[House Report 113-288]
[From the U.S. Government Publishing Office]
113th Congress Rept. 113-288
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2013
_______
December 11, 2013.--Committed to the Committee of the Whole House on
the State of the Union and 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. 2542]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business, to whom was referred the
bill (H.R. 2542) 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.................................9
III. Need for Legislation...........................................10
IV. Hearings.......................................................14
V. Committee Consideration........................................14
VI. Committee Votes................................................16
VII. Section-by-Section Analysis of H.R. 2542.......................33
VIII. Congressional Budget Cost Estimate.............................72
IX. Unfunded Mandates..............................................74
X. New Budget Authority, Entitlement Authority, and Tax Expenditur74
XI. Oversight Findings.............................................76
XII. Statement of Constitutional Authority..........................76
XIII. Congressional Accountability Act...............................76
XIV. Federal Advisory Committee Statement...........................77
XV. Statement of No Earmarks.......................................77
XVI. Statement of Duplication of Federal Programs...................77
XVII. Disclosure of Directed Rule Makings............................77
XVIII.Performance Goals and Objectives...............................77
XIX. Changes in Existing Law Made by the Bill, as Reported..........77
XX. Dissenting Views...............................................95
I. Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Regulatory
Flexibility Improvements Act of 2013''.
(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. Establishment and approval of small business concern size
standards by Chief Counsel for Advocacy.
Sec. 11. Clerical amendments.
Sec. 12. Agency preparation of guides.
Sec. 13. GAO report.
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 pertaining to the protection of the rights of
and benefits for veterans or 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 (including
compliance costs and effects on revenue) 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 Rulemaking.--
(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
the 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 2013, 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,
an assessment of the proposed rule's impact on start-up costs for small
entities, 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.
``(g) A small entity or a representative of a small entity may submit
a request that the agency provide a copy of the report prepared under
subsection (d) and all materials and information provided to the Chief
Counsel for Advocacy of the Small Business Administration under
subsection (b). The agency receiving such request shall provide the
report, materials and information to the requesting small entity or
representative of a small entity not later than 10 business days after
receiving such request, except that the agency shall not disclose any
information that is prohibited from disclosure to the public pursuant
to section 552(b) of this title.''.
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 2013, 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 2013 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
2013 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
(including small business concerns owned and controlled by women, small
business concerns owned and controlled by veterans, and small business
concerns owned and controlled by socially and economically
disadvantaged individuals (as such terms are defined in the Small
Business Act)) 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, territorial, 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. The
agency shall include in the publication a solicitation of public
comments on any further inclusions or exclusions of rules from the
list, and shall respond to such comments. 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. ESTABLISHMENT AND APPROVAL OF SMALL BUSINESS CONCERN SIZE
STANDARDS BY CHIEF COUNSEL FOR ADVOCACY.
(a) In General.--Subparagraph (A) of section 3(a)(2) of the Small
Business Act (15 U.S.C. 632(a)(2)(A)) is amended to read as follows:
``(A) In general.--In addition to the criteria
specified in paragraph (1)--
``(i) the Administrator may specify detailed
definitions or standards by which a business
concern may be determined to be a small
business concern for purposes of this Act or
the Small Business Investment Act of 1958; and
``(ii) the Chief Counsel for Advocacy may
specify such definitions or standards for
purposes of any other Act.''.
(b) Approval by Chief Counsel.--Clause (iii) of section 3(a)(2)(C) of
the Small Business Act (15 U.S.C. 632(a)(2)(C)(iii)) is amended to read
as follows:
``(iii) except in the case of a size standard
prescribed by the Administrator, is approved by
the Chief Counsel for Advocacy.''.
(c) Industry Variation.--Paragraph (3) of section 3(a) of the Small
Business Act (15 U.S.C. 632(a)(3)) is amended--
(1) by inserting ``or Chief Counsel for Advocacy, as
appropriate'' before ``shall ensure''; and
(2) by inserting ``or Chief Counsel for Advocacy'' before the
period at the end.
(d) Judicial Review of Size Standards Approved by Chief Counsel.--
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is amended by
adding at the end the following new paragraph:
``(9) Judicial review of standards approved by chief
counsel.--In the case of an action for judicial review of a
rule which includes a definition or standard approved by the
Chief Counsel for Advocacy under this subsection, the party
seeking such review shall be entitled to join the Chief Counsel
as a party in such action.''.
SEC. 11. CLERICAL AMENDMENTS.
(a) Definitions.--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) Incorporations by Reference and Certifications.--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) Table of Sections.--The table of sections for chapter 6 of title
5, United States Code, is amended--
(1) by striking the item relating to section 605 and
inserting the following 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) Other Clerical Adendments to Chapter 6.--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. 12. 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.''.
SEC. 13. GAO REPORT.
Not later than 90 days after the date of enactment of this Act, the
Comptroller General of the United States shall complete and publish a
study that examines whether the Chief Counsel for Advocacy of the Small
Business Administration has the capacity and resources to carry out the
duties of the Chief Counsel under this Act and the amendments made by
this Act.
II. Purpose of the Bill and Summary
The purpose of H.R. 2542, the ``Regulatory Flexibility
Improvements Act of 2013,'' 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 United States Government
Accountability Office (GAO), reports from the Chief Counsel for
Advocacy,\1\ and Congressional hearings held by the Committee
on the Judiciary and the Committee on Small Business
demonstrates that agencies are still reluctant to comply with
the analytical requirements of the RFA. Further action is
evidently needed to force agency compliance.
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\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.
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The bill defines and expands which economic effects are to
be examined by agencies, imposes greater detail in performing
the analyses, clarifies language concerning applicability of
the RFA to the Internal Revenue Service (IRS), 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, mandates that the Chief
Counsel promulgate RFA compliance regulations applicable to all
federal agencies, and transfers the limited function on
determining size standards of small businesses for purposes
other than the Small Business Act and the Small Business
Investment Act of 1958 to the Chief Counsel for Advocacy.
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.
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\3\The term ``collection of information'' is a term of art used in
the Paperwork Reduction Act. See 44 U.S.C. Sec. 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 553 of
the APA or some other statute. Interpretative regulations are exempt
from the notice and comment requirements. 5 U.S.C. 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, the President issued Executive Order
(E.O.) 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\
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\8\Presidential Memorandum for the Heads of Executive Departments
and Agencies: Regulatory Flexibility, Small Business, and Job Creation,
76 Fed. Reg. 3,827, 3,827 (Jan. 21, 2011).
\9\Id. at 3,828.
\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.
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Coetaneous with the release of the memorandum on the RFA,
President Obama issued E.O. 13,563.\11\ While the putative
purpose of the Order was to clarify the regulatory analytical
requirements set forth in E.O. 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.
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\11\76 Fed. Reg. 3,821 (Jan. 21, 2011), reprinted at 3 C.F.R. 215
(2011). In 2012, President Obama supplemented E.O. 13,563 by issuing
E.O. 13,610, which emphasized the importance of public participation in
the periodic review process, provided guidance on prioritization of
reviews, and set a schedule for agencies to report on their review
efforts. 77 Fed. Reg. 28,469 (May 14, 2012), reprinted at 3 C.F.R. 258
(2012).
\12\Exec. Order No. 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 No. 13,563, Sec. 6, 75 Fed. Reg. at 3,822.
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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 findings of the 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\
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\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.
\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-02-491T); Regulatory Flexibility Act: Key Terms
Still Need To Be Clarified (2001) (GAO-01-669T); Regulatory Flexibility
Act: Implementation in EPA Program Offices and Proposed 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) (TGGD-98-75); Regulatory
Flexibility Act: Agencies' Use of the October 1997 Unified Agenda Often
Did Not Satisfy Notification Requirements (1998) (GGD-98-61R);
Regulatory Flexibility Act: Agency Use of the November 1996 Unified
Agenda Did Not Satisfy Notification Requirements (1997) (GGD/OGC-97-
77R); Regulatory Flexibility Act: Status of Agencies' Compliance (1995)
(T-GGD-95-112).
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Testimony at hearings held by the Committee on Small
Business during the 106th, 107th, 108th, 109th, 110th, 112th
and 113th 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. 2542 which are set
forth in the next section of this report.
IV. Hearings
H.R. 2542 is, with one significant exception, identical to
the bill that passed the House by a vote of 263 to 159. The one
addition is the inclusion of H.R. 585 which was reported out of
the Committee by a vote of 13 to 8. As a result, the findings
of the Committee in the previous Congress for H.R. 527 and H.R.
585 that address the matters set forth in H.R. 2542 are
incorporated herein by reference.\16\ The findings of the
previous Congress were confirmed anew in a hearing by the
Subcommittee on Investigations, Oversight and Regulations
entitled ``Regulating the Regulators Reducing Burdens on Small
Business'' on March 14, 2013.
---------------------------------------------------------------------------
\16\H.R. Rep. No. 112-89, pt. 2, at 13-14 (2011); H.R. Rep. No.
