Report on the Regulatory Flexibility Act
FY 2006

Annual Report of the Chief Counsel for Advocacy on Im-
plementation of the Regulatory Flexibility Act and Execu-
tive Order 13272
February 2007
Report on the Regulatory Flexibility Act, FY 2006

Annual Report of the Chief Counsel for Advocacy on Im-
plementation of the Regulatory Flexibility Act and Execu-
tive Order 13272

February 2007

To the President and the Congress of the United States

I am pleased to present the fiscal year (FY) 2006 edition of the annual Report on the Regulatory Flexibility 
Act. Charged with overseeing implementation of the Regulatory Flexibility Act of 1980 (RFA) and Execu-
tive Order 13272, the Office of Advocacy reports annually on federal agency compliance. The RFA re-
quires federal agencies, during the regulatory development process, to review the potential impact of pro-
posed regulations on small businesses and other small entities and to examine significant alternatives that 
minimize small entity impacts while still meeting the purpose of the regulation. E.O. 13272, signed by 
President Bush in 2002, strengthened the implementation process by requiring agencies to post their RFA 
implementation procedures and policies publicly, ensuring Advocacy has an opportunity to review rules 
earlier in the process, and requiring Advocacy to train federal agencies in how to comply with the law.
    Advocacy Attorney Keith Holman looked at the RFAs record of success in an article, The Regula-
tory Flexibility Act at 25: Is the Law Achieving its Goal? published in the Fordham Urban Law Journal 
in May 2006. Holman noted that the task has been not only to enforce the laws provisions, but to change 
the rule writing culture so that the agencies appreciate the importance of small businesses and the effects of 
their rules on them. Accordingly, we have taken the mandate to train federal agencies very seriously. We 
continue to receive requests to conduct more training sessions in agencies such as the Internal Revenue 
Service, the Fish and Wildlife Service, and the Department of State. In FY 2006, we also unveiled a train-
ing module that can be accessed online for new agency rule writers or those who may need a refresher.   
    Our efforts are showing results. Over the past several years, we have seen real progress in agency un-
derstanding of and compliance with the RFA and E.O. 13272. Nearly all Cabinet departments have posted 
their RFA policies on their websites and more agencies are routinely notifying us electronically of regula-
tory proposals. An increasing number of agencies are coming to us earlier in the regulatory development 
process to ensure that they have done the work needed to address small business concerns. And consulta-
tion with small businesses and their representatives about the effects of a proposed rule is more likely to 
occur early enough to make a difference. As a result of the laws implementation in FY 2006, small busi-
nesses saved $7.25 billion in the first year and $117 million in annually recurring costs.
    Cost savings are just one concrete measure that has been used by Advocacy for a number of years to 
show how enforcement of the law makes a difference to small entities. As agencies begin to see for them-
selves the importance of implementing the RFA early in the rulemaking process, the cost savings will be 
more difficult to calculate, and other measures of the laws effectiveness may be needed. As a result, this 
fiscal year, we are continuing to analyze various methods of quantifying Advocacys effectiveness.
    One measure of the federal RFAs success that is apparent in FY 2006 is the number of state govern-
ments implementing laws modeled on it. The Office of Advocacy offered model legislation for the states in 
December 2002. With 19 state regulatory flexibility laws or executive orders already in effect as of FY 
2005, 11 more states introduced RFA legislation in FY 2006, two states enacted it, and two more governors 
issued executive orders. A record of successful RFA implementation is now being built at the state level.       
    For the rest of the story, I will let the report speak for itself. The Office of Advocacy is committed to a 
regulatory culture that supports the continued growth of Americas vibrant small business community. We 
continue to be gratified by the support we receive for this effort from the Administration and the Congress, as 
well as the small business community. 
Thomas M. Sullivan
Chief Counsel for Advocacy 
Contents
 
To the President and the Congress of the United States
1  An Overview of the Regulatory Flexibility Act and Related Policy
History
Analysis under the RFA
SBREFA, Judicial Review, Amicus AuthorityE 
Executive Order 13272
2  Federal Agency Compliance and the Role of the Office of Advocacy
Agency Compliance with Executive Order 13272
RFA Training under E.O. 13272
Measuring Effectiveness
Overview of RFA Implementation
Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, Fiscal Year 2006
Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy, Fiscal Year 2006
Table 2.2 Regulatory Cost Savings, Fiscal Year 2006
Table 2.3 Summary of Cost Savings, Fiscal Year 2006
3 Advocacy Review of Agency RFA Compliance in Fiscal Year 2006
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Department of Veterans Affairs
Environmental Protection Agency
Federal Acquisition Regulation Council
Federal Communications Commission
Federal Trade Commission
Securities and Exchange Commission
Small Business Administration
Conclusion
4.  Making the States Flexible: Small Business Regulatory Flexibility Model Legislation
Success Stories
Table 4.1 State Regulatory Flexibility Legislation, 2006 Legislative Activity
Table 4.2 State Regulatory Flexibility Legislation, Status as of October 2006
Chart 4.1 Mapping State Regulatory Flexibility Provisions, Fiscal Year 2006
Appendices
A  Supplementary Tables
Table A.1 Cabinet Department RFA Procedures in Compliance with Section 3(a) of E.O. 13272
Table A.2 Training in Federal Agencies, FY 2003-2006
Table A.3 SBREFA Panels through Fiscal Year 2006
B  The Regulatory Flexibility Act
C  Executive Order 13272
D  Abbreviations
1
An Overview of the Regulatory Flexibility Act and Related 
PolicyHistory
When Congress passed the Regulatory Flexibility Act (RFA) in 1980, it found, among other things, that 
laws and regulations designed for application to large scale entities have been applied uniformly to small 
businesses, small organizations, and small governmental jurisdictions even though the problems that gave 
rise to government action may not have been caused by those smaller entities; uniform Federal regulatory 
and reporting requirements have in numerous instances imposed unnecessary and disproportionately bur-
densome demands including legal, accounting and consulting costs upon small businesses, small organiza-
tions, and small governmental jurisdictions with limited resources; [and] unnecessary regulations create 
entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial prod-
ucts and processes. (1)
    
    The 1980 passage of the RFA was intended to address this longstanding problem of the disproportion-
ate economic impact of federal regulations on small businesses. The RFA changed the process by which 
regulations were promulgated under the Administrative Procedures Act (APA). By requiring agencies to 
consider the impact of their regulations on small entities, the RFA simultaneously addressed the dispropor-
tionate effect of those regulations and promoted the participation of small businesses in the rulemaking 
process. 
Analysis under the RFA
The RFA does not require special treatment or regulatory exemptions for small businesses, but mandates an 
analytical process for determining how best to achieve public policy objectives without unduly burdening 
small entities. During the preparation of a proposed rule, an agency must prepare an initial regulatory flexi-
bility analysis (IRFA) if it determines that a proposal may impose a significant economic impact on a sub-
stantial number of small entities. The RFA requires agencies to publish the IRFA, or a summary thereof, 
in the Federal Register at the same time it publishes the proposed rulemaking.(2) An agency can waive the 
requirement for an IRFA if it can certify that the proposed rule will not have such an impact; such certifica-
tions must have a factual basis.(3) 
    Under section 603(b) of the RFA, an IRFA must describe the impact of the proposed rule on small en-
tities and contain the following information(4)
A description of the reasons why the action by the agency is being considered.
A succinct statement of the objectives of, and legal basis for, the proposed rule.
A descriptionand, where feasible, an estimate of the numberof small entities to which the proposed 
rule will apply.
A description of the projected reporting, recordkeeping, and other compliance requirements of the proposed 
rule, including an estimate of the classes of small entities that will be subject to the requirement and 
the types of professional skills necessary for preparation of the report or record.
    An identification, to the extent practicable, of all relevant federal rules that may duplicate, overlap, or 
conflict with the proposed rule.
    Each IRFA must also contain a description of any significant alternatives to the proposed rule that 
minimize the burden on small entities while still accomplishing the objective of the rule.(5) After the 
agency has collected the comments submitted in response to the proposed rule, it must publish a final regu-
latory flexibility analysis, or FRFA.(6) The FRFA must address, in light of the comments it has received, 
the same elements of the IRFA. The FRFA must also describe the steps followed by the agency to mini-
mize the economic impact on small entities; give the factual, policy, and legal reasons for selecting the al-
ternatives adopted in the final rule; and explain why other alternatives were rejected.(7) 
    By specifically analyzing the impact of proposed rules on small businesses and seeking their input, 
agencies can seek alternative measures to reduce or eliminate the disproportionate small business burden 
without compromising public policy objectives. 
SBREFA, Judicial Review, Amicus Authority
In 1996, Congress passed the Small Business Regulatory Enforcement Fairness Act (SBREFA), which did 
several things to aid small businesses.(8) It increased the specificity of the already-required economic 
analysis, and it required the Environmental Protection Agency (EPA) and the Occupational Safety and 
Health Administration (OSHA) to convene panels to consult with small entity representatives before pro-
posing any rules expected to have a significant economic impact on those businesses.(9) These panels con-
sist of representatives of the agency, the Office of Advocacy (Advocacy), the Office of Management and 
Budgets Office of Information and Regulatory Affairs (OIRA), and small entity representatives.(10) In 
addition to considering the agencys policies, data, and economic analysis, the panels also present this in-
formation to several small entity representatives, who provide written and verbal feedback to the agency. 
SBREFA also provided for small entities to seek judicial review of an agencys rulemaking if the agency 
failed to comply with the rulemaking provisions of the RFA, and gave the Small Business Administrations 
(SBA) chief counsel for advocacy enhanced authority to enter briefs in such cases as a friend of the 
court.(11) 
Executive Order 13272
On August 13, 2002, President George W. Bush signed Executive Order 13272, which further spelled out 
the obligations of the RFA for the Office of Advocacy and federal agencies.(12) It required Advocacy to 
remind the heads of the agencies of their responsibilities under the RFA and to provide training to those 
agencies on how to comply. It further emphasized Advocacys authority to comment on draft rules to the 
agency or to OIRA. 
    E.O. 13272 directed the agencies to issue written procedures and policies on how they comply with the 
RFA. Most federal agencies have posted their RFA procedures on their websites.(13) It also directed the 
agencies to notify Advocacy when a proposed rule would have a significant economic impact on a substan-
tial number of small entities.(14) Under the executive order, each agency is required to give every appro-
priate consideration to comments it receives from Advocacy on proposed rules, and publish its response to 
Advocacys comments with the final rule.(15)
2
Federal Agency Compliance and the Role of the Office of 
Advocacy

