[House Report 112-289]
[From the U.S. Government Publishing Office]


112th Congress                                            Rept. 112-289
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

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



 
            REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011

                                _______
                                

               November 16, 2011.--Ordered to be printed

                                _______
                                

Mr. Graves of Missouri, from the Committee on Small Business, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 527]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 527) to amend chapter 6 of title 5, United States 
Code (commonly known as the Regulatory Flexibility Act), to 
ensure complete analysis of potential impacts on small entities 
of rules, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
   I. Amendment.......................................................2
  II. Purpose of the Bill and Summary.................................8
 III. Background and the Need for Legislation.........................9
  IV. Hearings.......................................................13
   V. Committee Consideration........................................14
  VI. Committee Votes................................................15
 VII. Section-by-Section Analysis of H.R. 527........................27
VIII. Congressional Budget Cost Estimate.............................62
  IX. Unfunded Mandates..............................................65
   X. New Budget Authority, Entitlement Authority, and Tax Expenditur65
  XI. Oversight Findings.............................................65
 XII. Statement of Constitutional Authority..........................67
XIII. Congressional Accountability Act...............................67
 XIV. Federal Advisory Committee Statement...........................67
  XV. Statement of No Earmarks.......................................67
 XVI. Performance Goals and Objectives...............................67
XVII. Dissenting Views...............................................68
XVIII.Changes in Existing Law Made by the Bill, as Reported..........71


                              I. Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SEC. 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Regulatory 
Flexibility Improvements Act of 2011''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Clarification and expansion of rules covered by the Regulatory 
Flexibility Act.
Sec. 3. Expansion of report of regulatory agenda.
Sec. 4. Requirements providing for more detailed analyses.
Sec. 5. Repeal of waiver and delay authority; Additional powers of the 
Chief Counsel for Advocacy.
Sec. 6. Procedures for gathering comments.
Sec. 7. Periodic review of rules.
Sec. 8. Judicial review of compliance with the requirements of the 
Regulatory Flexibility Act available after publication of the final 
rule.
Sec. 9. Jurisdiction of court of appeals over rules implementing the 
Regulatory Flexibility Act.
Sec. 10. Clerical amendments.
Sec. 11. Agency preparation of guides.

SEC. 2. CLARIFICATION AND EXPANSION OF RULES COVERED BY THE REGULATORY 
                    FLEXIBILITY ACT.

  (a) In General.--Paragraph (2) of section 601 of title 5, United 
States Code, is amended to read as follows:
          ``(2) Rule.--The term `rule' has the meaning given such term 
        in section 551(4) of this title, except that such term does not 
        include a rule of particular (and not general) applicability 
        relating to rates, wages, corporate or financial structures or 
        reorganizations thereof, prices, facilities, appliances, 
        services, or allowances therefor or to valuations, costs or 
        accounting, or practices relating to such rates, wages, 
        structures, prices, appliances, services, or allowances.''.
  (b) Inclusion of Rules With Indirect Effects.--Section 601 of title 
5, United States Code, is amended by adding at the end the following 
new paragraph:
          ``(9) Economic impact.--The term `economic impact' means, 
        with respect to a proposed or final rule--
                  ``(A) any direct economic effect on small entities of 
                such rule; and
                  ``(B) any indirect economic effect on small entities 
                which is reasonably foreseeable and results from such 
                rule (without regard to whether small entities will be 
                directly regulated by the rule).''.
  (c) Inclusion of Rules With Beneficial Effects.--
          (1) Initial regulatory flexibility analysis.--Subsection (c) 
        of section 603 of title 5, United States Code, is amended by 
        striking the first sentence and inserting ``Each initial 
        regulatory flexibility analysis shall also contain a detailed 
        description of alternatives to the proposed rule which minimize 
        any adverse significant economic impact or maximize any 
        beneficial significant economic impact on small entities.''.
          (2) Final regulatory flexibility analysis.--The first 
        paragraph (6) of section 604(a) of title 5, United States Code, 
        is amended by striking ``minimize the significant economic 
        impact'' and inserting ``minimize the adverse significant 
        economic impact or maximize the beneficial significant economic 
        impact''.
  (d) Inclusion of Rules Affecting Tribal Organizations.--Paragraph (5) 
of section 601 of title 5, United States Code, is amended by inserting 
``and tribal organizations (as defined in section 4(l) of the Indian 
Self-Determination and Education Assistance Act (25 U.S.C. 450b(l))),'' 
after ``special districts,''.
  (e) Inclusion of Land Management Plans and Formal Rule Making.--
          (1) Initial regulatory flexibility analysis.--Subsection (a) 
        of section 603 of title 5, United States Code, is amended in 
        the first sentence--
                  (A) by striking ``or'' after ``proposed rule,''; and
                  (B) by inserting ``or publishes a revision or 
                amendment to a land management plan,'' after ``United 
                States,''.
          (2) Final regulatory flexibility analysis.--Subsection (a) of 
        section 604 of title 5, United States Code, is amended in the 
        first sentence--
                  (A) by striking ``or'' after ``proposed 
                rulemaking,''; and
                  (B) by inserting ``or adopts a revision or amendment 
                to a land management plan,'' after ``section 603(a),''.
          (3) Land management plan defined.--Section 601 of title 5, 
        United States Code, is amended by adding at the end the 
        following new paragraph:
          ``(10) Land management plan.--
                  ``(A) In general.--The term `land management plan' 
                means--
                          ``(i) any plan developed by the Secretary of 
                        Agriculture under section 6 of the Forest and 
                        Rangeland Renewable Resources Planning Act of 
                        1974 (16 U.S.C. 1604); and
                          ``(ii) any plan developed by the Secretary of 
                        Interior under section 202 of the Federal Land 
                        Policy and Management Act of 1976 (43 U.S.C. 
                        1712).
                  ``(B) Revision.--The term `revision' means any change 
                to a land management plan which--
                          ``(i) in the case of a plan described in 
                        subparagraph (A)(i), is made under section 
                        6(f)(5) of the Forest and Rangeland Renewable 
                        Resources Planning Act of 1974 (16 U.S.C. 
                        1604(f)(5)); or
                          ``(ii) in the case of a plan described in 
                        subparagraph (A)(ii), is made under section 
                        1610.5-6 of title 43, Code of Federal 
                        Regulations (or any successor regulation).
                  ``(C) Amendment.--The term `amendment' means any 
                change to a land management plan which--
                          ``(i) in the case of a plan described in 
                        subparagraph (A)(i), is made under section 
                        6(f)(4) of the Forest and Rangeland Renewable 
                        Resources Planning Act of 1974 (16 U.S.C. 
                        1604(f)(4)) and with respect to which the 
                        Secretary of Agriculture prepares a statement 
                        described in section 102(2)(C) of the National 
                        Environmental Policy Act of 1969 (42 U.S.C. 
                        4332(2)(C)); or
                          ``(ii) in the case of a plan described in 
                        subparagraph (A)(ii), is made under section 
                        1610.5-5 of title 43, Code of Federal 
                        Regulations (or any successor regulation) and 
                        with respect to which the Secretary of the 
                        Interior prepares a statement described in 
                        section 102(2)(C) of the National Environmental 
                        Policy Act of 1969 (42 U.S.C. 4332(2)(C)).''.
  (f) Inclusion of Certain Interpretive Rules Involving the Internal 
Revenue Laws.--
          (1) In general.--Subsection (a) of section 603 of title 5, 
        United States Code, is amended by striking the period at the 
        end and inserting ``or a recordkeeping requirement, and without 
        regard to whether such requirement is imposed by statute or 
        regulation.''.
          (2) Collection of information.--Paragraph (7) of section 601 
        of title 5, United States Code, is amended to read as follows:
          ``(7) Collection of information.--The term `collection of 
        information' has the meaning given such term in section 3502(3) 
        of title 44.''.
          (3) Recordkeeping requirement.--Paragraph (8) of section 601 
        of title 5, United States Code, is amended to read as follows:
          ``(8) Recordkeeping requirement.--The term `recordkeeping 
        requirement' has the meaning given such term in section 
        3502(13) of title 44.''.
  (g) Definition of Small Organization.--Paragraph (4) of section 601 
of title 5, United States Code, is amended to read as follows:
          ``(4) Small organization.--
                  ``(A) In general.--The term `small organization' 
                means any not-for-profit enterprise which, as of the 
                issuance of the notice of proposed rulemaking--
                          ``(i) in the case of an enterprise which is 
                        described by a classification code of the North 
                        American Industrial Classification System, does 
                        not exceed the size standard established by the 
                        Administrator of the Small Business 
                        Administration pursuant to section 3 of the 
                        Small Business Act (15 U.S.C. 632) for small 
                        business concerns described by such 
                        classification code; and
                          ``(ii) in the case of any other enterprise, 
                        has a net worth that does not exceed $7,000,000 
                        and has not more than 500 employees.
                  ``(B) Local labor organizations.--In the case of any 
                local labor organization, subparagraph (A) shall be 
                applied without regard to any national or international 
                organization of which such local labor organization is 
                a part.
                  ``(C) Agency definitions.--Subparagraphs (A) and (B) 
                shall not apply to the extent that an agency, after 
                consultation with the Office of Advocacy of the Small 
                Business Administration and after opportunity for 
                public comment, establishes one or more definitions for 
                such term which are appropriate to the activities of 
                the agency and publishes such definitions in the 
                Federal Register.''.

SEC. 3. EXPANSION OF REPORT OF REGULATORY AGENDA.

  Section 602 of title 5, United States Code, is amended--
          (1) in subsection (a)--
                  (A) in paragraph (2), by striking ``, and'' at the 
                end and inserting ``;'';
                  (B) by redesignating paragraph (3) as paragraph (4); 
                and
                  (C) by inserting after paragraph (2) the following:
          ``(3) a brief description of the sector of the North American 
        Industrial Classification System that is primarily affected by 
        any rule which the agency expects to propose or promulgate 
        which is likely to have a significant economic impact on a 
        substantial number of small entities; and''; and
          (2) in subsection (c), to read as follows:
  ``(c) Each agency shall prominently display a plain language summary 
of the information contained in the regulatory flexibility agenda 
published under subsection (a) on its website within 3 days of its 
publication in the Federal Register. The Office of Advocacy of the 
Small Business Administration shall compile and prominently display a 
plain language summary of the regulatory agendas referenced in 
subsection (a) for each agency on its website within 3 days of their 
publication in the Federal Register.''.

SEC. 4. REQUIREMENTS PROVIDING FOR MORE DETAILED ANALYSES.

  (a) Initial Regulatory Flexibility Analysis.--Subsection (b) of 
section 603 of title 5, United States Code, is amended to read as 
follows:
  ``(b) Each initial regulatory flexibility analysis required under 
this section shall contain a detailed statement--
          ``(1) describing the reasons why action by the agency is 
        being considered;
          ``(2) describing the objectives of, and legal basis for, the 
        proposed rule;
          ``(3) estimating the number and type of small entities to 
        which the proposed rule will apply;
          ``(4) describing the projected reporting, recordkeeping, and 
        other compliance requirements of the proposed rule, including 
        an estimate of the classes of small entities which will be 
        subject to the requirement and the type of professional skills 
        necessary for preparation of the report and record;
          ``(5) describing all relevant Federal rules which may 
        duplicate, overlap, or conflict with the proposed rule, or the 
        reasons why such a description could not be provided;
          ``(6) estimating the additional cumulative economic impact of 
        the proposed rule on small entities beyond that already imposed 
        on the class of small entities by the agency or why such an 
        estimate is not available; and
          ``(7) describing any disproportionate economic impact on 
        small entities or a specific class of small entities.''.
  (b) Final Regulatory Flexibility Analysis.--
          (1) In general.--Section 604(a) of title 5, United States 
        Code, is amended--
                  (A) in paragraph (4), by striking ``an explanation'' 
                and inserting ``a detailed explanation'';
                  (B) in each of paragraphs (4), (5), and the first 
                paragraph (6), by inserting ``detailed'' before 
                ``description''; and
                  (C) by adding at the end the following:
          ``(7) describing any disproportionate economic impact on 
        small entities or a specific class of small entities.''.
          (2) Inclusion of response to comments on certification of 
        proposed rule.--Paragraph (2) of section 604(a) of title 5, 
        United States Code, is amended by inserting ``(or certification 
        of the proposed rule under section 605(b))'' after ``initial 
        regulatory flexibility analysis''.
          (3) Publication of analysis on website.--Subsection (b) of 
        section 604 of title 5, United States Code, is amended to read 
        as follows:
  ``(b) The agency shall make copies of the final regulatory 
flexibility analysis available to the public, including placement of 
the entire analysis on the agency's website, and shall publish in the 
Federal Register the final regulatory flexibility analysis, or a 
summary thereof which includes the telephone number, mailing address, 
and link to the website where the complete analysis may be obtained.''.
  (c) Cross-references to Other Analyses.--Subsection (a) of section 
605 of title 5, United States Code, is amended to read as follows:
  ``(a) A Federal agency shall be treated as satisfying any requirement 
regarding the content of an agenda or regulatory flexibility analysis 
under section 602, 603, or 604, if such agency provides in such agenda 
or analysis a cross-reference to the specific portion of another agenda 
or analysis which is required by any other law and which satisfies such 
requirement.''.
  (d) Certifications.--Subsection (b) of section 605 of title 5, United 
States Code, is amended--
          (1) by inserting ``detailed'' before ``statement'' the first 
        place it appears; and
          (2) by inserting ``and legal'' after ``factual''.
  (e) Quantification Requirements.--Section 607 of title 5, United 
States Code, is amended to read as follows:

``Sec. 607. Quantification requirements

  ``In complying with sections 603 and 604, an agency shall provide--
          ``(1) a quantifiable or numerical description of the effects 
        of the proposed or final rule and alternatives to the proposed 
        or final rule; or
          ``(2) a more general descriptive statement and a detailed 
        statement explaining why quantification is not practicable or 
        reliable.''.

SEC. 5. REPEAL OF WAIVER AND DELAY AUTHORITY; ADDITIONAL POWERS OF THE 
                    CHIEF COUNSEL FOR ADVOCACY.

  (a) In General.--Section 608 is amended to read as follows:

``Sec. 608. Additional powers of Chief Counsel for Advocacy

  ``(a)(1) Not later than 270 days after the date of the enactment of 
the Regulatory Flexibility Improvements Act of 2011, the Chief Counsel 
for Advocacy of the Small Business Administration shall, after 
opportunity for notice and comment under section 553, issue rules 
governing agency compliance with this chapter. The Chief Counsel may 
modify or amend such rules after notice and comment under section 553. 
This chapter (other than this subsection) shall not apply with respect 
to the issuance, modification, and amendment of rules under this 
paragraph.
  ``(2) An agency shall not issue rules which supplement the rules 
issued under subsection (a) unless such agency has first consulted with 
the Chief Counsel for Advocacy to ensure that such supplemental rules 
comply with this chapter and the rules issued under paragraph (1).
  ``(b) Notwithstanding any other law, the Chief Counsel for Advocacy 
of the Small Business Administration may intervene in any agency 
adjudication (unless such agency is authorized to impose a fine or 
penalty under such adjudication), and may inform the agency of the 
impact that any decision on the record may have on small entities. The 
Chief Counsel shall not initiate an appeal with respect to any 
adjudication in which the Chief Counsel intervenes under this 
subsection.
  ``(c) The Chief Counsel for Advocacy may file comments in response to 
any agency notice requesting comment, regardless of whether the agency 
is required to file a general notice of proposed rulemaking under 
section 553.''.
  (b) Conforming Amendments.--
          (1) Section 611(a)(1) of such title is amended by striking 
        ``608(b),''.
          (2) Section 611(a)(2) of such title is amended by striking 
        ``608(b),''.
          (3) Section 611(a)(3) of such title is amended--
                  (A) by striking subparagraph (B); and
                  (B) by striking ``(3)(A) A small entity'' and 
                inserting the following:
  ``(3) A small entity''.

SEC. 6. PROCEDURES FOR GATHERING COMMENTS.

  Section 609 of title 5, United States Code, is amended by striking 
subsection (b) and all that follows through the end of the section and 
inserting the following:
  ``(b)(1) Prior to publication of any proposed rule described in 
subsection (e), an agency making such rule shall notify the Chief 
Counsel for Advocacy of the Small Business Administration and provide 
the Chief Counsel with--
          ``(A) all materials prepared or utilized by the agency in 
        making the proposed rule, including the draft of the proposed 
        rule; and
          ``(B) information on the potential adverse and beneficial 
        economic impacts of the proposed rule on small entities and the 
        type of small entities that might be affected.
  ``(2) An agency shall not be required under paragraph (1) to provide 
the exact language of any draft if the rule--
          ``(A) relates to the internal revenue laws of the United 
        States; or
          ``(B) is proposed by an independent regulatory agency (as 
        defined in section 3502(5) of title 44).
  ``(c) Not later than 15 days after the receipt of such materials and 
information under subsection (b), the Chief Counsel for Advocacy of the 
Small Business Administration shall--
          ``(1) identify small entities or representatives of small 
        entities or a combination of both for the purpose of obtaining 
        advice, input, and recommendations from those persons about the 
        potential economic impacts of the proposed rule and the 
        compliance of the agency with section 603; and
          ``(2) convene a review panel consisting of an employee from 
        the Office of Advocacy of the Small Business Administration, an 
        employee from the agency making the rule, and in the case of an 
        agency other than an independent regulatory agency (as defined 
        in section 3502(5) of title 44), an employee from the Office of 
        Information and Regulatory Affairs of the Office of Management 
        and Budget to review the materials and information provided to 
        the Chief Counsel under subsection (b).
  ``(d)(1) Not later than 60 days after the review panel described in 
subsection (c)(2) is convened, the Chief Counsel for Advocacy of the 
Small Business Administration shall, after consultation with the 
members of such panel, submit a report to the agency and, in the case 
of an agency other than an independent regulatory agency (as defined in 
section 3502(5) of title 44), the Office of Information and Regulatory 
Affairs of the Office of Management and Budget.
  ``(2) Such report shall include an assessment of the economic impact 
of the proposed rule on small entities, including an assessment of the 
proposed rule's impact on the cost that small entities pay for energy, 
and a discussion of any alternatives that will minimize adverse 
significant economic impacts or maximize beneficial significant 
economic impacts on small entities.
  ``(3) Such report shall become part of the rulemaking record. In the 
publication of the proposed rule, the agency shall explain what 
actions, if any, the agency took in response to such report.
  ``(e) A proposed rule is described by this subsection if the 
Administrator of the Office of Information and Regulatory Affairs of 
the Office of Management and Budget, the head of the agency (or the 
delegatee of the head of the agency), or an independent regulatory 
agency determines that the proposed rule is likely to result in--
          ``(1) an annual effect on the economy of $100,000,000 or 
        more;
          ``(2) a major increase in costs or prices for consumers, 
        individual industries, Federal, State, or local governments, 
        tribal organizations, or geographic regions;
          ``(3) significant adverse effects on competition, employment, 
        investment, productivity, innovation, or on the ability of 
        United States-based enterprises to compete with foreign-based 
        enterprises in domestic and export markets; or
          ``(4) a significant economic impact on a substantial number 
        of small entities.
  ``(f) Upon application by the agency, the Chief Counsel for Advocacy 
of the Small Business Administration may waive the requirements of 
subsections (b) through (e) if the Chief Counsel determines that 
compliance with the requirements of such subsections are impracticable, 
unnecessary, or contrary to the public interest.''.

SEC. 7. PERIODIC REVIEW OF RULES.

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

``Sec. 610. Periodic review of rules

  ``(a) Not later than 180 days after the enactment of the Regulatory 
Flexibility Improvements Act of 2011, each agency shall publish in the 
Federal Register and place on its website a plan for the periodic 
review of rules issued by the agency which the head of the agency 
determines have a significant economic impact on a substantial number 
of small entities. Such determination shall be made without regard to 
whether the agency performed an analysis under section 604. The purpose 
of the review shall be to determine whether such rules should be 
continued without change, or should be amended or rescinded, consistent 
with the stated objectives of applicable statutes, to minimize any 
adverse significant economic impacts or maximize any beneficial 
significant economic impacts on a substantial number of small entities. 
Such plan may be amended by the agency at any time by publishing the 
revision in the Federal Register and subsequently placing the amended 
plan on the agency's website.
  ``(b) The plan shall provide for the review of all such agency rules 
existing on the date of the enactment of the Regulatory Flexibility 
Improvements Act of 2011 within 10 years of the date of publication of 
the plan in the Federal Register and for review of rules adopted after 
the date of enactment of the Regulatory Flexibility Improvements Act of 
2011 within 10 years after the publication of the final rule in the 
Federal Register. If the head of the agency determines that completion 
of the review of existing rules is not feasible by the established 
date, the head of the agency shall so certify in a statement published 
in the Federal Register and may extend the review for not longer than 2 
years after publication of notice of extension in the Federal Register. 
Such certification and notice shall be sent to the Chief Counsel for 
Advocacy of the Small Business Administration and the Congress.
  ``(c) The plan shall include a section that details how an agency 
will conduct outreach to and meaningfully include small businesses for 
the purposes of carrying out this section. The agency shall include in 
this section a plan for how the agency will contact small businesses 
and gather their input on existing agency rules.
  ``(d) Each agency shall annually submit a report regarding the 
results of its review pursuant to such plan to the Congress, the Chief 
Counsel for Advocacy of the Small Business Administration, and, in the 
case of agencies other than independent regulatory agencies (as defined 
in section 3502(5) of title 44) to the Administrator of the Office of 
Information and Regulatory Affairs of the Office of Management and 
Budget. Such report shall include the identification of any rule with 
respect to which the head of the agency made a determination described 
in paragraph (5) or (6) of subsection (e) and a detailed explanation of 
the reasons for such determination.
  ``(e) In reviewing a rule pursuant to subsections (a) through (d), 
the agency shall amend or rescind the rule to minimize any adverse 
significant economic impact on a substantial number of small entities 
or disproportionate economic impact on a specific class of small 
entities, or maximize any beneficial significant economic impact of the 
rule on a substantial number of small entities to the greatest extent 
possible, consistent with the stated objectives of applicable statutes. 
In amending or rescinding the rule, the agency shall consider the 
following factors:
          ``(1) The continued need for the rule.
          ``(2) The nature of complaints received by the agency from 
        small entities concerning the rule.
          ``(3) Comments by the Regulatory Enforcement Ombudsman and 
        the Chief Counsel for Advocacy of the Small Business 
        Administration.
          ``(4) The complexity of the rule.
          ``(5) The extent to which the rule overlaps, duplicates, or 
        conflicts with other Federal rules and, unless the head of the 
        agency determines it to be infeasible, State and local rules.
          ``(6) The contribution of the rule to the cumulative economic 
        impact of all Federal rules on the class of small entities 
        affected by the rule, unless the head of the agency determines 
        that such calculations cannot be made and reports that 
        determination in the annual report required under subsection 
        (d).
          ``(7) The length of time since the rule has been evaluated or 
        the degree to which technology, economic conditions, or other 
        factors have changed in the area affected by the rule.
  ``(f) The agency shall publish in the Federal Register and on its 
website a list of rules to be reviewed pursuant to such plan. Such 
publication shall include a brief description of the rule, the reason 
why the agency determined that it has a significant economic impact on 
a substantial number of small entities (without regard to whether it 
had prepared a final regulatory flexibility analysis for the rule), and 
request comments from the public, the Chief Counsel for Advocacy of the 
Small Business Administration, and the Regulatory Enforcement Ombudsman 
concerning the enforcement of the rule.''.

SEC. 8. JUDICIAL REVIEW OF COMPLIANCE WITH THE REQUIREMENTS OF THE 
                    REGULATORY FLEXIBILITY ACT AVAILABLE AFTER 
                    PUBLICATION OF THE FINAL RULE.

  (a) In General.--Paragraph (1) of section 611(a) of title 5, United 
States Code, is amended by striking ``final agency action'' and 
inserting ``such rule''.
  (b) Jurisdiction.--Paragraph (2) of such section is amended by 
inserting ``(or which would have such jurisdiction if publication of 
the final rule constituted final agency action)'' after ``provision of 
law,''.
  (c) Time for Bringing Action.--Paragraph (3) of such section is 
amended--
          (1) by striking ``final agency action'' and inserting 
        ``publication of the final rule''; and
          (2) by inserting ``, in the case of a rule for which the date 
        of final agency action is the same date as the publication of 
        the final rule,'' after ``except that''.
  (d) Intervention by Chief Counsel for Advocacy.--Subsection (b) of 
section 612 of title 5, United States Code, is amended by inserting 
before the first period ``or agency compliance with section 601, 603, 
604, 605(b), 609, or 610''.

SEC. 9. JURISDICTION OF COURT OF APPEALS OVER RULES IMPLEMENTING THE 
                    REGULATORY FLEXIBILITY ACT.

  (a) In General.--Section 2342 of title 28, United States Code, is 
amended--
          (1) in paragraph (6), by striking ``and'' at the end;
          (2) in paragraph (7), by striking the period at the end and 
        inserting ``; and''; and
          (3) by inserting after paragraph (7) the following new 
        paragraph:
          ``(8) all final rules under section 608(a) of title 5.''.
  (b) Conforming Amendments.--Paragraph (3) of section 2341 of title 
28, United States Code, is amended--
          (1) in subparagraph (D), by striking ``and'' at the end;
          (2) in subparagraph (E), by striking the period at the end 
        and inserting ``; and''; and
          (3) by adding at the end the following new subparagraph:
                  ``(F) the Office of Advocacy of the Small Business 
                Administration, when the final rule is under section 
                608(a) of title 5.''.
  (c) Authorization to Intervene and Comment on Agency Compliance With 
Administrative Procedure.--Subsection (b) of section 612 of title 5, 
United States Code, is amended by inserting ``chapter 5, and chapter 
7,'' after ``this chapter,''.

SEC. 10. CLERICAL AMENDMENTS.

  (a) Section 601 of title 5, United States Code, is amended--
          (1) in paragraph (1)--
                  (A) by striking the semicolon at the end and 
                inserting a period; and
                  (B) by striking ``(1) the term'' and inserting the 
                following:
          ``(1) Agency.--The term'';
          (2) in paragraph (3)--
                  (A) by striking the semicolon at the end and 
                inserting a period; and
                  (B) by striking ``(3) the term'' and inserting the 
                following:
          ``(3) Small business.--The term'';
          (3) in paragraph (5)--
                  (A) by striking the semicolon at the end and 
                inserting a period; and
                  (B) by striking ``(5) the term'' and inserting the 
                following:
          ``(5) Small governmental jurisdiction.--The term''; and
          (4) in paragraph (6)--
                  (A) by striking ``; and'' and inserting a period; and
                  (B) by striking ``(6) the term'' and inserting the 
                following:
          ``(6) Small entity.--The term''.
  (b) The heading of section 605 of title 5, United States Code, is 
amended to read as follows:

``Sec. 605. Incorporations by reference and certifications''.

  (c) The table of sections for chapter 6 of title 5, United States 
Code, is amended--
          (1) by striking the item relating to section 605 and 
        inserting the following new item:

``605. Incorporations by reference and certifications.'';

          (2) by striking the item relating to section 607 and 
        inserting the following new item:

``607. Quantification requirements.''; and

          (3) by striking the item relating to section 608 and 
        inserting the following:

``608. Additional powers of Chief Counsel for Advocacy.''.

  (d) Chapter 6 of title 5, United States Code, is amended as follows:
          (1) In section 603, by striking subsection (d).
          (2) In section 604(a) by striking the second paragraph (6).

SEC. 11. AGENCY PREPARATION OF GUIDES.

  Section 212(a)(5) the Small Business Regulatory Enforcement Fairness 
Act of 1996 (5 U.S.C. 601 note) is amended to read as follows:
          ``(5) Agency preparation of guides.--The agency shall, in its 
        sole discretion, taking into account the subject matter of the 
        rule and the language of relevant statutes, ensure that the 
        guide is written using sufficiently plain language likely to be 
        understood by affected small entities. Agencies may prepare 
        separate guides covering groups or classes of similarly 
        affected small entities and may cooperate with associations of 
        small entities to distribute such guides. In developing guides, 
        agencies shall solicit input from affected small entities or 
        associations of affected small entities. An agency may prepare 
        guides and apply this section with respect to a rule or a group 
        of related rules.''.

                      II. Purpose and Bill Summary

    The purpose of H.R. 527, the ``Regulatory Flexibility 
Improvements Act of 2011,'' is to amend the Regulatory 
Flexibility Act (RFA) by eliminating interpretive lacunae that 
agencies have used to avoid compliance with the Act. The RFA 
was enacted in 1980 to ensure that federal agencies take into 
account the disparate impact that regulations have on small 
businesses and other small entities. Agencies regularly flouted 
the requirements of the RFA forcing Congress to take action in 
1996 with the enactment of the Small Business Regulatory 
Enforcement Fairness Act (SBREFA). SBREFA made some significant 
changes to the RFA with the expectation that it would improve 
agency compliance. Studies by the General Accounting Office, 
reports from the Chief Counsel for Advocacy,\1\ and 
Congressional hearings held by the Committees on the Judiciary 
and the Committee on Small Business demonstrate that agencies 
are still reluctant to comply with the analytical requirements 
of the RFA. Further action is evidently needed to force agency 
compliance.
---------------------------------------------------------------------------
    \1\Pub. L. No. 94-305 created the Office of Advocacy within the 
United States Small Business Administration and vested management in a 
Chief Counsel. The RFA assigned monitoring functions to the Chief 
Counsel. Therefore, this report uses the terms Chief Counsel for 
Advocacy and Office of Advocacy interchangeably.
---------------------------------------------------------------------------
    The bill defines and expands which economic effects are to 
be examined by agencies, imposes greater detail in performing 
the analyses, clarifies language concerning the applicability 
of the RFA to the Internal Revenue Service, subjects all 
agencies, including the IRS, to the procedures in Sec. 609 on 
the SBREFA panel process, eliminates barriers to judicial 
review of RFA compliance for agencies that have a statutory 
exhaustion requirement after a final rule is published before 
the rule can be challenged in court, and mandates that the 
Chief Counsel promulgate RFA compliance regulations applicable 
to all federal agencies.