112-288, at 2 (2011), respectively.
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V. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on September 18, 2013 and ordered H.R.
2542 reported, as amended, to the House by a voice vote at 3:22
p.m. During the markup, 19 amendments were offered. Seven
amendments were adopted and 12 were rejected. Disposition of
the amendments is addressed below.
Amendment Number One filed by Mr. Huelskamp (R-KS) requires
the agencies to provide to small entities, upon their request,
panel reports and materials and information provided to the
Chief Counsel for Advocacy within 10 business days of the
request. The amendment was adopted by voice vote at 2:06 p.m.
Amendment Number Two filed by Ms. Meng (D-NY) and Mr.
Barber (D-AZ) would allow an agency to avoid compliance with
the RFA, as amended by H.R. 2542, by certifying that compliance
will delay implementation of a rule and increase the likelihood
that children will be harmed. The amendment was not agreed to
on a recorded vote of 11 yeas and 12 noes at 3:07 p.m.
Amendment Number Three filed by Ms. Meng (D-NY) would
require that initial and final regulatory flexibility analyses
include a description and estimate of the benefits of the
proposed rule to small entities. The amendment was not agreed
to on a recorded vote of 10 yeas and 13 noes at 3:11 p.m.
Amendment Number Four filed by Ms. Meng (D-NY) would
require each agency to estimate the benefits of the proposed
rule and if they exceed the regulation's costs then the agency
does not have to convene a Small Business Advocacy Review
panel. The amendment was not agreed to by a voice vote at 2:16
p.m.
Amendment Number Five filed by Mr. Barber (D-AZ) requires
that an agency conduct outreach to and meaningfully include
women, veteran and socially and economically disadvantaged
small businesses in their plan to gather input on existing
agency rules. The amendment was agreed to by voice vote at 2:18
p.m.
Amendment Number Six filed by Mr. Barber (D-AZ) requires
that an assessment of the economic impact of the proposed rule
on small entities in a panel report includes an assessment of
the proposed rule's impact on startup costs for small entities.
The amendment was agreed to by voice vote at 2:20 p.m.
Amendment Number Seven by Ms. Hahn (D-CA) would require
that a panel include at least one small entity or their
representative that shall benefit from or whose health or
safety would be protected by the proposed rule. The amendment
was not agreed to by voice vote at 2:23 p.m.
Amendment Number Eight by Ms. Chu (D-CA) would allow an
agency to elect not to comply with the RFA, as amended by H.R.
2542, by certifying that compliance with the terms of H.R. 2542
would significantly inhibit the ability of the agency to carry
out its statutory duties. The amendment was not agreed to by
voice vote at 2:25 p.m.
Amendment Number Nine by Ms. Chu (D-CA) would require the
Office of the Chief Counsel for Advocacy to convene a small
business panel on potential regulations that may be promulgated
to implement a trade agreement when Congress approves a trade
agreement. The amendment was not agreed to on a recorded vote
of 9 yeas and 14 noes at 3:13 p.m.
Amendment Number 10 by Mr. Tipton (R-CO) allows small
entities to provide input on the list of rules an agency plans
to review by requiring agencies to solicit public comment on
the list of rules when it is published in the Federal Register
and on the agency's website. The amendment was agreed to by
voice vote at 2:35 p.m.
Amendment Number 11 by Mr. Schrader (D-OR) would strike
section 10 of H.R. 2542 which provides authority to the Small
Business Administration Office of Advocacy to determine size
standards for purposes other than the Small Business Act or the
Small Business Investment Act of 1958. The amendment was not
agreed to on a recorded vote of 11 yeas and 13 noes at 3:15
p.m.
Amendment Number 12 by Ms. Clarke (D-NY) would allow an
agency not to comply with the RFA, as amended by H.R. 2542,
with regard to a rule related to terrorism or disaster
preparedness or response. The amendment was not agreed to on a
recorded vote of 11 yeas and 13 noes at 3:17 p.m.
Amendment Number 13 by Ms. Clarke (D-NY) requires a GAO
study no later than 90 days after the enactment of H.R. 2542
that examines whether the Office of the Chief Counsel for
Advocacy has the capacity and resources to carry out its duties
under H.R. 2542. The amendment was agreed to by voice vote at
2:47 p.m.
Amendment Number 14 by Ms. Clarke (D-NY) would strike
section 2(b) of H.R. 2542 which defines economic impact as
including both direct economic effects and indirect economic
effects that are reasonably foreseeable and result from the
rule. The amendment was not agreed to by voice vote at 2:50
p.m.
Amendment Number 15 by Mr. Murphy (D-FL) and Mr. Barber (D-
AZ) exempts rules that protect the rights of and benefits for
veterans from the definition of ``rule'' in H.R. 2542. The
amendment was agreed to by voice vote at 2:53 p.m.
Amendment Number 16 by Mr. Murphy (D-FL) would allow the
Chief Counsel for Advocacy to take on approval of small
business size standards only if and when the Chief Counsel
certifies that he or she has the funding and personnel to take
on this additional duty. The amendment was not agreed to by
voice vote at 2:56 p.m.
Amendment Number 17 by Mr. Schweikert (R-AZ) clarifies that
indirect economic effects include compliance costs and effects
on revenue. The amendment was agreed to by voice vote at 2:58
p.m.
Amendment Number 18 by Mr. Payne (D-NJ) would have made the
effective date of H.R. 2542 contingent on a certification from
the Chief Counsel for Advocacy that H.R. 2542 will not prevent
any agency from taking appropriate and timely action. The
amendment was not agreed to on a recorded vote of 9 yeas and 15
noes at 3:20 p.m.
Amendment Number 19 by Ms. Velazquez (D-NY) would have
required the Chief Counsel for Advocacy to establish a
compliance schedule setting forth a schedule by which agencies
must comply with section 6 of H.R. 2542 based on the agency's
budgetary resources. The amendment was not agreed to on a
recorded vote of 11 yeas to 13 noes at 3:22 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. 2542
Offered by Mr. Huelskamp of Kansas
Page 19, insert after ``interest.'' on line 22 the following:
``(g) A small entity or a representative of a small entity
may submit a request that the agency provide a copy of the
report prepared under subsection (d) and all materials and
information provided to the Chief Counsel for Advocacy of the
Small Business Administration under subsection (b). The agency
receiving such request shall provide the report, materials and
information to the requesting small entity or representative of
a small entity not later than 10 business days after receiving
such request, except that the agency shall not disclose any
information that is prohibited from disclosure to the public
pursuant to 552(b) of title 5, United States Code.''.
----------
Amendment to H.R. 2542
Offered by Ms. Meng of New York
Page 30, insert after line 14 the following (and conform the
table of contents accordingly):
SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE
LAW.
If the head of an agency certifies that compliance with the
requirements of this Act or the amendments made by this Act
would cause a delay in the implementation of a rule (or a land
management plan) which would result in a significant increase
in the likelihood that children would be harmed, then such
agency may elect to comply with the requirements of chapter 6
of title 5, United States Code, as in effect on the date prior
to the date of enactment of this Act.
----------
Amendment to H.R. 2542
Offered by Ms. Meng of New York
Page 11, line 24, strike ``and''.
Page 12, line 3, insert after ``entities.'' the following:
``(8) describing and estimating the benefits
(including those pertaining to health and safety) of
the proposed rule to small entities.''.
Page 12, line 3, strike ``entities.'' and insert the
following: ``entities; and''.
Page 12, line 12, strike ``and''.
Page 12, insert after line 12 the following (and redesignate
provisions accordingly):
(C) in the first paragraph (6), by striking
``and'' at the end;
Page 12, line 16, insert before the period at the end the
following:
``(8) describing and estimating the benefits
(including those pertaining to health and safety) of
the proposed rule to small entities.''.
Page 12, line 16, strike ``entities.'' and insert ``entities;
and''.
----------
Amendment to H.R. 2542
Offered by Ms. Meng of New York
Page 16, line 22, strike ``information on'' and insert the
following: ``an estimate of''.
Page 17, line 11, insert before ``shall'' the following: ``,
except as provided under subsection (g),''.
Page 19, line 22, insert after ``public interest.'' the
following:
``(g) If the potential beneficial economic impacts (including
those pertaining to health and safety) estimated under
subsection (b)(1)(B) exceed the potential adverse economic
impacts estimated under that subsection, a panel under
subsection (c) may not be convened.''.
----------
Amendment to H.R. 2542
Offered by Mr. Barber of Arizona
Page 21, line 12, insert after ``businesses'' the following:
``(including small business concerns owned and controlled by
women, small business concerns owned and controlled by
veterans, and small business concerns owned and controlled by
socially and economically disadvantaged individuals (as such
terms are defined in the Small Business Act))''.
----------
Amendment to H.R. 2542
Offered by Mr. Barber of Arizona
Page 18, line 15, insert after ``energy'' the following: ``an
assessment of the proposed rule's impact on start-up costs for
small entities,''.
