[Congressional Record Volume 145, Number 78 (Thursday, May 27, 1999)]
[Senate]
[Pages S6307-S6310]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. BOND (for himself and Mr. Kerry):
S. 1156. A bill to amend provisions of law enacted by the Small
Business Regulatory Enforcement Fairness Act of 1996 to ensure full
analysis of potential impacts on small entities of rules proposed by
certain agencies, and for other purposes; to the Committee on Small
Business.
small business advocacy review panel technical amendments act of 1999
Mr. BOND. Mr. President, I rise today to introduce ``The Small
Business Advocacy Review Panel Technical Amendments Act of 1999.'' I am
pleased to be joined by Senator Kerry, the Ranking Member on the Small
Business Committee, which I chair. Our bill is simple and
straightforward. It clarifies and amends certain provisions of law
enacted as part of my ``Red Tape Reduction Act,'' the Small Business
Regulatory Enforcement Fairness Act of 1996. In 1996, this body led the
way toward enactment of this important law. With a unanimous vote, we
took a major step to ensure that small businesses are treated fairly by
federal agencies.
Like the Regulatory Flexibility Act, which it amended, the Red Tape
Reduction Act is a remedial statute, designed to redress the fact that
uniform federal regulations impose disproportionate impacts on small
entities, including small business, small not-for-profits and small
governments. A recent study conducted for the Office of Advocacy of the
Small Business Administration documented, yet again, that small
businesses continue to face higher regulatory compliance costs than
their big-business counterparts. With the vast majority of businesses
in this nation being small enterprises, it only makes sense for the
rulemaking process to ensure that the concerns of such small entities
get a fair airing early in the development of a federal regulation.
The bill Senator Kerry and I are introducing focuses on Section 244
of the Small Business Regulatory Enforcement Fairness Act of 1996,
which amended chapter 6 of title 5, United States Code (commonly known
as the Regulatory Flexibility Act). As a result, each ``covered
agency'' is required to convene a Small Business Advocacy Review Panel
(Panel) to receive advice and comments from small entities.
Specifically, under section 609(b), each covered agency is to convene a
Panel of federal employees, representing the Office of Information and
Regulatory Affairs within the Office of Management and Budget, the
Chief Counsel of Advocacy of the Small Business Administration, and the
covered agency promulgating the regulation, to receive input from small
entities prior to publishing an initial Regulatory Flexibility analysis
for a proposed rule with a significant economic impact on a substantial
number of small entities. The Panel, which convenes for 60 days,
produces a report containing comments from the small entities and the
Panel's own recommendations. The report is provided to the head of the
agency, who reviews the report and, where appropriate, modifies the
proposed rule, initial regulatory analysis or the decision on whether
the rule significantly impacts small entities. The Panel report becomes
a part of the rulemaking record.
Consistent with the overall purpose of the Regulatory Flexibility Act
and the Small Business Regulatory Enforcement Fairness Act, the
objective of the Panel process is to minimize the adverse impacts and
increase the benefits to small entities affected by the agency's
actions. Consequently, the true proof of each Panel's effectiveness in
reducing the regulatory burden on small entities is not known until the
agency issues the proposed and final rules. So far, the results are
encouraging.
Under current law, the Occupational Safety and Health Administration
(OSHA) and the Environmental Protection Agency (EPA) are the only
agencies currently covered by the Panel process. Our bill adds the
Internal Revenue Service (IRS) as a covered agency. In 1996, the Red
Tape Reduction Act expressly included the IRS under the Regulatory
Flexibility Act; however, the Treasury Department has interpreted the
language in the law in a manner that essentially writes them out of the
law. The Small Business Advocacy Review Panel Technical Amendments Act
of 1999 clarifies which interpretative rules involving the internal
revenue code are to be subject to compliance with the Regulatory
Flexibility Act, for those rules with a significant economic impact on
a substantial number of small entities, the IRS would be required to
convene a Small Business Advocacy Review Panel.
