[Senate Report 116-326]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 628
                                                       
116th Congress  }                                            {   Report
                                 SENATE                          
2d Session      }                                            {   116-326
_______________________________________________________________________

                                     

                                                       


         HARMLESS ERROR LESSER PENALTY FOR SMALL BUSINESSES ACT

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 2757

          TO WAIVE THE IMPOSITION OF A CIVIL FINE FOR CERTAIN
       FIRST-TIME PAPERWORK VIOLATIONS BY SMALL BUSINESS CONCERNS




               December 15, 2020.--Ordered to be printed
               
                           ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
19-010               WASHINGTON : 2020 
                
               
               
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
ROB PORTMAN, Ohio                    GARY C. PETERS, Michigan
RAND PAUL, Kentucky                  THOMAS R. CARPER, Delaware
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
MITT ROMNEY, Utah                    KAMALA D. HARRIS, California
RICK SCOTT, Florida                  KYRSTEN SINEMA, Arizona
MICHAEL B. ENZI, Wyoming             JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri

                Gabrielle D'Adamo Singer, Staff Director
                   Joseph C. Folio III, Chief Counsel
           Joshua P. McLeod, Senior Professional Staff Member
               David M. Weinberg, Minority Staff Director
               Zachary I. Schram, Minority Chief Counsel
          Yogin J. Kothari, Minority Professional Staff Member
                     Laura W. Kilbride, Chief Clerk
                     
                     

                                                       Calendar No. 628
                                                       
116th Congress  }                                              {   Report
                                 SENATE
 2d Session     }                                              {  116-326

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



 
         HARMLESS ERROR LESSER PENALTY FOR SMALL BUSINESSES ACT

                                _______
                                

               December 15, 2020.--Ordered to be printed

                                _______
                                

 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 2757]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 2757) to waive the 
imposition of a civil fine for certain first-time paperwork 
violations by small business concerns, having considered the 
same, reports favorably thereon with an amendment (in the 
nature of a substitute) and recommends that the bill, as 
amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................2
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................3
 VI. Congressional Budget Office Cost Estimate........................4
VII. Changes in Existing Law Made by the Bill, as Reported............5

                         I. Purpose and Summary

    S. 2757, the Harmless Error Lesser Penalty for Small 
Businesses Act, or the HELP for Small Businesses Act, would 
prohibit an agency from imposing a civil fine for certain 
first-time paperwork violations committed by a small business.

              II. Background and the Need for Legislation

    By one estimate, Federal regulations cost American 
consumers and businesses more than $1.9 trillion every year.\1\ 
These regulatory costs fall disproportionately on small 
businesses, which ``bear the largest burden of federal 
regulations.''\2\ The primary reason that the regulatory cost 
burden falls disproportionately on small businesses is that 
firms with 20 employees incur ``the same expense as a firm with 
500 employees.''\3\ Accordingly, for larger businesses, the 
costs are spread over a larger number of employees, which 
lowers the costs and provides a comparative cost advantage over 
smaller firms.\4\
---------------------------------------------------------------------------
    \1\Clyde W. Crews Jr., Ten Thousand Commandments An Annual Snapshot 
of the Federal Regulatory State, Competitive Enter. Inst. (2020), 
https://cei.org/sites/default/files/Ten_Thousand_Commandments_2020.pdf.
    \2\See, e.g., Nicole V. Crain & W. Mark Crain, Small Bus. Admin., 
The Impact of Regulatory Costs on Small Firms iv (2010) (``As of 2008, 
small business face an annual regulatory cost of $10,585 per employee, 
which is 36 percent higher than the regulatory cost facing large firms 
(defined as firms with 500 or more employees).''); Ben Gitis & Sam 
Batkins, Regulatory Impact on Small Business Establishments, American 
Action Forum, (2015) (``The results . . . indicate that regulations 
cumulatively have a highly regressive effect on businesses.'')
    \3\Id.
    \4\W. Mark Crain & Nicole V. Crain, The Cost of Federal Regulation 
to the U.S. Economy, Manufacturing and Small Business, Nat'l Ass'n of 
Mfrs. 3 (2014), https://www.nam.org/wp-content/uploads/2019/05/Federal-
Regulation-Full-Study.pdf.
---------------------------------------------------------------------------
    Small firms without in-house legal departments or expensive 
outside legal counsel can potentially make minor paperwork 
violations that result not only in fines and penalties, but 
also divert resources to responding to these legal 
consequences.\5\ Often, these violations have little 
consequence and simply need to be corrected for the Federal 
agency to proceed with their collection of information.\6\ For 
example, a business establishing a 401k for its employees that 
misses one signature on a 20-page form, rather than having an 
opportunity to correct the mistake, was issued a small penalty 
and spent hours communicating with the Federal agency that 
could have been put to better use.\7\
---------------------------------------------------------------------------
    \5\Examining Federal Rulemaking Challenges and Areas of Improvement 
within the Existing Regulatory process: Hearing Before the S. Comm. on 
Homeland Sec. and Governmental Affairs, Subcomm. On Regulatory Affairs 
and Fed. Mgmt., 114th Cong. (2015) (statement of Drew Greenblatt).
    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------
    S. 2757 bars Federal agencies from penalizing first-time 
paperwork violation for businesses with fewer than 50 
employees. It provides various exceptions to this rule for 
paperwork violations that negatively impact health, safety, the 
environment, and criminal investigations. It also requires 
agencies to track first-time violations and to report on their 
waivers.

