[Senate Report 114-420]
[From the U.S. Government Publishing Office]


                                                      Calendar No. 484
114th Congress }                                             { Report
                                 SENATE
 2d Session    }                                             { 114-420

======================================================================
 
                        THE PROVE IT ACT OF 2016

                                _______
                                

               December 20, 2016.--Ordered to be printed

   Filed, under authority of the order of the Senate of December 10 
                  (legislative day, December 9), 2016

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 2847]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 2847), to require greater 
transparency for Federal regulatory decisions that impact small 
businesses having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                            I. INTRODUCTION

    The Prove It Act of 2016 (S. 2847) was introduced by 
Senator Ernst on April 25, 2016.
    The Prove It Act of 2016 authorizes the Chief Council of 
the Small Business Administration (SBA) to request the Office 
of Information and Regulatory Affairs of the Office of 
Management and Budget to review any federal certification on a 
proposed rule. The Chief Council's ability to review any 
proposed rule gives him/her the power to check the rule for its 
economic impact on a substantial number of small entities.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    At every point of our history, the need for increased 
transparency is very apparent in many levels and agencies 
within our government. For small business entities working with 
the federal government, The Prove It Act of 2016 addresses the 
need for a check on federal agencies when they develop rules 
and certifications. S. 2847 mimicked the process of reviewing 
federal rules from the National Environmental Policy Act 
(NEPA). This act specifically looks to the Council on 
Environmental Quality (CEQ) and uses its process of settling a 
dispute between agencies for the Environmental Impact 
Statement. The process that is laid out in NEPA incentivizes 
agencies to collaborate on the Environmental Impact Statement 
before it would become a problem. The need for this legislation 
was also apparent when the SBA Office of Advocacy testified to 
the Senate Small Business Committee on April 25, 2016 that the 
Environmental Protection Agency (EPA) incorrectly certified the 
Waters of the U.S. rule. The SBA concluded that the rule should 
have included a small business panel to better address the 
concerns for small entities in the rule.

                      III. HEARINGS & ROUNDTABLES

    In the 114th Congress, issues related to The Regulatory 
Flexibility Act (RFA) and the implantation of the Waters of the 
U.S. rule were discussed in the Senate Committee on Small 
Business in full committee hearing. On April 27, 2016 the 
Committee held a hearing titled, ``Drowning in Regulations: The 
Waters of the U.S. Rule and the Case for Reforming the RFA.'' 
This hearing examined the implementation of the RFA and how it 
was designed to ensure that agencies would include small 
business input. This law was designed for input but some 
agencies would take actions to circumvent the law through 
loopholes and misinterpretation. The hearing included a witness 
from the SBA's Office of Advocacy who presented a variety of 
agency failures of implantation of the RFA.

                        IV. DESCRIPTION OF BILL

    The bill authorizes the Chief Council of the Small Business 
Administration to request the Office of Information and 
Regulatory Affairs of the Office of Management and Budget to 
review any federal agency certification to a federal rule to 
ensure that it will not have a significant economic impact on 
small entities. The bill outlines that if the Chief Council 
wants to review an agency's rule they must be published in the 
Federal Register and on the website of the SBA Office of 
Advocacy. The Chief Council must also include any documentation 
that he/she furnished during the notice and comment period of 
the proposed rule and they must also explain why they disagree 
with the certification and provide factual information to why 
they do.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on May 11, 2016
    A motion to adopt the Prove It Act, a bill to require 
greater transparency for Federal regulatory decisions that 
impact small businesses without amendment was reported 
favorably to the Senate with the following Senators present: 
Senators Vitter, Risch, Scott, Ernst, Ayotte, Shaheen, 
Cantwell, Cardin, Heitkamp, Markey, Booker, Coons, Hirono, and 
Peters.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                      May 24, 2016.
    S. 2847 would authorize the Small Business Administration 
(SBA) to request that the Office of Management and Budget (OMB) 
review federal agency certifications that their proposed 
regulations would have no significant effect on small entities. 
CBO estimates that implementing S. 2847 would cost $10 million 
over the 2017-2021 period.
    Under current law, federal agencies are required to publish 
in the Federal Register an analysis of the impact of their 
proposed rules on small entities, such as small businesses, 
not-for-profits, and local governments, and to propose 
alternative regulations to minimize any significant economic 
impacts that may result. Agencies are exempt from this 
requirement if the head of the agency certifies that the rule, 
if promulgated, would not have a significant economic impact on 
a substantial number of small entities. Currently, OMB reviews 
executive agencies' analyses of economically significant rules 
(those likely to result in an annual effect on the economy of 
$100 million or more).
    S. 2847 would authorize SBA to request that OMB review 
agency certifications if SBA disagrees with an agency's 
findings. OMB would be required to review analyses of the 
impact of the rules, including independent agency rules and 
those determined to be not economically significant. If OMB 
determined that the proposed rule would have a significant 
economic impact on small entities, the federal agency would be 
required to submit a full analysis of the impact of their 
proposed rule on small entities.
    On the basis of information from SBA and OMB about the 
current review process for agency rules, CBO estimates that 
implementing S. 2847 would result in approximately 30 to 40 
additional reviews by OMB each year, the majority of which 
would be rules that are not economically significant. 
Currently, about 35 OMB analysts each review approximately 10 
to 15 rules per year. CBO estimates that implementing S. 2847 
would cost $2 million per year for each of fiscal years 2017-
2021 for three to four additional OMB staff to review SBA 
petitions and for additional administrative activities by 
agencies to prepare additional analysis for some of the rules 
identified by the SBA.
    Because enacting S. 2847 could affect direct spending by 
agencies not funded through annual appropriations, pay-as-you-
go procedures apply. CBO estimates, however, that any net 
change in spending by those agencies would be negligible. 
Enacting S. 2847 would not affect revenues. CBO estimates that 
enacting S. 2847 would not increase net direct spending or on-
budget deficits in any of the four consecutive 10-year periods 
beginning in 2027.
    S. 2847 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides for the title, ``The Prove It Act of 
2016.''

