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

H.R. 527

Regulatory Flexibility Improvements Act of 2011

Date
December 1, 2011 (112th Congress, 1st Session)

Staff Contact
Sarah Makin

Floor Situation

On Thursday, December 1, 2011, the House is scheduled to consider H.R. 527, the Regulatory Flexibility Improvements Act of 2011.  The bill was introduced by Rep. Lamar Smith (R-TX) on February 8, 2011, and referred to the Committee on the Judiciary.  On July 7, 2011, a mark-up was held and the bill was reported as amended by a vote of 18-8. 

H.R. 527 will be considered under a rule, H. Res. 477, that provides one hour of general debate with 40 minutes equally divided and controlled by the chair and ranking minority member of the Committee on the Judiciary and 20 minutes equally divided and controlled by the chair and ranking minority member of the Committee on Small Business.  Additionally, the rule makes in order only those amendments to H.R. 527 printed in part A of the Rules Committee report (six amendments, each debatable for ten minutes), and provides for one motion to recommit with or without instructions. 

Bill Summary

H.R. 527 would amend the Regulatory Flexibility Act (RFA) to require federal agencies to analyze fully the impact a new regulation would have on small businesses, before the agency adopts the regulation. 

The bill would expand coverage to:

  • All rules within the Administrative Procedure Act’s (APA) definition, other than certain rules of particular applicability.  Current law extends coverage only to rules promulgated through notice and comment rulemaking);
  • Rules with indirect effects or beneficial effects on small entities;
  • Rules affecting tribes and land management plans; and
  • Certain IRS interpretive rules, including recordkeeping requirements. 

H.R. 527 would require agencies to identify in their biannual regulatory agenda the sector of the North American Industrial Classification System which will be affected by a rule, and to post online a plain-language summary of the bi-annual regulatory agenda.  Furthermore, the bill would require that the Small Business Administration’s Office of Advocacy compile and post plain-language summaries of the agencies’ regulatory agendas. 

The bill would prescribe more stringent requirements for initial and final regulatory flexibility analyses, including requirements for:

  • Identification of cumulative economic impacts and disproportionate impacts on small entities or a specific class of small entities;
  • Heightened provision of quantitative information;
  • Greater inclusion of responses to comments on certifications of proposed rules; and
  • Publication of analyses on agency websites.

H.R. 527 would eliminate certain authorities for agencies to waive or delay compliance with requirements for initial and final regulatory flexibility analyses.  The bill would also grant the Chief Counsel for Advocacy the authority to issue government-wide RFA compliance regulations, to intervene in agency adjudications and to file comments in response to any agency notice requesting comment. 

The bill would modify standards for determining which proposed rules will be subject to small business review panel requirements.  Current law limits panel requirements to rules for which the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and the Consumer Financial Protection Bureau will prepare initial regulatory flexibility analyses.  H.R. 527 would extend review panel requirements to any rules for which an agency will prepare an initial regulatory flexibility analysis or that the Office of Information and Regulatory Affairs (OIRA) determines to be a major rule under standards equivalent to those found in the Congressional Review Act. 

H.R. 527 would ensure agencies periodically review regulations that have significant economic impacts on small entities and take action to minimize adverse or disproportionate impacts and maximize benefits to the greatest extent possible, consistent with states objectives of applicable statues.  The bill would require that agencies reach out to and gather input from small businesses as a part of the review process. 

The bill would modify the current provision in law that limits judicial review to “final agency action.”  Under the bill, judicial review would be available when the agency publishes its final rule.

H.R. 527 would grant the U.S. Court of Appeals jurisdiction to review all rules issued under the RFA and Small Business Regulatory Fairness Act (SBREFA).  The bill would authorize the Chief Counsel for Advocacy of the Small Business Administration to appear amicus curiae and comment in any lawsuit brought to review a rule. 

Finally, the bill would require agencies to solicit input from small entities when preparing compliance guides, and would require compliance guides to be written in plain language.  H.R. 527 would allow agencies to work with small entities’ associations to distribute the compliance guides; to prepare different compliance guides for different entities; and to prepare a single compliance guide for a group of rules.