----------
Amendment to H.R. 2542
Offered by Ms. Hahn of California
Page 17, line 13, insert after ``, including at least one
such small entity (or their representative) that shall benefit
from or whose health or safety would be protected by such
proposed rule,''.
Page 18, line 2, insert before the period at the end the
following: ``, and a small entity or a representative of a
small entity (or their representative) that shall benefit from
or whose health or safety would be protected by such proposed
rule''.
----------
Amendment to H.R. 2542
Offered by Ms. Chu of California
Page 30, insert after line 14 the following (and conform the
table of contents accordingly):
SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE
LAW.
If the head of an agency certifies that compliance with the
requirements of this Act or the amendments made by this Act
would significantly inhibit the ability of the agency to carry
out the statutory duties of the agency, then such agency may
elect to comply with the requirements of chapter 6 of title 5,
United States Code, as in effect on the date prior to the date
of enactment of this Act.
----------
Amendment to H.R. 2542
Offered by Ms. Chu of California
Page 19, line 22, insert after ``public interest.'' the
following:
``(g)(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 significant adverse economic impacts or maximize
significant beneficial economic impacts on small entities.''.
----------
Amendment to H.R. 2542
Offered by Mr. Tipton of Colorado
Page 23, line 11, insert after ``plan.'' the following: ``The
agency shall include in the publication a solicitation of
public comments on any further inclusions or exclusions of
rules from the list, and shall respond to such comments.''.
----------
Amendment to H.R. 2542
Offered by Mr. Schrader of Oregon
Beginning on page 26, line 4, strike section 10, and conform
the table of contents accordingly.
----------
Amendment to H.R. 2542
Offered by Ms. Clarke of New York
Page 30, insert after line 14 the following (and conform the
table of contents accordingly):
SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE
LAW.
If the head of an agency certifies that compliance with the
requirements of this Act or the amendments made by this Act
with regard to a rule is necessary to safeguard the United
States and its territories in regard to an act or potential act
of terrorism or to respond or prepare to respond to a disaster,
then such agency may elect not to comply with the requirements
of this Act or the amendments made by this Act, and to comply
with the requirements of chapter 6 of title 5, United States
Code, as in effect on the date prior to the date of enactment
of this Act.
----------
Amendment to H.R. 2542
Offered by Ms. Clarke of New York
Page 30, insert after line 14 the following:
SEC. 13. GAO REPORT.
Not later than 90 days after the date of enactment of this
Act, the Comptroller General of the United States shall
complete and publish a study that examines whether the Chief
Counsel for Advocacy of the Small Business Administration has
the capacity and resources to carry out the duties of the Chief
Counsel under this Act and the amendments made by this Act.
----------
Amendment to H.R. 2542
Offered by Ms. Clarke of New York
Page 3, strike lines 1 through 14, and redesignate provisions
accordingly.
----------
Amendment to H.R. 2542
Offered by Mr. Murphy of Florida
Page 2, line 10, insert after ``does not include'' the
following: ``a rule pertaining to the protection of the rights
of and benefits for veterans or''.
----------
Amendment to H.R. 2542
Offered by Mr. Murphy of Florida
Page 27, insert after line 20 the following:
(e) Effective Date.--Notwithstanding any other provision of
this Act, this section, and the amendments made by this
section, shall take effect only beginning on the date that the
Chief Counsel for Advocacy of the Small Business Administration
submits to the Committee on the Judiciary of the House of
Representatives, the Committee on the Judiciary of the Senate,
the Committee on Small Business of the House of
Representatives, and the Committee on Small Business and
Entrepreneurship of the Senate a certification that the Office
of Advocacy has sufficient funding and personnel to carry out
the additional duties and responsibilities provided for in this
section and the amendments made by this section.
----------
Amendment to H.R. 2542
Offered by Mr. Schweikert of Arizona
Page 3, line 10, insert after ``indirect economic effect''
the following: ``(including compliance costs and effects on
revenue)''.
----------
Amendment to H.R. 2542
Offered by Mr. Payne of New Jersey
Page 30, insert after line 14 (and conform the table of
contents accordingly) the following:
SEC. 13. EFFECTIVE DATE.
Nothing in this Act or the amendments made by this Act may
take effect until the date on which the Chief Counsel for
Advocacy of the Small Business Administration submits a
certification to Congress that, in the determination of Chief
Counsel, this Act and the amendments made by this Act will not
prevent any agency from taking appropriate and timely agency
action.
----------
Amendment to H.R. 2542
Offered by Ms. Velazquez of New York
Page 19, line 22, insert after ``public interest.'' the
following:
``(g) Agencies may defer compliance with subsections (b)
through (f) of this section, as amended by the Regulatory
Flexibility Improvements Act of 2013. The Chief Counsel of the
Office of Advocacy shall establish a compliance schedule
setting forth during which fiscal years agencies shall become
compliant with section 6 of the Act. The Chief Counsel shall
base that compliance schedule on the budgetary resources
available to the agencies and the extent to which the rules of
such agencies have affected small entities.''.
----------
VII. Section-by-Section Analysis of H.R. 2542
Section 1. Short title
Designates the bill as the ``Regulatory Flexibility
Improvements Act of 2013.''
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. 2542
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.\17\ 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. Finally, any
rule that pertains to the protection of the rights and benefits
for veterans is exempted from the definition of rule.
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\17\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 (Commission) 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,\18\ that the use
of indirect effects by Senator Culver 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.\19\
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\18\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.
\19\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).
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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.\20\ 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.
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\20\If a state does not develop a state implementation plan, the
EPA is authorized to develop the implementation plan.
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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.\21\ 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 E.O. 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
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.
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\21\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.
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Section 303(d) of the Clean Water Act, 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.''\22\ 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 E.O. 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.
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\22\There are Indian tribes with populations of less than 50,000.
EPA's conclusion that only large governmental entities were being
regulated was wrong.
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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.\23\ 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.
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\23\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.
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To the extent that these rules are significant under E.O.
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),\24\ the term ``effects'' means:
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\24\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.
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(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 farther removed in distance, but 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 Phone
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,\25\ 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.\26\
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\25\CEQ regulations define effects of major federal actions to
include economic and social impacts. 40 C.F.R. 1508.8.
\26\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.
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Section 2(b) adopts a definition of ``economic effect''
that parallels the definition of ``effects'' 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. Furthermore, the definition clearly
states that both compliance costs and effects on revenue are
indirect economic effects.
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 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.\27\ 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.
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\27\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. Sec. 40 C.F.R. 1502.23.
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This interpretation is incorrect, but it is easy to
comprehend how agencies reached the conclusion based on 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\28\ because
small entities (except in very unusual circumstances) will
represent the vast majority of entities subject to a particular
regulation.\29\
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\28\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.
\29\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.
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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 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.\30\ GAO also reached the
same conclusion.\31\ Nevertheless, the Forest Service and BLM
maintain that their resource management plans are not
rules.\32\ 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.\33\
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\30\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).
\31\GAO, Congressional Review Act: Application to the Tongass
National Forest Land and Resource Plan 2 (1997) (T-OGC-97-54).
\32\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.
\33\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 553 of the APA or some other statute. Section 553 of the
APA exempts interpretative rules from the notice and comment
requirements. The 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.\34\
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\34\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).
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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.\35\ This has
been a longstanding position of the Treasury Department and the
IRS.
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\35\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 190 (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 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 Reference Servs.
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. 2542 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. 2542 also
consider the IRS interpretation to violate the letter and the
prophylactic intent of SBREFA.\36\ 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, would not
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.
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\36\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).
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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, and directives
from Presidents Bush and Obama have not changed the
intransigent position of the IRS or Treasury Department on RFA
compliance. H.R. 2542 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.\37\ 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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\37\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).
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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 statues 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 to 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,\38\ 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\39\ to the terms ``collection of information'' and
``recordkeeping requirement.''
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\38\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.
\39\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,\40\ 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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\40\The Small Business Administrator determines size based on an
examination of small businesses on a national basis. 13 C.F.R.
Sec. 121.102(b).
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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.\41\ The second interpretation,
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.\42\ This
interpretation of EAJA has been rejected by the D.C., Fifth,
and Seventh Circuits.\43\ 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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\41\National Truck Equipment Ass'n v. NHTSA, 972 F.2d 669, 674 (6th
Cir. 1992).
\42\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 (1998) (collecting cases in which federal government argued for
aggregation).
\43\National Ass'n of Manufacturers v. DOL, 159 F.3d 597, 602 (D.C.
Cir. 1998) (discussing circuit split).
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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.\44\ Since the small organization does
not control or have direct access to the net worth of its
members, it should be judged on solely on its resources and not
those of its members or donors.
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\44\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.