                       III. Need for Legislation

    During the 1970s, Congress enacted numerous regulatory 
statutes. By the end of that decade, businesses, especially 
small ones, were groaning under the weight of federal 
regulation. Regulatory requirements were stifling innovation, 
limiting small business growth, and contributing to the general 
malaise experienced during the latter half of that decade. The 
Federal Register, the compendium of federal regulatory actions, 
had grown from a non-weighty publication for the obscuranta and 
arcana of the federal government to a 42,000 page blueprint for 
regulating many of the aspects of modern American life. Small 
businesses found this crush of federal dictates particularly 
problematic because those businesses had greater difficulty in 
complying with regulations than their larger competitors.
    In a series of hearings during the late 1970s, Congress 
began focusing on the ever-growing burden federal regulation 
imposed upon small businesses. Small businesses reiterated two 
major themes: 1) they were under-represented in federal 
regulatory proceedings; and 2) federal agency efforts to impose 
a ``one-size-fits-all'' body of regulation imposed 
disproportionate burdens on small businesses.\2\
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    \2\The finding on disproportionate impact was substantiated by an 
Office of Advocacy study in 1984 which found concrete economic evidence 
of differential impacts of regulation by firm size. That conclusion was 
affirmed anew in a 2001 economic research study sponsored by the Office 
of Advocacy. W. Crain & T. Hopkins, The Impact of Regulatory Costs on 
Small Business (Oct. 2001). The full report can be found at http://
www.sba.gov/advo/research/rs207tot.pdf.
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    These findings were supported and reinforced during the 
1980 White House Conference on Small Business. Congress reacted 
with the passage of the RFA. That Act constitutes an additional 
component of a significantly broader mechanism to control 
agency decisionmaking--the Administrative Procedure Act (APA). 
The APA prevents an agency from taking actions which are 
``arbitrary, capricious, an abuse of discretion, or otherwise 
not in accordance with the law.'' 5 U.S.C. Sec. 706(2)(A). This 
standard presumes that an agency will undertake rational 
rulemaking to: 1) ascertain the problem to be solved through 
regulation; 2) develop potential solutions; 3) seek public 
comment on proposed solutions and alternatives not considered 
by the agency; and 4) craft a final rule that addresses all 
relevant criteria. Since the vast majority of entities 
(businesses, not-for-profit organizations, and governmental 
jurisdictions) regulated by the federal government are small, a 
rational rule should be one that achieves the objectives of the 
agency without unduly burdening small entities. The RFA, by 
focusing the agency's analysis on the economic effects on small 
entities, will help the agency promulgate rational rules.
    From the time of enactment until 1996, compliance with the 
RFA was at best sporadic. Agencies faced little threat from 
non-compliance since judicial review of regulatory flexibility 
analyses was very limited, see Thompson v. Clark, 741 F.2d 401, 
405 (D.C. Cir. 1984), and an agency's certification decision 
could not be challenged in court. See Colorado State Banking 
Bd.v. RTC, 926 F.2d 931, 948 (10th Cir. 1991); Lehigh Valley 
Farmers v. Block, 640 F. Supp. 1497, 1520 (E.D. Pa. 1986), 
aff'd on other grounds, 829 F.2d 409 (3d Cir. 1987) (district 
court determination on RFA not raised on appeal). Without the 
ability of court orders, agencies only had to comply when it 
would benefit their rulemaking or could be cajoled by the Chief 
Counsel for Advocacy or the Office of Information and 
Regulatory Affairs (OIRA). Both the Committee on Small Business 
and the Committee on the Judiciary held hearings at which 
witnesses confirmed the systemic failure by many agencies to 
comply with the RFA.
    Congress responded to this collective disregard by federal 
agencies with the enactment of SBREFA. The primary change 
authorized direct judicial review of agency compliance with the 
RFA, including challenges to agency certifications. SBREFA also 
mandated that Internal Revenue Service (IRS or Service) 
interpretative regulations that impose a ``collection of 
information requirement''\3\ be subject to the strictures of 
the RFA.\4\ The legislation also recognized that, by the time a 
proposed rule is published for notice and comment, the agency 
has substantial intellectual capital invested in the scope of 
the proposed rule and is unlikely to change the core of its 
proposal during the notice and comment period.\5\ Therefore, 
SBREFA requires the Environmental Protection Agency (EPA) and 
the Occupational Safety and Health Administration (OSHA) to 
obtain input from representatives of small entities prior to 
the publication of any proposed rule that would have a 
significant economic impact on a substantial number of small 
entities, i.e., any proposed rule for which an initial 
regulatory flexibility analysis would be prepared.
---------------------------------------------------------------------------
    \3\The term ``collection of information'' is a term of art used in 
the Paperwork Reduction Act. See 44 U.S.C. Sec.  3502(3).
    \4\The RFA only requires agency compliance if the regulation is 
required to be issued pursuant to notice and comment pursuant to 
Sec. 553 of the APA or some other statute. Interpretative regulations 
are exempt from the notice and comment requirements. 5 U.S.C. 
Sec. 553(b)(A).
    \5\In fact some would argue that the notice and comment period was 
not a critical component of rational rulemaking but the keystone of 
``rationale rulemaking'' in which the agency uses the public comment 
process to find further support for the foregone conclusion of its 
proposed regulation.
---------------------------------------------------------------------------
    The changes wrought by SBREFA had some effect on agency 
compliance. Lawsuits were filed against agencies, although not 
to the extent feared by critics of judicial review.\6\ Due to 
the litigation, agencies have come to realize that 
certifications need to be supported by sound economic analysis 
or face successful challenges to compliance with the RFA. Input 
by small entities has generated ideas that improved EPA 
regulations.\7\ Despite these ameliorative effects of SBREFA, 
much still needs to be done to ensure that agencies comply with 
the RFA.
---------------------------------------------------------------------------
    \6\Since the changes to the RFA went into effect in late June of 
1996 through 2006, a Lexis search reveals somewhere around 110 reported 
cases involving the RFA. By contrast, during the first ten years after 
the enactment of the National Environmental Policy Act (NEPA), there 
were 770 reported cases involving that statute. Neither count 
accurately reflects the true number of cases filed because reported 
cases may involve appeals and there may be multiple reported cases 
involving the same litigation. In other instances, cases that were 
filed during the respective time periods may not have been resolved. 
Finally, this only represents reported cases and not those that were 
filed but settled or were disposed of without a reported decision. 
Nevertheless, the magnitude of litigation under the RFA was 
significantly less than under NEPA.
    \7\There are insufficient circumstances to assess the results of 
this so-called ``panel process'' on OSHA regulations.
---------------------------------------------------------------------------
    Despite SBREFA and litigation, agencies continued to ignore 
the law. President Bush recognized the importance of the RFA 
and sought to impose greater compliance by the agencies. In a 
March 19, 2002 speech, President Bush stated:

          Every agency is required to analyze the impact of new 
        regulations on small businesses before issuing them. 
        That is an important law. The problem is it is often 
        being ignored. The law is on the books; the regulators 
        do not care that the law is on the books. From this day 
        forward they will care that the law is on the books. We 
        want to enforce the law.

Subsequent to that speech, President Bush issued Executive 
Order 13,272, 67 Fed. Reg. 53,462 (Aug. 16, 2002). The order 
required agencies to adopt standards for complying with the 
RFA, make those standards known to the public, and give the 
Office of Advocacy the opportunity to comment on proposed rules 
that will have a significant economic impact on a substantial 
number of small entities prior to publication in the Federal 
Register. While that Executive Order represents a step in the 
direction of ensuring the pellucidity of agency procedures to 
comply with the RFA, it does not close the loopholes that 
currently exist in the Act or prevent agencies from adopting 
crabbed interpretations of the RFA that enable the agencies to 
elide the analytical responsibilities imposed by Congress more 
than 30 years ago.
    President Obama also recognized the importance of the RFA. 
In a memorandum to the Executive Branch on January 18, 2011, 
the President noted that the RFA ``establishes a deep national 
commitment to achieving statutory goals without imposing 
unnecessary burdens on the public.''\8\ The President went on 
to direct agencies to ``give serious consideration to whether 
and how it is appropriate . . . to reduce regulatory burdens on 
small businesses, through increased flexibility.''\9\ In the 
memorandum, the President requested (but could not mandate) 
independent agencies to comply with its terms.\10\
---------------------------------------------------------------------------
    \8\President Memorandum for the Heads of Executive Departments and 
Agencies: Regulatory Flexibility, Small Business and Job Creation, 76 
Fed. Reg. 3827, 3827 (Jan. 21, 2011).
    \9\Id. at 3828.
    \10\Since the Supreme Court decision in Humphrey's Executor v. 
United States, 295 U.S. 602 (1935), independent collegial body 
agencies, such as the Federal Communications Commission or Nuclear 
Regulatory Commission, are not subject to control by the White House or 
subject to presidential executive orders.
---------------------------------------------------------------------------
    Coetaneous with the release of the memorandum on the RFA, 
President Obama issued Executive Order (E.O.) 13,563.\11\ While 
the putative purpose of the Order was to clarify the regulatory 
analytical requirements set forth in Executive Order 
12,866,\12\ Sec. 6 of E.O. 13,563 required agencies to prepare 
plans for periodic review of regulations, including all extant 
regulations.\13\ Of course, there already is an existing 
requirement for periodic review of regulations, Sec. 610 of the 
RFA.
---------------------------------------------------------------------------
    \11\76 Fed. Reg. 3,821(Jan. 21, 2010).
    \12\Executive Order 12,866, 58 Fed. Reg. 51,735 (Oct. 4, 1993), 
requires federal agencies to perform a cost-benefit analysis for any 
regulation that will have an impact of more than $100 million on the 
economy.
    \13\Exec. Order 13,563, Sec. 6, 75 Fed. Reg. at 3822.
---------------------------------------------------------------------------
    Two presidents, in succession, ordered federal agencies to 
follow the RFA, a law that has been in existence for over 30 
years. Every President from Ronald Reagan to Barack Obama has 
mandated a comprehensive review of existing agency regulations 
despite the fact that the RFA has required such reviews since 
its enactment in 1980. Given the fact that presidents must 
reiterate what is already in the law to agencies over which 
they have plenary authority starkly demonstrates the need for 
revision to the RFA. Furthermore, presidential reminders, 
through memoranda or executive orders, may be ignored with 
impunity by independent regulatory agencies since presidents 
are unable to exert regulatory authority over such agencies.
    The conclusion that the RFA must be amended despite efforts 
of five presidents is buttressed by the finding of the 
Government Accountability Office (GAO). GAO has done numerous 
studies on agency compliance with various aspects of the RFA 
and SBREFA.\14\ According to GAO, the most significant 
stumbling block to improved compliance is the lack of 
definitions for ``significant economic impact'' and 
``substantial number of small entities.'' GAO also notes that 
this threshold determination of whether a rule will have a 
significant economic impact on a substantial number of small 
entities is critical to compliance with other requirements in 
the RFA, including periodic review of rules under Sec. 610 and 
the receipt of small entity input prior to the publication of 
proposed rules by EPA and OSHA.\15\
---------------------------------------------------------------------------
    \14\SBREFA also requires federal agencies to prepare compliance 
guides for regulations that have a significant economic impact on a 
substantial number of small entities. Nothing in the bills being 
considered at the hearing modifies that requirement.
    \15\See Regulatory Flexibility Act: Congress should revisit and 
clarify elements of the act to improve its effectiveness (2006) (GAO 
06-998T); Regulatory Flexibility Act: Clarification of key terms still 
needed (2002) (GAO-02-491); Regulatory Flexibility Act: Key terms still 
need to be clarified (2001) (GAO-01-669T); Regulatory Flexibility Act: 
Implementation in EPA Program Offices and the lead rule (2000) (GGD-00-
193); Regulatory Flexibility Act: Agencies' interpretations of review 
requirements vary (1999) (GGD-99-55); Regulatory Flexibility Act: 
Implementation of the Small Business Advocacy Review Panel Requirements 
(1998) (T-GGD-98-75); Regulatory Flexibility Act: Agencies use of the 
October 1997 Unified Agenda did not satisfy notification requirements 
(1998) (GGD-98-61R); Regulatory Flexibility Act: Status of Agencies' 
Compliance (1995) (T-GGD-95-112).
---------------------------------------------------------------------------
    Testimony at hearings held by the Committee on Small 
Business during the 106th, 107th, 108th, 109th, 110th, and 
112th Congresses further supports the need for change. Hearings 
before the Committee found that considerable confusion still 
reigns on when agencies need to conduct regulatory flexibility 
analyses. Witnesses testified that agencies still finds ways to 
avoid compliance with the RFA, even after the enactment of 
SBREFA and various presidential directives to comply. Finally, 
the testimony was consentient in finding that agencies continue 
to impose unnecessary burdens on small businesses as a result 
of their failure to comply with the RFA.
    Nor have the courts been the anodyne that the authors of 
SBREFA contemplated. Courts have not given agency compliance 
with the RFA the same searching scrutiny that they have given 
to compliance with the National Environmental Policy Act (NEPA) 
even though the authors of SBREFA expected judicial review to 
have the same impact on agency decisionmaking that court 
decisions had on agency compliance with NEPA. See Associated 
Fisheries of Maine v. Daley, 127 F.3d 104, 114 (1st Cir. 1997).
    Neither the actions of successive presidents, nor the 
courts, nor congressional oversight have tempered the broad 
discretion that agencies have in implementing the RFA. This 
broad discretion enables them to avoid compliance with the 
RFA's underlying analytical requirements. In order to constrain 
this discretion and ensure proper consideration is given to the 
impact that regulatory actions will have on small entities, 
particularly small businesses, it is necessary to make further 
amendments to the RFA as set forth in H.R. 527 which are set 
forth in the next section of this memorandum.

                              IV. Hearings

    In the 112th Congress, the Committee held two hearings on 
H.R. 527. On March 30, 2011, the Committee convened a hearing 
titled ``Reducing Federal Agency Overreach: Modernizing the 
Regulatory Flexibility Act.'' At the hearing, small business 
representatives testified about the continued ongoing problems 
of obtaining adequate analyses under the RFA including 
situations in which court orders mandated compliance. The 
Committee then met on June 15, 2011 to receive testimony from 
outside experts on the bill text at a hearing entitled 
``Lifting the Weight of Regulations: Growing Jobs by Reducing 
Regulatory Burdens.'' The witnesses were consentient in their 
view that H.R. 527, particularly granting the Office of 
Advocacy the authority to issue regulations to implement the 
RFA, would vastly improve agency compliance with the Act.
    In additions to hearings specifically addressing H.R. 527, 
the Committee's subcommittees investigated agency compliance 
with the RFA in the context of hearings on specific rules and 
their impact on small businesses. Those hearings were: ``Green 
Isn't [sic] Always Gold: Are EPA Regulations Stifling Small 
Business (May 12, 2011); ``Do Not Enter: How Proposed Hours of 
Service Trucking Rules are a Dead End for Small Businesses 
(June 14, 2011); and ``Regulatory Injury: How USDA's Proposed 
GIPSA Rule Hurts America's Small Businesses'' (July 7, 2011). 
In each instance, the failure to fully comply with the RFA led 
to the proposal of rules by the agency that could have a 
significant deleterious impact on small businesses if those 
rules were adopted in final form unchanged.
    Modifications to improve the RFA were also considered in 
the 110th Congress when the Committee held a hearing entitled 
``Legislation to Improve the Regulatory Flexibility Act'' 
(December 6, 2007). At that hearing, the Chief Counsel for 
Advocacy and Small Businesses testified that improvements were 
needed to ensure agencies fully considered the impacts of their 
proposed and final rules on small businesses. Subsequent to 
that hearing, the Committee reported out legislation, H.R. 
4458, the Small Business Regulatory Improvement Act, that 
addressed some, but not all, of the matters resolved in H.R. 
527.

                       V. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on July 13, 2011 and ordered H.R. 527 
reported, as amended, to the House by a voice vote at 3:54 p.m. 
During the markup, nine amendments were offered. Four 
amendments were adopted, four were rejected and one amendment 
was withdrawn. Disposition of the amendments is addressed below 
and is based on the order amendments were filed with the Clerk 
of the Committee and not necessarily in the order that they 
were considered at the markup.
    Amendment Number One filed by Mr. Owens (D-NY) requires the 
agencies, in drafting compliance guides to contact small 
businesses. The amendment was adopted by voice vote at 1:20 
p.m.
    Amendment Number Two filed by Mr. Owens (D-NY) requires 
agencies to specify, in their periodic review plans, how they 
will obtain input from small businesses. The amendment was 
adopted by voice vote at 1:21 p.m.
    Amendment Number Three filed by Mr. Schrader (D-OR) 
requires agencies to provide greater detail about the impacts 
on small businesses in their semi-annual regulatory agendas. It 
also requires the agencies to post such material on their 
websites. The amendment was adopted by voice vote at 1:23 p.m.
    Amendment Number Four filed by Ms. Velazquez (D-NY) would 
prohibit the amendments made by H.R. 527 from going into effect 
in any year in which the federal deficit exceeded $500 billion. 
The amendment was not agreed to on a recorded vote of 10 yeas 
to 13 noes at 3:53 p.m.
    Amendment Number Five filed by Ms. Velazquez (D-NY) was a 
substitute limiting the changes to a more a detailed statement 
for regulatory flexibility analyses, requiring agencies to 
consider indirect effects, and making changes to ensure better 
periodic review of rules. The amendment was not agreed to on a 
recorded vote of 9 yeas to 14 noes at 3:54 p.m.
    Amendment Number Six filed by Ms. Velazquez (D-NY) was an 
amendment to require the Chief Counsel to estimate the costs 
incurred in the panels required by Sec. 5 of H.R. 527. The 
amendment was not agreed to on a recorded vote of 10 yeas to 13 
noes at 3:47 p.m.
    Amendment Number Seven filed by Ms. Velazquez (D-NY) would 
have excluded regulations issued by the SBA relating to 
government contracts and loans from coverage of H.R. 527. The 
amendment was not agreed to on a recorded vote of 9 yeas to 14 
noes at 3:40 p.m.
    Amendment Number Eight filed by Mr. Critz (D-PA) requires 
agencies specifically to consider energy costs in the report of 
the panels that will be incorporated into the Federal Register 
notice of a proposed rule. The amendment was agreed to by voice 
vote at 1:35 p.m.
    Amendment Number Nine filed by Mr. Critz (D-PA) would have 
established panels to consider the impacts of free trade 
agreements during the panel process pursuant to Sec. 609 of the 
RFA as amended by Sec. 5 of H.R. 527. The amendment was 
withdrawn at 1:37 p.m.

                          VI. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto.

         Amendment to H.R. 527 Offered by Mr. Owens of New York

  Add at the end of the bill the following:

SEC. 10. AGENCY PREPARATION OF GUIDES.

  Section 212(a)(5) the Small Business Regulatory Enforcement 
Fairness Act of 1996 (5 U.S.C. 601 note) is amended to read as 
follows:
          ``(5) Agency preparation of guides.--The agency 
        shall, in its sole discretion, taking into account the 
        subject matter of the rule and the language of relevant 
        statutes, ensure that the guide is written using 
        sufficiently plain language likely to be understood by 
        affected small entities. Agencies may prepare separate 
        guides covering groups or classes of similarly affected 
        small entities and may cooperate with associations of 
        small entities to distribute such guides. In developing 
        guides, agencies shall solicit input from affected 
        small entities or associations of affected small 
        entities. An agency may prepare guides and apply this 
        section with respect to a rule or a group of related 
        rules.''.

         Amendment to H.R. 527 Offered by Mr. Owens of New York

  Page 20, insert after line 5 the following (and redesignate 
succeeding sections accordingly):

  ``(c) The plan shall include a section that details how an 
agency will conduct outreach to and meaningfully include small 
businesses for the purposes of carrying out this section. The 
agency shall include in this section a plan for how the agency 
will contact small businesses and gather their input on 
existing agency rules''.

        Amendment to H.R. 527 Offered by Mr. Schrader of Oregon

  Page 9, insert after line 15 the following (and redesignate 
succeeding sections accordingly):

SEC. 3. EXPANSION OF REPORT OF REGULATORY AGENDA.

  Section 602 of title 5, United States Code, is amended--
          (1) in subsection (a)--
                  (A) in paragraph (2), by striking ``and'' at 
                the end;
                  (B) by redesignating paragraph (3) as 
                paragraph (4); and
                  (C) by inserting after paragraph (2) the 
                following:
          ``(3) a brief description of the sector of the North 
        American Industrial Classification System that is 
        primarily affected by any rule which the agency expects 
        to propose or promulgate which is likely to have a 
        significant economic impact on a substantial number of 
        small entities; and''.
          (2) in subsection (c), to read as follows:
  ``(c) Each agency shall prominently display a plain language 
summary of the information contained in the regulatory 
flexibility agenda published under subsection (a) on its 
website within 3 days of its publication in the Federal 
Register. The Office of Advocacy of the Small Business 
Administration shall compile and prominently display a plain 
language summary of the regulatory agendas referenced in 
subsection (a) for each agency on its website within 3 days of 
their publication in the Federal Register.''.

       Amendment to H.R. 527 Offered by Ms. Velazquez of New York

  Add, at the end of the bill, the following:

SEC. 10. EFFECTIVE DATE.

  This Act and the amendments made by this Act shall take 
effect on October 1 of the first full fiscal year--
          (1) for which no funding is authorized by law for the 
        Office of Advocacy of the Small Business Administration 
        in an amount exceeding the level of funding for the 
        Office for fiscal year 2011; and
          (2) that follows any fiscal year for which the actual 
        annual Federal budget deficit did not exceed 
        $500,000,000,000.

        
        
       Amendment to H.R. 527 Offered by Ms. Velazquez of New York

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Small Business Regulatory 
Improvement Act of 2011''.

SEC. 2. FINDINGS.

  Congress finds the following:
          (1) Small businesses are frequently the source of new 
        products, methods, and innovations.
          (2) A vibrant and growing small business sector is 
        critical to creating jobs in a dynamic economy.
          (3) Regulations designed for application to large-
        scale entities have been applied uniformly to small 
        businesses and other small entities.
          (4) Uniform Federal regulatory and reporting 
        requirements in many instances have imposed on small 
        businesses and other small entities disproportionately 
        burdensome demands, including legal, accounting, and 
        consulting costs.
          (5) Since 1980, Federal agencies have been required 
        to recognize and take account of the differences in the 
        scale and resources of regulated entities but have 
        failed to do so.
          (6) Alternative regulatory approaches that do not 
        conflict with the stated objectives of the statutes the 
        regulations seek to implement may be available and may 
        minimize the significant economic impact of regulations 
        on small businesses and other small entities.
          (7) Federal agencies have failed to analyze and 
        uncover less costly alternative regulatory approaches, 
        despite the fact that the chapter 6 of title 5, United 
        States Code (commonly known as the Regulatory 
        Flexibility Act), requires them to do so.
          (8) Federal agencies continue to interpret chapter 6 
        of title 5, United States Code, in a manner that 
        permits them to avoid their analytical 
        responsibilities.
          (9) Significant changes are needed in the methods by 
        which Federal agencies develop and analyze regulations, 
        receive input from affected entities, and develop 
        regulatory alternatives that will lessen the burden or 
        maximize the benefits of final rules to small 
        businesses and other small entities.
          (10) It is the intention of the Congress to amend 
        chapter 6 of title 5, United States Code, to ensure 
        that all impacts, including foreseeable indirect 
        effects, of proposed and final rules are considered by 
        agencies during the rulemaking process and that the 
        agencies assess a full range of alternatives that will 
        limit adverse economic consequences or enhance economic 
        benefits.
          (11) Federal agencies should be capable of assessing 
        the impact of proposed and final rules without delaying 
        the regulatory process or impinging on the ability of 
        Federal agencies to fulfill their statutory mandates.

SEC. 3. CLARIFICATION AND EXPANSION OF RULES COVERED BY THE REGULATORY 
                    FLEXIBILITY ACT.

  Section 601 of title 5, United States Code, is amended by 
adding at the end the following new paragraph:
          ``(9) Economic impact.--The term `economic impact' 
        means, with respect to a proposed or final rule--
                  ``(A) any direct economic effect on small 
                entities of such rule; and
                  ``(B) any indirect economic effect on small 
                entities which is reasonably foreseeable and 
                results from such rule (without regard to 
                whether small entities will be directly 
                regulated by the rule).''.

SEC. 4. REQUIREMENTS PROVIDING FOR MORE DETAILED ANALYSES.

  (a) Initial Regulatory Flexibility Analysis.--Subsection (b) 
of section 603 of title 5, United States Code, is amended to 
read as follows:
  ``(b) Each initial regulatory flexibility analysis required 
under this section shall contain a detailed statement 
describing--
          ``(1) the reasons why the action by the agency is 
        being considered;
          ``(2) the objectives of, and legal basis for, the 
        proposed rule;
          ``(3) the type of small entities to which the 
        proposed rule will apply;
          ``(4) the number of small entities to which the 
        proposed rule will apply or why such estimate is not 
        available;
          ``(5) the projected reporting, recordkeeping, and 
        other compliance requirements of the proposed rule, 
        including an estimate of the classes of small entities 
        which will be subject to the requirement, the costs, 
        and the type of professional skills necessary to comply 
        with the rule; and
          ``(6) all relevant Federal rules which may duplicate, 
        overlap, or conflict with the proposed rule, or the 
        reasons why such a description could not be 
        provided.''.
  (b) Final Regulatory Flexibility Analysis.--
          (1) Paragraph (4) of such section is amended by 
        striking ``an explanation'' and inserting ``a detailed 
        explanation''.
          (2) Paragraph (5) of such section is amended to read 
        as follows:
          ``(4) a description of the projected reporting, 
        recordkeeping, and other compliance requirements of the 
        rule, including an estimate of the classes of small 
        entities which will be subject to the requirement, the 
        costs, and the type of professional skills necessary to 
        comply with the rule; and''.
  (c) Certification of No Impact.--Subsection (b) of section 
605 of title 5, United States Code, is amended by inserting 
``detailed'' before ``statement'' both places such term 
appears.

SEC. 5. PERIODIC REVIEW OF RULES.

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

``Sec. 610. Periodic review of rules

  ``(a) Not later than 180 days after the enactment of the 
Small Business Regulatory Improvement Act of 2011, each agency 
shall publish in the Federal Register and place on its website 
a plan for the periodic review of rules issued by the agency 
which the head of the agency determines have a significant 
economic impact on a substantial number of small entities. Such 
determination shall be made without regard to whether the 
agency performed an analysis under section 604. The purpose of 
the review shall be to determine whether such rules should be 
continued without change, or should be amended or rescinded, 
consistent with the stated objectives of applicable statutes, 
to minimize significant economic impacts on a substantial 
number of small entities. Such plan may be amended by the 
agency at any time by publishing the revision in the Federal 
Register and subsequently placing the amended plan on the 
agency's website.
  ``(b) The plan shall provide for the review of all such 
agency rules existing on the date of the enactment of the Small 
Business Regulatory Improvement Act of 2011 within 10 years of 
the date of publication of the plan in the Federal Register and 
for review of rules adopted after the date of enactment of the 
Small Business Regulatory Improvement Act of 2011 within 10 
years after the publication of the final rule in the Federal 
Register. If the head of the agency determines that completion 
of the review of existing rules is not feasible by the 
established date, the head of the agency shall so certify in a 
statement published in the Federal Register and may extend the 
review for not longer than 2 years after publication of notice 
of extension in the Federal Register. Such certification and 
notice shall be sent to the Chief Counsel for Advocacy and the 
Congress.
  ``(c) Each agency shall annually submit a report regarding 
the results of its review pursuant to such plan to the Congress 
and, in the case of agencies other than independent regulatory 
agencies (as defined in section 3502(5) of title 44, United 
States Code) to the Administrator of the Office of Information 
and Regulatory Affairs of the Office of Management and Budget. 
Such report shall include the identification of any rule with 
respect to which the head of the agency made a determination 
described in paragraph (5) or (6) of subsection (d) and a 
detailed explanation of the reasons for such determination.
  ``(d) In reviewing rules under such plan, the agency shall 
consider the following factors:
          ``(1) The continued need for the rule.
          ``(2) The nature of complaints received by the agency 
        from small entities concerning the rule.
          ``(3) Comments by the Regulatory Enforcement 
        Ombudsman and the Chief Counsel for Advocacy.
          ``(4) The complexity of the rule.
          ``(5) The extent to which the rule overlaps, 
        duplicates, or conflicts with other Federal rules and, 
        unless the head of the agency determines it to be 
        infeasible, State and local rules.
          ``(6) The length of time since the rule has been 
        evaluated or the degree to which technology, economic 
        conditions, or other factors have changed in the area 
        affected by the rule.
  ``(e) The agency shall publish in the Federal Register and on 
its website a list of rules to be reviewed pursuant to such 
plan. Such publication shall include a brief description of the 
rule, the reason why the agency determined that it has a 
significant economic impact on a substantial number of small 
entities (without regard to whether it had prepared a final 
regulatory flexibility analysis for the rule), and request 
comments from the public, the Chief Counsel for Advocacy, and 
the Regulatory Enforcement Ombudsman concerning the enforcement 
of the rule.''.