Section 2. Review procedures relating to initial regulatory flexibility 
        analysis certifications

    This section gives the Chief Council of the SBA the ability 
to submit a request for review to the Administrator of the 
Office of Information and Regulatory Affairs (OIRA) for any 
federal agency's certification. This power is given so if the 
Chief Council disagrees with the publishing agency, the Chief 
Council has the power to review the rule and whether or not it 
would have a significant economic impact on a number of small 
entities. For the Chief Council of the SBA to conduct a review 
they must publish the request for review in the Federal 
Register and on the SBA Office of Advocacy website, attach 
proper documentation and comments made during the comment 
period of the proposed rule by the Chief Council, and provide a 
factual statement as of why the Chief Council disagrees with 
the proposed rule. After the request is published in the 
Register, the federal agency in question has ten days to submit 
a response.

                             MINORITY VIEWS

    S. 2847, the ``Prove It Act of 2016,'' authorizes the Chief 
Counsel of the Small Business Administration to request the 
Office of Information and Regulatory Affairs (OIRA) to review 
any federal agency certification to a federal rule to ensure it 
will not have a significant economic impact on small entities.
    The Ranking Member of the Senate Committee on Small 
Business and Entrepreneurship opposes S. 2847 because it has 
not been thoroughly vetted; it creates duplicative processes; 
and creates additional requirements for agencies without 
providing the necessary resources to achieve them.

                             I. DESCRIPTION

    S. 2847 gives the Small Business Administration's Office of 
Advocacy authority to request an additional review of an 
agency's evaluation regarding a rule's impact on small entities 
from the Office of Information and Regulatory Affairs (OIRA). 
S. 2847 would also require the Office of Information and 
Regulatory Affairs to respond publicly when the Office of 
Advocacy requests a review of an agency's certification that a 
rule would not have a significant economic impact on a 
substantial number of small entities. The Office of Information 
and Regulatory Affairs review must then be made public within 
forty days.

                             II. BACKGROUND

    The U.S. Small Business Administration's Office of Advocacy 
is an independent office that influences the federal rulemaking 
process through several activities, including outreach to small 
businesses about proposed regulations and providing formal 
comments to Congress and federal agencies on proposed 
legislation and regulations. At times, the Office of Advocacy 
may disagree with a federal agency's decision to certify that a 
given rule will not have a significant economic impact on a 
substantial number of small entities.
    Generally, the Regulatory Flexibility Act requires all 
federal rulemaking agencies to: (1) analyze the economic impact 
of proposed regulations when there is likely to be a 
significant economic impact on a substantial number of small 
entities; (2) consider regulatory alternatives that will 
achieve the agency's goal while minimizing the burden on small 
entities; and (3) make their analysis available for public 
comment. Agencies are exempt from these requirements if the 
agency ``certifies'' that the rule would not have a 
``significant economic impact on a substantial number of small 
entities.''

                             III. CONCERNS

    The Ranking Member is concerned that the Committee has not 
fully vetted this legislation, which would significantly alter 
the federal rulemaking process. As a result, the Ranking Member 
does not believe the Committee understands the full extent of 
the legislation's impact on the ability of agencies to craft 
necessary rules.
    The Ranking Member is also concerned that the process set 
forth in S. 2847 creates a duplicative framework for regulatory 
review. Currently, the Office of Information and Regulatory 
Affairs regularly reviews most rules before they are made 
final. The additional process set forth by S. 2847 would 
duplicate those efforts, while causing unnecessary delays, and 
creating additional costs.
    S. 2847 also fails to provide any additional resources for 
agencies to meet the new duplicative requirements. As a result, 
the measure could delay necessary rulemakings.

                             IV. CONCLUSION

    The Ranking Member believes that poorly crafted regulations 
can result in an excessive burden on small businesses. Unlike 
large companies, small firms often do not have the time and 
resources to devote to understanding new rules or complying 
with them.
    At the same time, well-crafted regulations have the 
potential to encourage innovation and entrepreneurship, while 
addressing critical threats to public health, the environment 
and safety.
    The Ranking Member believes that, as the Committee 
considers reforms to the rulemaking process, the Committee 
should do so in a way that does not stop important rules that 
protect the public.
    For these reasons, the Ranking Member respectfully dissents 
and opposes this bill, which was opposed by all Minority 
members of the Committee.

                                  [all]