H.R. 421 — Small Business Regulatory Flexibility Improvements Act

This section amends the Regulatory Flexibility Act (RFA) to expand the scope of rules subject to regulatory flexibility analysis as follows: (1) revises the definition of "rule" to exclude rules pertaining to veterans' rights or benefits, part 232 of title 32, Code of Federal Regulations (or successors), or rules of particular applicability relating to rates, wages, prices, or similar matters (i.e., clarifying exclusions from RFA coverage); (2) defines "economic impact" to include both direct and reasonably foreseeable indirect effects (e.g., compliance costs or revenue effects) on small entities, even if not directly regulated; (3) requires initial and final regulatory flexibility analyses to describe alternatives that minimize adverse or maximize beneficial significant economic impacts on small entities; (4) includes tribal organizations (as defined in 25 U.S.C. 5304(l)) within "small governmental jurisdiction"; (5) subjects agency publication or adoption of revisions or amendments to land management plans—developed by the Secretaries of Agriculture (under 16 U.S.C. 1604) or Interior (under 43 U.S.C. 1712)—to initial and final regulatory flexibility analysis requirements and defines such plans, revisions, and amendments; (6) applies RFA analysis requirements to interpretive rules of agency heads involving internal revenue laws or recordkeeping requirements (as defined in 44 U.S.C. 3502) and updates related definitions; and (7) redefines "small organization" as any nonprofit enterprise that, as of the notice of proposed rulemaking, meets criteria specified in subparagraph (A)(i) (text incomplete in provided amendment). (As background, the RFA generally requires federal agencies to analyze proposed and final rules' impacts on small businesses, organizations, and governmental jurisdictions and consider regulatory alternatives. Thus, these changes broaden RFA applicability to additional agency actions and effects.)

This section expands the contents of semiannual regulatory flexibility agendas—published by agencies in the Federal Register in October and April for rules likely to have a significant economic impact on a substantial number of small entities—to include (1) a brief description of the North American Industry Classification System (NAICS) sector primarily affected by each such rule and (2) requires each agency to prominently display a plain language summary of its agenda on its website not later than three days after Federal Register publication, with the Small Business Administration's Office of Advocacy required to compile and prominently display such summaries by agency on the SBA website within three days. (Thus, the agendas better identify affected industries and improve online accessibility for small businesses.)

This section revises requirements under the Regulatory Flexibility Act (RFA) for initial regulatory flexibility analyses (section 603(b)), final regulatory flexibility analyses (section 604), certifications of no significant economic impact on small entities (section 605), and quantification of rule impacts (section 607). (As background, the RFA requires federal agencies to analyze proposed and final rules' effects on small businesses and other small entities and consider less burdensome alternatives.) Specifically, the section (1) replaces the contents of section 603(b) to require a detailed initial regulatory flexibility analysis statement covering eight elements, including reasons for agency action, estimated number and type of affected small entities, projected compliance requirements and professional skills needed, overlapping federal rules, cumulative economic impacts, disproportionate impacts on small entities, and effects on small entities' access to credit; (2) amends section 604(a) to require detailed descriptions and explanations throughout, adds a new requirement for a detailed description of disproportionate economic impacts (new paragraph (8)), requires responses to comments on any certification of no significant impact, and revises section 604(b) to mandate public availability of the full final regulatory flexibility analysis on the agency's website (previously just copies to the public) with a Federal Register notice including the website link; (3) revises section 605(a) to allow cross-references to other required analyses to satisfy RFA agenda or analysis content requirements; (4) amends section 605(b) to require certifications to include a detailed statement with factual and legal basis plus a sufficiently detailed economic assessment or summary (previously just a factual basis statement); and (5) replaces section 607 to require either a quantifiable or numerical description of a rule's effects and alternatives, or a more general descriptive statement plus a detailed explanation of why quantification is not practicable or reliable (previously allowing either without the added explanation).