If the Treasury Department and the IRS had implemented the Red Tape
Reduction Act as Congress originally intended, the regulatory burdens
on small businesses could have been reduced, and small businesses could
have been saved considerable trouble in fighting unwarranted rulemaking
actions. For instance, with input from the small business community
early in the process, the IRS' 1997 temporary regulations on the
uniform capitalization rules could have had taken into consideration
the adverse effects that inventory accounting would have on farming
businesses, and especially nursery growers. Similarly, if the IRS had
conducted an initial Regulatory Flexibility, it would have learned of
the enormous problems surrounding its limited partner regulations prior
to issuing the proposal in January 1997. These regulations, which
became known as the ``stealth tax regulations,'' would have raised
self-employment taxes on countless small businesses operated as limited
partnerships or limited liability companies, and also would have
imposed burdensome new recordkeeping and collection of information
requirements.
Specifically, the bill strikes the language in section 603 of title 5
that included IRS interpretative rules under the Regulatory Flexibility
Act, ``but only to the extent that such interpretative rules impose on
small entities a collection of information requirement.'' The Treasury
Department has misconstrued this language in two ways. First, unless
the IRS imposes a requirement on small businesses to complete a new
OMB-approved form, the Treasury says Reg Flex does not apply. Second,
in the limited circumstances where the IRS has acknowledged imposing a
new reporting requirement, the Treasury has limited its analysis of the
impact on small businesses to the burden imposed by the form. As a
result, the Treasury Department and the IRS have turned Reg Flex
compliance into an unnecessary, second Paperwork Reduction Act.
To address this problem, our bill revises the critical sentence in
Section 603 to read as follows:
In the case of an interpretative rule involving the
internal revenue laws of the United States, this chapter
applies to interpretative rules (including proposed,
temporary and final regulations) published in the Federal
Register for codification in the Code of Federal Regulations.
Coverage of the IRS under the Panel process and the technical changes
I have just described are strongly supported by the Small Business
Legislative Council, the National Association for the Self-Employed,
and many other organizations representing small businesses. Even more
significantly, these changes have the support of the Chief Counsel for
Advocacy. I ask unanimous consent to include in the Record following
this statement copies of letters and statements from these small
business advocates.
The remaining provisions of our bill address the mechanics of
convening a Panel and the selection of the small entity representatives
invited to submit advice and recommendations to the Panel. While these
provisions are very similar to the legislation introduced in the other
body (H.R. 1882) by our colleagues Representatives Talent, Velazquez,
Kelly, Bartlett, and Ewing, Senator Kerry has expressed some specific
concerns regarding the potential for certain provisions to be
misconstrued. I have agreed to work with him to address his concerns in
report language and, if necessary, with minor revisions to the bill
text.
Our mutual goal is to ensure that the views of small entities are
brought forth through the Panel process and taken to heart by the
``covered agency'' and other federal agencies represented on the
Panel--in short, to
[[Page S6308]]
continue the success that EPA and OSHA have shown this process has for
small businesses. I thank the Senator from Massachusetts for his
support, and ask unanimous consent that the Small Business Advocacy
Review Panel Technical Amendments Act of 1999 be printed, following
this statement.
Mr. President, I ask unanimous consent that the bill and additional
material be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1156
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Advocacy
Review Panel Technical Amendments Act of 1999''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds the following:
(1) A vibrant and growing small business sector is critical
to creating jobs in a dynamic economy.
(2) Small businesses bear a disproportionate share of
regulatory costs and burdens.
(3) Federal agencies must consider the impact of their
regulations on small businesses early in the rulemaking
process.
(4) The Small Business Advocacy Review Panel process that
was established by the Small Business Regulatory Enforcement
Fairness Act of 1996 has been effective in allowing small
businesses to participate in rules that are being developed
by the Environmental Protection Agency and the Occupational
Safety and Health Administration.