SEC. 6. CHANGES TO THE REGULATORY FLEXIBILITY ACT TO COMPORT WITH 
                    EXECUTIVE ORDER 13272.

  (a) Initial Regulatory Flexibility Analysis.--Section 603 of 
title 5, United States Code, is amended by adding at the end 
the following:
  ``(e) An agency shall notify the Chief Counsel for Advocacy 
of the Small Business Administration of any draft rules that 
may have a significant economic impact on a substantial number 
of small entities either--
          ``(1) when the agency submits a draft rule to the 
        Office of Information and Regulatory Affairs at the 
        Office of Management and Budget, if submission is 
        required; or
          ``(2) if no submission to the Office of Information 
        and Regulatory Affairs is so required, at a reasonable 
        time prior to publication of the rule by the agency.''.
  (b) Inclusion in Final Regulatory Flexibility Analysis of 
Response to Comments on Certification of Proposed Rule.--
Paragraph (2) of section 604(a) of title 5, United States Code, 
is amended by inserting after ``initial regulatory flexibility 
analysis'' the following: ``(or certification of the proposed 
rule under section 605(b))''.



       Amendment to H.R. 527 Offered by Ms. Velazquez of New York

  Page 17, line 12, insert after ``entities.'' the following: 
``Such report shall also include a total cost of conducting the 
panel described in subsection (c)(2) as well as a detailed 
report of the components of that total cost, including expenses 
of officers and employees of the Federal government (at rates 
authorized for such officers and employees under subchapter I 
of chapter 57 of title 5, United States Code) who participate 
in the panel and the rate of salary or basic pay of each 
officer or employee of the Federal government who participates 
in the panel, prorated to account for time of service on the 
panel.''

  Page 17, insert after line 12 the following (and redesignate 
succeeding paragraphs accordingly):
          ``(3) Not later than 60 days after the end of a 
        fiscal year, the Chief Counsel shall submit a 
        consolidated report detailing the total cost of all 
        panels conducted pursuant to subsection (c)(2) in that 
        fiscal year. This report shall include a detailed 
        description of the components of the total cost, 
        including expenses of officers and employees of the 
        Federal government (at rates authorized for such 
        officers and employees under subchapter I of chapter 57 
        of title 5, United States Code) who participate in the 
        panel and the rate of salary or basic pay of each 
        officer or employee of the Federal government who 
        participates in the panel, prorated to account for time 
        of service on the panel.''.
        

        
       Amendment to H.R. 527 Offered by Ms. Velazquez of New York

  Page 3, line 12, insert before the period at the end the 
following:

The amendment made by this subsection shall not apply to a rule 
making by the Administrator of the Small Business 
Administration regarding the contracting, lending, investment, 
or entrepreneurial development programs of the Administrator

  Page 13, insert after line 6 the following:

  (f) Application to Certain Rules.--This section and the 
amendments made by this section shall not apply to a rule 
making by the Administrator of the Small Business 
Administration regarding the contracting, lending, investment, 
or entrepreneurial development programs of the Administrator.

  Page 15, insert after line 3 the following:

  (c) Application to Certain Rules.--This section and the 
amendments made by this section shall not apply to a rule 
making by the Administrator of the Small Business 
Administration regarding the contracting, lending, investment, 
or entrepreneurial development programs of the Administrator.

  Page 18, line 17, insert before the period at the end the 
following:

The amendment made by this section shall not apply to a rule 
making by the Administrator of the Small Business 
Administration regarding the contracting, lending, investment, 
or entrepreneurial development programs of the Administrator



       Amendment to H.R. 527 Offered by Mr. Critz of Pennsylvania

  Page 17, line 9, insert after ``small entities'' the 
following: ``, including an assessment of the proposed rule's 
impact on the cost that small entities pay for energy,''.

       Amendment to H.R. 527 Offered by Mr. Critz of Pennsylvania

  Page 18, insert after line 11 the following (and redesignate 
succeeding subsections accordingly):

  ``(f)(1) If Congress approves a trade agreement under section 
2191 of title 19, United States Code, then the Chief Counsel 
for Advocacy of the Small Business Administration shall--
          ``(A) identify small entities or representatives of 
        small entities or a combination of both for the purpose 
        of obtaining advice, input, and recommendations from 
        those persons about the potential economic impacts of 
        rules implementing or pertaining to such trade 
        agreement; and
          ``(B) convene a review panel consisting of an 
        employee from the Office of Advocacy of the Small 
        Business Administration, an employee from relevant 
        agencies or, if appropriate, an employee from the 
        Office of Information and Regulatory Affairs of the 
        Office of Management and Budget to review the advice, 
        input, and recommendations provided to the Chief 
        Counsel under subparagraph (A).
  ``(2) Not later than 60 days after the review panel described 
in paragraph (1) is convened, the Chief Counsel for Advocacy of 
the Small Business Administration shall, after consultation 
with the members of such panel, submit a report to Congress. 
Such report shall include an assessment of the economic impact 
of rules implementing or pertaining to the trade agreement on 
small entities and a discussion of any alternatives that will 
minimize adverse significant economic impacts or maximize 
beneficial significant economic impacts on small entities.''.

              VII. Section-by-Section Analysis of H.R. 527


Section 1. Short title

    Designates the bill as the ``Regulatory Flexibility 
Improvements Act of 2011.''

Section 2. Clarification and expansion of rules covered by the RFA

    Subsection (a)--Definition of ``Rule''
    The RFA currently defines a rule as one that is issued 
pursuant to the notice and comment provisions of Sec. 553(b) of 
the APA. This definition is unnecessarily restrictive for no 
apparent reason. Fundamentally, a rule is any issuance from an 
agency that does not emanate from an adjudication. Appalachian 
Power Co. v. EPA, 208 F.3d 1015, 1021 n.13 (D.C. Cir. 2000), 
quoting Batterton v. Marshall, 648 F.2d 694, 700 (D.C. Cir. 
1980). The definition of a rule should be consistent, to the 
extent practicable, with the definitions set forth in the APA. 
That will permit courts, for purposes of interpreting the RFA, 
to adopt the interpretations they have developed under the APA. 
See White v. Mercury Marine, 129 F.3d 1428, 1434 (11th Cir. 
1997); Greenwood Trust Co. v. Massachusetts, 971 F.2d 818, 827 
(1st Cir. 1992), cert. denied, 506 U.S. 1052 (1993); Doe v. 
DiGenova, 779 F.2d 74, 82 (D.C. Cir. 1985) (legislative use of 
same term in different sections should be given the same 
meaning and interpretation) Therefore, Sec. 2(a) of H.R. 527 
eliminates the distinction between Sec. 551(4) of the APA and 
Sec. 601(2) of the RFA.
    Section 2(a) of the bill does make one necessary 
distinction between rules as defined under the APA and the RFA. 
The APA definition of a rule includes any rule of particular 
applicability relating to ``rates, wages, corporate or 
financial structures, prices, facilities, appliances, services, 
or allowances therefor or to valuations, costs or accounting, 
or practices relating to such rates, wages, structures, prices, 
appliances, services, or allowances.'' 5 U.S.C. Sec. 551(4). 
The RFA does not apply to any rule that falls within any of the 
aforementioned categories. Id. at Sec. 601(2). Agencies should 
not be delayed in approving the financial structure or the like 
of a specific entity as such rule change clearly could not 
affect a significant number of small entities. In 
contradistinction, the rules for how agencies determine rates, 
wages, or financial structures may have a dramatic impact on 
small entities.\16\ As a result, the appropriate compromise is 
to define a rule that will cover rates, wages, etc. only if the 
rule can be applied to more than one entity. For example, the 
definition of a rule under the Committee's solution would 
include the Federal Communications Commission's (FCC) 
regulations for calculating the rates charged by incumbent 
local exchange carriers for unbundled network elements. A rule 
would not include the application of those standards for 
determining the unbundled network element rates for a 
particular incumbent local exchange carrier. To the extent that 
the determination of the rates are made in a rulemaking, this 
definition ensures that the agency cannot use as an excuse for 
delay the need to comply with the RFA. Furthermore, the 
amendatory language answers in the affirmative the question of 
whether the RFA covers rules of general applicability 
concerning the calculation of rates, wages, etc.
---------------------------------------------------------------------------
    \16\From a purely logical standpoint, the approval of rates, wages, 
etc. for a particular entity looks more like a license as that term is 
defined in the APA. However, the definition of a ``license'' under the 
APA is quite restrictive and approval of various types of corporate 
structures (such as the approval of a initial public offering by the 
Securities and Exchange Commission) does not constitute a license under 
the APA.
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    Subsection (b)--Inclusion of Indirect Effects
    The RFA requires preparation of a regulatory flexibility 
analysis if the agency determines that the rule will have a 
significant economic impact on a substantial number of small 
entities. The original authors of the RFA did not define the 
term ``economic impact'' following the trend in the National 
Environmental Policy Act (NEPA) in which the term ``significant 
effect on the environment'' was left open to interpretation. 
The scope of the economic impacts that should be considered for 
compliance with the RFA has been the subject of much discussion 
and confusion even during the debates on passage. The genesis 
of the confusion stems from comments made by Senator John 
Culver (D-IA) (one of the original authors of the RFA). In the 
section-by-section analysis of the RFA, Senator Culver 
suggested that agencies should assess both indirect and direct 
effects of the proposed regulation. 126 Cong. Rec. 21,458-59 
(1980).
    The issue of indirect effects reappeared when an electric 
cooperative, Mid-Tex, challenged the Federal Energy Regulatory 
Commission's determination to permit the inclusion of 
construction-work-in-progress expenses (CWIP) in the rate base 
for generating utilities. The inclusion of CWIP forced the 
Commission to raise the rates for wholesale power purchased by 
electric cooperatives such as Mid-Tex. The Commission certified 
that the proposed rule would not have a significant economic 
impact on a substantial number of small entities because the 
rule only affected large entities--the generators of electric 
power. The electric cooperatives, in their challenge to the 
regulation, alleged that the Commission should have performed a 
regulatory flexibility analysis on the impact that the decision 
would have on the purchasers of the power. The D.C. Circuit 
disagreed with the cooperatives' interpretation of the RFA's 
legislative history and held that Congressional intent with 
respect to the analysis of indirect effects was ambiguous. The 
court determined, although it did not have to,\17\ that the use 
of indirect effects by Senator Culver meant referred to the 
indirect effects on the entities subject to the regulation not 
the pass-through indirect effects on society in general. Mid-
Tex Elec. Coop. v. FERC, 773 F.2d 327, 342-43 (D.C. Cir. 1985). 
This conclusion has been reaffirmed on a number of occasions by 
the D.C. Circuit, the only circuit that has considered the 
issue.\18\
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    \17\Since the decision to certify a rule was not a justiciable 
claim under the original version of the RFA, the court did not have to 
decide the issue.
    \18\American Trucking Ass'n v. EPA, 175 F.3d 1027, 1044-45 (D.C. 
Cir. 1999), rev'd on other grounds, 531 U.S. 457 (2001); Motor & Equip. 
Mfrs. Ass'n v. Nichols, 142 F.3d 449, 466 (D.C. Cir. 1998); United 
Distr. Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996). Other courts 
also have adopted the D.C. Circuit's interpretation. White Eagle Coop. 
Ass'n v. Conner, 553 F.3d 467, 479-81 (7th Cir. 2009) (producers 
indirectly regulated under milk marketing so not able to bring claim 
under RFA).
---------------------------------------------------------------------------
    By limiting analysis to entities directly regulated, the 
D.C. Circuit's interpretation of the RFA enables federal 
agencies to avoid assessing impacts on small entities for some 
very significant rulemakings. Some examples will elucidate this 
problem.
    The EPA is charged with establishing national ambient air 
quality standards under the Clean Air Act. Once established, 
the Clean Air Act then grants to the states the authority to 
develop plans to meet those standards.\19\ Ambient air quality 
standards can impose significant economic harm on businesses 
that may have to reduce their activities in order to comply 
with the state implementation plan and meet the ambient air 
quality standards. EPA does not comply with the RFA when it 
develops the standards or during the approval of the state 
implementation plans.
    The EPA argues that the RFA does not apply because the 
ambient air quality standards and state implementation plans 
only regulate states which are not small entities under the 
RFA.\20\ Despite this legal legerdemain, a revised ambient air 
quality standard can have a profound impact on the economy and 
one that is totally foreseeable. The EPA identified significant 
economic consequences when it revised its ambient air quality 
standards for nitrogen oxide and particulate matter in the late 
1990s. That regulation underwent substantial economic review, 
including the development of a cost-benefit analysis pursuant 
to Executive Order 12,866. As a result, EPA was required to 
identify the foreseeable costs of imposing stricter ambient air 
quality standards on the nation, including small entities, even 
though the exact scope on specific small entities might vary 
depending based on the state implementation plan. If most of 
the entities are small that must readjust their behavior to 
reduce pollution and they cannot comply, the rule is irrational 
because EPA will not meet its goal of cleaner air. Therefore, 
an analysis of the indirect effects of the ambient air quality 
standards is a critical element in the development of the APA-
mandated rational rule.
---------------------------------------------------------------------------
    \19\If a state does not develop a state implementation plan, the 
EPA is authorized to develop the implementation plan.
    \20\The RFA applies to small businesses, small organizations (not-
for-profits), and small governmental jurisdictions which are defined as 
any governmental entity with a population of less than 50,000. No state 
has less than 50,000 people. Therefore, states are not small 
governmental jurisdictions.
---------------------------------------------------------------------------
    Section 303(d) of the Clean Water, 33 U.S.C. Sec. 1313(d), 
requires states to develop lists of impaired waters, i.e., 
those waters for which effluent limitations on point sources 
(such as factories and publicly-owned treatment facilities) do 
not meet the water quality standards applicable to such body of 
water. The states are then required to establish total maximum 
daily load (TMDL) for each impaired body to bring into 
compliance with the applicable water quality standard. On July 
13, 2000, EPA promulgated new regulations to implement the TMDL 
program. 65 Fed. Reg. 43,585. The EPA certified the final rule 
because it found that the ``rule established requirements 
applicable only to EPA, states, territories, and Indian tribes. 
Thus, EPA is not required to prepare a regulatory flexibility 
analysis.''\21\ Id. at 43,654. EPA reached this conclusion even 
though it found that the changes in the TMDL program would 
result in an annual effect on the economy of more than $100 
million. In its Executive Order 12,866 analysis, EPA estimated 
the cost on various industries for complying with updated TMDLs 
developed by the states. The development and availability of 
this data under the Executive Order belies any notion that 
EPA's rules only affected states. As with the ambient air 
quality standards, the economic consequences were large but 
foreseeable even though the exact impact on specific entities 
was not available. Therefore, EPA could and should have 
developed a regulatory flexibility analysis that assessed the 
impact on small entities.
---------------------------------------------------------------------------
    \21\There are Indian tribes with less populations of less than 
50,000. EPA's conclusion that only large governmental entities were 
being regulated was wrong.
---------------------------------------------------------------------------
    If EPA was the only agency where the issue of direct and 
indirect effects occurred, it would deserve a legislative 
solution given the impact that EPA regulations have on small 
entities.\22\ However, EPA is not the only agency that has 
avoided RFA compliance due to the indirect effects of the 
regulations they promulgate. For example, the Department of 
Agriculture never complied with the RFA when it promulgated 
revised regulations for amending forest management plans even 
though those rules would have significant impact on how the 
national forests would be managed and would affect thousands of 
small businesses and rural local governments. The IRS proposed 
to modify the reporting of non-resident alien interest income 
which could threaten the availability of capital for small 
businesses. The Immigration and Naturalization Service proposed 
reducing the time limit for extensions of visas to foreign 
visitors which, although not directly regulating any small 
businesses, could have a significant adverse impact on small 
businesses that rely on residents of cold climates wintering in 
places such as Florida or Arizona.
---------------------------------------------------------------------------
    \22\Congress recognized the significance of EPA rules on small 
entities in SBREFA by creating a mechanism for those entities to 
provide input into the development of proposed EPA regulations.
---------------------------------------------------------------------------
    To the extent that these rules are significant under 
Executive Order 12,866, the indirect effects would be analyzed 
in the development of a cost-benefit analysis. However, the 
impacts would not be assessed for cost-effectiveness under the 
RFA--a gap that makes no logical sense and undermines the 
ability of agencies to craft rational rules as mandated by the 
APA.
    Given the adverse consequences for small entities of 
indirect effects, it is imperative that agencies consider the 
foreseeable indirect effects of their regulatory actions on 
small entities. The Committee does not find that objections 
raised by the courts and federal agencies--that indirect 
economic effects cannot be measured with any accuracy--valid. 
The RFA, as already noted, was modeled on NEPA, in effect 
forcing agencies to perform an economic impact statement. The 
Committee believes that the parallels between NEPA and the RFA 
should include the scope of the effects examined.
    According to the regulations promulgated by the Council of 
Environmental Quality (CEQ),\23\ the term ``effect'' means:
---------------------------------------------------------------------------
    \23\These regulations are given substantial deference by the 
courts. See Robertson v. Methow Valley Citizens Ass'n, 490 U.S. 332, 
356 (1989); Andrus v. Sierra Club, 442 U.S. 347, 358 (1979). It is 
important to note that the Court gives these regulations substantial 
deference even though CEQ issued the rules pursuant to an Executive 
Order issued by President Carter since NEPA had no statutory 
authorization for CEQ to do anything other than monitor agency 
compliance with NEPA.

          (a) Direct effects, which are caused by the action 
        and occur at the same time and place.
          (b) Indirect effects, which are caused by the action 
        and are later in time or further removed in distance by 
        are still reasonably foreseeable. Indirect effects may 
        include growth inducing effects and other effects 
        related to induced changes in the pattern of land use, 
        population density or growth rate, and related effects 
        on air and water and other natural systems, including 
        ecosystems.