This section repeals agency heads' authority under current law to waive or delay initial regulatory flexibility analyses under section 603 or final regulatory flexibility analyses under section 604 of title 5, U.S. Code, for emergency rules. (As background, the Regulatory Flexibility Act requires federal agencies to assess proposed and final rules' impacts on small businesses and other small entities; prior law allowed waivers of section 603 requirements or delays of up to 180 days for section 604 requirements upon a published finding of emergency.) The section revises section 608 to instead grant additional powers to the Chief Counsel for Advocacy of the Small Business Administration, including (1) issuing rules within 270 days of enactment—after notice and comment—to govern agency compliance with the act (with authority to later modify such rules and a prohibition on agencies issuing supplemental rules without prior consultation; (2) intervening, notwithstanding other law, in agency adjudications without fines or penalties to inform the agency of impacts on small entities (without initiating appeals); and (3) filing comments on any agency notice requesting comment, regardless of section 553 requirements. The section makes conforming amendments to section 611(a) by striking cross-references to former section 608(b) and eliminating subparagraph (3)(B).

This section revises the procedures under 5 U.S.C. §609 for gathering small entity input on proposed rules likely to have significant economic impacts. (As background, §609 of the Regulatory Flexibility Act requires covered agencies to notify the Small Business Administration's Chief Counsel for Advocacy and convene a review panel before publishing an initial regulatory flexibility analysis for rules likely to have a significant economic impact on a substantial number of small entities (SISE).) The revision strikes current subsections (b) through (e) and inserts new ones that (1) require agencies, prior to publication, to notify the Chief Counsel with all rulemaking materials (including the draft rule, except for internal revenue or independent agency rules) and impact information; (2) direct the Chief Counsel, within 15 days, to identify affected small entities or representatives and convene a panel of one representative each from the SBA Office of Advocacy, the rulemaking agency, and the Office of Information and Regulatory Affairs (if not an independent agency); (3) require the Chief Counsel, within 60 days of panel convening, to submit a report assessing economic impacts (including on small entity energy and startup costs), alternatives to minimize adverse or maximize beneficial effects, with the report entering the rulemaking record and the agency explaining its response in the proposed rule; and (4) expand applicability to proposed rules determined likely to have an annual economic effect of $100 million or more, major cost or price increases, significant adverse effects on competition or other factors, or a SISE. The revision further adds a waiver authority for the Chief Counsel if requirements are impracticable, unnecessary, or contrary to public interest; requires agencies to provide panel reports and materials to requesting small entities within 10 business days (except confidential information); and defines "independent regulatory agency." (Thus, the process now applies to a broader set of economically significant rules beyond just those with a SISE.)

This section revises Section 610 of title 5, United States Code, to require each agency to publish in the Federal Register, within 180 days of enactment, a plan for periodically reviewing all rules that have or will have a significant economic impact on a substantial number of small entities—without regard to whether the agency conducted a regulatory flexibility analysis under section 604—to determine whether such rules should be continued without change, amended, or rescinded to minimize adverse or maximize beneficial impacts on small entities consistent with applicable statutes. The plan must (1) review all existing covered rules within 10 years of plan publication and rules issued after enactment within 10 years of final rule publication (with possible extensions of up to 2 years upon certification published in the Federal Register and notification to Congress and the Small Business Administration's Chief Counsel for Advocacy); (2) detail agency outreach to small businesses—including those owned and controlled by women, veterans, or socially and economically disadvantaged individuals (as defined in 15 U.S.C. §§632, 637)—to gather input on rules; (3) be amended as needed via Federal Register notice; and (4) trigger annual agency reports to Congress, the SBA Chief Counsel for Advocacy, and (for non-independent agencies) the Office of Information and Regulatory Affairs on review results, including explanations for rules continued without change. In conducting reviews, agencies must consider seven factors—such as the rule's continued need, small entity complaints, complexity, overlaps with other rules, and changes in technology or economic conditions—and amend or rescind rules to the greatest extent possible to minimize adverse significant economic impacts (including disproportionate impacts on specific small entity classes) or maximize beneficial ones. Agencies must annually publish and solicit comment on a list of rules selected for review, including the basis for their significant impact determination. (As background, these requirements strengthen the Regulatory Flexibility Act's periodic review process to better protect small entities from regulatory burdens.)