(b) Purposes.--The purposes of this Act are the following:
(1) To provide a forum for the effective participation of
small businesses in the Federal regulatory process.
(2) To clarify and strengthen the Small Business Advocacy
Review Panel process.
(3) To expand the number of Federal agencies that are
required to convene Small Business Advocacy Review Panels.
SEC. 3. ENSURING FULL ANALYSIS OF POTENTIAL IMPACTS ON SMALL
ENTITIES OF RULES PROPOSED BY CERTAIN AGENCIES.
Section 609(b) of title 5, United States Code, is amended
to read as follows:
``(b)(1) Before the publication of an initial regulatory
flexibility analysis that a covered agency is required to
conduct under this chapter, the head of the covered agency
shall--
``(A) notify the Chief Counsel for Advocacy of the Small
Business Administration (in this subsection referred to as
the `Chief Counsel') in writing;
``(B) provide the Chief Counsel with information on the
potential impacts of the proposed rule on small entities and
the type of small entities that might be affected; and
``(C) not later than 30 days after complying with
subparagraphs (A) and (B)--
``(i) with the concurrence of the Chief Counsel, identify
affected small entity representatives; and
``(ii) transmit to the identified small entity
representatives a detailed summary of the information
referred to in subparagraph (B) or the information in full,
if so requested by the small entity representative, for the
purposes of obtaining advice and recommendations about the
potential impacts of the draft proposed rule.
``(2)(A) Not earlier than 30 days after the covered agency
transmits information pursuant to paragraph (1)(C)(ii), the
head of the covered agency shall convene a review panel for
the draft proposed rule. The panel shall consist solely of
full-time Federal employees of the office within the covered
agency that will be responsible for carrying out the proposed
rule, the Office of Information and Regulatory Affairs of the
Office of Management and Budget, and the Chief Counsel.
``(B) The review panel shall--
``(i) review any material the covered agency has prepared
in connection with this chapter, including any draft proposed
rule;
``(ii) collect advice and recommendations from the small
entity representatives identified under paragraph (1)(C)(i)
on issues related to paragraphs (3), (4), and (5) of section
603(b) and section 603(c); and
``(iii) allow any small entity representative identified
under paragraph (1)(C)(i) to make an oral presentation to the
panel, if requested.
``(C) Not later than 60 days after the date a covered
agency convenes a review panel pursuant to this paragraph,
the review panel shall report to the head of the covered
agency on--
``(i) the comments received from the small entity
representatives identified under paragraph (1)(C)(i); and
``(ii) its findings regarding issues related to paragraphs
(3), (4), and (5) of section 603(b) and section 603(c).
``(3)(A) Except as provided in subparagraph (B), the head
of the covered agency shall print in the Federal Register the
report of the review panel under paragraph (2)(C), including
any written comments submitted by the small entity
representatives and any appendices cited in the report, as
soon as practicable, but not later than--
``(i) 180 days after the date the head of the covered
agency receives the report; or
``(ii) the date of the publication of the notice of
proposed rulemaking for the proposed rule.
``(B) The report of the review panel printed in the Federal
Register shall not include any confidential business
information submitted by any small entity representative.
``(4) Where appropriate, the covered agency shall modify
the draft proposed rule, the initial regulatory flexibility
analysis for the draft proposed rule, or the decision on
whether an initial regulatory flexibility analysis is
required for the draft proposed rule.''.
SEC. 4. DEFINITIONS.
Section 609(d) of title 5, United States Code, is amended
to read as follows:
``(d) For the purposes of this section--
``(1) the term `covered agency' means the Environmental
Protection Agency, the Occupational Safety and Health
Administration of the Department of Labor, and the Internal
Revenue Service of the Department of the Treasury; and
``(2) the term `small entity representative' means a small
entity, or an individual or organization that represents the
interests of 1 or more small entities.''.
SEC. 5. COLLECTION OF INFORMATION REQUIREMENT.