For more than 30 years, the Office of Advocacy has represented the concerns of small business before 
Congress and regulatory agencies. One of Advocacys primary functions is to examine the role of small 
business in the American economy(16) Congress tasked Advocacy with being an independent voice for 
small business(17) in 1976, and mandated that Advocacy measure the direct costs and other effects of 
government regulations on small business(18) Four years later, the Regulatory Flexibility Act was en-
acted, requiring federal agencies to consider the impact of their regulations on small businesses and other 
small entities.(19) The law gave the chief counsel for advocacy the responsibility of reporting to the presi-
dent and Congress on agency compliance with the law.(20) Executive Order 13272 further requires regula-
tory agencies to share drafts of proposed rules that may have a significant impact on a substantial number 
of small entities and to consider Advocacys comments on those rules.(21) 
    The level of federal agency compliance with these two requirements continues to vary across agencies 
and departments. As this report indicates, fiscal year 2006 has led to numerous interventions by the Office 
of Advocacy on behalf of small businesses, saving them $7.25 billion in first year and $117 million in an-
nual recurring savings.(22) Clearly some agencies have not yet incorporated the RFA analytical process 
into their regulatory development. However, the Office of Advocacy sees improvement across the board in 
many other agencies. Those agencies have approached Advocacy earlier in the decision making process in 
an effort to consider the regulatory impacts of their proposed regulations before a draft proposed rule is 
published in the Federal Register. 
    The RFA has been in existence for 26 years. SBREFA, the major amendment to the RFA, is now 10 
years old. E.O. 13272 has been in effect for four years. Despite the age of these congressional and execu-
tive directives, agencies remain in need of assistance when it comes to considering small business concerns 
and analyzing potential economic impacts of their draft regulations on the small businesses they regulate. 
Consideration of these impacts is becoming less an afterthought for some federal agencies, yet a full and 
consistent understanding of the requirements of these important mandates remains elusive to others.(23) 
Agency Compliance with Executive Order 13272 
E.O. 13272 contains three requirements for federal regulatory agencies. The first was completed, for the 
most part, in FY 2003, when Cabinet-level departments issued written policies and procedures describing 
how they will ensure that their regulations consider the potential impact on small entities. These documents 
were made publicly available on most department websites.(24) 
    The second requirement directs agencies to notify Advocacy of any draft rules that may have a signifi-
cant economic impact on a substantial number of small entities under the RFA.(25) Such notifications are to 
be made either when the agency submits a draft rule to OIRA under Executive Order 12866 or, if no 
such submission is required, at a reasonable time before publication of the rule by the agency.(26) Advo-
cacy established an email address, notify.advocacy@sba.gov, to make it easier for agencies to comply 
electronically with the notice requirements of E.O. 13272 and the RFA. More agencies utilized the sys-
tem in FY 2006. Instant communication enables agencies to work with Advocacy sooner rather than 
later, and Advocacy is committed to encouraging more agencies to abandon the paper notification sys-
tem still used at a few remaining agencies. 
    The third requirement under E.O. 13272 is to give appropriate consideration to Advocacys comments 
on a proposed rule.(27) In the final rule published in the Federal Register, an agency must respond to writ-
ten comments submitted by Advocacy. Most agencies have either complied with this requirement or did not 
have an opportunity to comply in fiscal year 2006 because they did not issue a final rule on which Advo-
cacy publicly commented. 
RFA Training under E.O. 13272
One of the important requirements of the executive order is that Advocacy train every federal regulatory agency 
in how to comply with the RFA.(28) In FY 2006, the third year of training, economists, attorneys, and regula-
tory and policy staff at numerous agencies received detailed instruction on how to consider the impact of their 
regulations on small entities before they put pen to paper. This is an important step in helping them comply 
with the RFA and E.O. 13272. 
    Having identified 66 departments, agencies, and independent commissions that promulgate regulations 
affecting small businesses, the Office of Advocacy hopes to complete training of all 66 by FY 2008. Since 
the executive order was signed, Advocacy has trained more than 48 federal agencies, many on more than 
one occasion.(29) Some federal agencies are considering making this training mandatory for all of their 
regulatory staff, which can include as many as 1,500 employees in some large agencies. With classroom 
sessions ideally consisting of 25-30 students, it frequently takes many sessions at an agency to accomplish 
this task, but Advocacy has found that these smaller, more intensive sessions are the most productive for 
attendees. 
    Agency feedback following each training session continues to be excellent. A better test of the effective-
ness of RFA training, however, is how agencies comply with the RFA once the training is complete. After 
training, most agencies are more willing to share draft documents with Advocacy in an effort to improve their 
RFA compliance. The difference is becoming apparent in regulatory certifications.(30) For the most part, agen-
cies have learned that they must provide a factual basis for their assertion that a rule will not have a significant 
impact on a substantial number of small entities. It is now infrequent that these agencies issue boilerplate state-
ments to that effect without an explanation in the proposed rule. This progress can be directly attributed to the 
RFA training sessions focus on providing more information to small entities in the proposed rule and analyz-
ing small entity impacts as early as possible in the rulemaking process. 
Online RFA Training Completed
In fiscal year 2006, efforts were concentrated on the development and rollout of an online component to the 
RFA classroom training. Federal agency rule writers can now access an online training site to take the RFA 
course. New employees and those that need a refresher have valuable information on the RFA at their fin-
gertips. Advocacy is hopeful that this enhanced training tool will help more agency staff fully understand 
the RFA compliance requirements and consider the small entity impacts of their rules. The online RFA 
training can be accessed at www.sba.gov/advo/rfaonlinetraining.html. (31)
Measuring Effectiveness
Historically, Advocacy has measured its achievements under the RFA through a calculation of regulatory 
cost savings. However, the cost savings figure does not begin to capture the totality of Advocacys in-
volvement in the rulemaking process. Under E.O. 13272, Advocacy has proven very successful in its ef-
forts to have agencies analyze a rules impact on small businesses before the regulation is made public in 
the Federal Register. Many of Advocacys greatest successes cannot be recounted or quantified publicly 
because of the importance of maintaining the confidentiality of interagency communication. Preproposal 
oral and written communications between Advocacy and agencies are kept confidential, and that helps the 
prepublication exchange of information between Advocacy and agencies. Often preproposal communica-
tions are where the greatest benefits are achieved in agency compliance with the RFA and in the choice of 
alternatives that lessen the rules impact on small businesses.
    The success of Advocacys early intervention in the rulemaking process and its agency training under 
E.O. 13272 presented Advocacy with an interesting conundrum. How can Advocacy modernize the meas-
urement of its effectiveness to encompass its ongoing regulatory interventions, determine the benefits of 
earlier intervention in the rulemaking process, and evaluate the success of agency training under E.O. 
13272? Theoretically, as Advocacy achieves more success utilizing these tools and agencies become more 
proficient in complying with the RFA, cost savings between the first public proposal and the final rule 
should diminish.
    Advocacy has recently undertaken an exploration of ways to increase its ability to gauge its effective-
ness post-E.O. 13272. In future annual reports, Advocacy anticipates using new measurement tools to re-
fine and increase information about its effectiveness in persuading federal agencies to comply with the 
RFA.
Overview of RFA Implementation 
Advocacy promotes agency compliance with the RFA and E.O. 13272 in several ways throughout the 
rulemaking process. Advocacy attorneys and economists regularly review proposed regulations and work 
closely with small entities, trade associations, and federal regulators to identify areas of concern and to 
work to ensure that the RFAs requirements are fulfilled (Chart 2.1). 
    Advocacy provides a voice for the small business community early in the rulemaking process, by put-
ting the real-world concerns of small businesses directly in front of agency officials. Advocacy staff regu-
larly meet with small businesses and their trade associations regarding federal agency responsibilities under 
the RFA, factors to be addressed in agency economic analyses, and the judicial review provision enacted in 
the SBREFA amendments. Roundtable meetings with small businesses and trade associations focus on spe-
cific regulations and issues, such as environmental, transportation, and industrial safety regulations. Advo-
cacy also plays a key role as a participant in SBREFA panels convened to review EPA and OSHA rules 
(see Table A.3 in Appendix A). 
    Advocacys Office of Economic Research continues to provide economic data to help agencies iden-
tify industrial sectors dominated by small firms. Advocacy makes statistics available on its website and 
maintains a database of information on trade associations that can be helpful to federal agencies seeking 
input from small businesses.
    As regulatory proposals and final rules are developed, Advocacy provides preproposal consultation, in-
teragency review under E.O. 12866, informal comments to the agency, congressional testimony, and friend 
of the court amicus briefs. Advocacy also continues to review proposed regulations and send formal com-
ment letters where appropriate. In FY 2006, Advocacy sent over 40 formal comment letters to federal agen-
cies (Table 2.1).(32) 
     As a result of Advocacy interventions, quantifiable cost savings were achieved for small businesses in 
16 regulations in FY 2006 (Table 2.2). Efforts to reduce the regulatory burden of these 16 rules resulted in 
FY 2006 regulatory cost savings of $7.25 billion in the first year and $117 million in annually recurring 
savings (Table 2.3).  


Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, 
FY 2006 (percent)
In fiscal year 2006, the Office of Advocacy provided comments to several agencies on how to comply with 
the RFA. Chart 2.1 illustrates key concerns raised by Advocacys comment letters and prepublication re-
view of draft rules. The chart highlights areas for improved compliance based on Advocacys analysis of its 
FY 2006 comment letters and other regulatory interventions summarized in this report.

Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy,  
Fiscal Year 2006*

Date 

Agency

Comment Subject

10/03/05

SEC

Comment letter regarding the Notice of Proposed Rulemaking extending 
small public company compliance deadlines for internal control reporting 
under the Sarbanes-Oxley Act of 2002, Section 404; 70 Fed. Reg. 56,825 
(Aug. 30, 2005).

10/14/05

DOL

Comment letter regarding the Notice of Proposed Rulemaking on Form 
5500 E-Filing Regulation; 70 Fed. Reg. 51,542 (Aug. 30, 2005). 

10/28/05

FCC

Response letter to Public Notice Seeking Comment Regarding Possible Re-
vision or Elimination of Rules under the Regulatory Flexibility Act, 5 
U.S.C. Section 610; DA-05-154.

10/28/05

OSHA

Response letter to Public Notice of Regulatory Flexibility Act Section 610 
Review of Lead in Construction Standard; 70 Fed. Reg. 32,739 (June 6, 
2005).

10/31/05

DHS

Comment letter regarding the Advance Notice of Proposed Rulemaking on 
Documents Required for Travel within the Western Hemisphere; 70 Fed. 
Reg. 52,037 (Sept. 1, 2005). 

11/14/05

EPA

Report of the Small Business Advocacy Review Panel convened for the 
Notice of Proposed Rulemaking on the Control of Hazardous Air Pollutants 
from Mobile Sources or Mobile Source Air Toxics (MSAT). 

12/16/05 

FWS

Comment letter regarding the Notice of Proposed Rulemaking for the Inju-
rious Wildlife Species, the Black Carp; 70 Fed. Reg. 61,933 (Oct. 27, 2005).  

01/03/06

IRS

Comment letter regarding the Notice of Proposed Rulemaking on Income 
Attributable to Domestic Production Activities; 70 Fed. Reg. 67,220 (Nov. 
4, 2005). 

01/06/06

OMB

Response letter to the Notice and Request for Comments on OMBs Proposed 
Bulletin for Good Guidance Practices; 70 Fed. Reg. 71,866 (Nov. 30, 2005). 

01/09/06

OSHA

Comment letter regarding the Notice of Proposed Rulemaking on Electric 
Power Generation, Transmission, and Distribution, Electrical Protective 
Equipment Rule; 70 Fed. Reg. 34,822 (June 15, 2005). 

01/13/06

EPA

Comment letter regarding the Notice of Proposed Rulemaking on the Toxics 
Release Inventory (TRI) Burden Reduction Rulemaking- Phase II; 70 Fed. 
Reg. 57,822 (Oct. 4, 2005). 

01/18/06

FCC

Comment letter regarding the Notice of Proposed Rulemaking on the Junk 
Fax Prevention Act of 2005; CG Dkt. No. 05-338.

01/26/06

SEC

Response letter to the SECs Advisory Committee on Smaller Public Com-
panies Draft Recommendations to Reform Section 404 of the Sarbanes- 
Oxley Act of 2002. 

02/01/06

FWS

Comment letter regarding the Notice of Proposed Rulemaking on the Des-
ignation of Critical Habitat of California Red-Legged Frog; 70 Fed. Reg. 
66,906 (Aug. 4, 2005). 

02/06/06

FAA

Comment letter regarding the Notice of Proposed Rulemaking on the Wash-
ington D.C. Metropolitan Area Special Flight Rules Area Rule; 70 Fed. 
Reg. 45,250 (Aug. 4, 2005). 

02/10/06

EPA

Comment letter regarding the Notice of Proposed Rulemaking on Amend-
ments to the Spill Prevention, Control and Countermeasure (SPCC) Rule; 
70 Fed. Reg. 75,324 (Dec. 12, 2005). 

03/14/06

EPA

Comment letter regarding the Proposed 2006 Multi-Sector General Permit 
(MSGP) for Industrial Facilities; 70 Fed. Reg. 72,116 (Dec. 1, 2005). 

03/14/06

FCC

Notice of ex parte presentation of recommendations to the FCC regarding 
the Junk Fax Prevention Act of 2005; CG Dkt. No. 05-338.

04/27/06

PTO

Comment letter regarding the Notice of Proposed Rulemaking on Changes 
to Practice for the Examination of Claims in Patent Applications; 71 Fed. 
Reg. 61 (Jan. 3, 2006); and Changes to Practice for Continuing Applica-
tions, Requests for Continued Examination Practice, and Applications Con-
taining Patentably Indistinct Claims; 71 Fed. Reg. 48 (Jan. 3, 2006). 

04/27/06

SEC

Response letter to Notice of Roundtable on Internal Control Reporting and 
Request for Comments on compliance experience with Section 404 of the 
Sarbanes-Oxley Act of 2002, File No. 4-511.

05/03/06

SEC

Statement to the House Committee on Government Reform regarding com-
pliance experience with Section 404 of the Sarbanes-Oxley Act of 2002.  

05/04/06

FSIS

Comment letter regarding the Notice of Proposed Rulemaking on the Avail-
ability of Lists of Retail Consignees during Meat or Poultry Recalls; 71 Fed. 
Reg. 11,326 (Mar. 7, 2006). 

05/08/06

DOT/IRS

Comment letter regarding the Notice of Proposed Rulemaking on Escrow 
Accounts, Trusts and Other Funds Used During Exchanges of Like-Kind 
Property; 71 Fed. Reg. 6,231 (Feb. 7, 2006).

05/25/06

EPA

Comment letter regarding the Notice of Proposed Rulemaking on Lead; 
Renovation, Repair, and Painting Program; 71 Fed. Reg. 1,587 (Jan. 10, 
2006).

05/30/06

State

Comment letter regarding the Notice of Proposed Rulemaking on the Ex-
change Visitor Program, Training and Internship Programs; 71 Fed. Reg. 
17,768 (Apr. 7, 2006).

06/08/06

EPA

Response letter to EPA notification of May 26, 2006, regarding the Small 
Business Advocacy Review Panel for Non-Road Spark-Ignition En-
gines/Equipment; List of Additional Small Entity Representatives (SERS). 

06/08/06

OMB

Response letter regarding the OMBs Proposed Risk Assessment Bulletin; 
71 Fed. Reg. 2,600 (Jan. 17, 2006).

06/09/06

IRS

Comment letter regarding the Final Rule on Income Attributable to Domes-
tic Production; 71 Fed. Reg. 31,268 (June 1, 2006).

06/15/06

FCC

Response letter to proceeding on the Federal-State Joint Board on Universal 
Service, before the adoption of the final rule imposing Universal Service 
obligations on Voice over Internet Protocol providers; CC Dkt. No. 96-
45;WC Dkt. No. 04-36. 

07/05/06

TSA/ 
Coast Guard

Comment letter regarding the Notice of Proposed Rulemaking on Joint Pro-
posed Transportation Worker Identification Credential (TWIC) Implementa-
tion in the Maritime Sector Rule; 71 Fed. Reg. 29,396 (May 22, 2006). 

07/06/06

FWS

Comment letter regarding the Notice of Availability of Draft Economic 
Analysis for the Proposed Designation of Critical Habitat for the Spikedace 
and Loach Minnow; 71 Fed. Reg. 32,496 (June 6, 2006). 

07/17/06

SBA

Comment letter regarding the Notice of Proposed Rulemaking on the 
Women-Owned Small Business Federal Contract Assistance Program; 71 
Fed. Reg. 34,550 (June 15, 2006). 

08/02/06

FWS

Comment letter regarding the Notice of Proposed Rulemaking on the Des-
ignation of Critical Habitat for the Five Endangered and Two Threatened 
Mussels in Four Northeast Gulf Mexico Drainages; 71 Fed. Reg. 32,745 
(June 6, 2006). 