Background

The RFA, as amended by the SBREFA, requires agencies to analyze the impact a new regulation will have on small businesses, before adopting the regulation.  According to the House Committee on the Judiciary, small businesses are America’s main job creators, but they have higher regulatory compliance costs than their larger competitors.  Meanwhile, the regulatory burden on small businesses is increasing sharply.  It makes sense to require agencies to examine how regulations impact small businesses, just as they must consider how new regulations may affect the environment. 

Under current law, if a proposed or final rule will have a “significant economic impact on a substantial number” of small businesses, then the agency must analyze alternatives to achieve the same result, including weighing costs and benefits.  But agencies are not complying fully with the current law.  H.R. 527 would close loopholes and cure weaknesses in the current law, to require agencies to conduct the kind of analysis they should be doing right now.  For example:

  • Currently, agencies only need to assess direct economic impacts on small businesses.  But many regulations – like the EPA’s air quality standards – have clearly foreseeable indirect consequences on small businesses and so should be analyzed under the RFA.  Agencies already calculate indirect effects for environmental impact statements.
  • The bill would eliminate loopholes that enable the IRS to avoid complying with the RFA.
  • H.R. 527 would require agencies to prepare more detailed analyses, including the cumulative impact of the new regulation on small businesses, and strengthens judicial review of agencies’ compliance with the RFA.
  • Today, only three agencies are required to obtain input from small businesses through “advocacy review panels” before publishing a proposed rule.  H.R. 527 would require all federal agencies to obtain such input, and to develop and conduct regulatory reviews of existing regulations.  This is consistent with President Obama’s Executive Order 13563, which directs agencies to review their regulations and to solicit public input.
  • Agency compliance with the RFA is inconsistent, with each agency interpreting the law as it pleases.  H.R. 527 would require the Small Business Administration’s Chief Counsel for Advocacy to prepare RFA compliance regulations that all agencies must follow.  This builds on the Chief Counsel’s current responsibility to monitor agency compliance with the RFA.

Improved RFA compliance will enable agencies to find less costly and more beneficial ways to achieve their regulatory objectives.  Nothing in the bill would prevent an agency from issuing any particular regulation.  H.R. 527 would improve the rulemaking process, so agencies (and the public) will know before a new regulation is adopted how it will affect small businesses.

Cost

The Congressional Budget Office (CBO) estimates that enacting H.R. 527 would cost $80 million over the 2012-2016 period to expand the RFA, assuming appropriation of the necessary funds.  Enacting the bill could affect direct spending by agencies not funded through annual appropriations; therefore, pay-as-you-go procedures apply.  CBO estimates, however, that any net increase in spending by those agencies would not be significant.  Enacting H.R. 527 would not affect revenues.

Amendments

Amendment No. 1—Rep. Critz (D-PA):  This amendment would require agencies to consider the estimated cumulative impact on small businesses of any other rule stemming from the implementation of the Free Trade Agreements.

Amendment No. 2—Rep. Jackson Lee (D-TX):  This amendment would exempt all rules promulgated by the Department of Homeland Security.

Amendment No. 3—Rep. Cohen (D-TN):  This amendment would exempt from the bill’s requirements any rule that relates to food safety, workplace safety, consumer products safety, air or water quality. 

Amendment No. 4—Rep. Peters (D-MI):  This amendment would exempt from the bill all rules that the Office of Management and Budget (OMB) determines would result in net job creation.

Amendment No. 5—Rep. Jackson Lee (D-TX):  This amendment would require a Government Accountability Office (GAO) report within two years of enactment on the cost effectiveness of the Act and the effect it will have on federal agency rule making.  The amendment would require the report to contain: a list of all additional costs and resources that each agency will have to expend to carry out the Act and the amendments made by the Act; the effect of the Act and the amendments made by the Act on the efficiency of the rule making process (including the amount of time required to make and implement a new rule); to what extent the Act or the amendments made by the Act will impact the making and implementation of new rules in the event of an emergency; and the overall effectiveness of the Act or the amendments made by the Act. 

Amendment No. 6—Rep. Johnson (D-GA):  This amendment would create an exception for any rule making to carry out the FDA Food Safety Modernization Act.