(a) Definition.--Section 601 of title 5, United States
Code, is amended--
(1) in paragraph (5) by inserting ``and'' after the
semicolon;
(2) in paragraph (6) by striking ``; and'' and inserting a
period; and
(3) by striking paragraphs (7) and (8).
(b) Initial Regulatory Flexibility Analysis.--The fourth
sentence of section 603 of title 5, United States Code, is
amended to read as follows: ``In the case of an
interpretative rule involving the internal revenue laws of
the United States, this chapter applies to interpretative
rules (including proposed, temporary, and final regulations)
published in the Federal Register for codification in the
Code of Federal Regulations.''.
SEC. 6. EFFECTIVE DATE.
This Act shall take effect upon the expiration of the 90-
day period beginning on the date of the enactment of this
Act.
____
Small Business Legislative Council,
Washington, DC, May 24, 1999.
Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: On behalf of the Small Business
Legislative Council (SBLC), I would like to offer our strong
support for your legislation to expand the Small Business
Regulatory Enforcement Fairness Act (SBREFA) to encompass
more of the activities of the Internal Revenue Service (IRS).
As you know, there is nothing more annoying to the small
business community than when the IRS issues a proposed rule
and it is obvious the authors have little or no understanding
of the business practices of the small businesses to be
covered by the rule.
OSHA and the EPA have also been identified in the past as
agencies guilty of acting without a solid understanding of an
industry. Thanks to your leadership, the 104th Congress fixed
the problem in the case of EPA and OSHA by enacting SBREFA.
Those two agencies must go out and collect information on
small business before they finish development of a proposed
rule. The law requires the OSHA and EPA to increase small
business participation in agency rulemaking activities by
convening a Small Business Advocacy Review Panel for a
proposed rule with a significant economic impact on small
entities. For such rules, the agencies must notify SBA's
Chief Counsel of Advocacy that the rule is under development
and provide sufficient information so that the Chief Counsel
can identify affected small entities and gather advice and
comments on the effects of the proposed rule. A Small
Business Advocacy Review Panel, comprising Federal government
employees from the agency, the Office of Advocacy, and OMB,
must be convened to review the proposed rule and to collect
comments from small businesses. Within 60 days, the panel
must issue a report of the comments received from small
entities and the panel's findings, which become part of the
public record.
As we have said many times before, we believe your ``red
tape cutting'' law, SBREFA, is one of the most significant
small business laws of all time. As you know first hand, for
a variety of reasons, the IRS was not included. This omission
should be corrected. If there is one agency with ongoing
rulemaking responsibilities that have an impact on small
business, it is the IRS.
In addition, the other provisions of SBREFA apply only to
the IRS when the interpretative rule of the IRS will ``impose
on small entities a collection of information requirement.''
We already know the IRS has embraced an extraordinarily
narrow interpretation of that phrase. We should take this
opportunity to amend SBREFA to ensure the IRS complies with
SBREFA any time it issues an interpetative regulation.
As you know, the SBLC is a permanent, independent coalition
of eighty trade and professional associations that share a
common commitment to the future of small business. Our
members represent the interests of small businesses in such
diverse economic sectors as manufacturing, retailing,
distribution, professional and technical services,
construction, transportation, tourism and agriculture. Our
policies are developed through a consensus among our
membership. Individual associations may express their
[[Page S6309]]
own views. For your information, a list of our members is
enclosed.
As always, we appreciate your outstanding leadership on
behalf of small business.
Sincerely,
David Gorin,
Chairman.
____
Members of the Small Business Legislative Council
ACIL
Air Conditioning Contractors of America
Alliance for Affordable Services
Alliance for American Innovation
Alliance of Independent Store Owners and Professionals
American Animal Hospital Association
American Association of Equine Practitioners
American Bus Association
American Consulting Engineers Council
American Machine Tool Distributors Association
American Nursery and Landscape Association
American Road & Transportation Builders Association
American Society of Interior Designers
American Society of Travel Agents, Inc.