08/03/06

PTO

Response letter to PTOs Request for Comments on Size Standard for Pur-
poses of United States Patent and Trademark Office Regulatory Flexibility 
Analysis for Patent-Related Regulations; 71 Fed. Reg. 38,388 (July 6, 2006). 

08/08/06

FCC

Comment letter regarding the Notice of Proposed Rulemaking and Initial 
Regulatory Flexibility Analysis on the Universal Service Contribution 
Methodology; WC Dkt. No. 06-122.

08/10/06

FWS

Comment letter regarding the Notice of Proposed Rulemaking on the 
Amended Designation of Critical Habitat for the Wintering Population of 
the Piping Plover; 71 Fed. Reg. 33,703 (June 12, 2006). 

08/21/06

FCC

Notice of ex parte presentation of recommendations to the FCC regarding 
the Childrens Television Obligations of Digital Television Broadcasters; 
CG Dkt. No. 00-167. 

08/25/06

OSHA

Response letter to the notification (Aug. 16, 2006) on the Small Business 
Advocacy Review Panel on the Occupational Safety and Health Administra-
tions draft proposal for Cranes and Derricks in Construction. 

09/05/06

EPA

Comment letter regarding the Control Techniques Guidelines in Lieu of 
Regulations for Lithographic Printing Materials, Letterpress Printing Mate-
rials, Flexible Packaging Printing Materials, Flat Wood Paneling Coatings, 
and Industrial Cleaning Solvents; 71 Fed. Reg. 44,521 (Aug. 4, 2006).

09/07/06

FWS

Comment letter regarding the Notice of Revised Proposed Rulemaking and 
Notice of Availability of Draft Economic Analysis for the Designation of 
Critical Habitat for the Alabama Beach Mouse; 71 Fed. Reg. 44,976 (Aug. 
8, 2006). 

09/14/06

SEC

Comment letter regarding the Notice of Proposed Rulemaking on Exten-
sions of Compliance Deadlines for Non-Accelerated Filers (Smaller Public 
Companies) for Section 404 of the Sarbanes-Oxley Act of 2002 (Internal 
Controls Financial Reporting); 71 Fed. Reg. 47,060 (Aug. 15, 2006). 

09/15/06

SEC

Response letter to SECs Concept Release on Forthcoming Management 
Guidance on Section 404 of the Sarbanes-Oxley Act of 2002 (Internal Con-
trols Financial Reporting); 71 Fed. Reg. 40,865 (July 18, 2006).

09/15/06

EPA

Comment letter regarding the Notice of Proposed Rulemaking on the Na-
tional Primary Drinking Water Regulations for Lead and Copper; 71 Fed. 
Reg. 40,827 (July 18, 2006). 

09/18/06

FTC

Comment letter regarding the Notice of Proposed Rulemaking on the Iden-
tity Theft Red Flags and Address Discrepancies Under the Fair and Accu-
rate Credit Transactions Act of 2003; 71 Fed. Reg. 40,785 (July 18, 2006). 

09/20/06

FCC

Comment letter on the Notice of Proposed Rulemaking and Initial Regula-
tory Flexibility Analysis on the Implementation of the Commercial Spec-
trum Enhancement Act and Modernization of the Commissions Competi-
tive Bidding Rules and Procedures; WT Dkt. No. 05-211.


Table 2.2 Regulatory Cost Savings, Fiscal Year 2006 
Agency

Subject Description

Cost Savings

CMS

Outcome and Assessment Information Set: The Centers for 
Medicare and Medicaid Services (CMS) published a final 
rule in 1999 requiring home health agencies (HHAs) that 
participate in the Medicare program to provide CMS with 
patient data called the Outcome and Assessment Information 
Set (OASIS). Advocacy commented in 1999 and 2000 voic-
ing concern that implementation of the rule would increase 
the administrative and cost burden for a significant number 
of HHAs, the majority of which were small health care pro-
viders. On December 23, 2005, CMS published another final 
rule (70 Fed. Reg. 76,199) revising the requirements of the 
rule so that HHAs were no longer required to input patient-
care data on non-Medicare/non-Medicaid patients. 

CMSs delay of the effec-
tive date saved small 
HHAs $334 million. The 
December 2005 decision 
further netted an additional 
annual savings of $47.7 
million. 
Source: National Associa-
tion for Home Care & 
Hospice

DOE

Energy Conservation Standards for Distribution Transform-
ers. On August 4, 2006, the Department of Energy (DOE) 
published a proposed rule on energy conservation standards 
for distribution transformers. More than half of the manufac-
turers of liquid and medium-voltage dry distribution trans-
formers are small businesses. In response to Advocacys 
informal interagency comments, DOE considered the im-
pacts on small business manufacturers when it proposed the 
least costly required efficiency standard from among five 
alternatives. DOE met with small businesses in designing the 
new efficiency standard and specifically chose a standard 
that would allow regulated manufacturers to make use of 
readily available techniques and materials. 

This proposed standard 
results in one-time cost 
savings of at least $5 mil-
lion.
Source: DOE
EPA

Clean Water Act Section 316(b), Phase III Cooling Water 
Intake Structures. On June 1, 2006, the U.S. Environmental 
Protection Agency (EPA) signed a final Clean Water Act 
rule designed to protect fish and other aquatic species from 
being killed when they are pulled into cooling water intakes. 
As originally planned by EPA, the rule would have required 
over 700 facilities to install devices to prevent aquatic losses, 
including an estimated 82 facilities owned by small entities. 
As a result of conducting a SBREFA review panel in early 
2004, EPA concluded that facilities with relatively low in-
take flows typically do not cause aquatic losses, and EPA 
proposed an exemption for facilities that have a cooling wa-
ter intake flow of 50 million gallons per day or less. This 
exemption, which is contained in the final rule, removes vir-
tually all small businesses from the rules coverage.  

The recommendations of 
the SBREFA panel re-
sulted in cost savings of 
$74 million for small enti-
ties such as municipal 
utilities, pulp and paper 
companies, and chemical 
plants. 
Source: EPA and Ameri-
can Public Power Associa-
tion estimates.
EPA

Spill Prevention Control and Countermeasures (SPCC). EPA 
proposed a rule in December 2005 that would streamline 
requirements for oil spill prevention and planning for some 
facilities that store and use oil. EPA adopted Advocacys 
recommendations for revisions in two areas: small facilities 
(under 10,000 gallons aggregate capacity for oil) and oil-
filled equipment. EPA proposed that the requirements for 
small facilities be streamlined, which allows the facilities to 
self-certify compliance with the SPCC requirements, instead 
of using a professional engineer. It also permits additional 
flexibility for tank integrity testing and security require-
ments. Facilities with oil-filled equipment are provided the 
option of preparing an oil spill contingency plan and a writ-
ten commitment of manpower, equipment, and materials in 
lieu of providing expensive secondary containment around 
the equipment. 

These changes produced 
small business cost sav-
ings amounting to $46 
million annually.
Source: EPA
EPA

Toxics Release Inventory - Phase II Burden Reduction. EPA 
proposed a rule in October 2005 that would allow short-form 
annual reporting of over 650 chemicals and classes of 
chemicals by industrial facilities. EPA adopted Advocacys 
recommendation to reduce small business reporting burden 
by expanding the availability of the short form (Form A) to a 
larger universe of reporters of non-PBT (persistent bioaccu-
mulative and toxic) chemicals, raising the threshold of the 
annual reportable amount from 500 pounds to 5,000 
pounds. EPA also made Form A available to PBT reporters 
with zero total releases, and less than 500 pounds PRA (PBT 
reportable amount). These changes reduce small business 
reporting burden while maintaining the integrity of the Toxic 
Release Inventory database. 

These changes created 
small business cost sav-
ings amounting to $7.4 
million in the first year 
and annually.
Source: EPA 
EPA

Clean Air Act Requirements to Control Mobile Source Air 
Toxics (MSAT). On March 29, 2006, EPA published a pro-
posed Clean Air Act rule that would require petroleum refin-
eries to reduce concentrations of benzene, an air toxic, in 
gasoline. The rule would also require portable gasoline con-
tainer manufacturers and light-duty highway vehicles to re-
duce the amount of benzene that is lost through evaporation. 
As a result of the recommendations from a SBREFA panel in 
September 2005, EPA proposed several flexibilities for small 
refiners, small gasoline container manufacturers, and light-
duty vehicle manufacturers. These flexibilities include addi-
tional lead time for compliance; allowing a benzene averag-
ing, banking, and trading program for refiners; and allowing 
a refiner or manufacturer that can demonstrate economic 
hardship additional time to comply with the standard. 

The delayed implementa-
tion is estimated to result 
in $12 million in first year 
cost savings and $12 mil-
lion in annual cost savings 
for the following four 
years.
Source: Advocacy esti-
mate based on EPA regu-
latory impact analysis
EPA

Resource Conservation and Recovery Act; RCRA Burden 
Reduction Rule. On April 4, 2006, EPA published a final 
rule that reduces many of the paperwork burdens currently 
imposed by the Resource Conservation and Recovery Act 
(RCRA). EPA promulgated the burden reduction rule in re-
sponse to recommendations from Advocacy and small busi-
ness representatives to streamline burdensome requirements 
that have little corresponding environmental benefit. 

