an opportunity to test the forms and data 
collection tools in the real world. For this reason, the 
federal government should look to partner with organizations 
like SHRM to field test paperwork requirements before they are 
imposed on the employer community. I'm sure I can speak on 
behalf of SHRM, and many of its 285,000 members, when I say 
that HR professionals have the expertise to understand not only 
the time it will take to complete a certain form but also to 
identify whether a new or revised form is redundant and show 
where common mistakes are likely to occur. Making the effort to 
field test new paperwork requirements would increase clarity 
and compliance while reducing the potential for unnecessary 
employer liability. Those are things SHRM and the HR community 
as a whole would fully support.

    Conclusion

    Mr. Chairman, small-business employers often fall into the 
``they don't know what they don't know'' category. There are no 
required classes for small businesses on all the forms and 
requirements of the federal and state governments. Many of my 
driven HR clients started and continue operating today because 
someone had an entrepreneurial spirit and an idea. Further, 
although none are experts in, or sometimes even familiar with 
the full panoply of employment laws and regulations, they have 
always made a good-faith effort to be in compliance. As I sit 
here today, I can think of several clients who were only one 
regulatory agency audit away from significant hardship or ruin 
before we started working with them. I say that not to pat 
myself on the back, but to show that, for far too many small 
businesses, and far too many well-intentioned and hard-working 
small-business owners, government forms and data collection may 
unnecessarily pose their biggest threat to continued success 
and prosperity.

    SHRM and its members will continue to work with the federal 
government to provide outreach and educational efforts to the 
employer community on these important issues. Thank you for 
your time. I appreciate the opportunity to share my perspective 
with you today and would be happy to answer any questions.
                   Testimony of Sally Katzen

 Professor of Practice and Distinguished Scholar in Residence, 
      NYU School of Law and Senior Advisor, Podesta Group

          before the House Committee on Small Business

                       on March 29, 2017

on ``Evaluating the Paperwork Reduction Act: Are Burdens Being 
                           Reduced''

    Good morning, Chairman Chabot, Ranking Member Velazquez and 
Members of the Committee. Thank you for inviting me to testify 
today on ``Evaluating the Paperwork Reduction Act: Are Burdens 
Being Reduced?'' As you know, I served as the Administrator of 
the Office of Information and Regulatory Affairs (OIRA) at the 
Office of Management and Budget (OMB) from 1993-1998 and was 
therefore very involved in the discussions that led to the 1995 
Reauthorization of the Act. I also was responsible for 
implementing the Act (before and after the 1995 revisions) 
during my tenure as Administrator and as the Deputy Director of 
Management of OMB from 2000 to January 2001.

    This Committee has played an important role in protecting 
and promoting the interests of America's small businesses, 
which are one of the important drivers of our nation's economy. 
For decades now, the small business community has listed the 
burden of federal regulations, including specifically 
paperwork, as one of its most pressing concerns. This concern 
is deeply felt (as you are hearing again today) and 
understandable, if for no other reason than small businesses 
have fewer (sometimes appreciably fewer) resources and 
institutional capacity than larger companies to acquire, 
understand, complete and process the paperwork required by the 
Federal government (as well as that required by State and local 
governments).

    The disparate impact of paperwork requirements on small 
businesses was foremost in our minds during the 1995 
reauthorization of the Paperwork Reduction Act (PRA), 44 U.S.C. 
3501, et seq.; indeed, the first subject identified in the 
purposes of the Act was to ``minimize the paperwork burden for 
... small businesses ...''. (PRA Sec. 3501(1)). The work we did 
then was later reinforced by amendments to the PRA, advanced by 
this Committee, which were enacted into law as the Small 
Business Paperwork Relief Act of 2002, 44 U.S.C. 3520, et seq.

    It is therefore most appropriate to ask, as you do in this 
hearing's title: ``Are burdens being reduced?'' Regrettably, 
the answer to this straightforward question is not as simple as 
it may seem and the reasons for that are more complicated than 
they might initially appear.