40 C.F.R. Sec. 1508.8. The CEQ regulations go on to state that 
the term ``effects'' includes economic effects whether direct, 
indirect, or cumulative. Id. Agencies have had to comply with 
these regulations for nearly a quarter of century. If federal 
agencies are capable of developing estimates of indirect 
effects of major federal actions for purposes of NEPA, the 
agencies should be capable of developing the same estimates for 
compliance with the RFA. This conclusion is buttressed by the 
fact that major federal actions, for purposes of NEPA, include 
rulemakings. Id. at Sec. 1508.18; see also Cellular Telephone 
Taskforce v. FCC, 205 F.3d 82, 94 (D.C. Cir. 2000), cert. 
denied, 531 U.S. 1070 (2001). Thus, federal agencies already 
are estimating the indirect effects, including economic 
impacts,\24\ of some of their regulations in order to comply 
with NEPA. Given that requirement, the Committee is of the 
opinion that extending the NEPA requirement to the RFA would 
not constitute a hardship that federal agencies contend it 
would be to estimate indirect economic impacts.\25\
---------------------------------------------------------------------------
    \24\CEQ regulations define effects of major federal actions to 
include economic and social impacts. 40 C.F.R. Sec. 1508.8.
    \25\Numerous parties, but especially federal agencies, opined that 
authorizing direct judicial challenges to RFA compliance would be akin 
to cracking open Pandora's jar and prevent federal agencies from 
performing their regulatory functions. As the statistics on estimated 
number of RFA lawsuits demonstrate, the ``sky-is-falling'' clamor from 
federal agencies was nothing more than, as Macbeth might have put it, 
sound and fury signifying nothing. In short, the contentions of federal 
agencies are akin to Getrude's sentiment in Hamlet about ladies doth 
protesting too much.
---------------------------------------------------------------------------
    Section 2(b) adopts a definition of ``economic effect'' 
that parallels the definition of ``effect'' utilized by CEQ in 
its NEPA regulations. The definitions of ``direct'' and 
``indirect'' (especially as it relates to foreseeability of 
economic consequences) effects have the same meaning as that 
developed by CEQ and the courts for interpreting the 
requirements of NEPA.
    Subsection (c)--Rule with Beneficial Effects
    A regulatory flexibility analysis must be prepared whenever 
an agency finds that a proposed or final rule will have a 
significant economic impact on a substantial number of small 
entities. The statute does not limit the economic impacts to 
only adverse consequences although Sec. 604 requires a final 
regulatory flexibility analysis to include a discussion of an 
agency's efforts to minimize the significant economic impacts 
of the final rule but requires no discussion of an agency's 
efforts to maximize beneficial impacts. This limitation on the 
analysis also falls within the parallelism to NEPA which only 
requires agencies to examine alternatives that will mitigate 
adverse environmental consequences.\26\ Thus, agencies have 
interpreted this requirement as obviating the need to perform a 
regulatory flexibility analysis when the impact of a rule will 
be significant but beneficial.
---------------------------------------------------------------------------
    \26\Even though NEPA refers only to mitigation efforts of adverse 
environmental consequences, beneficial impacts on the environment from 
various alternatives of the major federal action are discussed in an 
environmental impact statement. This especially is true when an agency 
prepares an environmental impact statement for regulatory changes that 
have the consequence of lowering the amount of pollutants that can be 
released into the environment. Furthermore, CEQ regulations contemplate 
that a cost-benefit analysis might be relevant to the decisionmaking 
process. 40 C.F.R. Sec. 1502.23.
---------------------------------------------------------------------------
    This interpretation is incorrect, but it is easy to 
comprehend how agencies reached the conclusion based on 
Sec. 604's failure to require a discussion of efforts made to 
maximize beneficial effects. Despite the absence of such a 
mandate, such an analysis would be useful because it forces the 
agency to examine whether it has selected an alternative that 
maximizes the benefits to small entities. If everything is 
ceteris paribus, an agency should select an alternative that 
maximizes any beneficial economic effect on small entities\27\ 
because small entities (except in very unusual circumstances) 
will represent the vast majority of entities subject to a 
particular regulation.\28\
---------------------------------------------------------------------------
    \27\This conclusion is supported by classical welfare economic 
theory which teaches that given the selection of a particular policy 
choice, the one selected should have the greatest ratio of benefits to 
costs. Such a selection constitutes the most efficient resource 
allocation.
    \28\Under definitions utilized by the Small Business 
Administration, small businesses represent more than 95% of the 
businesses in nearly all of the industrial classifications established 
by the North American Industrial Classification System. Similarly, 
there are far more governmental jurisdictions with populations under 
50,000 than those with more than 50,000.
---------------------------------------------------------------------------
    Section 2(c) eliminates this confusion by requiring that 
agencies consider the impact of regulations even if they have a 
beneficial effect. Under this subsection, a regulatory 
flexibility analysis will be performed whenever the economic 
impacts of the proposed or final rule is significant without 
regard to whether the impacts are positive or negative. This 
amendment will require agencies to assess alternatives that 
either mitigate negative economic impacts or enhance positive 
economic effects. Finally, this subsection should be 
interpreted to prevent agencies from certifying proposed or 
final rules when the impacts are significant but beneficial.
    Subsection (d)--Rules Affecting Tribal Organizations
    Under the current definitions in the RFA, small 
governmental jurisdictions are those with populations of less 
than 50,000. The definition typically includes governmental 
bodies whose power is delegated by the state such as 
municipalities, water districts, etc. Given the intent of the 
original legislation to focus on the impact of regulations on 
entities that are creatures of state governments, it is unclear 
whether the term ``governmental jurisdiction'' includes tribal 
organizations. They are sovereign entities that have a special 
relationship with the federal government. Oklahoma Tax Comm'n 
v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 509 
(1991). The federal government regularly imposes various and 
often significant regulatory requirements on tribal 
organizations from those related to the operation of tribal 
organizations to environmental controls. Despite the imposition 
of diverse regulatory requirements on tribal organizations, 
federal agencies fail to perform regulatory flexibility 
analyses on regulations affecting tribal organizations. The 
failure to comply with the RFA is particularly troubling 
because tribal organizations, like many small governments, do 
not have the infrastructure or resources to interpret and 
comply with federal regulatory requirements.
    Given the adverse consequences on tribal organizations from 
the failure to comply with the RFA, section 2(d) adds tribal 
organizations to the list of small governmental entities that 
fall within the ambit of the RFA. Federal agencies would have 
to perform a regulatory flexibility analysis on any proposed or 
final rule if it had significant economic effects on a 
substantial number of small tribal organizations, i.e., one 
with a population of less than 50,000. The term tribal 
organization has the same meaning as that used in Sec. 4(l) of 
the Indian Self-Determination and Education Assistance Act.
    Subsection (e)--Inclusion of Land Management Plans
    The long-standing position of the Office of the Chief 
Counsel for Advocacy has been that land management plans 
developed by the United States Forest Service (Forest Service) 
and the Bureau of Land Management (BLM) are rules that are 
subject to analysis under the RFA.\29\ GAO also reached the 
same conclusion.\30\ Nevertheless, the Forest Service and BLM 
maintain that their resource management plans are not 
rules.\31\ Given the potential consequences on small entities 
(both businesses that rely on the resources of the public lands 
and the communities that border those lands), the Forest 
Service and BLM should assess the impact of these plans on 
small entities under the RFA.\32\
---------------------------------------------------------------------------
    \29\Letter from Acting Chief Counsel for Advocacy Mark Hayward to 
Chief of the Forest Service, F. Dale Robertson at 17 (May 16, 1991) 
(copy of letter available from the Committee's Chief Counsel). In the 
1970s, Congress imposed requirements on BLM and the Forest Service to 
develop plans to guide and control the actions of the agencies in 
managing land under their jurisdiction. See Norton v. Southern Utah 
Wilderness Alliance, 542 U.S. 55, 59 (2004) (describing land planning 
obligations of BLM); Ohio Forestry Ass'n v. Sierra Club, 523 U.S. 726, 
729 (1998) (describing land management plans of Forest Service).
    \30\GAO, Congressional Review Act: Application to the Tongass 
National Forest Land and Resource Plan 2 (1997) (T-OGC-97-54).
    \31\The Forest Service gains some sustenance from the Supreme 
Court's decision in Ohio Forestry Ass'n. In that case, the Court held 
that a challenge to a forest management plan's logging schedule was not 
ripe because the logging set forth in the plan was subject to further 
review and revision, including a site specific analysis. The Court 
contrasted that with the immediacy and impact of a final rule. 523 U.S. 
at 737. Given the fact that the Federal Land Management Policy Act uses 
language very similar to that requiring forest management plans, courts 
would likely use the Supreme Court's decision in Ohio Forestry Ass'n to 
reach a similar conclusion about BLM's land management plans. See text 
accompanying discussion of subsection 2(a), supra. Even though the 
legal consequences may not satisfy the ripeness requirement under 
Article III of the Constitution, forest management plans do guide the 
agency's management of the forests and thus will have economic and 
policy impacts that need to be weighed, including those on small 
businesses and small governmental jurisdictions.
    \32\Both agencies typically develop environmental impact statements 
when making major modifications or developing new land management 
plans. As already noted, CEQ regulations, 40 C.F.R. Sec. 1508.8 
requires agencies to consider economic effects (both direct and 
indirect) in their environmental impact statements. As a result, no 
rational argument exists for concluding that analysis under the RFA 
would delay the development of a new plan or the adoption of a major 
modification to such plan.
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    Section 2(e) of the bill eliminates any questions by 
requiring the Forest Service and BLM to comply with the RFA 
when they are developing changes to resource management plans. 
Compliance is limited to the development of plans and revisions 
or amendments made thereto but only to the extent that the 
revisions or amendments require preparation of an environmental 
impact statement. This limitation is appropriate because minor 
changes to resource management plans that are not considered 
major federal actions and are unlikely to impose a significant 
economic impact on a substantial number of small entities. In 
contradistinction, preparation of environmental impact 
statements demonstrate that the proposed changes to the 
management plan will be significant. Since BLM and the Forest 
Service already will have to collect economic data to prepare 
an adequate environmental impact statement, analysis under the 
RFA will not pose any undue burdens on the agencies. Finally, 
this limitation ensures that BLM and the Forest Service will 
conserve their analytical resources to focus on those plan 
changes that would have the greatest significance to small 
entities.
    Subsection (f)--Inclusion of Certain Interpretative Rules 
of the IRS
    The RFA only applies to those regulations that are required 
to be published pursuant to notice and comment rulemaking by 
either Sec. 553 of the APA or some other statute. Section 553 
of the APA exempts interpretative rules from the notice and 
comment requirements. The Internal Revenue Service (IRS) issues 
numerous regulations but styles them as interpretative. Prior 
to the enactment of the SBREFA, the IRS determined that it was 
not required to comply with the RFA because their regulations 
were interpretative and therefore need not be issued pursuant 
to notice and comment rulemaking.\33\
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    \33\The fact that the IRS voluntarily seeks comment on proposed 
rules does not create a mandate that the agency is required to issue 
the regulations after notice and comment. Cf. Chrysler Corp. v. Brown, 
441 U.S. 281, 306-10 (1979) (noting that agency going beyond 
requirements in statute does not create justiciable right in court).
---------------------------------------------------------------------------
    Congress attempted to rectify the situation with the 
enactment of SBREFA by requiring IRS compliance with the RFA 
for any interpretative rule issued that imposes a collection of 
information requirement on small entities. The IRS has 
interpreted this amendment by limiting its application, not to 
any regulation that imposes a collection of information (a term 
taken directly from the Paperwork Reduction Act), but only on 
those regulations that require taxpayers to complete a new, 
never-used form. At a hearing of the Committee on Small 
Business on May 1, 2003, then Assistant Secretary for Tax 
Policy, the Honorable Pamela F. Olson, testified that the 
Department of Treasury and the IRS do not consider that they 
impose any collection of information requirements; rather 
collection of information requirements, as well as tax burdens, 
are imposed by Congress rather than the agencies.\34\ This has 
been a longstanding position of the Treasury Department and the 
IRS.
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    \34\This position is contradicted by the Service's litigation 
position that its regulations should be given deference that is 
accorded only to those rules for which the agency intended to have the 
force and effect of law, i.e., thereby actually making law. E.g., 
Landmark Legal Foundation v. IRS, 267 F.3d 1132 (D.C. Cir. 2001); Fior 
D'Italia v. United States, 242 F.3d 844 (9th Cir. 2001); Callaway v. 
Commissioner, 231 F.3d 106 (2d Cir. 2000); Snowa v. Commissioner, 123 
F.3d 90 (4th Cir. 1997).
    Commentators have noted that the Internal Revenue Code is replete 
with straightforward delegations requiring the IRS to promulgate 
regulations. J. Coverdale, Court Review of Tax Regulations and Revenue 
Rulings in the Chevron Era, 64 Geo. Wash. L. Rev. 35 (1995). For 
example, Sec. 385 of the Code provides: ``[t]he Secretary is authorized 
to prescribe such regulations as may be necessary . . . to determine 
whether an interest in a corporation is to be treated . . . as stock or 
indebtedness. . . .? In response to a question from then-Chairman 
Donald A. Manzullo (R-IL), Assistant Secretary Olson stated that any 
regulations implementing Sec. 385 were interpretative. However, no one 
would doubt that if a corporation did not follow the regulations 
promulgated pursuant to that section, the Service could find the 
taxpayer to be in violation of the law. Similarly, if the taxpayer 
failed to comply with the regulations adopted by the Secretary 
concerning the time for depositing taxes set forth in regulations 
adopted by the IRS pursuant to Sec. 6302, the taxpayer would find 
itself facing significant penalties. Nevertheless, the IRS maintains 
that the regulations are interpretative despite the fact that the 
Service is exercising its discretion when taxes are to be deposited or 
what constitutes indebtedness.
    The Service's intransigence and aberrant interpretation of the APA 
is further placed in stark relief by comparison to similar statutes. 
For example, Title V, Subtitle A of Gramm-Leach-Bliley provides: [t]he 
Federal Trade Commission [FTC], . . . may prescribe regulations 
clarifying or describing the types of institutions which shall be 
treated as financial institutions for purposes of this subchapter.'' 15 
U.S.C. Sec. 6827(4)(E). This permissive authority enables the FTC to 
include other institutions, including credit reporting agencies, as 
financial institutions, even though they were not enumerated in the 
definitions of financial institutions. This authority is no different 
than the supplementation that the IRS in Sec. Sec. 385 and 6302 found 
to be interpretative. Yet the FTC argued and the court agreed that the 
regulations classifying credit reporting agencies as financial 
institutions were valid legislative regulations with the force and 
effect of law subject to Chevron deference. Individual Services 
Reference Group v. FTC, 145 F. Supp. 2d 6 (D.D.C. 2001). There is no 
rational distinction between the permissive authority in Gramm-Leach 
Bliley and the permissive authority in the Internal Revenue Code. Thus, 
many of the regulations implementing the Code are legislative in nature 
and burdens are imposed by the Service.
    Nevertheless, nothing in H.R. 527 attempts to make a priori 
determinations of what regulations should be considered legislative in 
nature. Nor do the authors of the bill attempt to resolve the murky 
administrative law problem of distinguishing between legislative and 
interpretative rules.
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    The Office of the Chief Counsel for Advocacy has criticized 
that jejune interpretation. The authors of H.R. 527 also 
consider the IRS interpretation to violate the letter and the 
prophylactic intent of SBREFA.\35\ The RFA's definition of the 
term ``collection of information'' is identical to that used in 
the Paperwork Reduction Act. There is no evidence that Congress 
intended the term ``collection of information'' to mean 
something different in the RFA than it does in the Paperwork 
Reduction Act. Cf. Atlantic Cleaners & Dyers v. United States, 
286 U.S. 427, 433 (1932); United States v. Blasini-Lluberas, 
169 F.3d 57, 63 (1st Cir. 1999) (same term in different 
statutes have same meaning unless legislative history 
demonstrates to the contrary). The evidence of identical 
treatment of the term in the two statutes is evidenced by 
Congress incorporating into the RFA the exact definition of the 
term ``collection of information'' as it is used in the 
Paperwork Reduction Act. In addition, it would be illogical to 
assume that Congress did not intend the term ``collection of 
information'' from the two statutes to be coextensive because 
Congress was making a legislative modification designed to 
force IRS compliance with the RFA. Clearly, Congress, given the 
testimony in hearings on RFA compliance and reports of the 
Chief Counsel for Advocacy concerning IRS compliance, that it 
would adopt a definition of the term that authorizes the 
current crabbed interpretation of the term ``collection of 
information.'' Nor do the authors accept the principle that the 
IRS does not itself impose collection of information 
requirements not otherwise specified in statute.
---------------------------------------------------------------------------
    \35\OIRA is charged with interpreting and implementing the 
Paperwork Reduction Act. 44 U.S.C. Sec. 3504. Thus, the IRS is not the 
implementing agency. As such, its interpretation of that Act is not 
entitled to any deference. Professional Reactor Operator Soc'y v. NRC, 
939 F.2d 1047, 1051 (D.C. Cir. 1991).
---------------------------------------------------------------------------
    Of all the agencies that have protested and contested the 
application of the RFA to rulemakings, the IRS remains the most 
recalcitrant. The Service believes that its obligations to 
collect revenue supersede any mandates from Congress that the 
IRS considers interference with its statutory mission. The 
Constitution vested legislative power with Congress not the IRS 
and the Service has no authority to ignore those dictates. 
Hearings before the Committee on Small Business, comments from 
the Office of the Chief Counsel for Advocacy, comments from the 
Office of the Chief Counsel for Advocacy, and directives from 
Presidents Bush and Obama have not changed the intransigent 
position of the IRS or Treasury Department on RFA compliance. 
H.R. 527 represents the congressional response to the obstinacy 
of the IRS.
    Section 2(f) eliminates the IRS interpretation that it need 
only comply with the RFA if it is imposing a new form. The 
subsection also recognizes that the IRS believes that Congress 
is imposing the collection of information requirements. 
Therefore, the bill takes the approach that requires compliance 
with the RFA whenever the Service intends to codify a 
regulation in the Code of Federal Regulations and the 
regulation or statute that the regulation is interpreting 
imposes a collection of information requirement.
    The modifications to Sec. 603 should not be viewed by the 
IRS as limiting its economic analysis simply to the cost 
associated with the ``collection of information.'' Rather, the 
``collection of information'' simply acts as a trigger for the 
broader assessment of economic effects of the proposed and 
final rule. This would include any increases or decreases in 
payment of taxes resulting from the rule.
    The authors of the bill reject out of hand the IRS' 
contention that the true economic effect of its regulations 
stem from the Internal Revenue Code. There are a number of 
instances in which the IRS argues that its regulations are 
substantive and deserve Chevron deference. E.g., Bankers Life 
and Cas. Co. v. United States, 142 F.3d 973, 978 (7th Cir.), 
cert. denied, 525 U.S. 961 (1998) (explicating cases in which 
IRS requested Chevron deference). Since the Supreme Court 
accords Chevron deference only to agency pronouncements which 
are intended to have the force and effect of law in order to 
fill statutory gaps or resolve legislative ambiguities, United 
States v. Mead Corp., 533 U.S. 218, 230-31 (2001), the IRS 
cannot be heard to argue that its regulations are unable to 
create or eliminate the payment of taxes. To give a more recent 
example, the IRS decided to propose a regulation that would 
eliminate an exemption the agency itself created for special 
mobile machinery. 67 Fed. Reg. 38,913 (June 6, 2002). 
Eliminating the exemption would add hundreds of millions of 
dollars in tax burdens to companies not currently paying 
certain excise taxes. For the IRS to argue that the economic 
effects of its regulations stem solely from the strictures of 
Congressional mandates is disingenuous.
    Nor is it likely that compliance with the RFA will slow the 
issuance of IRS regulations. Taking the example of the special 
mobile machinery exemption, the IRS easily could have 
determined the total revenue that the Highway Trust Fund would 
receive from the elimination of the exemption based on the 
aggregate data it obtains when businesses file for excise tax 
rebates (this data also would provide an accurate estimate of 
the revenue impact of excise tax payments for vehicles 
currently exempt). The IRS should not be exempt from this basic 
requirement of rulemaking (understanding the scope of the 
problem and the effect of the proposed solution). Obtaining 
similar aggregate data to comply with the RFA should not slow 
the development of regulations.\36\ In fact, without this data, 
the IRS could not make sensible estimates of the amount of 
revenue gain or loss that would occur with a particular 
regulatory change. The argument that compliance with the RFA 
would slow regulatory development is a red herring and 
certainly is an inadequate rationale for supporting the current 
IRS practice with respect to RFA compliance.
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    \36\To the extent that the IRS needs to promulgate a regulation in 
an emergency situation, it can find good cause to forgo rulemaking and 
issue its regulation without analysis under the RFA. This exemption 
should be used sparingly by the Service because compliance with 
statutory mandates or the agency's own inaction fails to meet the 
``good cause'' exemption in the APA. Buschmann v. Schweiker, 676 F.2d 
352, 357 (9th Cir. 1982); Nat'l Ass'n of Farmworkers Organizations v. 
Marshall, 628 F.2d 604, 622 (D.C. Cir. 1980). In fact, the Ninth 
Circuit has determined that notice and comment rulemaking can be 
conducted in situations in which an agency is required to issue rules 
on a weekly basis; something the IRS does not have to do. Riverbend 
Farms, Inc. v. Madigan, 958 F.2d 1479, 1486-87 (9th Cir.), cert. 
denied, 506 U.S. 999 (1992).
---------------------------------------------------------------------------
    This conclusion is bolstered by the testimony of Frank 
Swain at the Committee's May 1, 2003 hearing on RFA compliance 
by the IRS in the 108th Congress. At that hearing, Mr. Swain 
revealed that the Service had in its possession a study it 
requested from the Federal Highway Administration on the 
economic impact of removing the special mobile machinery 
regulation. The study by the Federal Highway Administration was 
dated 1999 and the IRS did not promulgate a proposed rule on 
eliminating the exemption until the summer of 2002, nearly 
three years later. Thus, the assertion that the completion of 
regulatory analyses will slow the development of regulations 
is, at best, specious.
    The RFA adopted the definitions in the Paperwork Reduction 
Act for the terms ``collection of information'' and 
``recordkeeping requirement.'' Despite the identical nature of 
the definitions in the two pieces of legislation, some 
agencies, particularly the IRS, might argue in court the use of 
the terms in the two statutes have different meanings. See 
Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 433 
(1932) (noting that Congress may use similar terms in different 
statutes to have different meanings).
    The authors of SBREFA, in 1996, always intended that the 
terms utilized in the Paperwork Reduction Act have the same 
meaning as that in the RFA. To eliminate potential confusion, 
Sec. 2(f)(2-3) repeals the definitions in Sec. 601(7-8) and 
simply cross-references to the relevant portions of the 
Paperwork Reduction Act as set forth in title 44 of the United 
States Code. This eliminates any possibility that a court would 
apply a different interpretation to the RFA's use of the terms 
``collection of information'' and ``recordkeeping 
requirement.'' Although used for slightly different 
purposes,\37\ the palliative nature of both statutes, with 
respect to burdens on regulated entities, clearly justifies the 
application of the in pari passu canon of statutory 
construction\38\ to the terms ``collection of information'' and 
``recordkeeping requirement.''
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    \37\In the Paperwork Reduction Act, the terms trigger a mandatory 
review of the paperwork burdens imposed by the government on citizens. 
In the RFA, it triggers a mandatory review of the economic burdens 
imposed by the IRS on small entities. Both statutes, therefore, are 
designed to force agencies to examine ways to reduce burdens on the 
regulated community.
    \38\See Ruckelshaus v. Sierra Club, 463 U.S. 680, 691 (1983) 
(applying in pari passu construction of various federal attorneys fee 
shifting statutes).
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    Subsection (g)--Definition of Small Organization
    As already noted, the RFA covers small entities other than 
small businesses. The RFA defines a small organization as ``any 
not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field. . . .'' 5 U.S.C. 
Sec. 601(4). That definition fundamentally makes no sense 
because there is no rational way to determine a not-for-
profit's independence or economic dominance. The definition 
raises a number of practical questions. For example, on a local 
level, a rural electric cooperative might be considered 
dominant in the sense that it is the only provider of electric 
service in a rural area. However, on a national basis,\39\ is 
the rural electric cooperative dominant? Should the electric 
cooperative be compared with other electric cooperatives or 
with all other businesses in the electric utility industry? 
While some industries may have for-profit analogs, other small 
entities, such as charitable institutions or trade associations 
that can be adversely affected by federal regulations, do not. 
Furthermore, affiliation standards that the SBA uses in its 
size determinations may not be applicable in the not-for-profit 
sector, such as whether a trade association should be 
affiliated, for size determination purposes, with its members 
or whether a charitable institution is independently owned and 
operated by its donors.
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    \39\The Small Business Administrator determines size based on an 
examination of small businesses on a national basis. 13 CFR 
Sec. 121.102(b). H.R. 585 addresses the issue of size determinations 
for purposes of the RFA and other regulatory matters that fall outside 
the scope of the Small Business Act and Small Business Investment Act 
of 1958. That legislation will be discussed in Part III of this 
memorandum.
---------------------------------------------------------------------------
    In a different context, the courts have grappled with the 
notion of independence of not-for-profit entities. The Equal 
Access to Justice Act (EAJA) permits certain small entities to 
recover their legal fees should they prevail in litigation 
against the federal government. EAJA classifies eligible 
parties as one that does not have a net worth in excess of 
$7,000,000 or more than 500 employees. Under EAJA, the question 
then becomes whether an entity requesting attorneys fees from 
the government actually fits within its zone of protection. 
Courts, in trying to answer this question, have wrestled with 
the concept of affiliation by assessing whether the small 
entity is affiliated with larger enterprises in a manner that 
defeats the purpose of the EAJA--ensuring that only small 
entities that do not have the financial wherewithal to sue the 
federal government receive attorneys fees if they prevail in 
litigation.
    One interpretation, adopted by the Sixth Circuit, would 
require complete aggregation of members' net worth and 
employees to determine EAJA eligibility.\40\ The second 
intepretation, proffered by the federal government on a 
frequent basis, is that a trade association should be 
ineligible if any of its members exceed the net worth and 
employee standards.\41\ This interpretation of EAJA has been 
rejected by the D.C., Fifth, and Seventh Circuits.\42\ These 
circuits determined that EAJA eligibility should be calculated 
by looking solely at the organization that brings the 
litigation, its net worth, and number of employees.
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    \40\National Truck Equipment Ass'n v. NHTSA, 972 F.2d 669, 674 (6th 
Cir. 1992).
    \41\See Comment, Corporate Goliaths in the Costume of David: The 
Question of Association Aggregation under the Equal Access to Justice 
Act--Should the Whole Be Greater Than Its Parts? 26 Fla. St. U.L. Rev. 
151 (collecting cases in which federal government argued for 
aggregation).
    \42\National Ass'n of Manufacturers v. DOL, 159 F.3d 597, 602 (D.C. 
Cir. 1998) (discussing circuit split).
---------------------------------------------------------------------------
    Given the prophylactic nature of both the EAJA and the RFA 
with respect to small entities, it would make sense to apply 
the interpretations of the EAJA to the RFA. Thus, one 
definition of ``small organization'' would be to adopt the 
definition of small entity used by the Sixth Circuit. However, 
that approach is incompatible with the purposes of the RFA 
because the capabilities of a small organization to comply with 
regulations is not based on the resources of its members but 
rather on the number of employees and net worth the 
organization controls.\43\ Since the small organization does 
not control or have direct access to the net worth of its 
members, it should be judged solely on its resources and not 
those of its members or donors.
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    \43\While there is some facial appeal to the concept that a small 
organization could seek assistance from its members (probably through 
the payment of higher dues), there is no guarantee that it would be 
able to do so. And even if it did, depending on the makeup of the 
organization, that could impose additional burdens on small businesses 
that might be members of the organization which undercuts the 
palliative purpose of the RFA.
---------------------------------------------------------------------------
    Section 2(g) adopts a two-prong approach to the definition 
of small entity. First, it recognizes that for many not-for-
profit organizations there are small for-profit analogs. If 
there is an existing Small Business Administration size 
standard for a small business, the agency should use that 
definition for small organizations. For example, the size 
standard for electric utilities is one that generates, 
transmits, or distributes annually 4 million megawatt hours and 
a small not-for-profit electric cooperative would be one that 
generates, transmits or distributes annually 4 million megawatt 
hours. If an organization does not have an equivalent size 
standard under Small Business Administration regulations, then 
the size of the entity shall be that under the EAJA--net worth 
of $7,000,000 and not more than 500 employees. Net worth and 
number of employees should be calculated by examining the not-
for-profit organization without aggregating or affiliating the 
net worth or employees of any member or donor.
    Section 2(g) also provides a definition of small labor 
organization since they have unique characteristics that do not 
easily fall into any other category of small organization as 
used in the RFA or H.R. 527. Agencies do not examine the impact 
of their regulations on local chapters of national and 
international labor unions. As with other small organizations, 
local chapters may not be able to rely on the resources of 
their parent organizations for compliance assistance. 
Therefore, Sec. 2(g) deems that a local chapter of a labor 
union shall be a small organization for purposes of compliance 
with the RFA without regard to its affiliation with a national 
or international labor organization. As a result, if the 
Department of Labor imposes a regulation on the operation of a 
labor union, the Department will have to consider its impact on 
these local chapters even if they are considered to be 
affiliated with a national or international union. However, the 
agency need not consider the impact of the regulation on 
individual members of the local labor union since it is the 
entity (not the members) subject to the regulation.\44\
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    \44\Nor would the agency have to consider the indirect effects on 
the individual members since those individual members are not an 
entity, i.e., small business, small non-profit, or small governmental 
jurisdiction.
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    Finally, Sec. 3(g) authorizes an agency to adopt a 
different definition of small organization after the 
opportunity for notice and comment to the extent such different 
definition is appropriate. The subsection also requires 
consultation with the Office of the Chief Counsel for Advocacy. 
Essentially, the process for defining small organizations would 
be identical to that already in the RFA for small businesses 
under Sec.  601(3).

Section 3. Requirements Providing for More Detailed Analyses

    Senator Culver, in developing the concept for the RFA, was 
attempting to mirror the type of in-depth analyses that 
agencies performed under NEPA when assessing the impact of 
major federal actions that would have a significant impact on 
the environment. The language of the two statutes are 
sufficiently parallel to the point that it makes sense to draw 
a conclusion that the RFA creates a requirement for an economic 
impact statement for federal rules that will have a significant 
economic impact on a substantial number of small entities.
    This thesis has been accepted by the courts. In Associated 
Fisheries of Maine v. Daley, 127 F.3d 104 (1st Cir. 1997), 
Judge Selya, writing for the court, stated:

        We think a useful parallel can be drawn between RFA 
        Sec. 604 and the National Environmental Policy Act, 
        which furthers a similar objective by requiring the 
        preparation of an environmental impact statement (EIS). 
        . . . The EIS requirement is meant to inform the agency 
        and the public about potential alternatives prior to a 
        final decision on the fate of a particular project or 
        rule. . . . Recognizing analogous objectives of the two 
        acts. . . .