The final rule is estimated 
to result in annual cost 
savings of $3 million per 
year.
Source: EPA
FAA

Thermal/Acoustic Insulation Installed on Transport Category 
Airplanes. The Federal Aviation Administration (FAA) pro-
posed (in 2000) and then finalized (in 2003) a rule that estab-
lished new flammability and fire protection standards for 
thermal/acoustic insulation in transport category airplanes. 
FAA issued guidance on the new rule in 2005 that would 
have rendered whole inventories of spare parts unusable, and 
also required testing and certification of all new, conforming 
parts before they could be installed on an aircraft. FAA 
agreed that the language in the rule was broader than in-
tended and they issued this new final rule to narrow its 
scope. The new rule specifically limits the scope to (1) newly 
manufactured aircraft and (2) only the thermal blankets and 
insulation around the ventilation ducts in existing aircraft. 
All other existing spare parts were excluded. 

$74 million was saved in 
certification and testing 
costs, and $75 million in 
inventoried spare parts. 
Source: Industry esti-
mates.	
FDA

Prescription Drug Marketing Act of 1987; Prescription Drug 
Amendments of 1992; Policies, Requirements, and Adminis-
trative Procedures. In December 1999, the Food and Drug 
Administration (FDA) published a final rule that set forth 
requirements for the re-importation and wholesale distribu-
tion of prescription drugs in the United States. The rule was 
to become effective on December 4, 2000. Advocacy filed 
comments suggesting that the rule would negatively affect 
small distributors and wholesalers of prescription drugs who 
were required to provide and maintain information on the 
pedigree of the drugs. FDA chose to delay the effective date 
of the rule several times. On June 14, 2006, the FDA pub-
lished a notice that the effective date will be December 1, 
2006. Advocacy has generated cost savings to stakeholders 
from December 4, 2000 to February 2004, the last date on 
which the FDA delayed the effective date of the rule, but no 
data are available on the cost savings generated.

No data are available on 
cost savings.

FWS 

Critical Habitat, Canada Lynx. On November 9, 2005, the 
Fish and Wildlife Service (FWS) proposed to designate 
26,935 square miles of land as critical habitat for the Canada 
lynx. Advocacy met with FWS to discuss this rule. On Feb-
ruary 16, 2006, the agency revised this proposed designation 
by decreasing the critical habitat designation (CHD) to 
18,031 square miles. The proposed CHD excludes land in the 
state of Washington (1,693 square miles) and in Idaho and 
Montana (7,211 square miles). 

FWSs proposed decision 
to exclude these high-cost 
areas from its CHD will 
result in $6 million in cost 
savings. 
Source: FWS
FWS

Critical Habitat, Red Legged Frog. On April 13, 2006, the 
FWS published a final rule as part of its final designation of 
critical habitat for the California red-legged frog. Following 
the issuance of a proposed rule in November 2005 revising 
the designation of the critical habitat for the California red-
legged frog, Advocacy recommended in a comment letter on 
February 1, 2006, that FWS give meaningful consideration 
to excluding high-cost areas from its final designation. In its 
final rule, FWS addressed Advocacys concerns and ex-
cluded approximately 250,329 acres from this final designa-
tion on the basis of potential disproportionately high eco-
nomic cost. 

FWS decision to exclude 
these high-cost areas from 
its final designation re-
sulted in $396 million in 
cost savings over 20 years.
Source: FWS
NHTSA

Federal Motor Vehicle Safety Standard (FMVSS) No. 139. 
In June 2003, the National Highway Traffic Safety Admini-
stration (NHTSA) published Federal Motor Vehicle Safety 
Standard (FMVSS) No. 139, which contained new require-
ments for passenger car tires and other vehicles with a gross 
weight of 10,000 pounds or less. NHTSA received several 
petitions for reconsideration of the final rule; among those 
petitions was a request by Denman Tires (the only manufac-
turer of specialty radial tires and the only small manufac-
turer) that such tires be subject to a less expensive testing 
requirement. Denmans petition was supported by comments 
submitted by the Specialty Equipment Market Association 
and by Advocacy. Upon reconsideration, the agency found 
that the more rigorous testing procedures under FMVSS 139 
would have been prohibitively expensive, and that Denmans 
products could remain subject to the testing procedures of 
other motor vehicle safety standards. 

This decision saved the 
only small business af-
fected by the new safety 
standard an estimated $1.6 
million in the first year 
alone.
Source: Specialty Equip-
ment Market Association
NPS

Personal Watercraft Rule. On September 8 and 21, 2006, the 
National Park Service (NPS) reopened the Cape Lookout 
National Seashore and the Curecanti National Recreation 
Area to personal watercraft use. On March 21, 2000, the 
NPS created regulations that banned personal watercraft use 
in all national parks, which took effect in 2002. Advocacy 
has worked with NPS and representatives of the personal 
watercraft industry to reopen the national parks to personal 
watercraft use since 2002, and has been successful in reopen-
ing 11 other national parks since 2003. 

Park openings will create 
$1 million in cost savings 
in the first year of the re-
opening.
Source: NPS
OSHA

Occupational Exposure to Hexavalent Chromium. OSHA 
proposed (in 2004) and then finalized (in 2006) a rule that 
lowers the permissible exposure limit (PEL) for airborne 
exposure to hexavalent chromium. Advocacy was highly 
involved throughout the rulemaking process. Advocacy par-
ticipated in a SBREFA panel that reviewed the draft rule 
before it was published and recommended several changes to 
reduce the cost to small businesses. Because of these rec-
ommendations, OSHA established a PEL (or concentration 
not to be exceeded) of 5 g/m3 and excluded Portland ce-
ment, chromium copper arsenate, and industries with very 
low exposures. OSHA also provided exceptions for intermit-
tent users and large aircraft painting. 

Quantifiable cost savings 
to small business totaled 
$520 million. OSHA al-
lowed a four-year phase-in 
of engineering controls, 
which provide other sig-
nificant, but unquantified, 
cost savings. 
Source: OSHA

PHMSA

Wetlines. The Pipeline and Hazardous Materials Safety Ad-
ministration (PHMSA) issued a proposed rule in December 
2004 regulating external product piping (wetlines) on cargo 
tank motor vehicles. The rule limited to one liter the amount 
of flammable liquid that could remain in each wetline after 
drainage. Advocacy worked with small businesses and trade 
associations to analyze the potential impacts of the proposed 
regulation. In June 2006, having determined that further 
regulation would not produce the level of benefits we origi-
nally expected and that the quantifiable benefits of proposed 
regulatory approaches would not justify the corresponding 
cost, the agency withdrew its notice of proposed rulemaking.

PHMSAs decision to 
withdraw the rule resulted 
in $39.4 million in first-
year cost savings and 
$1.15 million in recurring 
annual savings.
Source: PHMSA
SEC

Section 404 of the Sarbanes-Oxley Act of 2002. Extension of 
Small Public Company Compliance Deadline for New Inter-
nal Control Reporting Requirement. In response to one rec-
ommendation by the Securities and Exchange Commissions 
(SEC) advisory committee on smaller public companies, on 
August 9, 2006, the SEC proposed to provide small busi-
nesses an extension of time to implement Section 404 of the 
Sarbanes-Oxley Act of 2002. Advocacy has worked with the 
SEC on the act since 2002. This rule was discussed in the 
OMB 2004 Report to Congress on the Costs and Benefits of 
Federal Regulations as a candidate for regulatory reform 
because of its impact on small business.

SECs proposed action is 
estimated to save smaller 
public companies $5.53 
billion in compliance 
costs.
Source: Industry estimates
TSA/ 
USCG

Transportation Worker Identification Credential (TWIC). On 
August 21, 2006, the Transportation Security Administration 
(TSA) and the U.S. Coast Guard issued a notice in the Fed-
eral Register indicating that facility and vessel owners will 
not be required to purchase or install card readers during the 
initial implementation of the TWIC in the maritime sector. 
While the notice references letters from Congress, the issues 
of the cost and technological feasibility of the reader re-
quirements were raised during Advocacys small business 
roundtable on the subject and in its comment letter to the 
agencies on the proposed rule. 

The removal of the card 
reader requirements gen-
erates $129.2 million in 
small business cost sav-
ings.
Source: TSA

Table 2.3 Summary of Cost Savings FY 2006 (Dollars) 1

Rule/Intervention

First-
Year 
Costs

 Annual      
Cost

CMS OASIS 2

   333,995,252 

   47,713,607 

DOE Energy Conservation Standards for Distribution Transformers 3
     5,000,000 


EPA Cooling Water 4

    74,000,000 


EPA SPCC Rule-Proposal 5

    46,000,000 

  46,000,000 

EPA Toxics Release InventoryPhase II Burden ReductionProposal  
6 

     7,400,000 

    7,400,000 

EPA Clean Air Act Requirements to Control Mobile Source Air Toxics  
   (MSAT)6

    12,000,000 

  12,000,000 

EPA Resource Conservation and Recovery ActRCRA Burden 
   Reduction Rule 7

     3,000,000 

    3,000,000 

FAA Thermal/Acoustic Insulation Installed on Transport Category  
   Airplanes  Final 8

   149,000,000 


FWS Critical HabitatCanada Lynx 9

     6,000,000 


FWS Critical HabitatRed Legged Frog 10

   396,000,000 


NHTSA Federal Motor Vehicle Safety Standard (FMVSS) No. 139 11

     1,600,000 


NPS Personal Watercraft Rule 12

     1,000,000 


OSHA Occupational Exposure to Hexavalent Chromium 13

   519,915,259 


PHMSA Wet Lines  14

    39,358,025 

    1,149,785 

SEC Section 404 Sarbanes-Oxley Act of 200217-month extension 15

5,528,973,325 


TSA Transportation Worker Identification Credential 16

   129,214,189 


TOTAL

  7,252,506,050 

  117,263,392 




1.   The Office of Advocacy generally bases its cost savings estimates on agency estimates. Cost savings for a given rule 
are captured in the fiscal year in which the agency agrees to changes in the rule as a result of Advocacys intervention. 
Where possible, the savings are limited to those attributable to small business. These are best estimates. First-year cost 
savings consist of either capital or annual costs that would be incurred in the rules first year of implementation. Recur-
ring annual cost savings are listed where applicable.