American Subcontractors Association
American Textile Machinery Association
American Trucking Associations, Inc.
Architectural Precast Association
Associated Equipment Distributors
Associated Landscape Contractors of America
Association of Small Business Development Centers
Association of Sales and Marketing Companies
Automotive Recyclers Association
Automotive Service Association
Bowling Proprietors Association of America
Building Service Contractors Association International
Business Advertising Council
CBA
Council of Fleet Specialists
Council of Growing Companies
Direct Selling Association
Electronics Representatives Association
Florists' Transworld Delivery Association
Health Industry Representatives Association
Helicopter Association International
Independent Bankers Association of America
Independent Medical Distributors Association
International Association of Refrigerated Warehouses
International Formalwear Association
International Franchise Association
Machinery Dealers National Association
Mail Advertising Service Association
Manufacturers Agents for the Food Service Industry
Manufacturers Agents National Association
Manufacturers Representatives of America, Inc.
National Association for the Self-Employed
National Association of Home Builders
National Association of Plumbing-Heating-Cooling
Contractors
National Association of Realtors
National Association of RV Parks and Campgrounds
National Association of Small Business Investment Companies
National Association of the Remodeling Industry
National Chimney Sweep Guild
National Community Pharmacists Association
National Electrical Contractors Association
National Electrical Manufacturers Representatives
Association
National Funeral Directors Association, Inc.
National Lumber & Building Material Dealers Association
National Moving and Storage Association
National Ornamental & Miscellaneous Metals Association
National Paperbox Association
National Society of Accountants
National Tooling and Machining Association
National Tour Association
National Wood Flooring Association
Organization for the Promotion and Advancement of Small
Telephone Companies
Petroleum Marketers Association of America
Printing Industries of America, Inc.
Professional Lawn Care Association of America
Promotional Products Association International
The Retailer's Bakery Association
Saturation Mailers Coalition
Small Business Council of America, Inc.
Small Business Exporters Association
Small Business Technology Coalition
SMC Business Councils
Society of American Florists
Turfgrass Producers International
Tire Association of North America
United Motorcoach Association
____
Office of Advocacy,
U.S. Small Business Administration,
Washington, DC, May 26, 1999.
Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Chairman Bond: This is in response to your request for
my views as to whether the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA) should be amended
to include more activities of the Internal Revenue Service
(IRS).
The proposed amendments to SBREFA are constructive. In
particular, applying the requirement that IRS convene Small
Business Advocacy Review Panels to consider the impact of
proposed rules involving the internal revenue laws is a goal
that certainly would give small businesses a stronger voice
in a process that affects them so dramatically.
The panel process has applied since 1996 to the
Environmental Protection Agency (EPA) and the Occupational
Safety and Health Administration (OSHA). A panel, comprising
the administrator of EPA or OSHA, the Chief Counsel for
Advocacy of the Small Business Administration, and the
director of the Office of Information and Regulatory Affairs,
collects comments from representatives of small entities.
Then the panel issues a report on the comments and the
panel's findings within 60 days. This process has been
extremely helpful in identifying the likely impact of major
rules on small entities, yet its tight timetable has assured
that needed rules are not delayed unduly.
Tax regulations impose the most widespread burdens on small
business. Therefore, it is important to have small business
input at the earliest possible stage of rulemaking. This
amendment builds on an existing panel process that is working
well. The panel process would bring a new level of scrutiny
to tax regulations, some of which have added immensely to
small entity burdens in the past.
At the same time, I am mindful that this expansion will add
significantly to the workload of both the Office of Advocacy
and the IRS, and I hope suitable staffing adjustments to
accommodate this important added work will be made.
Thank you for soliciting my views.
Sincerely,
Jere W. Glover,
Chief Counsel for Advocacy.