    Id. at 114. Judge Selya noted that the analogy seemed fair 
since the EIS requires a detailed statement while the RFA only 
requires a statement. The rectitude of Judge Selya's reading by 
D.C. Circuit adoption of the parallelism finding.\45\
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    \45\National Ass'n of Homebuilders v. United States Army Corps of 
Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
---------------------------------------------------------------------------
    NEPA's success in changing agency culture did not occur 
immediately after enactment because agencies were initially 
loath to prepare environmental impact statements and upset 
embedded constituencies that benefitted from various federal 
projects. Activists who disagreed with the need for a 
particular project used NEPA to stop the projects from going 
forward. While the Supreme Court ultimately determined that 
NEPA is not a substantive statute, see Stryckers Bay 
Neighborhood Council v. Karlen, 444 U.S. 223, 227 (1980), the 
litigation losses by the government forced agencies to draft 
better environmental impact statements. The litigation 
reinforced the underlying principle of NEPA that ``important 
effects will not be overlooked or underestimated only to be 
discovered after the resources have been committed or the die 
otherwise cast.'' Robertson v. Methow Valley Citizens Council, 
490 U.S. 332, 348 (1989).
    After a number of hearings before various House and Senate 
Committees, Congress determined that agencies were ignoring 
their responsibilities under the RFA. The solution recommended 
by witnesses and ultimately adopted by Congress was judicial 
review of agency compliance with the RFA. SBREFA was premised 
on the threat of judicial review creating an atmosphere that 
would force agencies to comply with the RFA in the same manner 
and with the same completeness that agencies considered 
environmental impacts to avoid challenges of their compliance 
with NEPA. In other words, the authors of SBREFA expected that 
important economic consequences to small entities would not be 
overlooked prior to an agency's commitment to a specific 
regulatory approach. The end-result is not analysis for 
analysis' sake, but rather more rational rulemaking as dictated 
by the APA.
    The imposition of judicial review has not had the salutary 
effect that Congress expected. While it has been effective in 
forcing agencies to perform regulatory flexibility analyses 
rather than certifications,\46\ the majority of analyses are 
perfunctory. The agencies comply with the bare minimum 
specifications without really addressing the important issues--
impacts on small entities and alternatives to minimize those 
impacts. However, this minimalist effort appears to satisfy the 
standard of demonstrating a reasonable effort to comply. A 
cursory look at a court's analysis of the adequacy of an 
environmental impact statement demonstrates the distinction 
between a statement pursuant to the RFA and detailed statement 
required by NEPA.
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    \46\Courts have found violations of the RFA when an agency 
incorrectly certified a rule rather than preparing a regulatory 
flexibility analysis. E.g., Harland Land Co. v. USDA, 186 F. Supp. 2d 
1076, 1097 (E.D. Cal. 2001); North Carolina Fisheries Ass'n v. Daley, 
16 F. Supp. 2d 647, 652 (E.D. Va. 1997).
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    Judicial review of agency compliance with NEPA is designed 
to ensure that agencies take a ``hard look'' at environmental 
consequences. Robertson, 490 U.S. at 350, citing Kleppe v. 
Sierra Club, 427 U.S. 390, 410 n.21 (1976). In turn, courts 
carefully scrutinize the environmental impact statement to 
determine whether the agency has addressed each element of the 
statement:\47\ the environmental impact of the proposed action; 
any unavoidable adverse environmental consequences should the 
proposed action be implemented; alternatives to the proposed 
action; relationship between short and long-term uses of the 
environment; and commitment of any irreversible and 
irretrievable commitments of resources should the proposal be 
implemented. 42 U.S.C. Sec. 4332(2)(C). Courts do not look at 
the statement as a whole and determine whether the agency made 
a reasonable effort to address the requirements of NEPA. 
Instead, the courts examine, in detail, each requirement to 
determine whether the statement adequately addresses that 
element. E.g., Colorado Env'tl Coalition v. Dombeck, 185 F.3d 
1162, 1171-76 (10th Cir. 1999); City of Carmel-by-the-Sea v. 
United States DOT, 123 F.3d 1142, 1150-60 (9th Cir. 1997). The 
close scrutiny accorded to environmental impact statements by 
the courts then ensures significant consideration of 
environmental consequences.
---------------------------------------------------------------------------
    \47\The review is an offshoot of the requirement that agencies must 
consider all relevant statutory factors in order to satisfy the 
rational decisionmaking standard of the APA. See Citizens to Preserve 
Overton Park v. Volpe, 401 U.S. 402, 418-19 (1971).
---------------------------------------------------------------------------
    There can be little doubt that the reasonableness standard 
is appropriate for judicial review of regulatory flexibility 
analyses. However, the absence of the ``detailed'' statement 
requirement has led courts to provide only a cursory review of 
compliance with the requirements of Sec. 604 of the RFA. The 
limited scope of the review to meet the standard of 
reasonableness has enabled agencies to avoid taking a hard look 
at the economic consequences of their proposed and final rules. 
Carrying the distinction found by Judge Selya in Associated 
Fisheries of Maine, to its logical conclusion suggests that the 
difference in the scrutiny between the two statutes rests on 
the distinction between a ``statement'' and a ``detailed 
statement.''
    Section 3 modifies the requirements for preparing a 
regulatory flexibility analysis in order to ensure that 
agencies will give the same ``hard look'' to economic 
consequences that agencies already give to environmental 
effects pursuant to NEPA. Adoption of this stronger standard 
does not transform the RFA into a decision-forcing statute. 
Once the agency has taken the ``hard look'' at the economic 
consequences of its rulemaking action, application of the 
rational rulemaking standards inherent in the APA would 
strongly suggest that the agency take those consequences into 
account when crafting a final rule. However, nothing in the RFA 
mandates a particular regulatory outcome and nothing in H.R. 
527 changes that abecedarian tenet of the RFA. The agency is at 
liberty to determine that other values outweigh the economic 
burdens imposed on small entities. Cf. Strycker's Bay 
Neighborhood Council, Inc. v. Karlen, 444 U.S. 223, 227-28 
(1980); Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 
519, 558 (1978) (holding that NEPA does not require agency to 
select least environmentally damaging alternative).
    Subsection (a)--IRFAs
    Section 3(a) amends Sec. 603 by requiring the initial 
regulatory flexibility analysis (IRFA) to contain a ``detailed 
statement'' rather than a statement. This should lead agencies 
to prepare IRFAs with the same detail and care that are 
currently required for draft environmental impact statements.
    Currently, an agency, in preparing an IRFA, must provide: 
(1) the rationale for undertaking the proposed rule: (2) a 
succinct statement of the objectives and legal basis for the 
rule; (3) a description and estimate, where practicable, of the 
number of small entities affected by the proposed rule; (4) a 
description of the reporting and recordkeeping requirements 
along with an estimate of the skills needed to comply with such 
requirements; (5) an identification to the extent practicable 
of overlapping or duplicative federal rules. 5 U.S.C. 
Sec. 603(b). In addition to these requirements of subsection 
(b), the IRFA also must contain alternatives that will minimize 
adverse or maximize beneficial effects of the proposed rule. 
Id. at Sec. 603(c).\48\ H.R. 527 makes a number of changes and 
additions to these analytical requirements as will be outlined 
below.
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    \48\Nothing in H.R. 527 affects the requirements in the IRFA under 
Sec. 603(c).
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    H.R. 527 strikes the term ``succinct'' from Sec. 603(b)(2) 
to avoid possible confusion between an overall requirement of a 
detailed statement and the use of a ``succinct'' statement of 
the objectives of the rule. Federal agencies will not have to 
create something new for this statement. Rather, they will be 
able to simply take the summary of the rule that is prepared 
for publication in the Federal Register and add the legal basis 
(if not already incorporated in the summary) and republish it 
in the IRFA.\49\
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    \49\This also comports with the change made by the Small Business 
Jobs Act of 2010 in which the references to the term ``succinct'' were 
deleted from Sec. 604. Pub. L. No. 111-240, Sec. 1601, 124 Stat. 2504, 
2551.
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    Section 603(b)(3) of the RFA currently requires the IRFA 
contain, when feasible, a description and an estimate of the 
number of small entities affected by the proposed rule. This 
requirement provides a substantial loophole for agencies to 
comply with the RFA. The Office of Advocacy calculates that 
there are more than 25 million small businesses in the United 
States based on aggregate data from the IRS. Size standards 
established by the Small Business Administration demonstrate 
that more than 95% of the businesses in each industrial 
classification are small. Thus, most entities subject to any 
regulation are likely to be small. An agency that fails to 
provide a relatively accurate estimate of the number of small 
entities affected by a proposed rule, cannot undertake rational 
rulemaking because the agency has no idea of the scope of the 
affected universe. The failure to provide an accurate estimate 
of the number of small entities affected would be akin to a 
federal agency stating that it has no way to determine the 
environmental consequences of building a dam on a river and 
therefore cannot complete an environmental impact statement. 
Such a rationale would not be accepted by any court and 
agencies should not be able to shirk their duty to understand 
the scope of the regulated universe simply because they might 
have to gather actual data on the number of small entities. As 
a result, Sec. 3(a) strikes the term ``where feasible'' in its 
redraft of Sec. 603(b)(3).\50\
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    \50\An agency might not be able to estimate the number of small 
entities when the agency is preparing a rule that opens up existing 
markets to new entrants or creates a new market. In such circumstances, 
there are no statistics on the number of small entities in that market. 
In such circumstances, it is probable that the agency, in preparing the 
proposed rule, has some sense of the number of potential new entrants 
from discussions with industry. Of course, such estimates will not have 
the precision that an agency should have when proposing a modification 
to an existing rule or imposing a new rule on a well-established 
industry. Nevertheless, an inaccurate estimate (with appropriate 
caveats concerning the lack of precision) is better than no estimate. 
Furthermore, the agency should recognize the lack of confidence in the 
estimate and make a specific request in its notice of proposed 
rulemaking for data on the number of small entities.
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    The current requirement for completion of an IRFA requires 
the agency to identify, to the extent practicable, all relevant 
duplicative, overlapping, and conflicting rules. 5 U.S.C. 
Sec. 603(b)(5). As with the requirement for estimating the 
number of small entities, the proviso ``to the extent 
practicable'' creates a loophole that allows the agency to 
prepare an irrational rule. Two classic examples elucidate the 
problem. The ergonomics standard established by the Department 
of Labor in 2000 (and subsequently overturned by a joint 
resolution pursuant to the Congressional Review Act) mandated 
that businesses develop plans to eliminate musucloskeletal 
disorders. One way to perform this task in skilled nursing 
facilities is to purchase mechanical lifts for patients. 
However, regulations promulgated by the Centers for Medicare 
and Medicaid Services (CMS) permit a patient to reject being 
lifted by mechanical device. Nothing in the final ergonomics 
rule or the final regulatory flexibility analysis (FRFA) 
addresses this potential conflict because the Department of 
Labor never identified the CMS rules as creating a problem. 
Another example involves the requirement for notifying 
communities of underground storage facilities pursuant to 
Sec. 312/313 of the Emergency Planning and Community Right to 
Know Act. EPA required gas stations to notify EPA that they had 
underground storage tanks with gasoline so EPA could provide 
that information to local communities. However, this 
information already was being provided to local fire 
departments under other regulatory regimes. The Office of the 
Chief Counsel for Advocacy had to intervene before EPA 
redressed the duplicative reporting requirement. Had EPA 
actually made the effort to comply with the RFA, it would have 
identified the duplication and avoided promulgation of an 
additional reporting burden on small businesses.
    It is difficult to understand how an agency can draft 
rational rules without knowing how its proposed or final 
regulatory solution will mesh with other existing federal 
requirements imposed by itself or other agencies. While the 
Office of Information and Regulatory Affairs in the Office of 
Management and Budget (OIRA) can play a role in identifying 
these overlaps and conflicts, the primary role must be the 
agency drafting the regulation because it is the agency that 
has the obligation to create a rational rule--not OIRA or the 
Office of Advocacy. Section 3(a) resolves this problem by 
striking the ``extent practicable'' from the existing 
Sec. 603(b)(5). Thus, an agency, in drafting proposed 
regulations, will have to identify duplicative, overlapping, 
and conflicting regulations. Obviously, agencies will need to 
start an interagency dialog in order to identify duplicative, 
overlapping, or inconsistent regulatory requirements. This 
should improve the rationality of agency rulemaking and prevent 
the tunnel-vision (the agency has to promulgate this rule, so 
why concern itself with what other agencies have done) that 
federal regulators currently wear in implementing the 
directives of Congress. The new requirement in the IRFA also 
should assist OIRA in carrying out its regulatory coordination 
function set forth in E.O. 12,866.
    Section 3(a) adds a new requirement for preparation of an 
IRFA. One of the biggest problems that small entities face is 
not the imposition of any one particular regulatory 
requirement; rather it is the accumulation of burdens from many 
regulatory requirements from all federal agencies that can have 
a significant effect on the capital available for small 
businesses to expand their enterprises. Any assessment of the 
impact of a rule on small entities, particularly small 
businesses, cannot be even reasonably accurate without 
understanding how the proposed rule interplays with the already 
extant burden on the entities subject to the regulation. To be 
sure, this assessment will be difficult. Section 3(a) adds a 
new paragraph (6) to Sec. 603(b) that requires an evaluation of 
the cumulative impact or an explanation why such cumulative 
impact is not possible. It is likely that an agency would have 
to inquire with OIRA, the Office of Advocacy and other federal 
agencies to compile the cumulative economic impact data. As 
with other provisions of the RFA, as amended by H.R. 527, 
nothing in the cumulative impact evaluation prevents an agency 
from determining that other factors are more significant than 
the costs imposed on small entities and continuing with the 
rulemaking process. Identification will provide the agency, the 
affected public, and Congress with a better assessment of the 
implementation of statutory mandates. Furthermore, the 
identification may help the agency develop alternatives that 
impose less cumulative impact while still achieving an agency's 
statutory objective.
    While the RFA requires identification of impacts on small 
entities, not all small entities are necessarily equally 
affected by a proposed rule. For example, many of the marketing 
orders established by the United States Department of 
Agriculture (USDA) pursuant to the Agricultural Marketing 
Agreement Act of 1937, 7 U.S.C. Sec. 608c,\51\ will have 
different effects on producers, handlers (essentially 
wholesalers), and processors. Even within one class of growers, 
the regulations implementing marketing orders may have 
disparate impacts between independent growers and those 
associated with agricultural cooperatives. This simply 
represents one example of numerous regulations in which a 
proposed rule might have very different consequences on 
different classes of small businesses. In fact, the Office of 
the Chief Counsel for Advocacy criticized USDA for conflating 
various impacts of its rules on marketing orders to find that 
the proposed rule would not have a significant economic impact 
on a substantial number of small entities even though a class 
of small businesses would be severely harmed. To rectify this 
situation and force agencies to better understand the potential 
consequences of their proposed rules, Sec. 3(a) of H.R. 527 
adds a new paragraph (7) to Sec. 603(b) of the RFA by requiring 
agencies to describe any disproportionate impact on small 
businesses\52\ or a specific class of small businesses.
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    \51\A detailed discussion of marketing orders and the Regulatory 
Flexibility Act can be found in Pineles, Marketing Orders and the 
Administrative Process: Fitting Round Fruit into Square Baskets, 5 San 
Joaquin Ag. L. Rev. 89 (1995).
    \52\The classic example of this situation occurred when the EPA was 
trying to determine whether to control volatile organic chemicals 
associated with filling gasoline tanks in cars. Evaporation of volatile 
organic chemicals from gasoline is a major contributor to ground level 
ozone and smog. There are two primary mechanisms for controlling such 
evaporation--modification of gasoline tanks in cars or by reconfiguring 
the fuel pump to prevent the escape of gasoline vapors as an 
automobile's gas tank is being filled. Modification of the fuel pump 
would disproportionately fall on small businesses while modifying the 
gas tank in cars would fall on big businesses. Although EPA ultimately 
selected the reconfiguration of gasoline station pumps (ergo the reason 
for the rubber hoses on the nozzles of gas pumps), had it needed to 
specifically identify the disproportionate impact on small businesses, 
it might have selected a different regulatory approach.
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    Subsection (b)--FRFAs
    Section 3(b) amends the requirements for completing a FRFA. 
The changes made by the Committee to Sec. 604 ensure the 
development of a detailed statement that forces agencies to 
give a ``hard look'' at the final rule stage to the economic 
consequences of the final rule. The bill adds the term 
``detailed'' to the statement requirement where currently only 
a statement is required.\53\ Use of the detailed statement in 
the preparation of a FRFA does not mandate any particular 
outcome in an agency rulemaking. Rather, it simply assures that 
an agency, the public, Congress, and the courts fully 
understand the scope and impact of a final rule on small 
entities. Furthermore, Sec. 3(b) requires that the same seven 
analytical elements required in the IRFA by the amended 
Sec. 603(b) be incorporated into the FRFA mandated by the 
amended Sec. 604(b).
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    \53\In addition to removing the term ``succinct'' as already noted, 
see note 48, supra, the Small Business Jobs Act of 2010 also removed 
the term ``summary'' from Sec. 604 of the RFA. Pub. L. No. 111-240, 
Sec. 1601, 124 Stat. 2504, 2551.
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    The changes made by Sec. 3(b) also comport with the 
parallelism between the RFA and NEPA as noted by the First and 
D.C. Circuits. The expectation is that the agencies, after the 
regulations issued by the Chief Counsel pursuant to Sec. 4 of 
H.R. 527, and the courts will interpret in the same manner the 
term ``detailed statement'' currently contained in NEPA. The 
FRFA should evidence the agency's hard look at the economic 
consequences of the final rule and provide appropriate grist 
for the mill of judicial review.
    Current law mandates the agency summarize, in the FRFA, the 
comments received in response to an IRFA. While it is true that 
all IRFAs lead to the preparation of a FRFA, not all FRFAs are 
developed in response to an IRFA. An agency may initially 
certify a rule pursuant to Sec. 605(b) and then receive 
sufficient comment that the rule will have a significant 
economic impact on a substantial number of small entities. The 
agency then would prepare a FRFA. However, the agency would be 
under no obligation to summarize the comments that it received 
in response to the certification in the FRFA. This simply 
represents an oversight by the authors of the RFA and SBREFA. 
An adequate FRFA should entail the summarization of comments 
received in response to a certification at the proposed rule 
stage. The process of summarization assists the Congress, the 
courts, and the regulated community in identifying those cost 
considerations that the agency failed to recognize at the 
proposed rule stage. The simple step of making an affirmative 
identification will help agencies perform better cost 
assessments at the initial stage of rulemaking and avoid 
unnecessary delays in the development of a final rule. Section 
3(b) rectifies this problem by requiring the summarization of 
comments on a certification made at the proposed rule stage.
    Current requirements in the RFA mandate federal agencies to 
publish the FRFA in the Federal Register or, in lieu thereof, a 
summary with information specifying where an individual can 
obtain the full analysis. Since the enactment of SBREFA in 
1996, numerous initiatives within the government have utilized 
the explosive growth of the Internet and Internet-based 
communication. Many agencies participate in the general website 
for regulatory matters, www.regulations.gov. Agencies that do 
not participate in that website (many of the independent 
agencies, such as the Commodities Futures Trading Commission or 
the Securities and Exchange Commission) have their own 
electronic interfaces for accepting and publishing regulatory 
material on the web. Continued growth of electronic 
availability of rulemaking documents and dockets is beneficial 
for both small entities and federal agencies. Since the RFA has 
not been amended since the growth of Internet-based rulemaking 
access, Sec. 3(b) updates the publication requirements for the 
FRFA by requiring that it be placed on the agency website. 
Publication on the agency's website and publication of the link 
to a website in the Federal Register notice of the final rule 
does not obviate the obligation that currently exists in the 
RFA to publish the FRFA or summary thereof in the Federal 
Register along with the final rule.\54\
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    \54\H.R. 527 does not address whether publication on 
www.regulations.gov satisfies the requirements of the amended Sec. 604. 
That issue is best left to the regulations that will be developed by 
the Office of the Chief Counsel for Advocacy.
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    Subsection (c)--Cross References to Other Analyses
    In an effort to avoid duplication, federal agencies can use 
other analyses to meet the requirements of the RFA but only if 
that analysis satisfies the requirements of the RFA. For 
example, a federal agency can use an environmental impact 
statement to the extent that analysis assesses alternatives 
which would be less burdensome or more beneficial to small 
entities. See Associated Fisheries of Maine, 127 F.3d at 115. 
Utilization of existing analyses is beneficial by reducing the 
work done by the agencies and the documentation that small 
entities must review during the rulemaking process. 
Unfortunately, agencies fail to provide adequate cross-
references to these other documents. For example, some agencies 
will state in their IRFA or FRFA that alternatives were 
examined to reduce the adverse consequences and a discussion 
can be found in the statement of basis and purpose. Generic 
cross-references then force interested small entities to wade 
through dozens, if not hundreds, of pages in the Federal 
Register or on an agency website to determine whether the IRFA 
or FRFA was adequate. The indefiniteness of the cross-
references is especially problematic at the proposed rule stage 
because the inability to quickly identify alternatives will 
tend to dissuade small entities from filing comments. Section 
3(c) resolves this problem by mandating that agencies make 
sufficiently specific cross-references to other analyses that 
satisfy the requirements of the IRFA or FRFA. The expectation 
is that the specificity must be sufficient so that a small 
entity can turn directly to the part of the cross-referenced 
analysis that addresses the component of the IRFA or FRFA.
    Subsection (d)--Certifications
    The RFA authorizes an agency head or delegatee to certify 
that a proposed rule will not have a significant economic 
impact on a substantial number of small entities. Certification 
obviates the need for preparation of an IRFA or FRFA\55\ in the 
same way that a finding of no significant environmental impact 
(FONSI) eliminates an agency's preparation of an environmental 
impact statement.\56\ After the enactment of the RFA in 1980, 
agencies frequently issued boilerplate certifications that 
merely reiterated the language of Sec. 605(b).\57\ Small 
entities had no way of ascertaining why these certifications 
were issued and courts were prohibited from even examining the 
certification as part of the rulemaking record.\58\
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    \55\Preparation of a certification at the proposed rule stage does 
not foreclose an agency from preparing a FRFA at the final rule stage 
due to comments filed after the proposed rule was published. The change 
in the agency position cannot be considered a failure; rather it 
demonstrates the principle of agency edification by the public inherent 
in the notice and comment process.
    \56\40 C.F.R. Sec. 1508.13; see Grand Canyon Trust v. FAA, 290 F.3d 
339, 342 (D.C. Cir. 2002).
    \57\Chief Counsel for Advocacy, United States Small Business 
Administration, Annual Report of the Chief Counsel for Advocacy on the 
Implementation of the Regulatory Flexibility Act: Calendar Year 1993 
15-16 (1994).
    \58\Lehigh Valley Farmers v. Block, 640 F. Supp. 1497, 1520 (E.D. 
Pa. 1986) (district court determination on RFA was not addressed on 
appeal).
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    Congress attempted to rectify the problem of boilerplate 
certifications with the enactment of SBREFA. Since July 1, 
1996, agencies are required to provide a factual basis for the 
certification. This amendment has not improved agency 
certifications. Many still reiterate the statutory language 
without further exegesis. Some refer back to other material in 
the statement of basis and purpose without identifying the 
cross-referenced material. Still others provide some factual 
basis for the certification. No agency provides the detail in 
its certification that can be found in an environmental 
assessment accompanying a FONSI. Given the fact that the RFA 
parallels NEPA (as already noted), it is appropriate for 
agencies to supply in their certifications, the same detail 
that accompanies an environmental assessment. Furthermore, 
requiring greater specificity and detail in the certification 
will force the agency to develop a better assessment of the 
potential economic effects on small entities before they 
publish a proposed rule. This should lead to improved agency 
decisionmaking.
    Section 3(d) amends Sec. 605(b) by requiring the 
preparation of a detailed statement supporting the 
certification decision. The section also mandates that the 
agency provide the legal rationale for any certification as 
well as a factual basis. This requirement is unfortunately 
necessary because agencies frequently certify proposed and 
final rules based on the inapplicability of the RFA to the 
rulemaking process in the first instance. For example, agencies 
often certify a rule in which the agency has forgone notice and 
comment under the APA. The Committee believes that it is 
appropriate for an agency to explain to the both the small 
entity community and any reviewing court these legal 
conclusions about the basis for its decision.\59\ If the FRFA 
is to be reviewed under the same standard as a final EIS 
prepared pursuant to NEPA, then the logical conclusion to the 
statutes' parallelism is for the certification under the RFA to 
be reviewed by a court under the same scrutiny that it would 
apply to a FONSI under NEPA.
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    \59\Technically, it would be incorrect for the agency to certify a 
rule for which notice and comment is not required because the RFA 
trigger is notice and comment. Nevertheless, many agencies, out of an 
abundance of caution, certify these rules. If they are going to do so, 
then the agencies should be required to explain what they are doing and 
why they are doing it.
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    Subsection (e)--Quantification Requirement
    Section 3(e) modifies the existing requirements in Sec. 607 
of the RFA concerning the quantification of effects on small 
entities. Agencies are required to provide a numerical or 
descriptive analysis of the effects on small entities. Rational 
rulemaking requires an agency to understand the scope of the 
regulated community, the costs currently faced by those 
entities, and the economic consequences of any regulatory 
action. Under Sec. 607, agencies can avoid developing sound 
numerical data and can provide general descriptions, such as 
the regulation will increase costs to small entities. The 
absence of objective numerical data makes it more difficult for 
small entities to assess the significance of any regulatory 
change. Agencies should make every effort to obtain objective 
data supporting a regulatory change including the estimated 
consequences to small entities.\60\ Section 3(e) amends 
Sec. 607 by making quantification of impacts the default in 
developing an assessment of impacts on small entities.
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    \60\The amendment set forth in Sec. 3(e) is further supported by 
the enactment in 2000 of the Data Quality Act and that Act's 
requirement that agencies provide accurate data in all of their 
functions, including rulemaking. The Data Quality Act requires the 
Office of Management and Budget to issue guidelines to all agencies 
ensuring that the soundness of the data they present to the public. 44 
U.S.C. Sec. 3516 note.
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    There may be circumstances in which it is difficult, if not 
impossible, to provide accurate quantification of a rule's 
impact on small entities. For example, if a regulation is 
opening a new market, the agency may not be able to determine 
the universe of potential market entrants. The agency then 
should not be forced to develop highly suspect numerical 
estimates of the impacts.\61\
    New subsection (b) of Sec. 607 of the RFA authorizes 
agencies to provide a more general description of the impacts 
on small entities if quantification is not practicable or 
reliable. The reliability factor in new subsection (b) should 
incorporate the standards of data established by each agency 
pursuant to the Data Quality Act. If an agency determines that 
it is unable to provide a quantification and still meet the 
criteria of the Data Quality Act, the agency shall provide a 
detailed statement explaining why it cannot provide the 
quantification. Ultimately, the quality and accuracy of the 
data will be the subject of regulations drafted by the Office 
of the Chief Counsel for Advocacy.
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    \61\The inaccurate estimates would be subject to challenge under 
the Data Quality Act in any event. If the quantifiable effects are 
sufficiently suspect simply due to the paucity of available data, it 
makes no logical sense for the agency to quantify such effects only to 
have them challenged under the Data Quality Act and adds no benefit to 
an agency's rulemaking, its analyses under the RFA or to the small 
entities.
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Section. 4. Repeal of waiver authority and additional powers of Chief 
        Counsel

    This section repeals the provision in Sec. 608 authorizing 
the head of an agency to waive completion of a FRFA for up to 
180 days if the agency cannot complete the FRFA by the time the 
rule needs to be published. In lieu of that waiver, H.R. 527 
grants additional powers to the Office of the Chief Counsel for 
Advocacy.
            Repeal of Waiver Authority
    The RFA allows an agency to waive the requirements for an 
IRFA and delay for up to 180 days the preparation of a FRFA. 
This provision is unnecessary. Notice and comment rulemaking is 
not required if the agency, for good cause finds it 
impracticable, unnecessary, or contrary to the public interest. 
5 U.S.C. Sec. 553(b)(B). The courts have interpreted this 
provision as authorizing an agency to forgo notice and comment 
rulemaking in true emergencies in which delayed promulgation 
would do real harm.\62\ An agency that establishes good cause 
to forgo notice and comment need not comply with the RFA 
because the analytical requirements are only triggered if the 
rule must be promulgated pursuant to notice and comment 
rulemaking. The conditions under which a waiver would issue 
under Sec. 608 of the RFA also satisfies the impracticable, 
unnecessary, or contrary to the public interest standard of 
Sec. 553(b)(B) of the APA. Since agencies would not be required 
to comply with the RFA under such circumstances no good 
rationale exist to have such a waiver provision.
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    \62\E.g., NRDC v. Evans, 316 F.3d 904, 911 (9th Cir. 2003); Utility 
Solid Waste Activities Group v. EPA, 236 F.3d 749, 754-55 (D.C. Cir. 
2001); Levesque v. Block, 723 F.2d 175, 185 (1st Cir. 1983).
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            Revised Sec. 608--Additional Powers for the Office of the 
                    Chief Counsel for Advocacy
    In two hearings on the Office of Advocacy, the Committee 
received testimony suggesting that the Chief Counsel for 
Advocacy's findings on compliance with the RFA should be 
accorded some type of deference.\63\ The witnesses were 
responding to the D.C. Circuit's decision in American Trucking 
Association v. EPA, 175 F.3d 1027 (D.C. Cir. 1999), rev'd in 
part and aff'd in part, Whitman v. American Trucking Ass'n, 531 
U.S. 457 (2001). In that case, the D.C. Circuit stated: ``[t]he 
SBA, however, neither administers nor has any policymaking role 
under the RFA; at most its role is advisory. . . . Therefore we 
do not defer to the SBA's interpretation of the RFA.'' 175 F.3d 
at 1044, citing Scheduled Airlines Traffic Offices v. 
Department of Defense, 87 F.3d 1356, 1361 (D.C. Cir. 1996).\64\ 
Absent some action by Congress, courts are unlikely to grant 
the Chief Counsel's interpretations of the RFA any deference. 
And if the courts do not do so, it also is highly improbable 
that other federal agencies will do so.
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    \63\Improving and Strengthening the Office of Advocacy: Hearing 
before the Committee on Small Business, United States House of 
Representatives, 107th Cong. 1st Sess. (2001) 11 (statement of Giovanni 
Coratolo); 65 (statement of Deputy Chief Counsel for Advocacy Kay 
Ryan); Improving the Office of Advocacy: Hearing before the Committee 
on Small Business, 106th Cong., 2d Sess. (2000) 12 (statement of James 
Morrison).
    \64\Although the D.C. Circuit referred to the SBA, it clearly meant 
the Chief Counsel for Advocacy.
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    The situation clearly needs to be rectified. Obtaining 
deference of the RFA will substantially change the balance 
between the Chief Counsel and agencies in developing 
regulations. Currently, the Office of Advocacy simply must 
cajole the agencies to make regulatory modifications or 
otherwise revise their certifications or regulatory flexibility 
analyses. The Chief Counsel has little power to coerce changes 
that would be beneficial to small businesses or other small 
entities. However, an Office of Advocacy accorded deference in 
interpreting the RFA can represent, in conjunction with its 
authority to file amicus briefs in court, a substantial power 
to coerce regulatory modifications. If an agency does not 
comply properly with the RFA, the threat of the Chief Counsel 
``intervening'' in court and expressing an opinion, which the 
court will give substantial deference, that the agency did not 
comply with the RFA could lead to a remand of the regulation. 
Therefore, the agency is likely to negotiate changes in RFA 
compliance that might in turn result in subsequent 
modifications to the rule that would reduce burdens on small 
entities.
    One potential option would be to amend the RFA by mandating 
that courts and agencies give substantial deference to the 
views of the Chief Counsel concerning compliance with the RFA. 
This appears to be the tersest solution to the D.C. Circuit's 
dismissal of Advocacy's comments. However, brevity in this 
circumstance is unworkable for a variety of reasons. First, the 
personnel of the Office of the Chief Counsel for Advocacy can 
change at the behest of the President. Each new Chief Counsel 
can adopt different interpretations of the RFA. If that is the 
case, then it is possible that an agency may receive 
inconsistent interpretations of the RFA; in turn, that makes it 
more difficult for the agency to develop a consistent 
methodology for assessing the impact on small entities. 
Furthermore, the courts have held that the level of deference 
afforded an agency is dramatically reduced if the agency is 
constantly changing the interpretation of a statute. Thomas 
Jefferson University v. Shalala, 512 U.S. 504, 515 (1994). And 
the constantly shifting sands of Chief Counsel interpretations 
is not the gravest barrier to achieving deference; the Chief 
Counsel's interpretations still must overcome the standards 
established by the Supreme Court in Chevron USA, Inc. v. NRDC, 
467 U.S. 837 (1984) and United States v. Mead Corp., 533 U.S. 
218 (2001).
    Courts start an analysis of a statute by first determining 
whether Congress spoke explicitly and clearly on the point in 
question. If so, Chevron dictates that the courts go no 
further; interpretations offered by the agency that are 
inconsistent with a clear mandate from Congress receive no 
deference and are invalid. 467 U.S. at 842-43. If the agency 
interpretation is consistent with the clear language of the 
statute, courts must uphold the agency interpretation. Id. This 
is often referred to as ``Chevron Part One'' analysis. The real 
deference accorded the agency comes pursuant to the so-called 
``Chevron Part Two'' analysis. Under that standard, an agency's 
interpretation of an ambiguous statute or statutory lacuna 
filled by the agency is accorded substantial deference if the 
interpretation or gap-filling regulation is rational. Id. In 
essence, as between two equally valid or rational 
interpretations of an ambiguity in a statute, the agency's 
interpretation wins under ``Chevron Part Two.''
    Not all pronouncements from an agency are eligible for 
deference under the ``Chevron Part Two'' test. For the answer 
to that question, one must look to the Court's decision in 
United States v. Mead Corp. According to that case, Chevron 
deference exists not on some inflexible line, but rather on a 
continuum depending on the intent of Congress and the agency's 
procedures for developing the interpretation. 533 U.S. at 227-
31. The keystone for Chevron deference is whether Congress 
``would expect the agency to be able to speak with the force of 
law.'' Id. at 229. The Court noted that ``a very good indicator 
of delegation meriting Chevron treatment in express 
congressional authorizations to engage in the process of 
rulemaking . . . that produces regulations . . . for which 
deference is claimed.'' Id. Since notice and comment rulemaking 
represents a formal administrative procedure to reach an agency 
decision, the Court concluded that it would be logical to 
assume Congress intended the agency pronouncement in such 
circumstances to have the force and effect of law. Id. at 230. 
Thus, regulations arising from notice and comment rulemaking 
would be afforded full Chevron deference.
    Given the state of the caselaw and the objectives of 
empowering the Chief Counsel, the best alternative for ensuring 
the Chief Counsel's interpretation of the RFA would be given 
Chevron deference is to require the Chief Counsel to promulgate 
government-wide rules which all agencies must follow in 
complying with the RFA. This is a well-trodden path followed by 
federal agencies in the implementation of the RFA's parallel 
statute--NEPA. After enactment of NEPA, all federal agencies 
developed their own, often inconsistent approaches, to 
compliance. In 1977, President Carter issued an executive order 
mandating the Council of Environmental Quality (CEQ) to ``issue 
regulations to Federal agencies for the implementation of the 
procedural provisions of the Act [NEPA] (42 U.S.C. 4332(2)).'' 
E.O. No. 11,991 (May 24, 1977), reprinted in 42 Fed. Reg. 
26,967 (1977). Even though Congress, in NEPA, did not delegate 
to CEQ any power to issue regulations,\65\ the regulations 
developed by it are accorded substantial deference by the 
courts. Robertson v. Methow Valley Citizens Ass'n, 490 U.S. 
332, 356 (1990).
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    \65\In fact, the powers and functions of CEQ remarkably parallel 
those of the Office of Advocacy.
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    New Sec. 608(a) provides that the Chief Counsel for 
Advocacy shall promulgate regulations governing agency 
compliance with the RFA. The Chief Counsel should follow the 
pattern established by CEQ--draft baseline regulations that all 
agencies must follow but grant the agencies the authority to 
supplement those regulations to meet their own needs. These 
regulations promulgated by the Chief Counsel must be done 
pursuant to notice and comment rulemaking because it ensures 
adequate participation of all interested parties and comports 
with the Supreme Court's determination in United States v. Mead 
that notice and comment rulemaking assures the agency (in this 
case the Chief Counsel) will be granted Chevron deference.
    The revised Sec. 608 also authorizes federal agencies to 
supplement the Chief Counsel's rules. However, these 
supplemental regulations cannot conflict with the regulations 
promulgated by the Chief Counsel. To ensure the absence of 
conflict, federal agencies wishing to supplement the rules must 
consult with the Chief Counsel in an effort to eliminate 
conflicts but may issue the rules without the approval of the 
Chief Counsel. H.R. 527 could have taken the approach that 
supplemental agency rules could not be adopted unless the Chief 
Counsel approved them. That path represents bad policy for two 
reasons. First, one agency should not have the authority to 
disapprove another agency's regulations; if the delegation of 
power was improper, Congress should act by passing legislation 
modifying the delegation of authority. Second, Chief Counsel 
approval would be an executive branch employee interfering with 
the operation of independent agencies such as the Federal 
Communications Commission, the Nuclear Regulatory Commission, 
and the Federal Trade Commission. Even though these agencies 
must obtain approval of their collection of information 
requests from OIRA, Congress recognized their independence from 
the executive branch by granting them the power to override a 
disapproval by simply majority vote of the commissioners. 44 
U.S.C. Sec. 3507(f)(1). It sets a bad precedent to authorize, 
on an ad hoc basis, an executive branch agency, approving or 
disapproving the actions of an independent collegial body 
regulatory commission.\66\
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    \66\The Supreme Court considers these independent regulatory 
commissions, at least in part, creatures of Congress. Humphrey's 
Executor v. United States, 295 U.S. 602, 628 (1935). Therefore, 
Congress can restrict their independence by requiring them to comply 
with the regulations adopted by the Chief Counsel.
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    New Sec. 608(b) provides the Chief Counsel with the same 
power to intervene in individual agency adjudications that the 
Chief Counsel has to file an amicus brief under Sec. 612 of the 
RFA. There have been instances in which the Chief Counsel 
attempted to intervene in adjudications before federal agencies 
due to the significance of the issues raised by the 
adjudication but was rebuffed because the administrative law 
judge determined that the Chief Counsel was not a proper party 
to the proceeding. This is particularly important because some 
agencies, such as the Agricultural Marketing Service, the 
Federal Energy Regulatory Commission, and the National Labor 
Relations Board make significant policy determinations in 
adjudicatory proceedings. The clear grant of a right to 
intervene will eliminate this problem.
    The section also makes clear that the right to intervene as 
a party in an adjudication does not grant the Chief Counsel the 
authority to appeal any decision by the administrative law 
judge either to another body in the agency (such as an appeal 
to the full Commission) or to federal court. The role of the 
Chief Counsel in adjudicatory proceedings is vital but limited 
to advising the decisionmakers of the significance of the 
issues to small entities rather than as a real party in 
interest. Given these concerns and the possibility that small 
entities might request the assistance of the Chief Counsel in 
an individual adjudication, the better policy is to exclude the 
Chief Counsel from intervening in adjudications in which the 
agency is authorized to impose a fine or penalty. It is the 
expectation that the Chief Counsel will refer to this 
restriction when a small entity requests intervention in an 
individual enforcement proceeding to deny that request. In sum, 
the intervention rights granted in this subsection are not 
designed to allow the small entity to substitute the Chief 
Counsel for adequate retention of private counsel.\67\
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    \67\The Chief Counsel has neither the resources nor the expertise 
to represent private parties in federal administrative enforcement 
proceedings.
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    Amended Sec. 608(c) authorizes the Chief Counsel to file 
comments on any notice of proposed rulemaking without regard to 
whether the notice had been issued pursuant to Sec. 553 of the 
APA. This language ensures the Chief Counsel's role as the 
primary advocate for small entities in federal agency 
decisionmaking and not just on agency compliance with the RFA.