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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. 2542. 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.\45\
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\45\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. 2(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. Expansion of report of regulatory agenda
Section 602 of the current RFA requires each agency to
publish in the Federal Register a regulatory flexibility agenda
each April and October. By alerting small entities to potential
consequences of upcoming rules, the authors of the legislation
expect greater involvement of small entities in the rulemaking
process ultimately leading to regulations that achieve agency
objectives without unnecessary burdens. These agendas describe
which rules an agency expects to issue in the near future that
are likely to have a significant economic impact on a
substantial number of small entities. The agencies are required
to briefly describe the rules; however, in their current form,
the regulatory flexibility agendas provide almost no insight
into the potential impacts of the rules on small entities.
Thus, the regulatory flexibility agendas are of little use to
most small entities.
Section 3 expands the information required to be provided
in the regulatory flexibility agendas thereby increasing
transparency and providing small entities with a better
understanding of the potential impacts of a rule an agency
expects to propose or promulgate. Each agency is required to
describe the sector of the North American Industrial
Classification System that is primarily affected by the rules.
Section 3 also requires the agencies and the Office of Advocacy
to publish plan language summaries of the information in the
agendas on their websites.
Section 4. 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 that 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 the 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 is
confirmed by the D.C. Circuit adoption of the parallelism
finding.\46\
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\46\National Ass'n of Homebuilders v. United States Army Corps of
Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
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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 Strycker's 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 resources have been committed or the die
otherwise cast.'' Robertson v. Methow Valley Citizens Council,
490 U.S. 332, 349 (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,\47\ 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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\47\Courts have found violations of the RFA when an agency
incorrectly certified a rule rather than preparing a regulatory
flexibility analysis. E.g., Harlan 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:\48\ 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 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.
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\48\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, 418-0919 (1971).
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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 4 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.
2542 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 4(a) amends 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).\49\ H.R. 2542 makes a number of changes and
additions to these analytical requirements as will be outlined
below.
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\49\Nothing in H.R. 2542 affects the requirements in the IRFA under
Sec. 603(c).
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H.R. 2542 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.\50\
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\50\This also comports with the change made by the Small Business
Jobs Act of 2010 in which the reference to term ``succinct'' were
deleted from Sec. 604. Pub. L. No. 111 09240, 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. 4(a) strikes the term ``where feasible'' in its
redraft of Sec. 603(b)(3).\51\
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\51\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 musculo-skeletal
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)
addressed 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 4(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 4(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 4(a) adds a
new paragraph (6) to Sec. 603(b) that requires an evaluation of
the cumulative impact or an explanation why such evaluation 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. 2542, 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
regulatory 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,\52\ 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. 4(a) of H.R. 2542
adds a new paragraph (7) to Sec. 603(b) of the RFA by requiring
agencies to describe any disproportionate impact on small
businesses\53\ or a specific class of small businesses.
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\52\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).
\53\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 4(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.\54\ 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, 4(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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\54\In addition to removing the term ``succinct'' as already noted,
see note 50, supra, the Small Business Jobs Act of 2010, also removed
the term ``summary'' from Sec. 604 of the RFA. Pub. L. No. 111 09240,
Sec. 1601, 124 Stat. 2504, 2551.
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The changes made by Sec. 4(b) also comports 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. 5 of
H.R. 2542, 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
4(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
(CFTC) or the Securities and Exchange Commission (SEC)) 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. 4(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.\55\
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\55\H.R. 2542 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
4(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\56\ in the
same way that a finding of no significant environmental impact
(FONSI) eliminates an agency's preparation of an environmental
impact statement.\57\ After the enactment of the RFA in 1980,
agencies frequently issued boilerplate certifications that
merely reiterated the language of Sec. 605(b).\58\ 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.\59\
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\56\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.
\57\40 C.F.R. Sec. 1508.13; see Grand Canyon Trust v. FAA, 290 F.3d
339, 342 (D.C. Cir. 2002).
\58\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).
\59\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 4(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.\60\ 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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\60\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 4(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.\61\ Section 4(e) amends
Sec. 607 by making quantification of impacts the default in
developing an assessment of impacts on small entities.
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\61\The amendment set forth in Sec. 4(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.\62\
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\62\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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New subsection (2) 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 (2) 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.
Section 5. 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. 2542
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.\63\ 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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\63\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.\64\ The witnesses were
responding to the D.C. Circuit's decision in American Trucking
Ass'n 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).\65\
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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\64\Improving and Strengthening the Office of Advocacy: Hearing
before the Committee on Small Business, 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).
\65\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. Granting the
Chief Counsel's interpretation of the RFA deference
substantially will change the balance between the Chief Counsel
and the agencies in the development of 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. 11,991 (May 24, 1977), reprinted in 42 Fed. Reg. 26,967
(May 25, 1977). Even though Congress, in NEPA, did not delegate
to CEQ any power to issue regulations,\66\ the regulations
developed by it are accorded substantial deference by the
courts. Robertson v. Methow Valley Citizens Ass'n, 490 U.S.
332, 356 (1989).
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\66\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. 2542 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.\67\
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\67\ 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.\68\
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\68\ 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 6. Procedures for gathering comments
Section 609 of the RFA requires three federal agencies, the
Occupational Safety and Health Administration (OSHA), the
Environmental Protection Agency (EPA) and the Consumer
Financial Protection Bureau (CFPB or Bureau), 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.\69\ 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.
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\69\ The panels are referred to both as Small Business Advocacy
Review panels and SBREFA panels. SBREFA created the requirement for EPA
and OSHA. The CFPB was added to the list of agencies that must convene
panels in the Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, Sec. 1100G, 124 Stat. 1376, 2112 (2010).
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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 609(b) makes a valuable contribution to agency
understanding of the impacts of its proposals on small
entities.\70\ 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. 2542 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.
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\70\At a Committee hearing on CFPB's compliance with the RFA, the
CFPB Director testified that the Small Business Advocacy Review panels
helped the Bureau to shape its proposals, been a collaborative process
between small entities and the Bureau, and have proven to be valuable
to the CFPB. Know Before You Regulate: The Impact of CFPB Regulations
on Small Business, 112th Cong., 2d Sess. (2012) 4 (statement of
Director Richard Cordray).
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Section 6 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, OSHA and CFPB 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
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 6 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. 2542 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.\71\
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\71\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.
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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.\72\ 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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\72\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.
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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. 2542'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 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. 2542 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. The assessment also
is required to discuss the proposed rule's impact on the cost
that small entities pay for energy and on start-up costs for
small entities. 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.
Finally, new Sec. 609(g) enhances transparency in the
rulemaking process by providing small businesses with access to
panel reports and materials and information used to develop a
proposed rule. It allows a small entity or a representative of
a small entity to request that an agency provide a copy of a
panel report and all materials prepared or utilized in
developing the proposed rule that were provided by the agency
to the Chief Counsel for Advocacy. The agency is required to
provide the report, materials and information to the requesting
small entity or its representative within 10 business days. Any
proprietary information utilized by the agency that is not
subject to disclosure under FOIA shall not be subject to
disclosure under this section.
Section 7. 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.\73\ 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. 2542 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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\73\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. The plan must detail how
an agency will conduct outreach to and gather input from small
businesses on existing rules in order to periodically review
its regulations pursuant to Sec. 610. In addition to
publication of the plan in the Federal Register, agencies are
required to place these plans on their websites.\74\
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\74\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 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 with the
periodic review provision will be based on the regulations
promulgated by the Chief Counsel pursuant to the authority of
amended 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(e)(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(d). These amendments to the
scope of review also comport with those made to the FRFA under
Sec. 4 of H.R. 2542.
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 each 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(f) 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. The agency is also required
to solicit and respond to comments from the public on any rules
that should have been included on or excluded from the list or
rules to be reviewed. Utilization of the Internet\75\ should
maximize input from affected small entities. The Committee also
requires publication in 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\76\ prior to the start of the next calendar year.
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\75\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.
\76\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. 2542 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 8. Judicial review of compliance with the RFA
Section 8(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 8(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).\77\ 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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\77\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.\78\ 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.\79\ 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. 8(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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\78\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 the 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.
\79\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. 555, 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.\80\ 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.
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\80\See National Ass'n of Homebuilders v. United States Army Corps
of Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
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The amendments made in Sec. 8(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
remain 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 8(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 8(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. 5 of H.R. 2542 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, 603, 604,
605(b), 609, and 610 of the RFA.
Section 9. Jurisdiction of Court of Appeals for challenges to rules
implementing RFA
Section 9 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,
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. 9(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
9(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 10. Establishment and approval of Small Business Concern Size
Standards by the Chief Counsel for Advocacy
In 1992, Senators Dale Bumpers (D-AR) and Malcolm Wallop
(R--WY) were incensed at actions taken by the Nuclear
Regulatory Commission (NRC) to increase fees for byproduct
users of fissile material under the Atomic Energy Act. The NRC
did not perform an adequate assessment of these fee increases
on small entities as required by the RFA. In establishing these
fees, the NRC utilized a different set of definitions than had
been set by the SBA under Sec. 3 of the Small Business Act.