 2   Source: Advocacy calculations based on industry data from the National Association for Home Care & Hospice

 3   Source: DOE

 4   Source: EPA and APPA

 5   Source: EPA

 6   Source: Office of Advocacy estimate based on EPA regulatory impact analysis

 7   Source: Industry estimates

 8   Source: FWS

 9  Source: Specialty Equipment Market Association

10  Source: NPS

11  Source: OSHA

12  Source: PHMSA

13  Source: SEC data (updated in 2005) and Advocacys 2002 calculation

14  Source: TSA




3
Advocacy Review of Agency RFA Compliance in  
Fiscal Year 2006

The Regulatory Flexibility Act celebrated a milestone 25th anniversary in 2005. Over the years, the Office of 
Advocacy has been an independent voice for small business in policy deliberations, working with agencies 
to examine the impact of their regulatory proposals on small entities. Advocacy has helped agencies comply 
with the RFA and Executive Order 13272 by providing written interagency communications, public com-
ments, and RFA training, and by hosting RFA panels and roundtables. In monitoring agency compliance, 
Advocacy has noticed an increase in the number of agencies that make a good-faith effort to comply with the 
RFA. 
Department of Agriculture
E.O. 13272 Compliance
The U.S. Department of Agriculture (USDA) has made its policies for considering small business impacts 
when promulgating regulations publicly available online, in compliance with section 3(a) of E.O. 13272. 
Three agencies within USDA consistently notify the Office of Advocacy of rules that may have a signifi-
cant economic impact on small entities, as required by section 3(b) of E.O. 13272: the Animal and Plant 
Health Inspection Service (APHIS), Agricultural Marketing Service (AMS), and the Grain Inspection, 
Packers, and Stockyard Administration (GIPSA). The Food Safety and Inspection Service (FSIS) does not, 
although it did publish a rule in 2006 that is expected to have significant economic impacts on small enti-
ties.
    APHIS has successfully worked with Advocacy on its regulations, often engaging the office early in 
the process by including Advocacy staff in interagency briefings on rulemakings. Although not always pro-
ficient in its certifications and RFA analyses, APHIS accepted Advocacys suggestions to improve their 
RFA compliance. 
    Neither APHIS, AMS, nor GIPSA published final rules in FY 2006 that were the subject of any Advo-
cacy comment; therefore, compliance with section 3(c) of E.O. 13272 cannot be assessed. APHIS has consis-
tently responded to interagency comments submitted by Advocacy in the rulemaking process.
Food Safety and Inspection Service 
Issue: Availability of Lists of Retail Consignees During Meat and Poultry Product Recalls. On March 
7, 2006, the U.S. Department of Agricultures Food Safety and Inspection Service (FSIS) published a pro-
posed rule seeking to make available to the public lists of the retail consignees of meat and poultry products 
that have been voluntarily recalled by an establishment if the product has been distributed to the retail level. 
While aware of the public policy behind such a rule, Advocacy disagreed with FSISs certification that the 
rule would not have a significant impact on a substantial number of small entities and filed comments sug-
gesting that FSIS analyze the economic impact of the rule in compliance with the requirements of the 
Regulatory Flexibility Act. FSIS consequently agreed to reopen and extend the comment period to obtain 
additional public information on the rules impact on the industry.
Department of Commerce
E.O. 13272 Compliance
The Department of Commerce (DOC) has made its RFA policies publicly available online, in compliance 
with section 3(a) of E.O. 13272. Two DOC agencies, the National Marine Fisheries Service (NMFS) and the 
U.S. Patent and Trademark Office (PTO), routinely submit draft and final rules to Advocacy pursuant to sec-
tion 3(b) of E.O. 13272.
    NMFS published a final rule on fisheries in the exclusive economic zone off Alaska and acknowledged 
Advocacys comments regarding an inadequate size standard, in compliance with section 3(c) of E.O. 13272.
    The PTO aggressively pursued patent reform initiatives to address the rising number of patent claim 
applications pending in FY 2006. Advocacy worked with the agency and small entity stakeholders on sev-
eral rules arising out of the agencys reform efforts. In March 2006, Advocacy conducted its first patent law 
roundtable, and subsequently developed important small entity contacts in the patent law arena. In advance 
of the roundtable, PTO personnel met with Advocacy staff to provide an overview of the patent application 
process.  
National Marine Fisheries Service 
Issue: Fisheries of the Exclusive Economic Zone Off Alaska; Implementing an Annual Groundfish 
Retention Standard. On June 16, 2005, NMFS published a proposed rule to carry out Amendment 79 to 
the Fisheries Management Plan for Groundfish of the Bering Sea and Aleutian Islands. This rule imple-
ments an annual groundfish retention standard (GRS), as well as monitoring and enforcement measures for 
trawl catcher/processors longer than 125 feet. The purpose of the action was to improve utilization of 
groundfish harvested by catcher/processor trawl vessels and reduce bycatch (the portion of a commercial 
fishing catch that consists of marine animals caught unintentionally).
    The catcher/processors in the groundfish industry contacted Advocacy regarding the size standard used 
for determining a small catcher/processor. Instead of using the Small Business Administrations 500-
employee size standard for floating factory ships in its initial regulatory flexibility analysis, NMFS used the 
$3.5 million annual volume size standard for fish harvesting operations. Advocacy submitted comment in 
August 2005 arguing that to the extent that NMFS used an inappropriate size standard, it was impossible to 
know whether the agency was correct in determining that none of the industry participants were small. The 
industry was also concerned about aspects of the proposal that were not recommended, such as new moni-
toring and enforcement measures, a new observer schedule, and the installation of a new NMFS-approved 
scale. Advocacy asked NMFS to perform an economic analysis on the new aspects of the rule and publish 
the analysis for public comment. 
    NMFS finalized the rule in April 2006. In the final rule, NMFS acknowledged that the $3.5 million 
size standard was inappropriate. NMFS stated that it is reviewing the catcher/processor size standard, but 
would continue to use the $3.5 million size standard until new guidance is adopted. The industry filed a 
lawsuit challenging the rulemaking in May 2006. The case was pending at the end of the fiscal year.
United States Patent and Trademark Office 
Issue: Changes to Practice for Examination of Claims in Patent Applications; Changes to Practice 
for Continuing Applications, Requests for Continued Examination Practice, and Applications Con-
taining Patentably Indistinct Claims. On January 3, 2006, the United States Patent and Trademark Office 
(PTO) published two proposed rules that would significantly change the patent application and prosecution 
process. The proposed regulations would limit to 10 the number of representative claims contained in an 
initial examination of a patent application, as well as restrict an applicant to one continuation application. 
Current rules of practice limit neither the number of claims reviewed on initial examination nor the number 
of permissible continuation applications. The PTO certified that the two proposed rules would not have a 
significant economic impact on a substantial number of small entities in accordance with section 605(b) of 
the RFA.
    On March 8, 2006, Advocacy hosted a roundtable to discuss the two proposals and obtain data on the 
economic impact of the proposals. Present at the roundtable were independent inventors, patent attorneys, 
trade association representatives, the PTO, and Advocacy staff. PTO staff gave a presentation on the two 
proposed regulations, listened, and participated in the discussion. During the roundtable and through subse-
quent discussions, Advocacy was informed by small entity stakeholders that the proposed rules would have 
a significant impact on small entities seeking patents. Taken together, the two proposals would increase the 
cost of patent application preparation and hinder the patent prosecution process. Small entities raised con-
cerns that the regulations would have significant impacts on the most valuable and commercially viable 
patents, which typically involve a higher number of continuations. Small entities asserted that compliance 
with the proposals would be much more costly than PTO estimates, would inhibit their ability to enhance 
their applications, would force them to seek review through the very expensive appeals process, and could 
weaken their ability to protect their patents.
    Advocacy submitted a public comment letter to the PTO on April 27, 2006. In its comments, Advo-
cacy relayed concerns expressed by small entity stakeholders. Advocacy also encouraged the agency to 
perform an initial regulatory flexibility analysis with a more complete discussion of the potential economic 
impact of the proposed rules and an evaluation of viable regulatory alternatives. The PTO has not yet final-
ized the proposed rules. Advocacy will continue to monitor this issue and work with the agency to address 
small entity concerns.