Section 5. Procedures for gathering comments

    SBREFA required two federal agencies, the Occupational 
Safety and Health Administration (OSHA) and the Environmental 
Protection Agency (EPA), to consider, prior to publication of a 
proposed rule in which an IRFA will be prepared, the concerns 
of small entities. Section 609(b) of the RFA establishes the 
procedures for obtaining the input of small entities. The 
procedures require the formation of a panel of federal 
employees, including a representative from the Office of 
Advocacy (the organizer of the panel) who then obtain input on 
the potential economic impacts from selected small entity 
representatives. After receiving the input, the panel submits a 
report to the agency and requires the agency to respond to the 
panel report in the proposed rule. The agency is at liberty to 
modify the proposal according to the recommendations of the 
panel report but is not required to do so.
    The Committee on Small Business received testimony in 
hearings that the panel process needs expansion to other 
federal agencies and requires technical changes to ensure 
optimal participation by small entities. The process 
established in Sec. 609(b) makes a valuable contribution to 
agency understanding of the impacts of its proposals on small 
entities. In fact, during a hearing on the H.R. 2345 (a 
predecessor bill), during the 108th Congress, the Chief Counsel 
for Advocacy, Tom Sullivan, recommended that the process be 
expanded to all agencies. The argument of the Chief Counsel 
(whose employees would have to deal with the SBREFA panels) 
makes sense and H.R. 527 adopts the recommendation to expand 
the SBREFA panel process to all agencies when they are 
proposing a rule that will have a significant economic impact 
on a substantial number of small entities or the proposed rule 
qualifies as a major rule under the Congressional Review Act. 
The SBREFA procedures will increase the value of the 
prepublication input to federal agencies and enhance the 
rationality of the rulemaking process.
    Section 5 modifies the standards for determining which 
proposed rules will be subject to the panel process. Current 
law limits the rules to those for which EPA and OSHA will 
prepare an IRFA. This parameter unnecessarily narrows the 
regulations that should be the subject of a Sec. 609 panel and 
allows the agencies to make a self-interested determination to 
avoid the panel process. A more appropriate standard would be 
any rule for which the covered agencies decide to prepare an 
IRFA or for any rule that a covered agency or OIRA determines 
to be a major rule under standards identical to those found in 
Sec. 804 of the Congressional Review Act. Except in the most 
unusual circumstances (such as a regulation on natural gas 
pipelines or automobile manufacturers), a major rule will 
affect a substantial number of small entities and the agency 
preparing the rule will benefit from small entity input.
    The Committee on Small Business has heard informally from 
the Office of the Chief Counsel for Advocacy that questions 
remain concerning the kind of material made available by the 
covered agencies. Section 5 clarifies that the agency provide 
the Chief Counsel and the employees of that Office all 
materials prepared or utilized in developing the proposed rule 
including a copy of the draft rule. The covered agencies also 
are required to provide information on the impacts, whether 
positive or negative, on small entities. Agencies should be as 
forthcoming with material as possible. To the extent that 
information utilized by the agency is not subject to disclosure 
as proprietary information under the Freedom of Information Act 
(FOIA), appropriate non-disclosure agreements with the Office 
of Advocacy would be appropriate. The Office of Advocacy is an 
executive branch agency within the federal government and 
should be assumed to operate under the same prohibitions 
against the release of predecisional documents or proprietary 
information that apply to all federal agencies under FOIA.
    Special procedures must be applied with respect to rules 
drafted by the IRS. If certain small entities receive the 
actual draft of a proposed tax rule, those entities may be able 
to take advantage of that information in tax planning or 
through business transactions. Clearly, this is a legitimate 
concern and H.R. 527 does not require the IRS provide the exact 
language of any draft proposed rule. For example, the IRS would 
state it is planning to modify the calculation of certain 
depreciable assets but would not be required to provide the 
exact date for the regulation to take effect. However, the IRS 
would be expected to provide sufficient information to enable 
the small entities to make sensible comments to the panel.
    Provision of draft regulations by independent regulatory 
agencies (those collegial body organizations set forth in 44 
U.S.C. Sec. 3502(5)) also raises potential problems. Under 
their organic statutes, these collegial bodies only can take 
action if a majority of the members of the collegial body 
approve the action. The Government in Sunshine Act prohibits 
the members from conducting business except in an open meeting. 
5 U.S.C. Sec. 552b(b). If an agency set forth in 44 U.S.C. 
Sec. 3502(5) was to submit a draft regulation to the Office of 
Advocacy, prior to a meeting, that could be taken as akin to 
the conduct of business not in an open meeting. The importance 
of the Government in Sunshine Act should not be underestimated. 
Therefore, the agencies are not required to submit the draft 
proposed rule to the Office of Advocacy. Under the revised 
Sec. 609, collegial bodies only should submit sufficient 
information so that small entities understand the scope of the 
proposed regulation in order to make their input to the panel 
worthwhile.\68\
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    \68\In many instances rules from these collegial bodies, such as 
the FCC, tend not to have very specific regulatory language. More often 
than not, the proposed rules read more akin to advanced notices of 
proposed rulemaking without even tentative conclusions.
---------------------------------------------------------------------------
    The Committee also recognizes that E.O. 12,866 by its own 
terms does not cover these independent regulatory agencies. 
Since the Supreme Court's decision in Humphrey's Executor v. 
United States, 295 U.S. 602 (1935), these agencies are not 
considered part of the executive branch and their regulatory 
activities are not considered subject to oversight by OIRA. To 
avoid any entanglement between the executive branch and these 
independent regulatory agencies, the panel reports are prepared 
by an employee of the agency and an employee of the Office of 
Advocacy. OIRA employees only will be a part of the panel 
process for those agencies not set forth in 44 U.S.C. 
Sec. 3502(5).
    Disputes have arisen between the Office of Advocacy and 
agencies over the definition of small entity representative. 
The conflict stems from an inconsistency in the drafting of 
Sec. 609(b). The Office of Advocacy is to identify individuals 
representative of small entities for obtaining advice but the 
panel is only required to collect advice and recommendations 
from individual small entity representatives identified by the 
agency after consultation with the Office of Advocacy. For 
example, EPA limits its universe of small entity 
representatives only to actual businesses affected; in 
contrast, the Office of Advocacy is willing to hear from trade 
association executives and lawyers who represent small 
entities.
    The language in Sec. 609 is not a model of clarity and 
requires amendment to ameliorate disputes between the Office of 
Advocacy and other federal agencies that serve on the panel. 
New subsection 609(c) that accords to the Office of Advocacy 
the sole responsibility of selecting the small entity 
representatives. The Office of Advocacy has the greatest 
contact with small entities and is least likely to select 
biased representatives.\69\ The Office of Advocacy should use 
the discretion granted to it in Sec. 609 in a balanced manner 
by finding small entity representatives that can provide 
diverse views on a particular proposed regulation. The 
amendment to Sec. 609 also ends the dispute over the universe 
of potential small entity representative by authorizing the 
Office of Advocacy to select either small entities or their 
representatives for providing advice to the panel. Under this 
language, the Office of Advocacy may select individual small 
entities, lawyers or consultants who represent small entities, 
or officials from trade associations whose members include 
small entities.
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    \69\Federal agencies promulgating regulations would have a bias to 
select small entity representatives, to the extent possible, that would 
support the regulatory position of the agency.
---------------------------------------------------------------------------
    Section 609 currently requires the panel to receive 
recommendations and draft a report that becomes part of the 
rulemaking record. The panel should receive advice and 
recommendations from small entities. The panel should discuss 
these issues but it is inappropriate for a panel to write a 
report conveying the concerns of small entities. H.R. 527's 
rewrite of Sec. 609 adds a new subsection (d) that mandates the 
Chief Counsel for Advocacy to draft the report. In drafting the 
report, the Chief Counsel must consult with the other panel 
members to ensure that the report accurately reflects the views 
of small entities. This change ensures that the Office of 
Advocacy, being an independent voice for small entities, will 
provide a more robust representation of small entity views than 
a report from a panel that includes personnel from the agency 
that crafted the rule and the agency that might review the 
rule--OIRA. Furthermore, the small entities are more likely to 
participate if they know that the Chief Counsel is charged with 
conveying their views to the rulemaking record.
    The panels that currently convened under Sec. 609 are not 
subject to the strictures of the Federal Advisory Committee 
Act. The amendments to that section made by H.R. 527 should not 
be construed as requiring the General Services Administration 
to comply with the Federal Advisory Committee Act.
    New Sec. 609(d) also modifies the contents of the report. 
Currently, the report simply provides a litany of issues raised 
by small entity representatives as filtered by the panel. While 
this information is useful, reasoned decisionmaking, including 
appropriate consideration of all statutory factors (one of 
which is the impact on small entities), requires a report of 
greater detail. A requirement has been added that the report 
contain an assessment of the proposed rule on small entities 
and a discussion of alternatives that will maximize beneficial 
or minimize adverse economic consequences. By requiring this 
information at a preproposal stage, the agency will have the 
opportunity to modify the regulation or amend its IRFA should 
it wish to do so. Furthermore, the inclusion of this report 
early in the rulemaking record will provide small entities with 
a base of ideas upon which to suggest other alternatives during 
the rulemaking process. The inclusion of alternatives also can 
assist the agency in demonstrating to the courts that it 
approached the rulemaking process with an open mind. PLMRS 
Narrowband Corp. v. FCC, 182 F.3d 995, 1002 (D.C. Cir. 1999); 
United Steelworkers of American v. Marshall, 647 F.2d 1189, 
1208 (D.C. Cir. 1980). The report need not be an exhaustive 
peroration of alternatives but should be sufficient to provide 
both the agency and the regulated community with some ideas on 
what alternatives are available. However, the report should 
include alternatives, to the extent possible, that are not 
being considered by the agency in the preparation of its IRFA.
    There may be exceptional circumstances where an agency 
finds it impracticable, unnecessary or contrary to the public 
interest to receive input at the prepoposal stage. New 
Sec. 609(f) creates a procedure by which the agency can seek a 
waiver of the panel process. Waivers only should be granted in 
the same exceptional circumstances similar to those that would 
permit an agency to forgo notice and comment rulemaking 
pursuant to Sec. 553(b)(B) of the APA. For example, EPA may 
need to deal with an imminent public health problem and has 
sufficient time to issue a rule for a brief notice and comment 
period but does not have the lead time to conduct a panel 
process. That would be the type of circumstance in which the 
Chief Counsel might consider a waiver of the panel process.

Section 6. Periodic review of rules

    Section 610 of the RFA mandates that agencies periodically 
review their rules that have a significant economic impact on a 
substantial number of small entities. GAO has done a number of 
studies of agency compliance with Sec. 610 and found compliance 
sorely lacking.\70\ GAO concludes that the problem relates back 
to the threshold determination of whether the regulation will 
have a significant economic impact on a substantial number of 
small entities. While GAO's conclusion is correct, the problems 
with Sec. 610 compliance are far more pervasive and endemic. 
Unfortunately, Sec. 610 was not a paragon of clear statutory 
drafting; the language is easily interpreted in a manner by 
which agencies can avoid compliance. Nevertheless, periodic 
review of regulations is an excellent idea because it forces 
agencies to examine their regulatory structures given changes 
in the marketplace. Rather than trying to correct unclear 
drafting, H.R. 527 completely revises the section through the 
development of procedures that ensure agencies will 
periodically review those regulations which have a significant 
economic impact on small entities.
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    \70\See note 15, supra.
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    When Sec. 610 was first enacted, agencies were required to 
develop plans for periodic review. These plans are now more 
than 30 years old. An investigation by the Committee on Small 
Business in 1997 and 1998 found that many agencies cannot find 
their plans; given the passage of time, it is less likely that 
those plans can be unearthed. Rather than having agencies dig 
through archives for 30 year old plans, revised Sec. 610 
requires the development of new plans for periodic review 
within 180 days after the enactment. In addition to publication 
of the plan in the Federal Register, agencies are required to 
place these plans on their websites.\71\
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    \71\This should not be a substantial burden on agencies since all 
executive branch agencies had to come up with a plan to review all 
existing reviews pursuant to President's Obama's revisions to E.O. 
12,866.
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    The trigger for periodic review in the revision to Sec. 610 
will be whether the agency head determines that the regulation 
has a significant economic impact on a substantial number of 
small entities. The language is written in the present tense 
meaning that the regulation is subject to review if at the time 
of review of the regulation, the rule has a significant 
economic impact on a substantial number of small entities. The 
provision grants the agency appropriate flexibility in 
determining when to conduct periodic review based on current 
circumstances not events that happened a number of years before 
the review. In ensuring that the review occurs based on current 
conditions, language in the amended Sec. 610 makes it explicit 
that the decision for review is independent of whether the 
agency developed a FRFA at the time of the rule's original 
promulgation. Despite the flexibility provided by Sec. 610, 
there is an expectation that the full compliance will with the 
periodic review will be based on the regulations promulgated by 
the Chief Counsel pursuant to the authority of Sec. 608.
    Although the revised Sec. 610 tracks the scope of the 
review currently in the RFA, there were a number of 
modifications designed to make the review more thorough. The 
review now must include comments from the Regulatory 
Enforcement Ombudsman and the Office of Advocacy to ensure that 
the agency receives the most current information on the affect 
of a rule including how agencies may be enforcing (or abusing) 
the regulation. The revision also requires the agency to 
consider the rule's contribution to the cumulative impact of 
federal regulatory burden on small businesses. However, given 
the complexity of such calculation, Sec. 610(d)(6) allows the 
head of the agency to explain why such calculation cannot be 
made and include such statements in the report that the agency 
files pursuant to new Sec. 610(e). These amendments to the 
scope of review also comport with those made to the FRFA under 
Sec. 3 of H.R. 527.
    Periodic review commences from the date of enactment of the 
Act. The plan must provide for review of all regulations in 
force at the time of enactment within ten years of the date of 
enactment. A regulation in effect on enactment may not have a 
significant economic impact on a substantial number of small 
entities and should not be reviewed. However, five years after 
enactment the regulation may have that impact; if the agency 
had not previously reviewed the regulation or made a 
determination that the regulation did not have a significant 
economic impact on a substantial number of small entities after 
publication of the plan of review, the head of the agency would 
determine at the time the regulation came up for review whether 
it should be reviewed. In short, the determination of 
``significance'' and ``substantial'' should be made as close to 
the review date as possible and based on the most current 
information available. Regulations promulgated after enactment 
of the legislation must be reviewed within ten years after the 
publication of the final rule in the Federal Register. Agencies 
are authorized to extend the review process for no more than 2 
years. Agencies have the resources to complete the review 
within 12 years. Unlike the current statute, the agency head 
delaying the review must notify the Chief Counsel for Advocacy 
because of the Chief Counsel's responsibility to monitor agency 
compliance with the RFA.
    A new mandate in Sec. 610 requires the agency to report 
annually on the results of its periodic reviews. The current 
version of Sec. 610 can be interpreted as allowing a review to 
take place without it being memorialized. Submission of a 
report will enable the Office of Advocacy, House and Senate 
Committees, and OIRA to take appropriate action to ensure 
compliance or question the determinations on specific rules. To 
protect the independence of collegial body commissions (such as 
the SEC or CFTC), the agencies identified in Sec. 3502(5) of 
Title 44, United States Code need not submit reports to OIRA.
    Revised subsection 610(e) requires the agency to place on 
its website a list of rules to be reviewed annually as well as 
a brief description of the rule, the agency's preliminary 
determination on why the regulation has a significant economic 
impact on a substantial number of small entities, and a request 
for comments from the public, the Chief Counsel and the 
Regulatory Enforcement Ombudsman. Utilization of the 
Internet\72\ should maximize input from affected small 
entities. The Committee also requires publication of the 
Federal Register and the agency can combine the publication of 
the list of rules for review in conjunction with its semi-
annual agenda in the Federal Register\73\ prior to the start of 
the next calendar year.
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    \72\It would be up to the Office of the Chief Counsel for Advocacy 
to determine how www.regulations.gov fits into the Internet publication 
requirement of Sec. 610.
    \73\Publication of the list in the April or May Federal Register's 
semi-annual agenda would not provide sufficient notice to small 
entities on the rules for which the agency has already commenced review 
since the beginning of the calendar year.
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    Nothing in the changes made by H.R. 527 modifies the 
ability of adversely affected entities to challenge agency 
compliance with the periodic review requirements. Given the 
procedures established in the revised Sec. 610 and the 
regulations to be promulgated by the Chief Counsel pursuant to 
amended Sec. 608, the determination of whether a particular 
regulation should be reviewed is subject to judicial challenge 
and is not committed to agency discretion under Heckler v. 
Chaney, 470 U.S. 821 (1985) and its progeny.

Section 7. Judicial review of compliance with the RFA

    Section 7(a) modifies the current requirement that judicial 
review of the RFA is limited to ``final agency action.'' 
Instead, judicial review will be available when the agency 
publishes the final rule. Section 7(b) modifies the 
jurisdiction of courts by inserting the parenthetical ``or 
which would have such jurisdiction if publication of the final 
rule constituted final agency action.''
    The changes are made due to concerns that certain 
procedural requirements for challenging agency regulations 
could dramatically delay small entity challenges to the agency 
compliance with the RFA. For example, under the Medicare 
program, challenges to CMS regulations must first run the 
gauntlet of the Department of Health and Human Services 
administrative law judges and departmental appeals boards. See 
Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 
(2000).\74\ Similarly, regulations issued to implement 
marketing orders under the Agricultural Marketing Agreement Act 
must go through a statutory exhaustion process before an 
administrative law judge and then the Chief Judicial Officer. 
United States v. Ruzicka, 329 U.S. 287 (1946). These formal 
statutory exhaustion requirements, often the vestiges of 
legislation enacted prior to the APA, are an anachronism in the 
context of informal rulemaking.
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    \74\There are cases in which the courts, after much judicial 
prestidigitation, found that exhaustion was not required. E.g., Furlong 
v. Shalala, 238 F.3d 227 (2d Cir. 2001); American Lithotripsy Soc'y v. 
Thompson, 215 F. Supp. 2d 23 (D.D.C. 2002). However, these court cases 
are not sufficiently definitive with respect to the availability of 
review outside the Departmental appeals process to ensure small entity 
access to federal courts for RFA challenges. Therefore, these cases do 
not militate against making the change to the RFA.
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    These agencies are utilizing a pre-APA decisionmaking 
process to determine if the regulation complied with the APA by 
building a record supplemental to the one developed during the 
rulemaking. These statutory exhaustion requirements enable 
covered agencies to take a second look at its own regulatory 
issuances.\75\ While that process may be beneficial to the 
agency in building a record to demonstrate the rationality of 
their rules, it enables the agencies to cavalierly dismiss the 
requirements of the APA and RFA by ensuring those assessments 
are addressed in a formal adjudication after the regulation is 
promulgated. Due to the cost involved of essentially conducting 
two separate litigations (an adjudication within the agency and 
a challenge at the federal court level), small entities 
generally will be foreclosed from challenging an agency's RFA 
analysis. It certainly takes a courageous small entity to 
absorb the cost of dual litigation in order to get into federal 
court recognizing the likelihood that the original challenge 
before a federal agency will almost certainly favor the federal 
agency.\76\ This severely undermines the rationale used by the 
drafters of SBREFA to mandate judicial review--the threat of a 
relatively quick, unbiased review of agency action in federal 
court would lead to improved compliance with the RFA. If an 
agency can avoid that (due to cost) in order to supplement its 
record ex post facto then the deterrent effect of judicial 
review is negated. Not surprisingly, CMS and the Agricultural 
Marketing Service remain two of the agencies that have had the 
worst record of complying with the RFA. As a result, the 
changes set forth in Sec. 7(a)-(b) ensure access to judicial 
review of challenges to agency compliance with the RFA without 
having to exhaust any post-promulgation internal agency 
adjudication on the underlying rule.
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    \75\The Chief Judicial Officer at the Department of Agriculture 
acts as the Secretary when hearing appeals pursuant to Sec. 15(A) of 
the Agricultural Marketing Agreement Act of 1937. If they Secretary 
thought the rule was irrational, the Secretary should not have issued 
it in the first instance. Upon further reflection, it is highly 
unlikely that the Secretary would find his or her initial decision to 
be irrational.
    \76\For example, the Chief Judicial Officer within the Department 
of Agriculture has, with one exception, never overturned the 
Secretary's regulation implementing a marketing order. And the only 
circumstance in which that was done was to benefit the largest central 
marketing organization of oranges and lemons grown in California (a 
marketing order that no longer exists).
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    The amendments could lead to piecemeal litigation on the 
final rule; judicial review on RFA compliance would then be 
followed at some later date by a challenge to the rationality 
of the rule. However, the response to this contention is the 
Supreme Court's finding that ``procedural rights'' are special, 
Lujan v. Defenders of the Wildlife, 504 U.S. 55, 572 n.7 (1992) 
and someone complaining of an agency's failure to comply with 
NEPA ``may complain of that failure at the time the failure 
takes place for the claim can never get riper.'' Ohio Forestry 
Ass'n, Inc. v. Sierra Club, 523 U.S. 726, 737 (1998). Given the 
parallels between the RFA and NEPA already recognized by the 
courts, then a challenge to agency compliance with the RFA can 
never be riper than it is when the agency promulgates the final 
rule, irrespective of whether the substance of the underlying 
rule requires review through some additional agency 
procedures.\77\ Furthermore, the likelihood of duplicative 
litigation is constrained by the limited number of agencies at 
which further agency appeals are required to challenge a final 
rule. Finally, it is important to note that the agencies that 
can take advantage of this statutory exhaustion process are 
among the worst in complying with the RFA--the Agricultural 
Marketing Service (AMS) and CMS. Therefore, the benefits of 
speeding judicial review of RFA compliance and the need to 
protect the ``special procedural rights inherent in the RFA'' 
outweigh the costs to the federal judiciary of piecemeal 
litigation.
---------------------------------------------------------------------------
    \77\See National Association of Homebuilders v. United States Army 
Corps of Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
---------------------------------------------------------------------------
    The amendments made in Sec. 7(a)-(b) are not intended to 
authorize challenges to either the agency's RFA compliance or 
the underlying regulation prior to the issuance of a final 
rule. Principles of exhaustion of administrative remedies 
remains the most prudent course by allowing the agency to 
correct deficiencies with its RFA compliance in the final rule. 
However, once the agency has had the opportunity to make 
corrections in the final rule, it seems foolhardy to allow the 
agency to get another crack at correcting its RFA compliance 
after issuance of the final rule. The amendment is intended to 
allow federal courts to do what they do best--review agency 
compliance with statutes governing agency decisionmaking. 
Federal courts will not benefit from any supplementation of the 
record because federal courts have nearly 60 years of 
determining compliance with the APA, more than 30 years of 
reviewing environmental impact statements under NEPA, and about 
35 years of ensuring adequate agency release of information 
under the Freedom of Information Act. RFA compliance is no more 
difficult and additional agency adjudication under the 
principle of exhaustion past the final rule simply will be of 
no benefit to the court. Finally, recalcitrant agencies like 
CMS and AMS, rather than risking immediate litigation over RFA 
compliance, will take the initiative, to improve their RFA 
compliance during the rulemaking process.
    Section 7(c) of the bill makes conforming technical 
corrections to Sec. 611. The trigger for any challenge is 
modified from the date of final agency action to publication of 
the final rule.
    Section 7(d) clarifies the Chief Counsel's amicus 
authority. In the past, the Department of Justice has 
challenged the scope of the Chief Counsel's brief on the 
occasions that the Chief Counsel has prepared a brief under 
Sec. 612. In one instance (prior to the enactment of SBREFA), 
the Department of Justice questioned whether the brief could 
address the rationality of the rule and compliance with the 
RFA. The authors of SBREFA attempted to clarify this by 
authorizing the amicus brief to address the adequacy of the 
rulemaking record with respect to small entities. Given the 
changes being made in Sec. 4 of the H.R. 527 concerning the 
promulgation of implementing rules by the Office of Advocacy, 
it is appropriate to specify that the Chief Counsel has the 
authority to address compliance with Sec. Sec. 601, 604, 
605(b), 609, and 610 of the RFA.

Section 8. Jurisdiction of Court of Appeals for challenges to rules 
        implementing RFA

    Section 8 recognizes that certain actions taken by the 
Chief Counsel may adversely affect the rights of small 
entities. The regulations concerning the implementation of the 
RFA, and any subsequent changes to those rules should be 
subject to judicial review by small entities that believe the 
rules do not properly implement the RFA. Any small entity would 
be entitled to challenge the Chief Counsel's decision pursuant 
to the requirements of the Administrative Orders Review Act, 28 
U.S.C. Sec. Sec. 2341-51. Given the importance of these rules 
and their impact on federal rulemaking, a federal appeals court 
appears to be the most appropriate venue for review. In some 
instances, challenges to agency decisions, such as those 
concerning ambient air quality standards under the Clean Air 
Act or licenses for use of spectrum under the Communications 
Act of 1934, as amended, must be brought in the D.C. Circuit. 
It would be inappropriate to force small entities to retain 
counsel and prosecute an appeal solely in the District of 
Columbia. In addition to authorizing challenges to Chief 
Counsel regulations, Sec. 10(b) also makes appropriate 
technical and conforming changes to the RFA and the 
Administrative Orders Review Act.
    As already noted, the Department of Justice has argued that 
limitations should exist on the scope of the amicus brief filed 
by the Chief Counsel. The RFA simply represents one component 
of the necessary considerations for developing a rational rule 
as mandated by the APA. A limitation on the scope of the amicus 
brief would place the Chief Counsel in the odd position of 
arguing that the agency did not comply with the RFA but could 
then not draw the obvious conclusion--the procedural failure 
constitutes a violation of the rational rulemaking mandated by 
the APA. See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Ins. 
Co., 463 U.S. 29, 43 (1983); Citizens to Preserve Overton Park 
v. Volpe, 401 U.S. 402, 418-19 (1971). Furthermore, the 
analysis performed by the agency pursuant to the RFA can 
demonstrate that the rule itself is irrational even if the 
agency complied with the RFA. Thompson v. Clark, 741 F.2d 401, 
405 (D.C. Cir. 1984). The Chief Counsel should not be 
prohibited from reaching conclusions of law concerning the 
rationality of an agency?s rule in an amicus brief. Section 
8(c) clarifies that the Chief Counsel has the authority in its 
amicus briefs to comment on compliance with the rationality of 
the rule as well as the procedures for complying with the APA 
and the RFA.

Section 9. Clerical amendments

    Section 9 contains appropriate clerical amendments needed 
to make the United States Code consistent with the changes made 
by the Committee in H.R. 527.