Senators Bumpers and Wallop sponsored an amendment to the Small
Business Act requiring that federal agencies wishing to adopt a
definition of small business that varied from those promulgated
by the Small Business Administration (SBA) pursuant to its
Sec. 3 authority must issue the new size standard for notice
and comment and then obtain approval of the Administrator of
the SBA.
While the Administrator has significant acumen in setting
size standards, that expertise is limited to the use of size
standards for purposes of the Small Business Act and Small
Business Investment Act of 1958. As a result, the Administrator
is not the proper official to determine size standards for
purposes of other agencies' regulatory activities. The
Administrator is not fluent with the vast array of federal
regulatory programs, is not in constant communication with
small entities that might be affected by another federal
agency's regulatory regime, and does not have the analytical
expertise to assess the regulatory impact of a particular size
standard on small entities. Furthermore, the Administrator's
standards are: very inclusive, not developed to comport with
other agencies' regulatory regimes, and lack sufficient
granularity to examine the impact of a proposed rule on a
spectrum of small businesses. When other agencies have sought
the approval of the Administrator under the amendments made to
Sec. 3 of the Small Business Act by Senators Bumpers and
Wallop, the Office of Size Standards consulted with personnel
in the Office of Advocacy on the rectitude of an agency's
definition of small business that varied from those set forth
in the SBA's regulations interpreting the Small Business Act.
Given this rationale, it is appropriate to split the size
standard functions in the Small Business Act. Section 10 of
H.R. 2542 provides that the Administrator shall establish size
standards to carry out the purposes of the Small Business Act
or Small Business Investment Act of 1958. Section 10 then
delegates the authority to approve a size standard for purposes
of all other statutes to the Chief Counsel. The Chief Counsel
is only entitled to rule on size standards for definitions of
small business concerns if the agency issuing the regulation
does not adopt a size standard approved by the Administrator
for carrying out the purposes of the Small Business Act or
Small Business Investment Act. This will constrain the number
of size standard decisions by the Chief Counsel and allow
agencies to utilize already established standards rather than
have to go through the Chief Counsel for approval of each
standard. If a federal agency adopts, as a definition of small
business, a size standard approved by the Administrator, the
federal agency need not seek approval of the Chief Counsel
pursuant to Sec. 3 of the Small Business Act as amended by H.R.
2542. The determination of a size standard for other regulatory
purposes has no effect on the requirements of an agency that
wishes to develop a definition of small business as set forth
in Sec. 601(3) of the RFA. Thus, there are two different size
standard approvals that the Chief Counsel may be forced to
make: 1) the size determination for analyzing the proposed and
final rule pursuant to the RFA; and 2) the definition of a
small business that may be included in the text of the final
rule.
Nothing in the legislation requires that the agency
promulgating a regulation must utilize the size standards in
its rules for purposes of complying with the RFA. However, it
would be logical for the agency to explain the rationale for
adopting different definitions in the statement of basis and
purpose as well as any FRFA or certification. To be sure, an
agency may use a different definition of small business for
purposes of compliance with the RFA if the agency adopts the
Administrator's definition of small business in the rule at
issue.
An alternative to the approach taken in H.R. 2542 would be
for the Administrator to make all size standard determinations
with the concurrence of the Chief Counsel on those size
standards developed to implement statutes other than the Small
Business Act or Small Business Investment Act. Adoption of that
regulatory regime could lead to the anomalous result of the
Chief Counsel and Administrator making different determinations
on the same size standard. Under Sec. 601 of the RFA, the
default size standard for agency compliance with the RFA are
the ones adopted by the Administrator and set forth in Part 121
of Title 13, Code of Federal Regulations. However, the RFA
permits the agency to utilize a different standard in complying
with the RFA after consultation with the Chief Counsel for
Advocacy. The agency then uses that standard for its initial
and final regulatory flexibility analyses which results in the
agency adopting a small business exemption identical to the
definition of a small business in its regulatory flexibility
analyses. Since that definition is different than the one
adopted by the Administrator, the agency must seek the approval
of the Administrator. If the Administrator disapproves that
standard, then a small business exemption that the Chief
Counsel and the agency thought was appropriate would not be put
into effect.\81\ H.R. 2542 avoids these potentially anomalous
results by vesting the Chief Counsel with the sole authority to
make size decisions for the purposes of other regulatory
programs.
---------------------------------------------------------------------------
\81\This could be particularly problematic if the size standard
adopted by the agency with the concurrence of the Chief Counsel is
larger than the size standard promulgated by the Administrator. The
Administrator might feel such an expansion of the term ``small
business'' inappropriate.
---------------------------------------------------------------------------
Section 10(c) makes conforming changes in Sec. 3(a)(3). The
Chief Counsel is added to ensure that size standards vary from
industry to industry as is appropriate given the context of the
rulemaking for which the Chief Counsel has been asked to
approve a definition of small business.
The Chief Counsel's decision on size standards should be
rational and subject to judicial review. Section 10(d)
authorizing judicial review eliminates litigation over whether
Congress intended a private right of action under Cort v. Ash,
422 U.S. 66 (1975), or whether the decision was left to the
discretion of the agency pursuant to Heckler v. Chaney, 470
U.S. 821 (1985).
To be sure, the Office of Advocacy could be placed in the
odd circumstance of being a respondent in an action in which it
is defended by the Department of Justice while at the same time
filing an amicus brief against the Department of Justice on
whether the agency complied with the RFA. Given the fact, the
Chief Counsel's ``intervention'' in the RFA compliance aspect
of the case is as an amicus rather than as a party, the
Committee does not believe the odd litigation stance will prove
problematic to the court reviewing the case or the Department
of Justice's defense of the Chief Counsel. The odd alignment of
defendants and friends of the court should not complicate
judicial review because courts often face challenges in which
one party challenging an agency action may agree with the
agency in opposition to a stance taken by another party
challenging the same rules. Despite the potential alignment of
interests, the Department of Justice should be able to fulfill
its obligations to defend the Chief Counsel on the size
standard decision\82\ even though the Chief Counsel may be
filing an amicus brief in opposition to the Justice
Department's other agency defendant. Finally, given the nature
of the claims and the record on review, the Department of
Justice's defense of the action will reveal client confidences
concerning the development of the rule to a ``party'' opposed
to the rule.
---------------------------------------------------------------------------
\82\It is very unlikely that the Chief Counsel will condemn an
agency's compliance with the RFA because of a size standard used in the
regulation was approved by the Chief Counsel. That actually would be
the height of irrational decisionmaking.
---------------------------------------------------------------------------
Nothing in these changes made by H.R. 2542 are designed to
authorize a specific challenge to the size determination made
by the agency and the Office of Advocacy pursuant to
Sec. 601(3). To the extent that a party believes that the size
standard utilized in complying with the RFA was unreasonable,
the adversely affected small entity may challenge the agency's
compliance with the RFA as set forth in Sec. 611.
The changes made in H.R. 2542 will not represent a
significant strain on the resources of the Office of the Chief
Counsel for Advocacy. According to data from the SBA, there
have been 27 requests by other agencies under the authority of
amended section 3 of the Small Business Act since the date of
amendment in 1992. That works out to between one to two
requests per year. Even that may be an overestimate since the
vast majority of requests were made by the Federal
Communications Commission to implement its authority to auction
spectrum under Sec. 309(j) of the Communications Act of 1934,
47 U.S.C. Sec. 309(j). Given that the number of such auctions
will continue to diminish as the government runs out of
spectrum to auction, the Office of the Chief Counsel for
Advocacy should have sufficient resources to handle the
authority transferred to it under this legislation.
Section 11. Clerical amendments
Section 11 contains appropriate clerical amendments needed
to make the United States Code consistent with the changes
sought by the Committee.
Section 12. Agency preparation of guides
Section 212(a)(5) of SBREFA requires agencies to prepare
compliance guides for any rule for which a FRFA was prepared.
Under the existing law, agencies may consult with small
entities in the development of these guides. Section 12
requires agencies to solicit input from affected small entities
or associations of affected small entities in the development
of compliance guides.
Since small entities represent most of the entities subject
to regulations, soliciting input from small entities in
preparing compliance guides will help agencies to develop
better guides. Small entities can identify potential compliance
problems with a regulation in advance so an agency is able to
address those problems in the compliance guide. This
collaborative process will provide the agency with the best
opportunity for obtaining full compliance from small entities
by ensuring that the compliance guide is comprehensive and
raises appropriate awareness of regulatory compliance
requirements.
Section 13. GAO Report
Section 13 requires the GAO to examine whether the Chief
Counsel for Advocacy of the Small Business Administration has
the capacity and resources to carry out its duties under H.R.
2542. The GAO's study must be completed and published not later
than 90 days after H.R. 2542's enactment.