Issue: Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility 
Analysis for Patent-Related Regulations. In July 2006, the PTO published a notice and request for com-
ments outlining a proposed size standard for use in the agencys Regulatory Flexibility Act (RFA) analyses. 
The notice proposed taking the existing SBA size standard currently used for paying reduced patent fees(33) 
and broadening its application for use in all of the agencys RFA analyses. In a public comment letter submit-
ted on August 3, 2006, Advocacy commended the PTO for seeking to identify an appropriate size standard to 
ensure agency compliance with the RFA. However, Advocacy questioned whether the proposed size standard 
was appropriate for use in all of the agencys RFA analyses.
    Advocacy convened a regulatory roundtable on July 19, 2006, to discuss the PTOs proposed size 
standard. Participants at the roundtable included personnel representing the interests of small businesses 
and independent inventors, the PTO, the SBAs Office of Size Standards, and Advocacy. Because the pro-
posed size standard tabulates only the number of applicants claiming small entity status, and not actual 
small entities, Advocacy expressed concern that it would be an inadequate measure. Small entity represen-
tatives expressed concern that the proposed RFA size standard would exclude a significant number of small 
entities. Further, they were concerned that the standard would not provide an accurate estimate of the num-
ber of small entities affected by the PTOs regulations because the agency does not count or collect data on 
the specific entities submitting a patent application. 
    In its comment letter, Advocacy supported PTOs decision to seek public comment on the proposed 
size standard and encouraged the agency to continue working with Advocacy and small entity stakeholders 
to identify a more appropriate size standard for use in its RFA analyses. The PTO has not published a final 
notice.
Department of Defense
E.O. 13272 Compliance
The Federal Acquisition Regulation Council (FAR Council) promulgates procurement regulations that are 
government-wide and affect small businesses. The FAR Council statutorily includes representation from 
the Department of Defense (DOD), the General Services Administration (GSA), and the National Aeronau-
tics and Space Administration (NASA). The DOD regulations, called the Defense Federal Acquisition 
Regulation Supplement (DFARS), are specific to DOD and can only supplement the FAR Council regula-
tions.  However, because the FAR Council and DOD regulatory processes are interrelated, DODs proce-
dures comply with section 3(a) of E.O. 13272. DOD submits prepublication rulemakings for Advocacy 
consideration in compliance with section 3(b) of E.O. 13272. DOD did not publish any final rules in FY 
2006 that were the subject of any written Advocacy comments; therefore, DOD compliance with section 
3(c) cannot be assessed. DODs staff received RFA training in FY 2005. 
    Advocacy worked closely with OIRAs Defense regulatory team, providing significant interagency in-
put on several regulations in fiscal year 2006.
    
Issue: Radio Frequency Identification. On April 21, 2005, DOD issued a proposed regulation to amend 
DFARS by adding a requirement that packages be marked with passive radio frequency identification 
(RFID) tags, replacing existing military shipping labels. By increasing the accuracy of shipments and re-
ceipts, and reducing the number of logistic touch points, these tags decrease the time required to deliver 
materiel to the troops. DOD has developed a three-year rollout plan for supplier implementation of RFID 
requirements. Advocacy worked closely with DOD to provide a detailed cost/benefit analysis of the impact 
of this regulation on small entities. DOD has conducted outreach and training to the small business commu-
nity on this regulation. The rule was implemented in September 2005.
     On May 19, 2006, DOD issued an interim rule for the second year of the rollout, which would expand 
the numbers of applicable DOD depots and of commodities required to have RFID tags. The rule requires 
contractors to affix passive RFID tags when shipping packaged petroleum, lubricants, oils, preservatives, 
chemicals, additives, construction and barrier materials, and medical materials to specified DOD locations. 
As a result of Advocacys involvement in the regulatory process, DOD continues to provide training assis-
tance to aid small businesses in converting to the RFID technology for shipments to DOD installations. The 
final rule was implemented in July 2006.
 
Issue: Transition of Prototype Projects to Follow-on Contracts. Another predecisional deliberative 
rulemaking this fiscal year was the DFARS rule on the Transition of Prototype Projects to Follow-On Con-
tracts. Other transaction agreements (OTA) is an acquisition tool that has been authorized by Congress, and 
is not within the regulatory acquisition framework of the FAR. In FY 2005, DOD awarded 78 OTAs total-
ing $150 million. Small businesses were awarded 22 of these for a value of nearly $40 million. As a result 
of Advocacys work with the DFARS and OIRA teams in FY 2006, the final regulatory flexibility analysis 
for this case complies with the RFA.  
Department of Education
E.O. 13272 Compliance
The Department of Education (Education) made its RFA policies and procedures available online and noti-
fied Advocacy of draft rules that may have a significant impact on a substantial number of small entities, in 
compliance with section 3(a) and 3(b) of E.O. 13272. Education did not finalize any rules in FY 2006 on 
which Advocacy has filed comments; therefore, Educations compliance with section 3(c) cannot be as-
sessed. 
Department of Energy
E.O. 13272 Compliance
The Department of Energy (DOE) continues to comply with section 3(a) of E.O. 13272 by maintaining its 
policies and procedures concerning the Regulatory Flexibility Act on its website. In FY 2006, all of DOEs 
draft rules that were sent to the Office of Management and Budget (OMB) for review were also sent to Ad-
vocacy, in compliance with section 3(b) of E.O. 13272. DOE proposed one rule in FY 2006 that was the 
subject of informal Advocacy comments, on distribution transformer energy conservation standards, and 
DOE fully responded to Advocacys comments in accordance with section 3(c) of Executive Order 13272.

Issue: Distribution Transformer Energy Efficiency Standards. On August 4, 2006, DOE published a 
notice of proposed rulemaking on energy conservation standards for distribution transformers. Advocacy 
submitted informal interagency comments to DOE requesting clarification of the costs and benefits of the 
regulatory alternatives under consideration. More than half of the manufacturers of liquid and medium-
voltage dry distribution transformers are small businesses. Advocacy met with DOE to discuss various 
regulatory options, and DOE considered the impacts on small business manufacturers when it proposed the 
least costly required efficiency standard from among five alternatives. DOE met with small businesses in 
designing the new efficiency standard and specifically chose a standard that would allow regulated manu-
facturers to make use of readily available techniques and materials. This proposed standard, relative to the 
next more expensive standard, is anticipated to result in one-time cost savings of at least $5 million.
Department of Health and Human Services
E.O. 13272 Compliance
The Department of Health and Human Services (HHS) made its policies and procedures publicly available 
online, in compliance with section 3(a) of E.O. 13272. Draft rules were not consistently submitted to Ad-
vocacy pursuant to section 3(b) of E.O. 13272 in FY 2006 by the Centers for Medicare and Medicaid Ser-
vices (CMS) or the Food and Drug Administration (FDA), two agencies that often promulgate rules that 
affect small businesses. Neither CMS nor FDA published final rules in FY 2006 that were the subject of 
any public Advocacy comment; therefore, compliance with section 3(c) of E.O. 13272 cannot be assessed. 

Centers for Medicare and Medicaid Services
Issue: Medicare and Medicaid Programs: Reporting Patient Outcome and Assessment Information 
Data as Part of the Conditions of Participation for Home Health Agencies. In January 1999, the Health 
Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services 
(CMS), published a final rule requiring home health agencies (HHAs) to submit all patient data through the 
Outcome and Assessment Information Set (OASIS). CMS certified that the rule would not have a signifi-
cant impact on a substantial number of small entities. Advocacy worked closely with OIRA and CMS to 
identify several concerns with the rules requirements that were expected to have a negative effect on small 
home health care agencies, most of which are considered small under SBA size standards. Advocacy was 
particularly concerned that HHAs would have to submit data on all patients, not just Medicare and Medi-
caid patients, adding to the time and cost required to comply with the rule. As a result of Advocacys in-
volvement and the comments filed by stakeholders, CMS published a final rule in January 2006 that did not 
require HHAs to transmit data for non-Medicare and non-Medicaid patients.
Food and Drug Administration
Issue: Prescription Drug Marketing Act of 1987; Prescription Drug Amendments of 1992; Policies, 
Requirements, and Administrative Procedures. On December 3, 1999, the Food and Drug Administra-
tion (FDA) published a final rule in the Federal Register that set forth requirements for the re-importation 
and wholesale distribution of prescription drugs in the United States. The rule was to become effective on 
December 4, 2000. Advocacy filed comments suggesting that the rule would negatively affect small dis-
tributors and wholesalers of prescription drugs who were required to provide and maintain information on 
the drugs pedigrees. Pursuant to Advocacys involvement and industry assurances that it would voluntarily 
implement electronic trace technology, FDA chose to delay the effective date of the rule several times, sav-
ing small businesses considerable revenue. On June 14, 2006, the FDA published a notice that the effective 
date will be December 1, 2006.
Department of Homeland Security
E.O. 13272 Compliance 
The Department of Homeland Security (DHS) continues to make progress in complying with E.O. 13272. 
DHS has posted its procedures for considering the small business impacts of its regulations on its website, 
in compliance with section 3(a) of E.O. 13272. However, DHS still does not submit draft rules to Advocacy 
as required by section 3(b). DHS published one final rule in FY 2006 that was the subject of Advocacy 
comments and revised it to reflect Advocacys concerns; therefore, it complied with section 3(c) of E.O. 
13272. 