    When you look at the gross numbers, there is, in fact, a 
huge paperwork burden, which as continued to increase, rather 
than decrease, over the years. The amount of time (and other 
resources) spent filling out forms or responding to information 
collection requests (ICRs) by the federal government is now 
roughly 9.8 billion hours annually. (See Office of Management 
and Budget, Information Collection Budge for 2016, available at 
http://obamawhitehouse.archives.gov/sites/default/files/omb/
inforeg/icb/icb--2016.pdf) But over 70% of the total 
is attributable to one agency--the Internal Revenue Service. 
That figure is a function both of the large number of people 
who file a Form 1040 (or the streamlined version 1040EZ), as 
they should, and also the complexity of the Internal Revenue 
Code; that complexity, in turn, is a product of decisions by 
the Congress--not the agency--that there should be a myriad of 
deductions, allowances, exceptions, credits, etc. Taxpayers 
could, I suppose, just put down the amount by which they wish 
to reduce their own taxes, but some calculations, 
documentation, or other basis for the claims is generally 
thought to be appropriate to justify the offsets. Most 
businesses that choose to take advantage of the provisions for 
accelerated depreciation, oil and gas depletion allowances, 
foreign tax credits, or real estate losses, to name a few 
examples, would not do so unless the tax benefits they derive 
from filling out those forms and supplying the required 
documentation were greater (often appreciably greater) than the 
cost of making such claims.

    More importantly, references to total burden hours (and 
their increases (or decreases were that to occur)) obscure the 
fact that there are different types of ``paperwork'' with very 
different effects and consequences for small businesses. 
Filling out a tax return means having to pay taxes (or getting 
a refund). But another type of paperwork is the so-called 
``third-party disclosures,'' such as signs that say ``Hard Hat 
Required'' or ``Caution: Dangerous/Toxic Substances Present,'' 
or labels on foods providing nutritional information or those 
on medicines providing content, dosage, and counter-indicator 
information. While a small business is often unable to hire the 
army of accountants and lawyers retained by a larger 
corporation to prepare its taxes, it is not self evident that 
it should be exempt from complying with straight-forward 
requirements for posting, or otherwise providing, health or 
safety warnings for their employees or customers.

    Another type of paperwork that should be considered on its 
own merits, rather than being swept up in the gross numbers, is 
paperwork designed to establish eligibility for, or compliance 
with statutory provisions establishing, various benefit 
programs. Consider, for example, applications for small 
business loans, student loans, veterans' benefits, social 
security or disability payments, farm subsidies, or permits for 
designated uses of our national parks. Obviously these forms 
should be as streamlined and simplified as possible, so that 
the burden on the applicant (including a small business) is 
reduced to a minimum. At the same time, however, there is a 
legitimate interest in ensuring that the program authorized by 
Congress (and using Federal funds) is run consistently with the 
underlying statutory requirements. The shorthand for this is 
``accountability,'' which both sides of the aisle agree is 
essential for good government. Paperwork in this context serves 
to help ensure that only those eligible for a loan, grant, 
payment, or permit are approved and that the agencies have 
sufficient information to competently evaluate whether or not 
their programs are achieving their objectives.

    That leads to yet another distinct category of paperwork--
namely, requests for information that enables the government to 
make informed and rational decisions in the first place. Data 
based decision-making is clearly preferable to conjecture or 
speculation, and in many instances the requisite data are 
dispersed among individuals, businesses, and/or state and local 
governments. Regulatory agencies should be making decisions 
based on the best scientific, technical or economic information 
available; otherwise the rules they impose on regulated 
entities (including small businesses) may be less efficient or 
effective ways of achieving their regulatory goals. Another set 
of information collections that guide Federal government 
decision-making involves the various statistical agencies, such 
as the Census Bureau at the Department of Commerce, the Bureau 
of Labor Statistics at the Department of Labor, the Bureau of 
Economic Analysis at the Department of Commerce, the Energy 
Information Administration at the Department of Energy, the 
Bureau of Transportation Statistics at the Department of 
Transportation, and the National Agriculture Statistical 
Service at the Department of Agriculture, to name some of the 
more well known statistical agencies. Much of the data they 
collect is not only used and useful for government decision-
making, but is also (once stripped of personal identifiers) 
often disseminated to the public, where it is used by those in 
the business community (including small businesses) or in the 
academy in considering or analyzing such subjects as marketing 
strategies or investment decisions.