VIII. Congressional Budget Cost Estimate
H.R. 2542 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. 2542 would cost $45
million over the 2014-2018 period subject to appropriation of
the necessary amounts. Pay-as-you-go procedures apply to this
legislation because it could affect direct spending by agencies
not funded through annual appropriations.
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 18, 2013.
Hon. Sam Graves,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Buget Office has
prepared the enclosed cost estimate for H.R. 2542, the
Regulatory Flexibility Improvements Act of 2013.
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. 2542--Regulatory Flexibility Improvements Act of 2013
Summary: H.R. 2542 would amend the Regulatory Flexibility
Act (RFA) to expand the number of rules covered by the act and
to require agencies to perform additional analysis of
regulations that affect small businesses. The legislation also
would provide new authorities to the Small Business
Administration's (SBA's) Office of Advocacy to intervene and
provide support for agency rulemaking. Finally, H.R. 2542 would
require the Government Accountability Office (GAO) to report on
the implementation of the legislation.
CBO estimates that implementing H.R. 2542 would cost $45
million over the 2014-2018 period, 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. CB0 estimates,
however, that any net increase in spending by those agencies
would not be significant. Enacting H.R. 2542 would not affect
revenues.
H.R. 2542 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. 2542 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 funding for agencies that
issue regulations affecting small businesses.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------------
2014 2015 2016 2017 2018 2014-2018
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level................. 5 9 12 12 12 50
Estimated Outlays............................. 4 7 10 12 12 45
----------------------------------------------------------------------------------------------------------------
Basis of estimate: For this estimate, CBO assumes that the
legislation will be enacted near the start of calendar year
2014, that the necessary amounts will be appropriated each
year, and that spending will follow historical patterns for
similar activities.
CBO is unaware of any comprehensive information on the
current level 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 rules, regardless of size, are
promulgated by the Departments of Transportation, Homeland
Security, and Commerce, and the Environmental Protection Agency
(EPA). Most major rules (those with an estimated economic
impact on the economy of more than $100 million per year) are
issued by the Departments of Health and Human Services and
Agriculture and EPA.
H.R. 2542 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 include an
examination of indirect economic effects on small businesses
and a more detailed analysis of the possible economic
consequences of the rule for small businesses and allow the
analysis to be provided to a requesting small business. The
legislation defines indirect economic effects as any impact
that is reasonably foreseeable. The legislation also would
require agencies to prepare reports on the cumulative economic
impact on small businesses of new and existing regulations.
Implementing H.R. 2542 would increase the amount of
regulatory analysis that agencies would need to prepare, and it
would expand the role of the SBA's Office of Advocacy and the
Office of Management and Budget's 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 agencies
indicates that the new requirements would increase the cost to
issue a few hundred of the thousands of federal regulations
issued annually. Based on that information, CBO estimates that
administrative costs in some regulatory agencies, the SBA's
Office of Advocacy, and OIRA would increase by a total of about
$12 million annually, subject to the availability of
appropriated funds. We expect that it would take about three
years to reach that level of effort. The GAO report would cost
less than $500,000 to complete in fiscal year 2014.
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. 2542 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. 2542
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 September 5, 2013, CBO
transmitted a cost estimate for H.R. 2542 as ordered reported
by the House Committee on the Judiciary on July 31, 2013. Both
versions of the bill contain similar provisions regarding
amending the Regulatory Flexibility Act and the estimated costs
are the same.
Estimate prepared by: Federal Spending: Matthew Pickford
and Susan Willie; Impact on State, Local, and Tribal
Governments: Melissa Merrell; Impact on the Private Sector:
Paige Piper/Bach.
Estimate approved by: Theresa A. Gullo, Deputy Assistant
Director for Budget Analysis.
IX. Unfunded Mandates
H.R. 2542 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 exhibits a serious
misunderstanding of the rulemaking process. Consequently, the
cost estimate significantly overestimates the cost of complying
with the new requirements of H.R. 2542.
First, the Congressional Budget Office admits that there
are no credible studies on the actual cost of writing federal
regulations. The 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. 6
of H.R. 2542. Under H.R. 2542, the prepublication panel
requirement, which currently only applies to CFPB, EPA and
OSHA, would be extended to all agencies. The CBO asserts that
federal agencies will be required to use ``panels of experts to
evaluate regulations.'' This misstates who participates in the
prepublication panel process. The participants in the panel
process include small business representatives and a panel of
government employees which includes a representative from the
covered agency, a representative from the Office of Information
and Regulatory Affairs and a representative of the Office of
Advocacy. The prepublication panel requirement is an outreach
tool that allows agencies to get input on regulatory proposals
that are under development from affected small businesses.
Agencies identify small businesses that will affected by the
regulatory proposal and small businesses provide the agency
with recommendations on how to reduce adverse or increase
positive consequences of the proposed rule on small businesses.
The small business recommendations must be included in a report
that is published along with the proposed rule. Agencies
already have extant procedures to gather input from interested
parties on regulations according to the plans developed in
response to E.O. 13,563 and executed pursuant to E.O. 13,610.
For example, at a May 8, 2013 hearing before the Committee, the
Under Secretary for Policy of the Department of Transportation
testified that they have been conducting outreach through
Department-wide public meetings and utilizing existing advisory
committees to engage with the public and address small business
concerns. The prepublication panel requirement simply codifies
existing outreach procedures and ensures that the input of
small businesses on a particular regulatory proposal is
memorialized. Thus, the Committee does not believe that the
type of outreach required adds any cost to the process of
writing regulations since agencies are already conducting
outreach pursuant to E.O.'s 13,563 and 13,610. Furthermore, the
Chief Counsel for Advocacy analyzes proposed rules that affect
small businesses already. Preparing the panel 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 examine the
indirect effects of significant rules, conduct more detailed
analyses of the possible economic consequences of significant
rules and evaluate the cumulative economic impact of rules on
small businesses under H.R. 2542. While the Congressional
Budget Office suggests the fact that these requirements will
increase costs, the Committee disputes that conclusion.
Agencies are already required to estimate indirect effects for
and conduct an assessment of the costs and benefits of
regulations that are subject to the strictures of E.O. 12,866.
Agencies also already are estimating the indirect effects,
including economic impacts, of some of their regulations to
comply with the National Environmental Policy Act. Furthermore,
agencies are already required to take into consideration
cumulative effects of regulations under E.O. 13,610. Thus, the
Committee believes that there will be significant overlap
between the regulatory analysis already done by agencies and
what is required for H.R. 2542. This substantially undermines
the rationale for this portion of CBO's cost estimate.
Fourth, agencies (other than independent collegial bodies)
are reviewing their existing regulations to comply with E.O.'s
13,563 and 13,610. Agencies published their final retrospective
review plans in August 2011 to comply with E.O. 13,563.
Subsequently, E.O. 13,610, which supplemented E.O. 13,563, was
issued to institutionalize regular assessment of significant
regulations. In response to a question from Chairman Graves at
a September 21, 2011 hearing on implementation of E.O. 13,563,
then Office of Information and Regulatory Affairs Administrator
Sunstein stated that the agencies could conduct the review of
all existing federal regulations, including outreach to the
regulated community, under current budgetary constraints. The
current Office of Information and Regulatory Affairs
Administrator was asked, in a question for the record following
a July 24, 2013 hearing, to explain how agencies are both doing
their existing work and conducting retrospective reviews.
Administrator Shelanski responded by stating that, ``agencies
are prioritizing their regulatory work based upon their
respective agency goals and priorities, as well as guidance
provided by the President's Executive Orders.'' If agencies are
capable of conducting retrospective reviews within their
existing budgetary constraints and able to prioritize the
reviews along with their goals and priorities, there should not
be a significant cost to comply with the requirements of H.R.
2542, i.e. agencies can comply with the new analytical
requirements within existing budget constraints.
For the foregoing reasons, the Committee does not adopt the
cost estimate provided by the Congressional Budget Office and
believes that agencies will be able to comply with the
requirements of H.R. 2542 by utilizing the procedures and
analysis that is already used to comply with Executive Orders
12,866, 13,563, and 13,610. 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. 2542 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. 2542 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 Statement
H.R. 2542 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. 2542 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. Statement of Duplication of Federal Programs
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, no provision of H.R. 2542 establishes or reauthorizes a
program of the federal government known to be duplicative of
another Federal program, a program that was included in any
report from the GAO pursuant to Section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
XVII. Disclosure of Directed Rule Makings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, H.R. 2542 requires the Chief Counsel for Advocacy of the
Small Business Administration to develop and issue regulations
related to RFA compliance. The Chief Counsel is required, after
an opportunity for notice and comment, to issue regulations not
later than 270 days after the date of enactment of the
legislation to govern federal agency compliance with Chapter 6
of Title 5 of the United States Code. This ensures, as stated
elsewhere in the report, that agencies implement the RFA in a
consistent manner.
XVIII. 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. 2542 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.
XIX. 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 pertaining to the
protection of the rights of and benefits for veterans
or 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 (including
compliance costs and effects on revenue) 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 the 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]
Sec. 605. Incorporations by reference and certifications
[(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.]