                        III. Legislative History

    Senator James Lankford (R-OK) introduced S. 2757, the 
Harmless Error Lesser Penalty for Small Businesses Act, on 
October 31, 2019, with Senator Maggie Hassan (D-NH), Senator 
Marco Rubio (R-FL) and Senator James M. Inhofe (R-OK). The bill 
was referred to the Committee on Homeland Security and 
Governmental Affairs.
    The Committee considered S. 2757 at a business meeting on 
March 11, 2020. During the business meeting, a substitute 
amendment was offered by Senator Lankford and Senator Hassan 
that modified the definition of small business and expanded on 
the reasons for which an agency could still impose a civil 
penalty for a first-time violation by a small business. The 
amendment was accepted by unanimous consent with Senators 
Johnson, Lankford, Romney, Scott, Enzi, Hawley, Peters, Carper, 
Hassan, and Rosen present.
    The bill, as amended, was ordered reported favorably by a 
roll call vote of 8 yeas to 5 nays. Senators Johnson, Portman, 
Lankford, Romney, Scott, Enzi, Hawley, and Hassan voted in the 
affirmative. Senators voting in the negative were Peters, 
Carper, Harris, Sinema and Rosen.

        IV. Section-by-Section Analysis of the Bill, as Reported


Section 1. Short title

    This section established that the bill may be cited as the 
``Harmless Error Lesser Penalty for Small Businesses Act'' or 
the ``HELP for Small Businesses Act.''

Section 2. Paperwork violations by small businesses

    Section 2 of the bill amends Section 3512 of title 44, 
United States Code, to add a new subsection at the end 
pertaining to small businesses.
    This new subsection defines the terms ``first-time 
violation'' and ``small business concern.'' A small business 
concern is defined as a business concern that operated with not 
more than 50 full-time employees in the preceding calendar 
year.
    The new subsection bars an agency from imposing a civil 
penalty on a small business concern that commits a first-time 
violation. In determining whether to impose a penalty, an 
agency is required to consider violations of information 
collections by another agency. There are five exceptions to 
this rule: violations that could interfere with detection of 
criminal activity; violations of internal revenue or other tax, 
debt, revenue, or receipt laws; violations not corrected within 
30 days of the agency providing actual written notice; 
violations that present or have the potential to present a 
danger to public health, safety, or the environment; and 
violations that have the potential to cause serious harm, 
injury or death.
    The new subsection also requires the Director of the Office 
of Management and Budget to establish a process for agencies to 
track first-time violations and requires an annual report from 
any agency that waived a penalty during the previous year that 
describes each waiver.
    Finally, the new subsection clarifies that nothing in this 
subsection relieves a small business from its legal obligations 
to comply with regulations, and that this subsection shall be 
construed to control if there are any conflicts with section 
223 of the Small Business Regulatory Enforcement Fairness Act 
of 1996.
    Section 2 subsection (b) makes technical edits.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, December 9, 2020.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2757, the HELP for 
Small Business Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    
    

    S. 2757 would direct federal agencies to waive fines on 
small businesses for first-time violations of reporting 
requirements. Those waivers would not apply if the agency 
determines the violation was intended to cover criminal 
activity, related to tax collections, not corrected in a timely 
manner, or dangerous to public health and safety. Agencies 
would be required to track and report on the waived fines.
    CBO is unaware of any comprehensive list of specific fees, 
fines, or penalties at a level of detail that would isolate 
penalties for violations of reporting requirements. The 
Government Accountability Office reports, however, that 
aggregated collections for fines, penalties, and forfeitures 
total tens of billions annually.
    Given the wide latitude agencies have in enforcing 
penalties and that violators are often given a grace period to 
correct the violation, CBO expects that few first-time 
violators of paperwork rules would pay significant fines. Thus, 
CBO estimates that the loss of fines, which are recorded in the 
budget as revenues, would be insignificant in every year but 
would total about $1 million over the 2021-2030 period.
    CBO also estimates that satisfying the bill's reporting 
requirements across approximately 50 agencies would cost less 
than $300,000 annually and about $1 million over the 2021-2025 
period; such spending would be subject to the availability of 
appropriated funds.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was reviewed by H. Samuel Papenfuss, 
Deputy Director of Budget Analysis.

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

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows: (existing law 
proposed to be omitted is enclosed in brackets, new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman):

UNITED STATES CODE

           *       *       *       *       *       *       *


TITLE 44--PUBLIC PRINTING AND DOCUMENTS

           *       *       *       *       *       *       *


CHAPTER 35--COORDINATION OF FEDERAL INFORMATION POLICY

           *       *       *       *       *       *       *



Subchapter I--Federal Information Policy

           *       *       *       *       *       *       *



SEC. 3512. PUBLIC PROTECTION.

