Regulatory Reform Bill Introduced

April 24, 2019

On April 10, Senator James Lankford (R-Okla.) introduced the Small Business Regulatory Flexibility Improvements Act (S. 1120) to require federal agencies to analyze the full impact of a proposed regulation on small businesses during the rulemaking process. Lankford chairs the Homeland Security and Governmental Affairs Subcommittee on Regulatory Reform and Federal Management.

The bill is cosponsored by Senators Chuck Grassley (R-Iowa), who is Chairman of the Finance Committee, Jim Risch (R-Idaho), who is Chairman of the Senate Foreign Relations Committee, Pat Roberts (R-Kansas), who is Chairman of the Senate Agriculture Committee, and Senator John Hoeven (R-N.D.), who is chairman of the Senate Indian Affairs Committee.

During the 115th Congress, NSBA supported Senator Lankford’s identical bill (S. 584), to the one he reintroduced for the 116th Congress. Please click here to read NSBA’s letter of support. NSBA supports the new bill, S. 1120, as it works toward alleviating some of the overwhelming and unnecessary regulatory burdens disproportionately borne by small businesses. In NSBA’s letter of support, we stated: “the Small Business Regulatory Flexibility Improvements Act, which will provide effective, meaningful assistance to America’s small businesses, is an excellent step in the right direction.

The Small Business Regulatory Flexibility Improvements Act would force agencies to analyze the total impact regulations have on all small businesses and closes loopholes used by agencies to avoid compliance with the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement and Fairness Act (SBREFA) of 1996. Specifically:

  • The RFA of 1980 requires federal agencies to assess the impact of proposed regulations on “small entities.” Under the RFA, agencies, including independent agencies, must prepare a regulatory flexibility analysis for rules deemed to have a “significant economic impact on a substantial number of small entities.” However, the RFA did not define “significant economic impact” or “substantial number of small entities,” leaving agencies with broad discretion to decide when regulatory flexibility analysis requirements are triggered.
  • The SBREFA of 1996 amended the RFA to create additional requirements agencies must follow when promulgating rules that impact small entities, however, deficiencies in both of the RFA and SBREFA left small businesses burdened by massive, one-size-fits-all regulatory schemes.
  • Agencies are frequently able to work around RFA and SBREFA requirements by (1) considering only the direct economic impacts of proposed rules; (2) not including tribes as a small entity; (3) exempting IRS regulations; (4) requiring small business review panels of only three agencies; and (5) allowing agencies to sign off on rules as having “no significant economic impact” without detailed analysis. 

This legislation would require agencies to change their rulemaking procedures so that RFA analyses include detailed statement describing: (1) the reasons why action by the agency is being considered; (2) the objectives of and legal basis for the rule; (3) the estimated number and type of small entities to which the proposed rule will apply; (4) the projected reporting and compliance requirements; (5) all relevant federal rules which may duplicate, overlap, or conflict with the proposed rule; (6) the estimated cumulative economic impact of the rule; (7) any disproportionate economic impact on small entities; and (8) any impairment of the ability of small entities to have access to credit.

Additionally, the bill would waive fines for certain first-time paperwork violations by small businesses but excludes waived fines for issues such as public health or safety, criminal activity, IRS laws, violations previously warned of, and other issues relating to public interest.

As proven by the NSBA 2017 NSBA Regulations Survey, small businesses are being inundated with rules that affect the very existence of their business and in order to strengthen the barrier between small firms and damaging government regulations, there is an urgent need to greatly reduce regulatory complexity, streamline the web of federal, state and local regulations, and adhere to plain language statutes.