(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
2013, 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, an assessment of the proposed rule's
impact on start-up costs for small entities, 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.
(g) A small entity or a representative of a small entity may
submit a request that the agency provide a copy of the report
prepared under subsection (d) and all materials and information
provided to the Chief Counsel for Advocacy of the Small
Business Administration under subsection (b). The agency
receiving such request shall provide the report, materials and
information to the requesting small entity or representative of
a small entity not later than 10 business days after receiving
such request, except that the agency shall not disclose any
information that is prohibited from disclosure to the public
pursuant to section 552(b) of this title.
* * * * * * *
[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 2013, 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 2013 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 2013 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 (including small business concerns owned and
controlled by women, small business concerns owned and
controlled by veterans, and small business concerns owned and
controlled by socially and economically disadvantaged
individuals (as such terms are defined in the Small Business
Act)) 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, territorial, 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. The agency shall include in the publication a
solicitation of public comments on any further inclusions or
exclusions of rules from the list, and shall respond to such
comments. 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 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.]
* * * * * * *
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.
* * * * * * *
----------
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.
* * * * * * *
----------
SMALL BUSINESS ACT
* * * * * * *
SEC. 3. DEFINITIONS.
(a) Small Business Concerns.--
(1) * * *
(2) Establishment of size standards.--
[(A) In general.--In addition to the criteria
specified in paragraph (1), the Administrator
may specify detailed definitions or standards
by which a business concern may be determined
to be a small business concern for the purposes
of this Act or any other Act.]
(A) In general.--In addition to the criteria
specified in paragraph (1)--
(i) the Administrator may specify
detailed definitions or standards by
which a business concern may be
determined to be a small business
concern for purposes of this Act or the
Small Business Investment Act of 1958;
and
(ii) the Chief Counsel for Advocacy
may specify such definitions or
standards for purposes of any other
Act.
* * * * * * *
(C) Requirements.--Unless specifically
authorized by statute, no Federal department or
agency may prescribe a size standard for
categorizing a business concern as a small
business concern, unless such proposed size
standard--
(i) * * *
* * * * * * *
[(iii) is approved by the
Administrator.]
(iii) except in the case of a size
standard prescribed by the
Administrator, is approved by the Chief
Counsel for Advocacy.
(3) Variation by industry and consideration of other
factors.--When establishing or approving any size
standard pursuant to paragraph (2), the Administrator
or Chief Counsel for Advocacy, as appropriate shall
ensure that the size standard varies from industry to
industry to the extent necessary to reflect the
differing characteristics of the various industries and
consider other factors deemed to be relevant by the
Administrator or Chief Counsel for Advocacy.
* * * * * * *
(9) Judicial review of standards approved by chief
counsel.--In the case of an action for judicial review
of a rule which includes a definition or standard
approved by the Chief Counsel for Advocacy under this
subsection, the party seeking such review shall be
entitled to join the Chief Counsel as a party in such
action.
* * * * * * *
----------
SECTION 212 OF 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.
* * * * * * *
XX. Dissenting Views
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 rules 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
already been very successful, calling into question the need
for additional RFA legislation in the first place. During FY
2012, the Office of Advocacy claims that efforts undertaken
through the RFA yielded nearly $2.4 billion in foregone
regulatory costs for small businesses.\2\ Such results included
regulatory savings across a wide-range of agencies including
the Department of Labor, Department of Transportation,
Environmental Protection Agency, and the Small Business
Administration (SBA). It is notable that significant savings
were achieved at a considerable number of agencies not subject
to the SBAR panel process.
---------------------------------------------------------------------------
\2\Office of Advocacy, U.S. Small Business Administration, ``Report
on the Regulatory Flexibility Act for FY 2012,'' at 3 (Washington,
D.C., Feb. 2013).
---------------------------------------------------------------------------
While the success of RFA is indisputable, the Committee has
nevertheless pursued additional legislation in this area. In
the 112th Congress, the Committee and the full House passed
H.R. 527, the Regulatory Flexibility Improvements Act of 2011,
but it failed to become public law. H.R. 2542, the Regulatory
Flexibility Improvements Act of 2013, incorporates the House-
passed version of H.R. 527 from the 112th Congress and combines
it with H.R. 585, the Small Business Size Standard Flexibility
Act of 2011, also passed by the Committee during the 112th
Congress. Identical to its predecessor legislation, H.R. 2542
gives extensive new powers to the Office of Advocacy, imposes
substantial requirements across all federal agencies, and does
so at significant cost to the taxpayer.
IMPACT OF LEGISLATION
H.R. 2542 makes far-reaching changes to the Regulatory
Flexibility Act (RFA) and its implementation. In doing so, the
legislation makes it significantly easier for opponents to stop
and delay the issuance of regulations throughout the
government. As a result, federal agencies will face
considerable obstacles in protecting human health, worker
safety, consumers, and the environment.
It is also important to recognize that the Congressional
Budget Office (CBO) scored the cost of H.R. 2542 at $45 million
for the five-year budget window between 2014-2018 (note that
the prior CBO estimate for this legislation in the 112th
Congress was nearly double this estimate; this issue is
discussed in detail below). However, it does not authorize any
new funding for these new requirements. It is highly improbable
that Advocacy's post-sequester budget of $8.5 million and
staffing level of 46 employees will be sufficient to administer
the additional responsibilities contained in H.R. 2542.
Impedes Health, Safety, and Consumer Protection Regulation
Taken together, the changes included in H.R. 2542 will
create delays for agencies issuing regulations. 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 substances.
In this regard, Rep. Meng offered an amendment that would
have specified that an agency does not have to comply with the
requirements of the legislation if doing so would cause a delay
that would result in a significant increase in the likelihood
that children would be harmed. It was not agreed to by a vote
of 11 ayes to 12 nays. By not including this amendment,
regulations that would protect children could be delayed or
made less effective. Rep. Hahn also offered an amendment to
address public safety concerns with the legislation. Her
amendment would have required that at least one small entity
(or their representative) that would benefit from or whose
health or safety would be protected by the proposed rule shall
be included in a panel. The amendment was not agreed to by
voice vote, thus preventing the full spectrum of small business
perspectives to be considered during a panel. To ensure that
the interests of small businesses, who can be both exporters
and consumers, were incorporated into trade agreements, Rep.
Chu offered an amendment to require the Office of Advocacy to
convene a panel for any trade agreement that is approved by
Congress. This amendment was not agreed to by a vote of 9 ayes
to 14 nays. Its exclusion will limit the examination of trade
agreements' impact on smaller firms. Rep. Murphy offered an
amendment to exempts rules pertaining to the protection and
rights of veterans from this legislation and it was agreed to
by voice vote. Providing such protection will minimize the
legislation's impact on veterans.
Further, the legislation requires agencies to analyze the
indirect effects of proposed rules. This mandate would require
wasteful new analyses that could be applied to virtually any
action an agency attempts to undertake, no matter how unclear
the connection is to small business interests. When added to
the existing procedural and analytical steps that agencies must
already take, the legislation would serve only to further delay
rulemakings and make it nearly impossible for agencies to
fulfill their mission of protecting the public. Rep. Clarke
offered an amendment to address this matter and strike this new
requirement, but it was not agreed to by voice vote. By failing
to incorporate this amendment, the legislation maintains its
broad mandate to incorporate indirect effects into RFA
analyses, allowing opponents of certain regulations to seek
further delays.
Fails to account for recent Executive Orders
In 2011, President Obama issued Executive Order (EO) 13563,
calling for agencies to retrospectively review existing
regulations. Shortly thereafter, EO 13579 was issued applying
this requirement to independent regulatory agencies. In 2012,
EO 13610 was issued to institutionalize these requirements and
to increase public participation in the regulatory process.
Though previously introduced and passed Committee and the House
in the 112th Congress, H.R. 2542 has not been updated to
accommodate the impact of these executive orders even though
the Committee has held two Committee hearings this year.
Testimony during these hearings on such retrospective reviews
has shown that departments and agencies have produced more than
two dozen regulatory review plans, with over 500 regulatory
reform initiatives. Just a small fraction of the rules already
finalized will produce billions of dollars of savings in the
near term. H.R. 2542 duplicates these efforts unnecessarily,
imposing new costs and complexity to address a problem that is
already being addressed government-wide.
Puts the environmental and public lands at risk
The legislation 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. In order to protect and enhance America's
water resources, plans proactively address adverse
environmental impacts and emphasize the maintenance and
restoration of watershed health. 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 result in the exploitation
of critical habitats and environmental resources.