    (a) * * *
    (b) The protection provided by [this section] subsection 
(a) may be raised in the form of a complete defense, bar, or 
otherwise at any time during the agency administrative process 
or judicial action applicable thereto.
    (c) Small Businesses.--
          (1) Definitions.--In this subsection:
                  (A) First-time violation.--The term ``first-
                time violation'' means a violation by a small 
                business concern of a requirement regarding 
                collection of information by an agency, where 
                the small business concern has not previously 
                violated any similar requirement regarding 
                collection of information by that agency.
                  (B) Small business concern.--The term ``small 
                business concern'', with respect to a calendar 
                year, means a business concern that employed an 
                average of not more than 50 full-time employees 
                on business days during the preceding calendar 
                year.
          (2) First time violation.--
                  (A) In general.--Except as provided in 
                subparagraph (C), in the case of a first-time 
                violation by a small business concern of a 
                requirement regarding the collection of 
                information by an agency, the head of the 
                agency shall not impose a civil fine on the 
                small business concern.
                  (B) Determination.--For purposes of 
                determining whether to impose a civil fine on a 
                small business concern under subparagraph (A), 
                the head of an agency shall not take into 
                account any violation by the small business 
                concern of a requirement regarding collection 
                of information by another agency.
                  (C) Exception.--The head of an agency may 
                impose a civil fine on a small business concern 
                for a first-time violation if the head of the 
                agency determines that--
                          (i) the violation has the potential 
                        to impede or interfere with the 
                        detection of criminal activity;
                          (ii) the violation is a violation of 
                        an internal revenue law or a law 
                        concerning the assessment or collection 
                        of any tax, debt, revenue, or receipt;
                          (iii) the violation was not corrected 
                        on or before the date that is 180 days 
                        after the date on which the head of the 
                        agency provided the small business 
                        concern with actual notice of the 
                        violation in writing; or
                          (iv) the violation presents, or has 
                        potential to present--
                                  (I) a danger to the public 
                                health;
                                  (II) a danger to safety;
                                  (III) a danger, or risk of 
                                harm, to the environment; or
                                  (IV) the violation has the 
                                potential to cause serious 
                                harm, injury, or death.
          (3) Agency tracking of first time violations.--
                  (A) In general.--The Director shall 
                promulgate regulations requiring an agency to 
                track each first-time violation of a 
                requirement regarding the collection of 
                information by the agency.
                  (B) Requirements.--In promulgating 
                regulations under subparagraph (A), the 
                Director shall ensure that an agency--
                          (i) does not make data compiled under 
                        the regulations available to the 
                        public; and
                          (ii) maintains the data described in 
                        clause (i) in a format that is 
                        consistent across agencies.
          (4) Annual report.--Each year, any agency that waived 
        a civil fine under paragraph (2)(A) of this subsection 
        during the preceding year and any agency (as defined in 
        section 221 of the Small Business Regulatory 
        Enforcement Fairness Act of 1996 (5 U.S.C. 601 note; 
        Public Law 104-121)) that waived or reduced a civil 
        penalty under section 223 of that Act during the 
        preceding year shall submit a report to Congress that 
        describes, for each such waiver or reduction--
                  (A) the specific requirement that was 
                violated, including the provision of law that 
                authorizes the agency to impose the civil fine 
                or civil penalty for the violation;
                  (B) the amount of the civil fine or civil 
                penalty that the agency could have imposed; and
                  (C) the industry in which the small business 
                concern or small entity that committed the 
                violation operates.
          (5) Relation to other laws.--In the event of a 
        conflict between section 223 of the Small Business 
        Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 
        601 note; Public Law 104-121) and this subsection, this 
        subsection shall control.
          (6) Rule of construction.--Nothing in this subsection 
        shall be construed to relieve a small business concern 
        from the obligation to comply with all legal 
        requirements.

           *       *       *       *       *       *       *


THE SMALL BUSINESS REGULATORY FAIRNESS ACT OF 1996

           *       *       *       *       *       *       *


SEC. 223. RIGHTS OF SMALL ENTITIES IN ENFORCEMENT ACTIONS.

    (a) * * *
    (b) * * *
    (c) Reporting.--[Agencies shall]
          (1) Initial Report.--Agencies shall report to the 
        Committee on Small Business [now Committee on Small 
        Business and Entrepreneurship] and Committee on 
        Governmental Affairs [now Committee on Homeland 
        Security and Governmental Affairs] of the Senate and 
        the Committee on Small Business and Committee on 
        Judiciary of the House of Representatives no later than 
        2 years after the date of enactment of this section 
        [Mar. 29, 1996] on the scope of their program or 
        policy, the number of enforcement actions against small 
        entities that qualified or failed to qualify for the 
        program or policy, and the total amount of penalty 
        reductions and waivers.
        (2) Annual report.--Agencies shall submit annual 
        reports to Congress in accordance with section 
        3512(c)(4) of title 44, United States Code.