            VIII. Congressional Budget Office Cost Estimate

    H.R. 527 would amend the RFA to require federal agencies to 
provide more detailed analyses of the impacts of their proposed 
and final rules on small entities, including small businesses. 
The bill also requires federal agencies to seek out the input 
of small entities prior to publication of significant proposed 
rules. Finally, the legislation revises the already extant 
requirement of agencies to review periodically their existing 
regulations.
    Based on information from the Office of the Chief Counsel 
for Advocacy and other agencies, the Congressional Budget 
Office estimates that implementing H.R. 527 would cost $80 
million over the 2012-2016 period subject to appropriation of 
the necessary amounts. Pay-as-you go procedures do not apply to 
this legislation because it would not affect direct spending or 
revenues.
                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 24, 2011.
Hon. Sam Graves,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 527, the 
Regulatory Flexibility Improvements Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 527--Regulatory Flexibility Improvements Act of 2011

    Summary: H.R. 527 would amend the Regulatory Flexibility 
Act (RFA). The bill would expand the number of rules covered by 
the RFA and require agencies to perform additional analysis of 
regulations that affect small businesses. Finally, the 
legislation would provide new authorities to the Small Business 
Administration's (SBA's) Office of Advocacy to intervene in 
agency rulemaking.
    CBO estimates that implementing H.R. 527 would cost $80 
million over the 2012-2016 period to expand the RFA, assuming 
appropriation of the necessary funds. Enacting the bill could 
affect direct spending by agencies not funded through annual 
appropriations; therefore, pay-as-you-go procedures apply. CBO 
estimates, however, that any net increase in spending by those 
agencies would not be significant. Enacting H.R. 527 would not 
affect revenues.
    H.R. 527 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 527 is shown in the following table. 
The costs of this legislation fall within budget functions 370 
(commerce and housing credit), 800 (general government), and 
all budget functions that include agencies that issue 
regulations affecting small businesses.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                                                                          2012-
                                                              2012     2013     2014     2015     2016     2016
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION
 
Estimated Authorization Level.............................       10       15       20       20       20       85
Estimated Outlays.........................................        8       14       18       20       20       80
----------------------------------------------------------------------------------------------------------------

    Basis of Estimate: For this estimate, CBO assumes that the 
legislation will be enacted near the end of fiscal year 2011, 
that the necessary amounts will be appropriated near the start 
of each fiscal year, and that spending will follow historical 
patterns for similar activities.
    CBO is unaware of any comprehensive information on the 
current costs of spending for regulatory activities 
governmentwide. However, according to the Congressional 
Research Service, federal agencies issue 3,000 to 4,000 final 
rules each year. Most are promulgated by the Departments of 
Transportation, Homeland Security, and Commerce, and the 
Environmental Protection Agency (EPA). Agencies that issue the 
most major rules (those with an estimated economic impact on 
the economy of more than $100 million per year) include the 
Department of Health and Human Services, the U.S. Department of 
Agriculture, and EPA.
    H.R. 527 would broaden the definition of a ``rule'' for 
rulemaking purposes to include agency guidance documents and 
policy statements. The bill also would expand the scope of the 
regulatory analysis for proposed and final rules to examine any 
indirect economic effects on small businesses and to provide a 
more detailed analysis of the possible economic consequences of 
the rule to small businesses. The legislation equates indirect 
economic effects with any impact that is reasonably 
foreseeable. The legislation also would require agencies to 
publicly report on the cumulative economic impact of any new 
regulations on the costs of existing regulations to small 
businesses. Implementing H.R. 527 would increase the number of 
agencies that need to prepare regulatory analysis and also 
would increase the role of the SBA's Office of Advocacy and the 
Office of Information and Regulatory Affairs (OIRA) in the 
rulemaking process. Finally, the legislation would require more 
federal agencies to use panels of experts to evaluate 
regulations and to prepare reports on the economic impact of 
proposed regulations on small business.
    Information from OIRA, SBA, and some federal regulatory 
agencies indicates that the new requirements under the bill 
would increase the cost to issue a few hundred of the thousands 
of federal regulations issued annually. Based on that 
information, CBO estimates that requiring the additional 
analysis would increase administrative costs to regulatory 
agencies, the SBA's Office of Advocacy, and OIRA by $20 million 
annually, subject to the availability of appropriated funds. We 
expect that it would take about three years to reach that level 
of effort.
    Under current law and executive orders, all agencies must 
prepare a regulatory analysis prior to issuing a final rule. 
That analysis includes the purpose of the regulatory action, 
the number and types of small businesses to which the rule will 
apply, the projected reporting and compliance costs of the 
rule, and any significant alternatives that would accomplish 
the objectives of the rule while minimizing the economic impact 
on small business and other activities.
    An agency can waive the requirement for a part of the 
regulatory analysis if it can certify that the proposed rule 
will not have a significant economic impact on a substantial 
number of small businesses. If a proposed rule is expected to 
have a significant economic impact, the agency is required to 
notify the Small Business Administration's Office of Advocacy 
and provide it with an opportunity to comment on the rule. In 
addition, EPA, the Occupational Safety and Health 
Administration, and the Consumer Financial Protection Bureau 
are required to convene panels of experts to evaluate any 
proposed regulation that may have a significant economic 
impact. Those panels consist of federal employees from the 
rulemaking agency, the Office of Management and Budget, and SBA 
who work to ensure that small business viewpoints are 
considered prior to the issuance of a final rule. Moreover, 
under current law, agencies are required to periodically review 
the economic impact of existing rules that may have an impact 
on small businesses.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. Enacting H.R. 527 could affect direct spending by 
agencies not funded through annual appropriations; therefore, 
pay-as-you-go procedures apply. CBO estimates, however, that 
any net increase in spending by those agencies would not be 
significant.
    Intergovernmental and private-sector impact: H.R. 527 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On August 24, 2011, CBO transmitted 
a cost estimate for H.R. 527 as ordered reported by the House 
Committee on the Judiciary on July 7, 2011. The pieces of 
legislation are similar, and the CBO cost estimates are the 
same.
    Estimate prepared by: Federal spending: Matthew Pickford; 
Impact on state, local, and tribal governments: Melissa 
Merrell; Impact on the private sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

                         IX. Unfunded Mandates

    H.R. 527 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act, Pub. 
L. No. 104-4, and would impose no costs on state, local or 
tribal governments.

  X. New Budget Authority, Entitlement Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House, the Committee provides the following opinion and 
estimate with respect to new budget authority, entitlement 
authority and tax expenditures.
    The Committee does not adopt as its own the estimate of new 
budget authority contained in the cost estimate prepared by the 
Director of the Congressional Budget Office pursuant to 
Sec. 402 of the Congressional Budget Act of 1974.
    The Committee believes that the cost estimate provided by 
the Congressional Budget Office seriously misconstrues the 
process of writing regulations. As a result, the estimate 
provided by the Congressional Budget Office significantly 
overestimates the cost of complying with the new requirements 
of H.R. 527.
    First, the Congressional Budget Office admits that there 
are no credible studies on the actual cost of writing federal 
regulations. That conclusion is buttressed by a review of 
federal appropriations legislation which does not specifically 
allocate funds to the writing and drafting of regulations.
    Second, the Congressional Budget Office's cost estimate is 
primarily based on the use of prepublication panels in Sec. 5 
of H.R. 527. Under that procedure, all agencies would have to 
prepare a report on recommendations of small businesses on how 
to reduce adverse or increase positive consequences of the 
proposed rule on small businesses and publish such report along 
with the proposed rule in the Federal Register. The main effort 
is the preparation of a report by the Office of the Chief 
Counsel for Advocacy based on input from the agency and small 
business representatives. In short, this process simply 
formalizes the already extant procedures that agencies use to 
obtain input from interested parties as they develop the 
proposed rules. According to all of the plans developed by 
federal agencies in response to E.O. 13,563, each agency has 
procedures designed to obtain input from the public. As part of 
this process, the agencies would be required to focus some of 
this outreach to small businesses or their representatives. The 
Committee does not believe that this type of outreach, which 
already is conducted, adds any cost to the process of writing 
regulations. The other cost is the actual preparation of the 
report by the Office of the Chief Counsel for Advocacy. Since 
the report would lay the basis for any subsequent comments on 
the proposed rule prepared by the Office of the Chief Counsel 
for Advocacy, the preparation of the reports simply would move 
the process to a different point in that Office's normal course 
of business in reviewing regulations published in the Federal 
Register.
    Third, federal agencies would be required to estimate the 
costs of indirect effects of significant rules under H.R. 527. 
While the Congressional Budget Office suggests the fact that 
this will increase costs, the Committee disputes that 
conclusion. Agencies already are required to estimate indirect 
effects for regulations that are subject to the strictures of 
E.O. 12,866. The Committee believes that there will be 
significant overlap between those two sets of rules--thereby 
substantially undermining this portion of the Congressional 
Budget Office estimate for H.R. 527.
    Fourth, in response to E.O. 13,563, agencies (other than 
independent collegial body agencies) published final plans in 
August to establish procedures for reviewing all existing 
federal agency regulations. In response to a question from 
Chairman Graves at a September 21, 2011 hearing on the 
implementation of E.O. 13,563, Administrator Sunstein stated 
that the agencies could conduct the review of all existing 
federal regulations, including outreach to the regulated 
community, under current budget constraints. If agencies are 
capable preparing these plans (which total over 800 pages) and 
do these reviews within existing budgets, there should not be a 
significant cost to comply with the requirements of H.R. 527, 
i.e., the agencies could comply with the new analytical 
requirements within existing budget constraints.
    Fifth, every President since President Carter has drafted 
Executive Orders that impose various analytical requirements, 
whether with respect to rulemaking or compliance with NEPA, on 
federal agencies. In some cases, those requirements are 
significantly greater than that imposed by legislation. For 
example, E.O. 12,866 imposes cost-benefit analysis requirements 
on federal agencies even when federal statutes do not. 
Nevertheless, agencies are able to comply with the requirements 
of these executive orders within existing budgets. If agencies 
are able to comply with Executive Orders that modify agency 
procedural requirements without the expenditure of additional 
funds, the agencies certainly should be able to comply with 
requirements of H.R. 527 without additional outlays.
    Sixth, every President from President Reagan forward has 
ordered agencies to review all agency regulations and eliminate 
unnecessary or costly rules. Clearly this has a significant 
cost to federal agencies. H.R. 527 provides a statutory 
procedure that, if properly enforced, would obviate any need 
for Presidents to issue a mandate to review agency regulations. 
The estimate from the Congressional Budget Office fails to take 
account of this.
    For the foregoing reasons, the Committee does not adopt the 
cost estimate provided by the Congressional Budget Office and 
believes that procedures to draft regulations will be 
incorporated into agency budgets as is current compliance with 
Executive Order 12,866 or Executive Order 13,563. The bill does 
not contain any new entitlement authority, tax expenditures, or 
tax revenue.

                         XI. Oversight Findings

    In accordance with clause (2)(b)(1) of Rule X of the Rules 
of the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 527 are incorporated into the descriptive 
portions of this report.

               XII. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
authority for this legislation in Art. I, Sec. 8, cls. 1, 3, 
and 18; Art. IV, Sec. 3, cl. 2, and the Sixteenth Amendment of 
the Constitution of the United States.

                 XIII. Congressional Accountability Act

    H.R. 527 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

             XIV. Federal Advisory Committee Act Statement

    H.R. 527 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App. 2.

                      XV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 527 does not contain 
any congressional earmarks, limited tax benefits or limited 
tariff benefits as defined in subsections (e), (f) or (g) of 
clause 9 of rule XXI of the Rules of the House.

                 XVI. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House, the Committee establishes the following performance 
related goals and objectives for this legislation:

          H.R. 527 includes a number of provisions designed to 
        strengthen agency compliance with the Regulatory 
        Flexibility Act, reduce confusion among agencies 
        concerning compliance with the Regulatory Flexibility 
        Act and streamline determinations associated with size 
        standards for the purposes of statutes other than the 
        Small Business Act and Small Business Investment Act of 
        1958.

                         XVII. Dissenting Views

      H.R. 527--THE REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011

Background

    In 1980, Congress enacted the Regulatory Flexibility Act 
(RFA) to respond to concerns that the uniform application of 
federal regulations imposed disproportionate burdens on small 
firms. In order to minimize the burden of regulations on small 
businesses, the RFA mandates that federal agencies consider the 
potential economic impact of federal regulations on small 
entities. Federal agencies accomplish this goal by analyzing 
regulations for their impact on small businesses. In addition 
to these requirements, select agencies provide further outreach 
to small firms by conducting small business advocacy reviews 
(SBAR) panels.\1\ The results of these interventions are used 
to tailor regulations in a manner that results in lower 
compliance costs for small firms.
---------------------------------------------------------------------------
    \1\Agencies subject to the panel process include the Environmental 
Protection Agency, the Occupational Safety and Health Administration, 
and the Consumer Financial Protection Bureau.
---------------------------------------------------------------------------
    By many measures, the efforts taken under the RFA have been 
very successful. During FY 2010, the Office of Advocacy claims 
that efforts undertaken through the RFA yield nearly $15 
billion in foregone regulatory costs for small businesses.\2\ 
Such results included regulatory savings across a wide-range of 
agencies including the Environmental Protection Agency, the 
Federal Aviation Administration, the Federal Acquisition 
Regulation Council, the Securities and Exchange Commission, and 
the Small Business Administration. It is notable that 
significant savings were achieved at a considerable number of 
agencies that are not subject to the SBAR panel process.
---------------------------------------------------------------------------
    \2\Office of Advocacy, U.S. Small Business Administration, ``Report 
on the Regulatory Flexibility Act for FY 2010'' (Washington, D.C., 
February 2011), 5.
---------------------------------------------------------------------------
    While the success of RFA is indisputable, small businesses 
have requested additional relief from federal regulations. As a 
result, the committee passed legislation in the 110th Congress 
which strengthened the RFA.\3\ While H.R. 527 incorporates the 
fundamental provisions of this prior legislation, it adds 
sweeping new powers to the Office of Advocacy, imposes 
substantial requirements across all federal agencies, and does 
so at significant cost to the taxpayer.
---------------------------------------------------------------------------
    \3\H.R. 4458, the Small Business Regulatory Improvement Act (110th 
Congress).

---------------------------------------------------------------------------
Impact of Legislation

    This legislation makes unequivocally sweeping changes to 
the RFA and its implementation. Among the most notable 
modifications are greatly expanding the powers of the SBA's 
Office of Advocacy and imposing costly new requirements on 
agencies. The legislation fails to authorize any new funding 
for these new requirements and it is unlikely that Advocacy's 
current budget of $9 million and staffing level of 46 employees 
will be sufficient to administer the additional 
responsibilities.
            Ignores substantial costs
    Although during the markup of H.R. 527 proponents stated 
that the legislation would incur no additional costs, committee 
Democrats disagree. While the CBO estimated a five-year $80 
million cost for the implementation of H.R. 527,\4\ committee 
Democrats performed a separate cost analysis of the 
legislation. The rationale for doing so was that CBO's own cost 
estimate for H.R. 4458 from the 110th Congress was greater than 
that for H.R. 527, while the scope of H.R. 4458 was actually 
more limited than H.R. 527. Based on analysis of prior 
Congressional Budget Office (CBO) cost estimates\5\ and of 
official correspondence with the Office of Advocacy,\6\ 
committee Democrats find that this legislation would actually 
cost $291,250,000 over a five-year window or approximately $58 
million per year.
---------------------------------------------------------------------------
    \4\Congressional Budget Office, Cost Estimate for H.R. 527, August 
24, 2011.
    \5\Congressional Budget Office, Cost Estimate for H.R. 1882, May 
28, 1999 and Cost Estimate for H.R. 4458, February 6, 2008.
    \6\Letter to Ranking Member Velazquez from Thomas M. Sullivan Chief 
Counsel of the Office of Advocacy, detailing the costs of expanding the 
SBAR panel process, dated May 18, 2004.
---------------------------------------------------------------------------
    In developing this analysis, staff used the CB0 cost 
estimates for H.R. 4458 (2007, 110th Congress) and H.R. 1882 
(1999, 106th Congress). Similar to H.R. 527, H.R. 4458 included 
provisions requiring more detailed regulatory flexibility 
analyses, strengthening the section 610 periodic review 
process, and requiring agencies to consider indirect effects in 
their analyses. CB0 determined that these provisions in H.R. 
4458, which H.R. 527 also contains, would cost $20 million per 
year or $100 million over the five-year period. Other major 
drivers of the cost estimate were the provisions of H.R. 527 
that would subject Internal Revenue Service (IRS) 
interpretative rules and land management plans of the Bureau of 
Land Management and the U.S. Forest Service to the RFA. In 
addition, H.R. 527 subjects rules pertaining to tribal 
organizations to the RFA and requires agencies to consider 
rules that have beneficial effects. It is estimated that these 
provisions would cost approximately $5.5 million per year to 
implement.
    The largest portion of costs pertaining to H.R. 527 emanate 
from the expansion of the SBAR panel process. In 1999, the 
committee reported H.R. 1882 which subjected the IRS to the 
SBAR panel process. The CBO estimated this cost at 
approximately $1.5 million per year, while the additional costs 
due to changes in the panel process would cost $0.5 million per 
year, for a total cost of $2 million per year. Based on this 
estimate, as well as information contained in official 
correspondence to the committee, these figures were 
extrapolated to the approximately 55 additional agencies that 
would be subject to the SBAR panel process under H.R. 527.\7\ 
Within these 55 agencies, 5 were considered to have the highest 
costs of $1.5 million per year, which would be on par with the 
IRS SBAR panel cost estimate in H.R. 1882. Ten agencies were 
considered to have the next highest costs of $1 million per 
year; twenty to have costs of $0.5 million per year; and the 
final twenty to have costs of $0.25 million per year. Based on 
this analysis, the expansion of the panel process alone would 
cost $32.5 million per year.
---------------------------------------------------------------------------
    \7\The number of additional agencies that would be subject to the 
SBAR panel process under H.R. 527 is between 50 and 70. This number 
could fluctuate depending on whether a particular agency located within 
a Cabinet Department will convene a panel at the agency-level or 
departmental-level. To be conservative, this analysis uses a number at 
the lower end of this range.
---------------------------------------------------------------------------
    While such changes could provide additional cost savings to 
small businesses, this benefit has not been quantified. 
Instead, the committee has only heard anecdotal testimony. 
Given this, it is unclear that the nearly $60 million annual 
cost of implementing H.R. 527 will yield any additional saving 
for small businesses. As a result, it may only add to the 
deficit, without any real benefit form small firms.
    Ranking Member Velazquez offered three amendments that 
would have addressed the costly nature of H.R. 527. A 
substitute was offered and defeated by a vote of 9 to 14 that 
was based on H.R. 4458 from the 110th, which would have 
provided meaningful relief to small businesses at a lower cost 
to taxpayers. An amendment was also offered that would have 
required the Office of Advocacy to report on the costs of the 
SBAR panel process. This was defeated by a vote of 10 to 13. 
Finally, an amendment was offered that would have permitted the 
legislation to be implemented only if it had no cost and if the 
federal deficit was less than half a trillion dollars in the 
prior year. Given the insistence by the legislation's 
proponents that H.R. 527 would have no cost, it was surprising 
that this amendment was defeated by a vote of 10 to 13.
            Delays issuance of important regulations
    Taken together, the changes included in H.R. 527 will 
create delays for agencies issuing regulations. By subjecting 
the agencies to the SBAR panel process and requiring more 
detailed analyses, agencies would face delays in implementing 
rules. The panel process requires the submission of information 
to the Office of Advocacy, the convening of the panel, and the 
submission of a report on panel proceedings. This could take up 
to 60 days to fulfill these requirements, delaying agencies' 
action on rulemakings. In addition, H.R. 527 will require 
agencies to provide more detailed analyses, which would include 
an assessment of the indirect costs of a rule. This analysis of 
indirect effects could require substantial time and resources, 
as such estimates are often not readily evident and require 
more in depth study and research.
    The impact of these bureaucratic delays could be 
significant on individuals or businesses seeking immediate 
government action. For example, this could impede rules 
pertaining to food safety, consumer protection, health and 
safety, and Veterans' assistance. It could also adversely 
impact rules that would protect families from fraudulent 
practices in the mortgage industry or safeguard children from 
toxic toys. With regard to the SBA, which administers programs 
to assist small business, H.R. 527 could ironically hurt the 
very entities that it is seeking to assist by delaying 
regulations implementing small business financing, contracting, 
or entrepreneurial development initiatives.
            Impairs the stewardship of the environmental and public 
                    lands
    H.R. 527 applies the RFA to Bureau of Land Management (BLM) 
and U.S. Forest Service (USFS) land management plans. Land 
management plans address the need for restoration and 
conservation to enhance the resilience of ecosystems to a 
variety of threats. Plans proactively address adverse 
environmental impacts and emphasize the maintenance and 
restoration of watershed health, which protect and enhance 
America's water resources. They also provide for the diversity 
of species and wildlife habitat and foster sustainable forests 
and lands and their contribution to vibrant rural economies.
    Applying the RFA to land management plans, would allow 
corporate interests, such as those engaged in the timber, 
energy, and mining industries, to challenge land management 
plans which restrict commercial activity in national parks and 
public lands. This could delay and block land management plans 
that restrict access to federal lands for commercial use or 
development.
            Turns the Office of Advocacy into a super-regulator
    Section 4 of H.R. 527 requires the Office of Advocacy to 
issue regulations subject to the notice and comment rulemaking 
provisions of the Administrative Procedures Act\8\ for the RFA, 
which will confer such regulations with Chevron deference, 
effectively giving the regulations the force of law. As a 
result, the Chief Counsel will now be involved in federal 
agency decision-making and not just on matters pertaining to 
agency compliance with the RFA.
---------------------------------------------------------------------------
    \ 8\ 5 U.S.C. Sec. 553.
---------------------------------------------------------------------------
    By broadening the Office of Advocacy's role in the 
rulemaking process, the balance between the office and federal 
agencies will change dramatically. Currently, the office may 
simply file a comment letter on a particular proposed rule and 
the agency may or may not heed its advice. However, if H.R. 527 
is enacted, the Office of Advocacy will be accorded with 
judicial deference in interpreting the RFA, which will provide 
it with substantial power to coerce regulatory modifications. 
This could adversely affect federal agencies ability to protect 
consumers, workers, and the environment.

Conclusion

    H.R. 527 would dramatically expand the powers of the Office 
of Advocacy, including requiring the office to issue RFA 
regulations, greatly increasing its role in judicial 
proceedings, and subjecting all RFA agencies to the SBAR panel 
processes. In doing so, it makes no effort to ensure that 
sufficient resources and personnel are provided, instead 
leaving taxpayers with the bill. If H.R. 527 is
enacted, agencies could be hamstrung in their efforts to 
accomplish their rulemaking and administrative 
responsibilities, leaving many regulations--including those 
that are consumer-, environmen- tally-, and worker-oriented--
delayed or, in the worst case, unimplemented.

                                                Nydia M. Velazquez.

      XVIII. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                      TITLE 5, UNITED STATES CODE


PART I--THE AGENCIES GENERALLY

           *       *       *       *       *       *       *


            CHAPTER 6--THE ANALYSIS OF REGULATORY FUNCTIONS

Sec.
601. Definitions.
     * * * * * * *
[605. Avoidance of duplicative or unnecessary analyses.]
605. Incorporations by reference and certifications.
     * * * * * * *
[607. Preparation of analyses.
[608. Procedure for waiver or delay of completion.]
607. Quantification requirements.
608. Additional powers of Chief Counsel for Advocacy.

Sec. 601. Definitions

  For purposes of this chapter--
          [(1) the term]
          (1) Agency.--The term ``agency'' means an agency as 
        defined in section 551(1) of this title[;].
          [(2) the term ``rule'' means any rule for which the 
        agency publishes a general notice of proposed 
        rulemaking pursuant to section 553(b) of this title, or 
        any other law, including any rule of general 
        applicability governing Federal grants to State and 
        local governments for which the agency provides an 
        opportunity for notice and public comment, except that 
        the term ``rule'' does not include a rule of particular 
        applicability relating to rates, wages, corporate or 
        financial structures or reorganizations thereof, 
        prices, facilities, appliances, services, or allowances 
        therefor or to valuations, costs or accounting, or 
        practices relating to such rates, wages, structures, 
        prices, appliances, services, or allowances;]
          (2) Rule.--The term ``rule'' has the meaning given 
        such term in section 551(4) of this title, except that 
        such term does not include a rule of particular (and 
        not general) applicability relating to rates, wages, 
        corporate or financial structures or reorganizations 
        thereof, prices, facilities, appliances, services, or 
        allowances therefor or to valuations, costs or 
        accounting, or practices relating to such rates, wages, 
        structures, prices, appliances, services, or 
        allowances.
          [(3) the term]
          (3) Small business.--The term ``small business'' has 
        the same meaning as the term ``small business concern'' 
        under section 3 of the Small Business Act, unless an 
        agency, after consultation with the Office of Advocacy 
        of the Small Business Administration and after 
        opportunity for public comment, establishes one or more 
        definitions of such term which are appropriate to the 
        activities of the agency and publishes such 
        definition(s) in the Federal Register[;].
          [(4) the term ``small organization'' means any not-
        for-profit enterprise which is independently owned and 
        operated and is not dominant in its field, unless an 
        agency establishes, after opportunity for public 
        comment, one or more definitions of such term which are 
        appropriate to the activities of the agency and 
        publishes such definition(s) in the Federal Register;]
          (4) Small organization.--
                  (A) In general.--The term ``small 
                organization'' means any not-for-profit 
                enterprise which, as of the issuance of the 
                notice of proposed rulemaking--
                          (i) in the case of an enterprise 
                        which is described by a classification 
                        code of the North American Industrial 
                        Classification System, does not exceed 
                        the size standard established by the 
                        Administrator of the Small Business 
                        Administration pursuant to section 3 of 
                        the Small Business Act (15 U.S.C. 632) 
                        for small business concerns described 
                        by such classification code; and
                          (ii) in the case of any other 
                        enterprise, has a net worth that does 
                        not exceed $7,000,000 and has not more 
                        than 500 employees.
                  (B) Local labor organizations.--In the case 
                of any local labor organization, subparagraph 
                (A) shall be applied without regard to any 
                national or international organization of which 
                such local labor organization is a part.
                  (C) Agency definitions.--Subparagraphs (A) 
                and (B) shall not apply to the extent that an 
                agency, after consultation with the Office of 
                Advocacy of the Small Business Administration 
                and after opportunity for public comment, 
                establishes one or more definitions for such 
                term which are appropriate to the activities of 
                the agency and publishes such definitions in 
                the Federal Register.
          [(5) the term]
          (5) Small governmental jurisdiction.--The term 
        ``small governmental jurisdiction'' means governments 
        of cities, counties, towns, townships, villages, school 
        districts, or special districts, and tribal 
        organizations (as defined in section 4(l) of the Indian 
        Self-Determination and Education Assistance Act (25 
        U.S.C. 450b(l))), with a population of less than fifty 
        thousand, unless an agency establishes, after 
        opportunity for public comment, one or more definitions 
        of such term which are appropriate to the activities of 
        the agency and which are based on such factors as 
        location in rural or sparsely populated areas or 
        limited revenues due to the population of such 
        jurisdiction, and publishes such definition(s) in the 
        Federal Register[;].
          [(6) the term]
          (6) Small entity.--The term ``small entity'' shall 
        have the same meaning as the terms ``small business'', 
        ``small organization'' and ``small governmental 
        jurisdiction'' defined in paragraphs (3), (4) and (5) 
        of this section[; and].
          [(7) the term ``collection of information''--
                  [(A) means the obtaining, causing to be 
                obtained, soliciting, or requiring the 
                disclosure to third parties or the public, of 
                facts or opinions by or for an agency, 
                regardless of form or format, calling for 
                either--
                          [(i) answers to identical questions 
                        posed to, or identical reporting or 
                        recordkeeping requirements imposed on, 
                        10 or more persons, other than 
                        agencies, instrumentalities, or 
                        employees of the United States; or
                          [(ii) answers to questions posed to 
                        agencies, instrumentalities, or 
                        employees of the United States which 
                        are to be used for general statistical 
                        purposes; and
                  [(B) shall not include a collection of 
                information described under section 3518(c)(1) 
                of title 44, United States Code.
          [(8) Recordkeeping requirement.--The term 
        ``recordkeeping requirement'' means a requirement 
        imposed by an agency on persons to maintain specified 
        records.]
          (7) Collection of information.--The term ``collection 
        of information'' has the meaning given such term in 
        section 3502(3) of title 44.
          (8) Recordkeeping requirement.--The term 
        ``recordkeeping requirement'' has the meaning given 
        such term in section 3502(13) of title 44.
          (9) Economic impact.--The term ``economic impact'' 
        means, with respect to a proposed or final rule--
                  (A) any direct economic effect on small 
                entities of such rule; and
                  (B) any indirect economic effect on small 
                entities which is reasonably foreseeable and 
                results from such rule (without regard to 
                whether small entities will be directly 
                regulated by the rule).
          (10) Land management plan.--
                  (A) In general.--The term ``land management 
                plan'' means--
                          (i) any plan developed by the 
                        Secretary of Agriculture under section 
                        6 of the Forest and Rangeland Renewable 
                        Resources Planning Act of 1974 (16 
                        U.S.C. 1604); and
                          (ii) any plan developed by the 
                        Secretary of Interior under section 202 
                        of the Federal Land Policy and 
                        Management Act of 1976 (43 U.S.C. 
                        1712).
                  (B) Revision.--The term ``revision'' means 
                any change to a land management plan which--
                          (i) in the case of a plan described 
                        in subparagraph (A)(i), is made under 
                        section 6(f)(5) of the Forest and 
                        Rangeland Renewable Resources Planning 
                        Act of 1974 (16 U.S.C. 1604(f)(5)); or
                          (ii) in the case of a plan described 
                        in subparagraph (A)(ii), is made under 
                        section 1610.5-6 of title 43, Code of 
                        Federal Regulations (or any successor 
                        regulation).
                  (C) Amendment.--The term ``amendment'' means 
                any change to a land management plan which--
                          (i) in the case of a plan described 
                        in subparagraph (A)(i), is made under 
                        section 6(f)(4) of the Forest and 
                        Rangeland Renewable Resources Planning 
                        Act of 1974 (16 U.S.C. 1604(f)(4)) and 
                        with respect to which the Secretary of 
                        Agriculture prepares a statement 
                        described in section 102(2)(C) of the 
                        National Environmental Policy Act of 
                        1969 (42 U.S.C. 4332(2)(C)); or
                          (ii) in the case of a plan described 
                        in subparagraph (A)(ii), is made under 
                        section 1610.5-5 of title 43, Code of 
                        Federal Regulations (or any successor 
                        regulation) and with respect to which 
                        the Secretary of the Interior prepares 
                        a statement described in section 
                        102(2)(C) of the National Environmental 
                        Policy Act of 1969 (42 U.S.C. 
                        4332(2)(C)).