    One other thought that is relevant when considering 
paperwork burden reduction is that, in some circumstances, 
providing information may actually be less burdensome than the 
alternative. This is classic First Amendment theory of the 
``least restrictive alternative,'' which is, I believe, an 
appropriate framework in this context as well. Consider, for 
example, the warning labels on cigarette packages. It is not 
better (in terms of burden and intrusiveness) to require 
information than to restrict the sale or ban the product 
altogether? Another example is that EPA has found that the 
reporting of emissions of certain toxic chemicals has the 
effect of reducing the commercial use of those products; when 
the reports are released, some (not all) companies choose to 
reduce their use of the covered products, either because they 
want to be responsible corporate citizens or because of 
pressure from neighbors affected by the releases. Whatever the 
reasons, the effect has been a substantial decrease in the use 
of some of these products, even though they were not subject to 
traditional regulation.

    I have gone into detail about some of the origins and 
objectives of different types of paperwork because, 
understandably, the small business community often does not 
make these distinctions. The Final Report of the Small Business 
Paperwork Relief Task Force, called for in the 2002 amendments 
to the PRA, recognized, albeit briefly, the force and effect of 
some of these distinctions. Small Bus. Admin. Final Report of 
the Small Business Paperwork Relief Taskforce 
(2003)(hereinafter ``SBPRTF Report''). For example, the Report 
notes ``several barriers to burden reduction'':

           Information Needs. ``Federal agencies have 
        specific statutory and programmatic responsibilities 
        and require information to fulfill those 
        responsibilities. Paperwork can only be reduced in ways 
        that will not negatively impact the effectiveness of 
        the laws and regulations for which the agency is 
        accountable''

           Expanded Responsibilities. The need for 
        information increases as new Federal programs are 
        created, existing programs are expanded, additional 
        health, safety or environmental protection laws are 
        enacted, and the tax law becomes more complex.'' SBPRTF 
        Report, at 17.

    This statement not only reflects an appreciation for the 
various components of the total paperwork burden, but it also 
explicitly recognizes the role that Congress (as a whole) plays 
in adding to the burden and the limited ability of agencies (or 
of the PRA) to simply cut their paperwork requirements.

    That said, there are ways to try to minimize the burden of 
paperwork on small businesses. The Report provides several 
recommendations, some of which have been undertaken or are in 
process that would be salutary. It is interesting that the Task 
Force does not unequivocally endorse (though it certainly does 
not dismiss) one of the ways agencies have tried over the last 
decade to reduce their paperwork burden--namely, by converting 
paperwork (as in pencil and paper) to electronic reporting. 
This effort is consistent not only with the PRA, but is also 
pursuant to the Government Paperwork Elimination Act of 1998. 
44 U.S.C.A. Sec. 3504, et seq. IT is worth noting, therefore, 
the portion of the SBPRTF Report that explains, in part, the 
reluctance of small businesses to move into the electronic 
environment, noting that

          ``the expenses associated with automation are often 
        beyond their reach. Small businesses often do not have 
        the training to quickly grasp new software 
        applications, nor the staff to assign to the task.'' 
        SBPRTF Report, at 32.

    To be sure, this finding was made in 2003, and we have all 
come a long way since then; even many of my generation who did 
not immediately embrace the advances in technology when they 
first came on the scene are now proficient users of electronic 
devices. For this reason, I believe that continued emphasis on 
electronic reporting is important in trying to constrain, if 
not reduce, paperwork burdens for small businesses.

    Another portion of the Report worth noting is its analysis 
of the potential for reducing burden through synchronizing or 
consolidating reporting requirements across agencies and even 
across federal, state, and local governments. Here too, the 
possibilities, which I have often championed, are tempered by 
other factors, including the following:

          [S]ynchronizing reporting frequency ... seems to have 
        the least potential for burden reduction because not 
        all information that businesses are required to report 
        is submitted to the Federal government on a regular 
        basis ... [but rather] only at the time of an event, 
        such as admission of a patient to a nursing home, or a 
        chemical spill.

          Seemingly duplicative information collections may not 
        be appropriate for consolidation due to the nature or 
        utility of the data collected. For example, definitions 
        across similar data collections may not be harmonized 
        due to differences across industries or underlying 
        statutes. Consolidation ... may lead to confusion 
        rather than simplification.