Mr. KERRY. Mr. President, as Ranking Democrat on the Committee on
Small Business, I join Committee Chairman Bond in introducing the Small
Business Advocacy Review Panel Technical Amendments Act of 1999. While
there are a few minor points that Chairman Bond and I have agreed to
work out before the Committee considers the bill, we both agree that
this is an important piece of legislation which should be enacted
promptly to facilitate the Small Business Enforcement Fairness Act
process. This process enables small entity representatives to
participate in rulemakings by the Environmental Protection Agency
(EPA), the Occupational Safety and Health Administration (OSHA), and,
under this bill, the Internal Revenue Service (IRS) of the Department
of Treasury.
This bill improves and enhances the Small Business Regulatory
Enforcement Fairness Act of 1996, which has not only reduced regulatory
burdens that otherwise would have been placed on small businesses, but
also has begun to institute a fundamental change in the way Federal
agencies promulgate rules that could have ``a substantial economic
impact on a substantial number of small businesses.'' Federal agencies
are required under existing law to form so-called SBREFA panels in
conjunction with the Office of Information and Regulatory Affairs in
the Office of Management and Budget, and with small entities, or their
representatives. These SBREFA panels are charged with creating flexible
regulatory options that would allow small businesses to continue to
operate without sacrificing the environmental, or health and safety
goals of the proposed rule.
These panels have been highly effective in saving small businesses
regulatory compliance costs. To date, seventeen (17) Small Business
Regulatory Enforcement Fairness Act panels have been convened by the
EPA, and three (3) by the OSHA. According to SBA's Office of Advocacy,
since the law's enactment in 1996, the EPA SBREFA panels have saved
small businesses almost $1 billion, and the OSHA SBREFA panels have
saved small businesses about $2 billion.
While the process has obviously worked well to date, there are a few
technical changes that we are proposing to help the process work even
better. These changes were recommended by selected small entity
representatives who have experience with the SBREFA panel process, and
who testified at a joint hearing held by the House Small Business
Committee's Subcommittees on Regulatory Reform and Paperwork Reduction,
and Government Programs and Oversight on March 11, 1999.
Let me take a minute to describe the provisions of the bill.
[[Page S6310]]
This bill would lengthen by thirty (30) days the time that small
entity representatives have to review the usually technical and
voluminous materials to be considered during panel deliberations. For
those small businessmen and women who would like to participate but do
not have a great deal of time to review technical data, the bill
requires OSHA, EPA and IRS to prepare detailed summaries of background
data and information.
The bill would also allow a small entity representative, if he or she
so chooses to, make an oral presentation to the panel.
Many small entities have expressed their interest in reviewing the
panel report before the rule is proposed, and this bill would require
the panel report to be printed in the Federal Register either as soon
as practicable or with the proposed rule, but in no case, later than
six (6) months after the rule is proposed.
Moreover, the bill would add certain rules issued by Internal Revenue
Service to the panel requirements of SBREFA. Many small businesses
complain that they are overwhelmed with the large burdens that the IRS
places on them. It is the goal of this bill to hold the IRS accountable
for the interpretative rules they issue that have a major impact on
small business concerns, and to open up the rulemaking process so small
entities can participate.
This new authority would significantly increase the workload of SBA's
Office of Advocacy, the Federal office charged with monitoring agency
compliance with the Regulatory Flexibility Act, including SBREFA.
Chairman Bond and I agree that it is important that the Office of
Advocacy have adequate resources to fulfill the new responsibilities
mandated by this bill. Therefore, we plan to send a letter jointly to
Appropriations Subcommittee on Commerce, Justice and State Chairman and
Ranking Member Senators Gregg and Hollings requesting them to approve
additional funding for the Office of Advocacy to handle these
additional responsibilities under the law.
I am proud to support this legislation. I believe it will result in
significant savings for small businesses and will improve the mechanism
for their voices to be heard.
Finally, I would like to thank Chairman Bond and his staff for their
efforts working with me and my staff to produce this important bill.
______