Gives SBA 's Office of Advocacy unilateral power to slowdown any and
all regulation
The legislation will enable the Office of Advocacy to be
involved in federal agency decision-making and not just on
matters pertaining to agency compliance with the RFA as they
are now. By broadening the Office of Advocacy's role in the
rulemaking process, the balance between the office and federal
agencies will change dramatically. To address this concern,
Rep. Chu offered an amendment that would have allowed an agency
to avoid convening a panel if doing so would inhibit an agency
from carrying out its statutory duties. This amendment was not
agreed to by voice vote. Similarly, Rep. Payne offered an
amendment that would have prevented the legislation from being
implemented until the Office of Advocacy certifies to Congress
that it will not prevent agencies from taking appropriate and
timely actions. This amendment was not agreed to by voice vote.
By not incorporating either of Rep. Chu and Rep. Payne's
amendments, the legislation will make it more difficult for
agencies' to carry out their basic missions.
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. 2542 is enacted, the Office of
Advocacy will be accorded with judicial deference in
interpreting the RFA, providing the office with substantial
power to coerce regulatory modifications. This could adversely
affect federal agencies ability to protect consumers, workers,
and the environment.
Fails to account for the benefits of rulemakings and promote
transparency
Federal rulemaking confer large benefits on society through
increasing human health and safety. To this point, the Office
of Management Budget (OMB) has estimated that the annual
benefits of major Federal regulations reviewed by OMB from
October 1, 2002, to September 30, 2012, for which agencies
estimated and monetized both benefits and costs, are in the
aggregate between $193 billion and $800 billion, while the
estimated annual costs are in the aggregate between $57 billion
and $84 billion. H.R. 2542, however, fails to recognize only
costs of regulations and not the benefits they provide to the
public. For these reasons, Rep. Meng offered an amendment that
would have required that the initial and final regulatory
analyses include a description and estimate of the benefits of
the proposed rule to small entities. This amendment was not
agreed to by a vote of 10 ayes to 13 nays. Rep. Meng offered an
additional amendment on this subject that would have required
each agency to estimate the benefits of the proposed rule and
if they exceeded the regulation's costs, then the agency would
not have to convene a panel under the RFA. This amendment was
not agreed to by voice vote. Without either of Rep. Meng's
amendments, the legislation fails to provide information
concerning the benefits of proposed regulations for small
businesses.
Along similar lines, Rep. Barber offered an amendment that
will increase the transparency of the panel process. His
amendment will require that the Office of Advocacy's report
summarizing each panel include an assessment of the proposed
rule's impact on the costs to startup a small business. This
amendment was agreed to by voice vote.
Diverts scarce taxpayer dollars away from key priorities
Given the current fiscal situation and the recent
sequester, it is hard to justify the diversion of limited
taxpayer dollars to modify the RFA--legislation that is already
producing impressive results. As the Office of Advocacy has
stated, the RFA was successful in reducing small businesses'
regulatory costs by $2.4 billion for last year alone. To fully
assess whether the Office of Advocacy has the resources and
capacity to carry out H.R. 2542, an amendment offered by Rep.
Clarke, and agreed to by voice vote, will require that the GAO
to undertake a study to assess whether the Office has the
resources to implement the legislation.
Taxpayer dollars should instead be used to restore the
budgets of domestic programs that were hurt the most by the
sequester. As noted, over a five-year period, it is expected
that this legislation would cost nearly $50 million, while the
true cost, based on prior CBO scores, is likely closer to $100
million. Such sums could be used to fully restore the budget to
services essential to the creation of new entrepreneurial
opportunities such as the SBA's Small Business Development
Center, Women's Business Center, Veteran's Business
Development, and SCORE programs. In an effort to mitigate the
legislation's impact on women, minorities, and veterans, an
amendment offered by Rep. Barber and passed by voice vote will
require agencies conducting periodic reviews of regulations to
reach out to small business owned by women, veterans, and
minorities.
Finally, with regard to the SBA, H.R. 2542 could hurt the
very entities that it is seeking to assist by delaying
regulations implementing small business financing, contracting,
and entrepreneurial development initiatives.
Creates excessive and unnecessary bureaucracy
This legislation splits the size standard functions in the
Small Business Act. It provides that the Administrator shall
establish size standards to carry out the purposes of the Small
Business Act or Small Business Investment Act of 1958. It then
delegates the authority to approve a size standard for purposes
of all other statutes to the Chief Counsel of Advocacy. In
practice, the Chief Counsel will approve size standards for
agencies seeking to use a size standard other than approved by
the Administrator for carrying out the purposes of the Small
Business Act or Small Business Investment Act. Under current
practice, if an agency seeks to use a different size standard
it must get approval from the Administrator of SBA, unless
specifically given the authority to do so in law. For RFA
purposes only under current practice, an agency can use a
different size standard if it consults with Advocacy and
provides an opportunity for notice and comment in the Federal
Register. Rep. Murphy offered an amendment to prevent this
authority from going into effect unless the Office of Advocacy
certifies it has the funding and personnel to carry out the
section. This amendment was not agreed to by voice vote,
creating a situation where the Office of Advocacy will be given
new responsibilities, but without commensurate funding. Such a
situation will cause the Office of Advocacy to reduce its
efforts in core areas, including broadly advocating for the
interests of small businesses.
Requiring Advocacy to take on size standard determinations,
even in this limited capacity, will require them to deviate
from their current mission of advocating for small businesses
in the regulatory process. Approval of a size standard can be
time consuming and require different skill sets than the Office
currently has. In addition, adding this capacity at Advocacy
would duplicate the SBA's Office of Size Standard mission. To
put a finer point on these concerns, former Chief Counsel for
Advocacy Frank Swain testified before the Committee that the
Office of Advocacy should not take on the new responsibilities
outlined in the legislation. To address this issue, Rep.
Schrader offered an amendment to strike this new authority,
which creates a duplicate sizes standard office in the Office
of Advocacy and does not eliminate the existing SBA Office of
Size Standards. This amendment was not agreed to by a vote of
11 ayes to 13 nays. By leaving this new authority in the
underlying legislation, the SBA will have duplicative entities
determining size standards. Such an outcome is a waste of
taxpayer dollars.
In attempt to provide a more rational and budgetary-
sensitive rollout of this legislation, Ranking Member Velazquez
offered an amendment that would have required the Office of
Advocacy to establish a compliance schedule that will determine
when agencies shall become compliant with the new government-
wide requirements to convene panels. The amendment would have
required the Office of Advocacy to base its decision on the
budgetary resources available to agencies and to the extent
those agencies' regulations have typically affected small
businesses. This amendment was not agreed to by a vote of 11
ayes to 13 nays. Without this amendment, the legislation will
be implemented across the entire government at the same time,
irrespective of agencies' budget situation. As a result, some
agencies may not have the resources to implement the new panel
requirements effectively and would do without the benefit of
learning the lessons that would have come with a tiered
implementation.
Does not provide agencies with flexibility to respond to disasters or
acts of terrorism
The underlying legislation repeals section 608 of the RFA,
permitting agencies to waive or delay completing an initial
regulatory flexibility analysis in the event of an emergency.
By doing so, the legislation could lead to situations where an
agency would be blocked from responding to a tragedy quickly
and effectively. Disasters are all too common and terrorism
continues to be a threat. Ensuring that agencies are not
unnecessarily prevented from helping the public or protecting
the homeland in a timely manner should be a priority. For this
reason, Rep. Clarke offered an amendment that would have
specified that an agency does not have to comply with the
legislation if the head of an agency certifies that a specific
rulemaking is necessary either safeguard the United States and
its territories in regard to an act or potential act of
terrorism or to respond or prepare to respond to a disaster.
This amendment was not agreed to by a vote of 11 ayes to 13
nays. Failure to include this amendment could lead to
situations where regulations critical to disaster response or
national security are unnecessarily delayed due to RFA
proceedings.
SPECIAL NOTE ON CONGRESSIONAL BUDGET OFFICE (CBO) COST ESTIMATE
The CBO provided a cost estimate for H.R. 2542 that found
that the legislation would cost $45 million over a five-year
period. However, this estimate is entirely inconsistent with
prior CBO's scores and as a result seemingly unreliable for the
purposes of floor consideration. During the 112th Congress, CBO
provided a cost estimate for identical legislation passed by
the Committee that was $86 million over a five-year period. The
legislation, H.R. 527 and H.R. 585, is wholly contained within
H.R. 2542. The only addition to H.R. 2542 is a provision that
would place further responsibilities on federal agencies,
thereby increasing the cost of the legislation further. CBO
provided no rationale for this change in the cost estimate and
did not provide any explanation when asked by Committee staff.
Given the massive discrepancies and CBO's inability to provide
clarification on this matter, CBO's cost estimate for H.R. 2542
is highly questionable and should be used with the utmost
caution.
CONCLUSION
H.R. 2542 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 panel
processes. This would give opponents of regulations powerful
tools to stop them. Doing so would leave many individuals, as
well as the environment, without the protections that federal
agencies are charged with providing. As a result, many
regulations--including those related to consumer protection,
the environment, and health and safety--would be delayed or, in
the worst case, unimplemented.
Nydia M. Velazquez.