          Further, for many reporting requirements, the 
        reporting frequency [content and timing] is mandated in 
        statute ... [and thus] would require legislative ... 
        action. SBPRTF Report, at 18.

    The Report is also on point in recognizing another 
potential problem with consolidating information from private 
individuals or firms in a single database or even isolated 
instances of sharing of information among agencies. See, e.g., 
SBPRTF Report, at 19. If this were proposed, it is almost 
certain that the relief from submitting information 
repetitively would be replaced by concerns about 
confidentiality and/or privacy. These are highly charged issues 
that we have made little progress in resolving; fears of 
hacking and identity theft are even more pronounced now in some 
quarters than the fear of ``Big Brother.''

    One final point from the Report that I think is critically 
important is the extent to which burden reduction requires 
sustained funding. See, e.g., SBPRTF Report, at 26. That was 
true in 2003 and is even more critical now, after many years of 
straight lined or decreased funding for many of the agencies in 
the Executive Branch. An agency simply cannot wish away 
paperwork burden; it takes staff time and resources, both of 
which are in very short supply in most agencies, which have 
been told for a number of years now to do more for less. If we 
are serious about doing something about the paperwork burden, 
the agencies must be provided adequate resources to accomplish 
the task.

    Lastly, although I may be biased because of my previous 
position at OIRA, I firmly believe that even if the paperwork 
burden is not being reduced, we should recognize that the PRA 
(and OIRA's implementation of the PRA) have been an important 
tool in restraining the Federal government's appetite for data. 
While there has been no empirical study of the effect of the 
PRA--there being no counterfactual baseline to compare it 
with--I submit that it has had a salutary effect. By its terms, 
the PRA requires agencies to provide notice to the public and 
an opportunity for them to comment on the ICR when it is in 
draft form. (PRA, Sec. 3206(c)(2)) Those being asked for 
information or those expecting to use the information can and 
should suggest ways of simplifying, streamlining, or otherwise 
reducing the burden of the proposed form. The agency is 
required to consider the comments submitted (PRA, 
Sec. 3206(d)(2)(A)), and only after the agency has either 
accepted or rejected the comments (in the case of rejection, 
the agency has to explain why (PRA, Sec. 3206(d)(2)(B))), is 
the ICR sent to OIRA, which again provides public notice (PRA, 
Sec. 3206(b)) and undertakes its own independent (and 
dispassionate) review of the ICR.

    I am aware of anecdotal information from my tenure at OIRA 
(that has continued to this day) to the effect that some 
program offices in various agencies do not propose new ICRs, 
unless they are statutorily mandated, because those who favor 
gathering the information believe that the process is so time 
consuming and labor intensive, and the difficulty of 
negotiating with OIRA is so exhausting, that it is not worth 
their effort. For these reasons, I am confident that the PRA is 
working to lessen the paperwork burden on all segments of the 
American public--individuals, small businesses, state, and 
local governmental offices, non-government organizations, etc.

    I recognize that paperwork is burdensome and that the 
burden poses a greater challenge to smaller firms than to large 
and even mid-sized companies. There are steps that can be taken 
to make a difference at the margin, but there is no magic 
bullet that would dramatically change the numbers. For this 
reason, I believe it is important and valuable to emphasize 
burden reduction, but I would urge you to do so in a thoughtful 
way that takes account of the many complications and 
complexities that exits.

    Thank you again for inviting me to testify, and I would be 
happy to try to answer any questions you may have.
[GRAPHIC] [TIFF OMITTED] T4759.026

    Chairman Chabot and Ranking Member Velazquez, thank you for 
the opportunity to submit written comments on behalf of the 
National Automobile Dealers Association (NADA) for the hearing 
record. NADA is a national trade association that represents 
more than 16,000 franchised new car and commercial truck 
dealerships engaged in the retail sale and lease of new and 
used motor vehicles, and in automotive service, repairs and 
parts sales. In 2016, America's franchised dealers collectively 
employed more than 1.1 million people and sold or leased some 
17.84 million new and 14.65 used light-, medium-, and heavy-
duty vehicles. NADA members operate in every congressional 
district in the country, yet 40 percent sell fewer than 300 new 
vehicles per year and the majority are small businesses as 
defined by the Small Business Administration (SBA).