Sec. 602. Regulatory agenda

  (a) During the months of October and April of each year, each 
agency shall publish in the Federal Register a regulatory 
flexibility agenda which shall contain--
          (1) * * *
          (2) a summary of the nature of any such rule under 
        consideration for each subject area listed in the 
        agenda pursuant to paragraph (1), the objectives and 
        legal basis for the issuance of the rule, and an 
        approximate schedule for completing action on any rule 
        for which the agency has issued a general notice of 
        proposed rulemaking[, and];
          (3) a brief description of the sector of the North 
        American Industrial Classification System that is 
        primarily affected by any rule which the agency expects 
        to propose or promulgate which is likely to have a 
        significant economic impact on a substantial number of 
        small entities; and
          [(3)] (4) the name and telephone number of an agency 
        official knowledgeable concerning the items listed in 
        paragraph (1).

           *       *       *       *       *       *       *

  [(c) Each agency shall endeavor to provide notice of each 
regulatory flexibility agenda to small entities or their 
representatives through direct notification or publication of 
the agenda in publications likely to be obtained by such small 
entities and shall invite comments upon each subject area on 
the agenda.]
  (c) Each agency shall prominently display a plain language 
summary of the information contained in the regulatory 
flexibility agenda published under subsection (a) on its 
website within 3 days of its publication in the Federal 
Register. The Office of Advocacy of the Small Business 
Administration shall compile and prominently display a plain 
language summary of the regulatory agendas referenced in 
subsection (a) for each agency on its website within 3 days of 
their publication in the Federal Register.

           *       *       *       *       *       *       *


Sec. 603. Initial regulatory flexibility analysis

  (a) Whenever an agency is required by section 553 of this 
title, or any other law, to publish general notice of proposed 
rulemaking for any proposed rule, [or] publishes a notice of 
proposed rulemaking for an interpretative rule involving the 
internal revenue laws of the United States, or publishes a 
revision or amendment to a land management plan, the agency 
shall prepare and make available for public comment an initial 
regulatory flexibility analysis. Such analysis shall describe 
the impact of the proposed rule on small entities. The initial 
regulatory flexibility analysis or a summary shall be published 
in the Federal Register at the time of the publication of 
general notice of proposed rulemaking for the rule. The agency 
shall transmit a copy of the initial regulatory flexibility 
analysis to the Chief Counsel for Advocacy of the Small 
Business Administration. In the case of an interpretative rule 
involving the internal revenue laws of the United States, this 
chapter applies to interpretative rules published in the 
Federal Register for codification in the Code of Federal 
Regulations, but only to the extent that such interpretative 
rules impose on small entities a collection of information 
requirement[.] or a recordkeeping requirement, and without 
regard to whether such requirement is imposed by statute or 
regulation.
  [(b) Each initial regulatory flexibility analysis required 
under this section shall contain--
          [(1) a description of the reasons why action by the 
        agency is being considered;
          [(2) a succinct statement of the objectives of, and 
        legal basis for, the proposed rule;
          [(3) a description of and, where feasible, an 
        estimate of the number of small entities to which the 
        proposed rule will apply;
          [(4) a description of the projected reporting, 
        recordkeeping and other compliance requirements of the 
        proposed rule, including an estimate of the classes of 
        small entities which will be subject to the requirement 
        and the type of professional skills necessary for 
        preparation of the report or record;
          [(5) an identification, to the extent practicable, of 
        all relevant Federal rules which may duplicate, overlap 
        or conflict with the proposed rule.]
  (b) Each initial regulatory flexibility analysis required 
under this section shall contain a detailed statement--
          (1) describing the reasons why action by the agency 
        is being considered;
          (2) describing the objectives of, and legal basis 
        for, the proposed rule;
          (3) estimating the number and type of small entities 
        to which the proposed rule will apply;
          (4) describing the projected reporting, 
        recordkeeping, and other compliance requirements of the 
        proposed rule, including an estimate of the classes of 
        small entities which will be subject to the requirement 
        and the type of professional skills necessary for 
        preparation of the report and record;
          (5) describing all relevant Federal rules which may 
        duplicate, overlap, or conflict with the proposed rule, 
        or the reasons why such a description could not be 
        provided;
          (6) estimating the additional cumulative economic 
        impact of the proposed rule on small entities beyond 
        that already imposed on the class of small entities by 
        the agency or why such an estimate is not available; 
        and
          (7) describing any disproportionate economic impact 
        on small entities or a specific class of small 
        entities.
  (c) [Each initial regulatory flexibility analysis shall also 
contain a description of any significant alternatives to the 
proposed rule which accomplish the stated objectives of 
applicable statutes and which minimize any significant economic 
impact of the proposed rule on small entities.] Each initial 
regulatory flexibility analysis shall also contain a detailed 
description of alternatives to the proposed rule which minimize 
any adverse significant economic impact or maximize any 
beneficial significant economic impact on small entities. 
Consistent with the stated objectives of applicable statutes, 
the analysis shall discuss significant alternatives such as--
          (1) * * *

           *       *       *       *       *       *       *

  [(d)(1)For a covered agency, as defined in section 609(d)(2), 
each initial regulatory flexibility analysis shall include a 
description of--
          [(A) any projected increase in the cost of credit for 
        small entities;
          [(B) any significant alternatives to the proposed 
        rule which accomplish the stated objectives of 
        applicable statutes and which minimize any increase in 
        the cost of credit for small entities; and
          [(C) advice and recommendations of representatives of 
        small entities relating to issues described in 
        subparagraphs (A) and (B) and subsection (b).
  [(2) A covered agency, as defined in section 609(d)(2), 
shall, for purposes of complying with paragraph (1)(C)--
          [(A) identify representatives of small entities in 
        consultation with the Chief Counsel for Advocacy of the 
        Small Business Administration; and
          [(B) collect advice and recommendations from the 
        representatives identified under subparagraph (A) 
        relating to issues described in subparagraphs (A) and 
        (B) of paragraph (1) and subsection (b).]

Sec. 604. Final regulatory flexibility analysis

  (a) When an agency promulgates a final rule under section 553 
of this title, after being required by that section or any 
other law to publish a general notice of proposed rulemaking, 
[or] promulgates a final interpretative rule involving the 
internal revenue laws of the United States as described in 
section 603(a), or adopts a revision or amendment to a land 
management plan, the agency shall prepare a final regulatory 
flexibility analysis. Each final regulatory flexibility 
analysis shall contain--
          (1) * * *
          (2) a statement of the significant issues raised by 
        the public comments in response to the initial 
        regulatory flexibility analysis (or certification of 
        the proposed rule under section 605(b)), a statement of 
        the assessment of the agency of such issues, and a 
        statement of any changes made in the proposed rule as a 
        result of such comments;

           *       *       *       *       *       *       *

          (4) a detailed description of and an estimate of the 
        number of small entities to which the rule will apply 
        or [an explanation] a detailed explanation of why no 
        such estimate is available;
          (5) a detailed description of the projected 
        reporting, recordkeeping and other compliance 
        requirements of the rule, including an estimate of the 
        classes of small entities which will be subject to the 
        requirement and the type of professional skills 
        necessary for preparation of the report or record;
          (6) a detailed description of the steps the agency 
        has taken to [minimize the significant economic impact] 
        minimize the adverse significant economic impact or 
        maximize the beneficial significant economic impact on 
        small entities consistent with the stated objectives of 
        applicable statutes, including a statement of the 
        factual, policy, and legal reasons for selecting the 
        alternative adopted in the final rule and why each one 
        of the other significant alternatives to the rule 
        considered by the agency which affect the impact on 
        small entities was rejected; and
          [(6)   for a covered agency, as defined in section 
        609(d)(2), a description of the steps the agency has 
        taken to minimize any additional cost of credit for 
        small entities.]
          (7) describing any disproportionate economic impact 
        on small entities or a specific class of small 
        entities.
  [(b) The agency shall make copies of the final regulatory 
flexibility analysis available to members of the public and 
shall publish in the Federal Register such analysis or a 
summary thereof.]
  (b) The agency shall make copies of the final regulatory 
flexibility analysis available to the public, including 
placement of the entire analysis on the agency's website, and 
shall publish in the Federal Register the final regulatory 
flexibility analysis, or a summary thereof which includes the 
telephone number, mailing address, and link to the website 
where the complete analysis may be obtained.

[Sec. 605. Avoidance of duplicative or unnecessary analyses

  [(a) Any Federal agency may perform the analyses required by 
sections 602, 603, and 604 of this title in conjunction with or 
as a part of any other agenda or analysis required by any other 
law if such other analysis satisfies the provisions of such 
sections.]

Sec. 605. Incorporations by reference and certifications

  (a) A Federal agency shall be treated as satisfying any 
requirement regarding the content of an agenda or regulatory 
flexibility analysis under section 602, 603, or 604, if such 
agency provides in such agenda or analysis a cross-reference to 
the specific portion of another agenda or analysis which is 
required by any other law and which satisfies such requirement.
  (b) Sections 603 and 604 of this title shall not apply to any 
proposed or final rule if the head of the agency certifies that 
the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities. If the head 
of the agency makes a certification under the preceding 
sentence, the agency shall publish such certification in the 
Federal Register at the time of publication of general notice 
of proposed rulemaking for the rule or at the time of 
publication of the final rule, along with a detailed statement 
providing the factual and legal basis for such certification. 
The agency shall provide such certification and statement to 
the Chief Counsel for Advocacy of the Small Business 
Administration.

           *       *       *       *       *       *       *


[Sec. 607. Preparation of analyses

  [In complying with the provisions of sections 603 and 604 of 
this title, an agency may provide either a quantifiable or 
numerical description of the effects of a proposed rule or 
alternatives to the proposed rule, or more general descriptive 
statements if quantification is not practicable or reliable.

[Sec. 608. Procedure for waiver or delay of completion

  [(a) An agency head may waive or delay the completion of some 
or all of the requirements of section 603 of this title by 
publishing in the Federal Register, not later than the date of 
publication of the final rule, a written finding, with reasons 
therefor, that the final rule is being promulgated in response 
to an emergency that makes compliance or timely compliance with 
the provisions of section 603 of this title impracticable.
  [(b) Except as provided in section 605(b), an agency head may 
not waive the requirements of section 604 of this title. An 
agency head may delay the completion of the requirements of 
section 604 of this title for a period of not more than one 
hundred and eighty days after the date of publication in the 
Federal Register of a final rule by publishing in the Federal 
Register, not later than such date of publication, a written 
finding, with reasons therefor, that the final rule is being 
promulgated in response to an emergency that makes timely 
compliance with the provisions of section 604 of this title 
impracticable. If the agency has not prepared a final 
regulatory analysis pursuant to section 604 of this title 
within one hundred and eighty days from the date of publication 
of the final rule, such rule shall lapse and have no effect. 
Such rule shall not be repromulgated until a final regulatory 
flexibility analysis has been completed by the agency.]

Sec. 607. Quantification requirements

  In complying with sections 603 and 604, an agency shall 
provide--
          (1) a quantifiable or numerical description of the 
        effects of the proposed or final rule and alternatives 
        to the proposed or final rule; or
          (2) a more general descriptive statement and a 
        detailed statement explaining why quantification is not 
        practicable or reliable.

Sec. 608. Additional powers of Chief Counsel for Advocacy

  (a)(1) Not later than 270 days after the date of the 
enactment of the Regulatory Flexibility Improvements Act of 
2011, the Chief Counsel for Advocacy of the Small Business 
Administration shall, after opportunity for notice and comment 
under section 553, issue rules governing agency compliance with 
this chapter. The Chief Counsel may modify or amend such rules 
after notice and comment under section 553. This chapter (other 
than this subsection) shall not apply with respect to the 
issuance, modification, and amendment of rules under this 
paragraph.
  (2) An agency shall not issue rules which supplement the 
rules issued under subsection (a) unless such agency has first 
consulted with the Chief Counsel for Advocacy to ensure that 
such supplemental rules comply with this chapter and the rules 
issued under paragraph (1).
  (b) Notwithstanding any other law, the Chief Counsel for 
Advocacy of the Small Business Administration may intervene in 
any agency adjudication (unless such agency is authorized to 
impose a fine or penalty under such adjudication), and may 
inform the agency of the impact that any decision on the record 
may have on small entities. The Chief Counsel shall not 
initiate an appeal with respect to any adjudication in which 
the Chief Counsel intervenes under this subsection.
  (c) The Chief Counsel for Advocacy may file comments in 
response to any agency notice requesting comment, regardless of 
whether the agency is required to file a general notice of 
proposed rulemaking under section 553.

Sec. 609. Procedures for gathering comments

  (a) * * *
  [(b) Prior to publication of an initial regulatory 
flexibility analysis which a covered agency is required to 
conduct by this chapter--
          [(1) a covered agency shall notify the Chief Counsel 
        for Advocacy of the Small Business Administration and 
        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;
          [(2) not later than 15 days after the date of receipt 
        of the materials described in paragraph (1), the Chief 
        Counsel shall identify individuals representative of 
        affected small entities for the purpose of obtaining 
        advice and recommendations from those individuals about 
        the potential impacts of the proposed rule;
          [(3) the agency shall convene a review panel for such 
        rule consisting wholly of full time Federal employees 
        of the office within the agency responsible for 
        carrying out the proposed rule, the Office of 
        Information and Regulatory Affairs within the Office of 
        Management and Budget, and the Chief Counsel;
          [(4) the panel shall review any material the agency 
        has prepared in connection with this chapter, including 
        any draft proposed rule, collect advice and 
        recommendations of each individual small entity 
        representative identified by the agency after 
        consultation with the Chief Counsel, on issues related 
        to subsections 603(b), paragraphs (3), (4) and (5) and 
        603(c);
          [(5) not later than 60 days after the date a covered 
        agency convenes a review panel pursuant to paragraph 
        (3), the review panel shall report on the comments of 
        the small entity representatives and its findings as to 
        issues related to subsections 603(b), paragraphs (3), 
        (4) and (5) and 603(c), provided that such report shall 
        be made public as part of the rulemaking record; and
          [(6) where appropriate, the agency shall modify the 
        proposed rule, the initial regulatory flexibility 
        analysis or the decision on whether an initial 
        regulatory flexibility analysis is required.
  [(c) An agency may in its discretion apply subsection (b) to 
rules that the agency intends to certify under subsection 
605(b), but the agency believes may have a greater than de 
minimis impact on a substantial number of small entities.
  [(d) For purposes of this section, the term ``covered 
agency'' means--
          [(1) the Environmental Protection Agency;
          [(2) the Consumer Financial Protection Bureau of the 
        Federal Reserve System; and
          [(3) the Occupational Safety and Health 
        Administration of the Department of Labor.
  [(e) The Chief Counsel for Advocacy, in consultation with the 
individuals identified in subsection (b)(2), and with the 
Administrator of the Office of Information and Regulatory 
Affairs within the Office of Management and Budget, may waive 
the requirements of subsections (b)(3), (b)(4), and (b)(5) by 
including in the rulemaking record a written finding, with 
reasons therefor, that those requirements would not advance the 
effective participation of small entities in the rulemaking 
process. For purposes of this subsection, the factors to be 
considered in making such a finding are as follows:
          [(1) In developing a proposed rule, the extent to 
        which the covered agency consulted with individuals 
        representative of affected small entities with respect 
        to the potential impacts of the rule and took such 
        concerns into consideration.
          [(2) Special circumstances requiring prompt issuance 
        of the rule.
          [(3) Whether the requirements of subsection (b) would 
        provide the individuals identified in subsection (b)(2) 
        with a competitive advantage relative to other small 
        entities.]
  (b)(1) Prior to publication of any proposed rule described in 
subsection (e), an agency making such rule shall notify the 
Chief Counsel for Advocacy of the Small Business Administration 
and provide the Chief Counsel with--
          (A) all materials prepared or utilized by the agency 
        in making the proposed rule, including the draft of the 
        proposed rule; and
          (B) information on the potential adverse and 
        beneficial economic impacts of the proposed rule on 
        small entities and the type of small entities that 
        might be affected.
  (2) An agency shall not be required under paragraph (1) to 
provide the exact language of any draft if the rule--
          (A) relates to the internal revenue laws of the 
        United States; or
          (B) is proposed by an independent regulatory agency 
        (as defined in section 3502(5) of title 44).
  (c) Not later than 15 days after the receipt of such 
materials and information under subsection (b), the Chief 
Counsel for Advocacy of the Small Business Administration 
shall--
          (1) identify small entities or representatives of 
        small entities or a combination of both for the purpose 
        of obtaining advice, input, and recommendations from 
        those persons about the potential economic impacts of 
        the proposed rule and the compliance of the agency with 
        section 603; and
          (2) convene a review panel consisting of an employee 
        from the Office of Advocacy of the Small Business 
        Administration, an employee from the agency making the 
        rule, and in the case of an agency other than an 
        independent regulatory agency (as defined in section 
        3502(5) of title 44), an employee from the Office of 
        Information and Regulatory Affairs of the Office of 
        Management and Budget to review the materials and 
        information provided to the Chief Counsel under 
        subsection (b).
  (d)(1) Not later than 60 days after the review panel 
described in subsection (c)(2) is convened, the Chief Counsel 
for Advocacy of the Small Business Administration shall, after 
consultation with the members of such panel, submit a report to 
the agency and, in the case of an agency other than an 
independent regulatory agency (as defined in section 3502(5) of 
title 44), the Office of Information and Regulatory Affairs of 
the Office of Management and Budget.
  (2) Such report shall include an assessment of the economic 
impact of the proposed rule on small entities, including an 
assessment of the proposed rule's impact on the cost that small 
entities pay for energy, and a discussion of any alternatives 
that will minimize adverse significant economic impacts or 
maximize beneficial significant economic impacts on small 
entities.
  (3) Such report shall become part of the rulemaking record. 
In the publication of the proposed rule, the agency shall 
explain what actions, if any, the agency took in response to 
such report.
  (e) A proposed rule is described by this subsection if the 
Administrator of the Office of Information and Regulatory 
Affairs of the Office of Management and Budget, the head of the 
agency (or the delegatee of the head of the agency), or an 
independent regulatory agency determines that the proposed rule 
is likely to result in--
          (1) an annual effect on the economy of $100,000,000 
        or more;
          (2) a major increase in costs or prices for 
        consumers, individual industries, Federal, State, or 
        local governments, tribal organizations, or geographic 
        regions;
          (3) significant adverse effects on competition, 
        employment, investment, productivity, innovation, or on 
        the ability of United States-based enterprises to 
        compete with foreign-based enterprises in domestic and 
        export markets; or
          (4) a significant economic impact on a substantial 
        number of small entities.
  (f) Upon application by the agency, the Chief Counsel for 
Advocacy of the Small Business Administration may waive the 
requirements of subsections (b) through (e) if the Chief 
Counsel determines that compliance with the requirements of 
such subsections are impracticable, unnecessary, or contrary to 
the public interest.

           *       *       *       *       *       *       *


[Sec. 610. Periodic review of rules

  [(a) Within one hundred and eighty days after the effective 
date of this chapter, each agency shall publish in the Federal 
Register a plan for the periodic review of the rules issued by 
the agency which have or will have a significant economic 
impact upon a substantial number of small entities. Such plan 
may be amended by the agency at any time by publishing the 
revision in the Federal Register. The purpose of the review 
shall be to determine whether such rules should be continued 
without change, or should be amended or rescinded, consistent 
with the stated objectives of applicable statutes, to minimize 
any significant economic impact of the rules upon a substantial 
number of such small entities. The plan shall provide for the 
review of all such agency rules existing on the effective date 
of this chapter within ten years of that date and for the 
review of such rules adopted after the effective date of this 
chapter within ten years of the publication of such rules as 
the final rule. If the head of the agency determines that 
completion of the review of existing rules is not feasible by 
the established date, he shall so certify in a statement 
published in the Federal Register and may extend the completion 
date by one year at a time for a total of not more than five 
years.
  [(b) In reviewing rules to minimize any significant economic 
impact of the rule on a substantial number of small entities in 
a manner consistent with the stated objectives of applicable 
statutes, the agency shall consider the following factors--
          [(1) the continued need for the rule;
          [(2) the nature of complaints or comments received 
        concerning the rule from the public;
          [(3) the complexity of the rule;
          [(4) the extent to which the rule overlaps, 
        duplicates or conflicts with other Federal rules, and, 
        to the extent feasible, with State and local 
        governmental rules; and
          [(5) the length of time since the rule has been 
        evaluated or the degree to which technology, economic 
        conditions, or other factors have changed in the area 
        affected by the rule.
  [(c) Each year, each agency shall publish in the Federal 
Register a list of the rules which have a significant economic 
impact on a substantial number of small entities, which are to 
be reviewed pursuant to this section during the succeeding 
twelve months. The list shall include a brief description of 
each rule and the need for and legal basis of such rule and 
shall invite public comment upon the rule.]

Sec. 610. Periodic review of rules

  (a) Not later than 180 days after the enactment of the 
Regulatory Flexibility Improvements Act of 2011, each agency 
shall publish in the Federal Register and place on its website 
a plan for the periodic review of rules issued by the agency 
which the head of the agency determines have a significant 
economic impact on a substantial number of small entities. Such 
determination shall be made without regard to whether the 
agency performed an analysis under section 604. The purpose of 
the review shall be to determine whether such rules should be 
continued without change, or should be amended or rescinded, 
consistent with the stated objectives of applicable statutes, 
to minimize any adverse significant economic impacts or 
maximize any beneficial significant economic impacts on a 
substantial number of small entities. Such plan may be amended 
by the agency at any time by publishing the revision in the 
Federal Register and subsequently placing the amended plan on 
the agency's website.
  (b) The plan shall provide for the review of all such agency 
rules existing on the date of the enactment of the Regulatory 
Flexibility Improvements Act of 2011 within 10 years of the 
date of publication of the plan in the Federal Register and for 
review of rules adopted after the date of enactment of the 
Regulatory Flexibility Improvements Act of 2011 within 10 years 
after the publication of the final rule in the Federal 
Register. If the head of the agency determines that completion 
of the review of existing rules is not feasible by the 
established date, the head of the agency shall so certify in a 
statement published in the Federal Register and may extend the 
review for not longer than 2 years after publication of notice 
of extension in the Federal Register. Such certification and 
notice shall be sent to the Chief Counsel for Advocacy of the 
Small Business Administration and the Congress.
  (c) The plan shall include a section that details how an 
agency will conduct outreach to and meaningfully include small 
businesses for the purposes of carrying out this section. The 
agency shall include in this section a plan for how the agency 
will contact small businesses and gather their input on 
existing agency rules.
  (d) Each agency shall annually submit a report regarding the 
results of its review pursuant to such plan to the Congress, 
the Chief Counsel for Advocacy of the Small Business 
Administration, and, in the case of agencies other than 
independent regulatory agencies (as defined in section 3502(5) 
of title 44) to the Administrator of the Office of Information 
and Regulatory Affairs of the Office of Management and Budget. 
Such report shall include the identification of any rule with 
respect to which the head of the agency made a determination 
described in paragraph (5) or (6) of subsection (e) and a 
detailed explanation of the reasons for such determination.
  (e) In reviewing a rule pursuant to subsections (a) through 
(d), the agency shall amend or rescind the rule to minimize any 
adverse significant economic impact on a substantial number of 
small entities or disproportionate economic impact on a 
specific class of small entities, or maximize any beneficial 
significant economic impact of the rule on a substantial number 
of small entities to the greatest extent possible, consistent 
with the stated objectives of applicable statutes. In amending 
or rescinding the rule, the agency shall consider the following 
factors:
          (1) The continued need for the rule.
          (2) The nature of complaints received by the agency 
        from small entities concerning the rule.
          (3) Comments by the Regulatory Enforcement Ombudsman 
        and the Chief Counsel for Advocacy of the Small 
        Business Administration.
          (4) The complexity of the rule.
          (5) The extent to which the rule overlaps, 
        duplicates, or conflicts with other Federal rules and, 
        unless the head of the agency determines it to be 
        infeasible, State and local rules.
          (6) The contribution of the rule to the cumulative 
        economic impact of all Federal rules on the class of 
        small entities affected by the rule, unless the head of 
        the agency determines that such calculations cannot be 
        made and reports that determination in the annual 
        report required under subsection (d).
          (7) The length of time since the rule has been 
        evaluated or the degree to which technology, economic 
        conditions, or other factors have changed in the area 
        affected by the rule.
  (f) The agency shall publish in the Federal Register and on 
its website a list of rules to be reviewed pursuant to such 
plan. Such publication shall include a brief description of the 
rule, the reason why the agency determined that it has a 
significant economic impact on a substantial number of small 
entities (without regard to whether it had prepared a final 
regulatory flexibility analysis for the rule), and request 
comments from the public, the Chief Counsel for Advocacy of the 
Small Business Administration, and the Regulatory Enforcement 
Ombudsman concerning the enforcement of the rule.

Sec. 611. Judicial review

  (a)(1) For any rule subject to this chapter, a small entity 
that is adversely affected or aggrieved by [final agency 
action] such rule is entitled to judicial review of agency 
compliance with the requirements of sections 601, 604, 605(b), 
[608(b),] and 610 in accordance with chapter 7. Agency 
compliance with sections 607 and 609(a) shall be judicially 
reviewable in connection with judicial review of section 604.
  (2) Each court having jurisdiction to review such rule for 
compliance with section 553, or under any other provision of 
law, (or which would have such jurisdiction if publication of 
the final rule constituted final agency action) shall have 
jurisdiction to review any claims of noncompliance with 
sections 601, 604, 605(b), [608(b),] and 610 in accordance with 
chapter 7. Agency compliance with sections 607 and 609(a) shall 
be judicially reviewable in connection with judicial review of 
section 604.
  [(3)(A) A small entity]
  (3) A small entity may seek such review during the period 
beginning on the date of [final agency action] publication of 
the final rule and ending one year later, except that, in the 
case of a rule for which the date of final agency action is the 
same date as the publication of the final rule, where a 
provision of law requires that an action challenging a final 
agency action be commenced before the expiration of one year, 
such lesser period shall apply to an action for judicial review 
under this section.
  [(B) In the case where an agency delays the issuance of a 
final regulatory flexibility analysis pursuant to section 
608(b) of this chapter, an action for judicial review under 
this section shall be filed not later than--
          [(i) one year after the date the analysis is made 
        available to the public, or
          [(ii) where a provision of law requires that an 
        action challenging a final agency regulation be 
        commenced before the expiration of the 1-year period, 
        the number of days specified in such provision of law 
        that is after the date the analysis is made available 
        to the public.]

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Sec. 612. Reports and intervention rights

  (a) * * *
  (b) The Chief Counsel for Advocacy of the Small Business 
Administration is authorized to appear as amicus curiae in any 
action brought in a court of the United States to review a rule 
or agency compliance with section 601, 603, 604, 605(b), 609, 
or 610. In any such action, the Chief Counsel is authorized to 
present his or her views with respect to compliance with this 
chapter, chapter 5, and chapter 7, the adequacy of the 
rulemaking record with respect to small entities and the effect 
of the rule on small entities.

           *       *       *       *       *       *       *

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TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *


PART VI--PARTICULAR PROCEEDINGS

           *       *       *       *       *       *       *


CHAPTER 158--ORDERS OF FEDERAL AGENCIES; REVIEW

           *       *       *       *       *       *       *


Sec. 2341. Definitions

  As used in this chapter--
          (1) * * *

           *       *       *       *       *       *       *

          (3) ``agency'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) the Secretary, when the order is under 
                section 812 of the Fair Housing Act; [and]
                  (E) the Board, when the order was entered by 
                the Surface Transportation Board[.]; and
                  (F) the Office of Advocacy of the Small 
                Business Administration, when the final rule is 
                under section 608(a) of title 5.

Sec. 2342. Jurisdiction of court of appeals

  The court of appeals (other than the United States Court of 
Appeals for the Federal Circuit) has exclusive jurisdiction to 
enjoin, set aside, suspend (in whole or in part), or to 
determine the validity of--
          (1) * * *

           *       *       *       *       *       *       *

          (6) all final orders under section 812 of the Fair 
        Housing Act; [and]
          (7) all final agency actions described in section 
        20114(c) of title 49[.]; and
          (8) all final rules under section 608(a) of title 5.
Jurisdiction is invoked by filing a petition as provided by 
section 2344 of this title.

           *       *       *       *       *       *       *

                              ----------                              


       SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT OF 1996

              TITLE II--SMALL BUSINESS REGULATORY FAIRNESS

SEC. 201. SHORT TITLE.

  This title may be cited as the ``Small Business Regulatory 
Enforcement Fairness Act of 1996''.

           *       *       *       *       *       *       *


SEC. 212. COMPLIANCE GUIDES.

  (a) Compliance Guide.--
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Agency preparation of guides.--The agency shall, 
        in its sole discretion, taking into account the subject 
        matter of the rule and the language of relevant 
        statutes, ensure that the guide is written using 
        sufficiently plain language likely to be understood by 
        affected small entities. Agencies may prepare separate 
        guides covering groups or classes of similarly affected 
        small entities and may cooperate with associations of 
        small entities to develop and distribute such guides. 
        An agency may prepare guides and apply this section 
        with respect to a rule or a group of related rules.]
          (5) Agency preparation of guides.--The agency shall, 
        in its sole discretion, taking into account the subject 
        matter of the rule and the language of relevant 
        statutes, ensure that the guide is written using 
        sufficiently plain language likely to be understood by 
        affected small entities. Agencies may prepare separate 
        guides covering groups or classes of similarly affected 
        small entities and may cooperate with associations of 
        small entities to distribute such guides. In developing 
        guides, agencies shall solicit input from affected 
        small entities or associations of affected small 
        entities. An agency may prepare guides and apply this 
        section with respect to a rule or a group of related 
        rules.

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