This section revises judicial review of agency compliance with the Regulatory Flexibility Act (RFA)—which requires federal agencies to assess the economic impact of rules on small entities (i.e., small businesses, organizations, and governmental jurisdictions) and consider less burdensome alternatives—by (1) allowing courts to review compliance upon publication of a final rule (from final agency action) under 5 U.S.C. §611(a), and (2) authorizing the Small Business Administration's Chief Counsel for Advocacy to intervene in such proceedings regarding agency compliance with additional RFA requirements (i.e., §§601, 603, 604, 605(b), 609, or 610) under 5 U.S.C. §612(b). (Thus, judicial challenges to RFA compliance may commence earlier, upon Federal Register publication of the final rule.)

This section expands the exclusive jurisdiction of courts of appeals (other than the Federal Circuit) under 28 USC 2342 to include all final rules under section 608(a) of title 5 (i.e., final regulatory flexibility analyses required by the Regulatory Flexibility Act, which mandates federal agencies to assess proposed and final rules' impacts on small entities and consider less burdensome alternatives). It makes conforming amendments to 28 USC 2341(3) to include the Small Business Administration's Office of Advocacy as an "agency" subject to such direct review for those rules. It further amends 5 USC 612(b) to authorize the Chief Counsel for Advocacy to intervene in and comment on agency compliance with chapters 5 (administrative procedure), 6 (regulatory flexibility), and 7 (judicial review) of title 5.

This section revises the authority to establish small business size standards (i.e., criteria determining eligibility for small business preferences, set-asides, and programs across federal laws) under the Small Business Act by (1) authorizing the Chief Counsel for Advocacy to specify standards for any Act other than the Small Business Act or Small Business Investment Act of 1958 (previously, only the Small Business Administration Administrator could do so for this chapter or any other Act); (2) requiring approval by the Chief Counsel for all standards except those prescribed by the Administrator (previously, approved by the Administrator); (3) extending industry-specific variation requirements to the Chief Counsel; and (4) permitting the Chief Counsel to be joined as a party in judicial review of rules containing such standards. (Thus, the changes expand the independent Office of Advocacy's role in defining small businesses for non-SBA programs.)

This section makes clerical amendments to chapter 6 of title 5, United States Code (Regulatory Flexibility Act), including (1) reformatting defined terms in section 601 as headings with initial capitals (e.g., "Agency," "Small business") and replacing semicolons with periods; (2) revising the heading of section 605 to "Incorporations by reference and certifications" and updating the table of sections for sections 605, 607, and 608; and (3) in section 603(d), striking paragraph (2), rephrasing the introductory clause, and renumbering subparagraphs, and in section 604(a)(7), striking a redundant cross-reference.

This section revises agency requirements under §212(a)(5) of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) for preparing small entity compliance guides (i.e., plain-language explanations of how small businesses, organizations, and governmental jurisdictions can comply with rules subject to Regulatory Flexibility Act analysis). Specifically, it requires agencies, in their sole discretion and considering a rule's subject matter and relevant statutes, to ensure guides use sufficiently plain language likely understood by affected small entities; authorizes separate guides for groups or classes of similarly affected small entities and cooperation with small entity associations for distribution; mandates solicitation of input from affected small entities or their associations during guide development; and permits application to a rule or group of related rules.

This section directs the Comptroller General of the United States to complete and publish, not later than 90 days after the date of enactment of this Act, a study examining whether the Chief Counsel for Advocacy of the Small Business Administration has the capacity and resources to carry out duties under this Act and the amendments made by this Act.

This section amends the Paperwork Reduction Act (44 U.S.C. §3506) by adding subsection (j) to prohibit agencies from imposing civil fines on small business concerns (as defined in 15 U.S.C. §632) for first-time violations of agency information collection requirements (i.e., no prior similar violation by that agency in the preceding 5 years; violations by other agencies do not count). Exceptions apply if the violation (1) poses serious harm to the public interest; (2) impedes criminal activity detection; (3) involves internal revenue or tax/debt laws; (4) remains uncorrected within 6 months of written notice; or (5) endangers public health or safety. For public health or safety violations, an agency may waive the fine if corrected within 24 hours of written notice to the owner (considering violation nature, good faith efforts, and economic benefit gained), but must notify Congress within 60 days if imposing a fine without such allowance.