    NADA welcomes the opportunity to comment on the committee's 
evaluation of the Paperwork Reduction Act (PRA). The purposes 
of the PRA are several, including to:

          minimize the paperwork burdens for individuals, small 
        businesses....Federal contractors....and other persons 
        resulting from the collection of information by or for 
        the Federal Government; and

          ensure the greatest possible public benefit from and 
        maximize the utility of information created, collected, 
        maintained, used, shared and disseminated by or for the 
        federal Government.\1\
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    \1\ 44 U.S.C. Sec. Sec. 3501, et seq.

    The PRA is designed to ensure that the Federal government 
does not saddle small businesses with unnecessary or 
inappropriate data collection or paperwork mandates. NADA 
wishes to highlight for the Committee several instances where 
the PRA's important constraints on government data collection 
were ignored, resulting in significant paperwork burdens on 
small business without little or no required benefit for the 
---------------------------------------------------------------------------
public.

    In 2014, the Occupational Health and Safety Administration 
(OSHA) announced a new injury and illness recordkeeping rule 
that had the effect of imposing unnecessary and burdensome 
compliance obligations on previously-exempt small 
businesses.\2\ Specifically, the new rule dramatically 
increased the number of industries and employers required to 
keep OSHA's recordkeeping forms, despite declining injury and 
illness rates across all private industry sectors and without 
any evidence suggesting that expanding the recordkeeping 
mandate would have a beneficial impact OSHA's laudable goal to 
increase worker health and safety. In fact, OSHA's own PRA 
analysis for the rule concluded that, despite the year over 
year declines in workplace injuries and illnesses, the number 
of establishments covered by the recordkeeping regulation would 
increase by 60,210 establishments, and the total hours all 
businesses would spend on this paperwork would rise from 
2,967,236 per year, to 3,359,913 in the first year and 
3,140,065 in subsequent years.\3\
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    \2\ 79 Fed. Reg. 56130, et seq. (September 18, 2014).
    \3\ 79 Fed. Reg. 56183, et seq. (September 29, 2016).

    Prior to the new rule, light-duty vehicle dealerships 
enjoyed a partial exemption from OSHA's injury and illness 
recordkeeping mandates due to their low (and continuously 
improving) injury and illness rates. The rule had the effect of 
imposing new and significant recordkeeping costs and burdens on 
light-duty dealerships without any increase4d workplace health 
and safety benefits. In fact, light-duty dealership injury and 
illness rates have declined at the same rate since the rule 
took effect as before. Since most light-duty car dealerships 
are small businesses, the rule has caused them to continue to 
shoulder a disproportionate share of the regulatory costs and 
burdens.\4\ As the Committee knows, small businesses 
consistently rank government paperwork burdens as one of their 
major concerns \5\.
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    \4\ See, Crain and Crain, The Impact of Regulatory Costs on Small 
Firms, SBA Office of Advocacy, (2010).
    \5\ NFIB, Small Business Problems and Priorities, (2008).

    Last year, the Equal Employment Opportunity Commission 
(EEOC) announced a complete overhaul of its EEO-1 reporting 
form, resulting in a significantly more complex and burdensome 
mandate. Whereas the old EEO-1 form contained 121 data points, 
the new form consists of 3,360 data points. The most 
significant and burdensome change to the EEO-1 form is that it 
now seeks to collect summary pay data and aggregate hours-
worked information that employers were never required to report 
in the past. Since all employers with 100 or more employees are 
covered by the annual EEO-1 mandate, it will impact most small 
business dealerships.\6\
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    \6\ Light-duty dealerships have a 200-employee SBA small business 
size standard and commercial truck dealerships have an SBA standard of 
250 employees.

    Ironically, changes to the EEO-1 form were made through a 
PRA information collection process rather than through notice 
and comment rulemaking. The new EEO-1 mandate arguably violates 
two key PRA goals by imposing complex and costly paperwork and 
reporting burdens on small business with little or no utility 
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public benefits in return.

    Mr. Chairman, America's franchised dealers commend the 
Committee for holding an oversight hearing on the Paperwork 
Reduction Act, a law critical to the vitality of small 
businesses.

				[all]