Issue: Homeland Security Acquisition Regulation. DHS published an interim rule in December 2003 that 
codified its acquisition system, and Advocacy submitted a public comment letter in January 2004. Among 
several comments, Advocacy urged DHS to revisit its mentor-protg program and the incentives to large 
businesses that participated as mentors. 
    On May 2, 2006, DHS published its final rule and acknowledged Advocacys comments, but disagreed 
with the assessment of the mentor-protg program. Notwithstanding, DHS revised its final regulation to 
reflect the concerns of Advocacy. DHS clarified the Homeland Security Acquisition Regulations regarding 
the limitations of the individual mentor-protg agreements. Based on Advocacys comment letter, this 
change in the final regulation will benefit small businesses by not allowing large businesses to satisfy their 
subcontracting goals through the mentor-protg program. To meet small business subcontracting goals, 
large businesses will be required to use other small businesses in addition to those in the mentor-protg 
program.  
Transportation Security Administration and U.S. Coast Guard
Issue: Transportation Worker Identification Credential. On May 22, 2006, the Transportation Security 
Administration (TSA) and the U.S. Coast Guard jointly issued the proposed rule for the Transportation 
Worker Identification Credential (TWIC) Implementation in the Maritime Sector. The proposed rule would 
implement Section 102 of the Maritime Transportation Security Act (MTSA) and other statutory provisions 
that require the Secretary of Homeland Security to issue a biometric transportation security card to indi-
viduals with unescorted access to secure areas of ports, vessels, and other facilities. The agency proposed 
an identification card that would include a computer chip with a digital photograph and fingerprints of the 
holder capable of being scanned on a card reader. The MTSA already requires owners and operators of 
these maritime facilities to submit to the Coast Guard detailed security assessments of their respective ves-
sels and facilities to identify security vulnerabilities. The agencies stated that they could not determine 
whether the proposed rule would have a significant economic impact on a substantial number of small enti-
ties, and prepared an initial regulatory flexibility analysis. 
    On June 21, 2006, Advocacy hosted a small business roundtable on the proposed TWIC rule that in-
cluded representatives of the maritime towing and passenger vessel, recreational boating, commercial truck-
ing, charter bus, and aviation sectors. Advocacy subsequently submitted a public comment letter to the agen-
cies expressing small business concerns. These concerns included the need to include missing information in 
the economic analysis, such as costs to small businesses utilizing seasonal or temporary workers. Small 
businesses were also concerned that the proposal was too complex, required technology for readers that does 
not exist, and required an additional card without preempting other already required credentials. TSA agreed 
in a Federal Register notice that it will bifurcate the proposed rule to eliminate the requirement for biometric 
card readers at this time, thereby reducing the burden on small entities. The agency has stated that any sub-
sequent rulemaking concerning card readers will be done through a full notice and comment rulemaking 
process. The estimated savings from the elimination of the reader requirement total nearly $130 million.  
Department of Housing and Urban Development
E.O. 13272 Compliance
The RFA policies and procedures of the Department of Housing and Urban Development (HUD) were 
made available to the public online, in compliance with section 3(a) of E.O. 13272. This fiscal year, HUD 
continued to notify Advocacy of rules that may have a significant impact on a substantial number of small 
entities as required by section 3(b) of E.O. 13272. HUD consistently contacts Advocacy to review draft 
rulemakings to ensure RFA compliance. HUD did not publish any final rules in FY 2006 that were the sub-
ject of any Advocacy comment; therefore, HUDs compliance with section 3(c) cannot be assessed. 
Department of the Interior
E.O. 13272 Compliance
The Department of the Interior (DOI) has a departmental manual listing the requirements and guidance to 
promote RFA compliance and has made it publicly available in compliance with section 3(a) of E.O. 
13272. DOI continues to notify Advocacy of rules that could have a significant economic impact on a sub-
stantial number of small entities as required by section 3(b). DOI also utilized Advocacys email notifica-
tion system to inform Advocacy of draft rules that may affect small businesses. The National Park Service 
(NPS) also complies with section 3(b) by sending Advocacy its draft rules. 
    The Fish and Wildlife Service (FWS) is not in compliance with section 3(b), because it does not send 
Advocacy its draft rules that could have a significant impact. FWS also repeatedly has not determined 
whether its proposed rules will have a significant economic impact on a substantial number of small enti-
ties. Advocacy filed five comment letters to FWS in FY 2006 citing the agencys failure to prepare an 
IRFA or certify the rule during the proposed rule stage as required by the RFA. Advoacy believes that these 
delays in completing the necessary RFA analysis thwart the ability of affected small entities to provide 
meaningful comment on the proposals impact.
    Both NPS and FWS had final rules and responded to comments by Advocacy, complying with section 
3(c) of E.O. 13272. However, FWS continued to have problems complying with the RFA requirements. In 
its final rule for the critical habitat designation of the California red-legged frog, FWS certified that the rule 
would not have a significant economic impact on a substantial number of small entities, despite small busi-
ness views to the contrary voiced during the process. FWS did not complete an IRFA or FRFA for this rule. 
Advocacy is working with FWS to improve its E.O. 13272 and RFA compliance, and has planned addi-
tional RFA training in FY 2007. Advocacys internal recommendations prompted FWS to submit an IRFA 
at the end of FY 2006 for the critical habitat designation of the Canada lynx. 
U.S. Fish and Wildlife Service
Issue: Designation of Critical Habitat for the California Red-Legged Frog. On November 3, 2005, 
FWS proposed to designate more than 737,912 acres of critical habitat for the California red-legged frog in 
23 California counties. Under section 605 of the RFA, FWS certified that the proposed rule would not have 
a significant economic impact on a substantial number of small entities. 
    Advocacy conducted outreach to small entities potentially affected by the proposed rule. As a result of 
these conversations, Advocacy recognized that the proposed rule should not have been certified because it 
would likely have a significant economic impact on a substantial number of small entities in the home 
building industry in a number of the affected counties. On February 1, 2006, Advocacy submitted a public 
comment letter to FWS, recommending that they revisit the economic impacts of the proposed designations 
and consider less burdensome alternatives. In particular, Advocacy recommended that FWS not designate 
areas it had identified as most likely to affect small businesses because of their high commercial value for 
home building. FWS took Advocacys comments under advisement as it prepared its final rule. On April 
13, 2006, FWS issued a final rule that excluded high-cost areas and eliminated 250,000 acres of proposed 
critical habitat. Based on FWSs economic analysis, Advocacy believes that the decision to eliminate these 
high-cost areas from its final designation resulted in $396 million in cost savings over 20 years.
 
Issue: Designation of Critical Habitat for the Alabama Beach Mouse. On February 1, 2006, FWS pro-
posed to designate approximately 1,298 acres in coastal lands of Alabama for the critical habitat of the 
Alabama beach mouse. On August 8, 2006, FWS published its draft economic analysis and reopened the 
period for comments. FWS did not provide an IRFA or certify the rule in either of these notices. 
    Advocacy believed that the draft economic analysis provided by FWS overlooked sectors of small enti-
ties that may be significantly affected, such as developers and builders. On September 7, 2006, Advocacy 
cited these concerns in a public comment letter, and recommended that FWS complete an IRFA for the 
proposed rule and subject the analysis to public comment prior to moving forward with the final rule. Ad-
vocacy will continue to monitor this issue and work with FWS to address small entity concerns.

Issue: Designation of Critical Habitat for the Canada Lynx. On November 9, 2005, FWS proposed to 
designate 26,935 square miles of land in Idaho, Maine, Minnesota, Montana, and Washington as the Can-
ada lynxs critical habitat. Advocacy spoke with stakeholder groups concerned that this critical habitat 
would have significant impacts on small businesses. Advocacy worked closely and had meetings with FWS 
and outside economists to discuss these concerns and ways to analyze the economic impacts. On February 
16, 2006, FWS revised the proposed designation by decreasing the critical habitat designation (CHD) to 
18,031 square miles. FWSs proposed decision to exclude these high-cost areas from its CHD will result in 
more than $6 million in cost savings. FWS did not provide an IRFA or certify that this rule would have a 
significant impact on a substantial number of small entities. After working with Advocacy, FWS published 
an IRFA and an economic analysis. A court order required FWS to complete a final critical habitat designa-
tion by November 1, 2006.
National Park Service
Issue: Personal Watercraft Rules. On March 21, 2000, the NPS created regulations that banned personal 
watercraft use in all national parks, which took effect in 2002. Advocacy met and worked with NPS and 
representatives of the personal watercraft industry to reopen the national parks to personal watercraft use, 
and has been successful in reopening 11 other national parks since 2003. On September 8 and 21, 2006, the 
National Park Service (NPS) reopened the Cape Lookout National Seashore and the Curecanti National 
Recreation Area to personal watercraft use. NPSs decision to reopen these two national parks will result in 
more than $1 million in cost savings in the first year of the reopening. 
Department of Justice
E.O. 13272 Compliance
The Department of Justice (DOJ) has made its policies and procedures publicly available as required by 
section 3(a) of E.O. 13272. DOJ continues to use the email notification system to notify Advocacy of draft 
rules that may have a significant impact on a substantial number of small entities, as required by section 
3(b) of E.O. 13272. DOJ did not publish any final rules in FY 2006 that were the subject of any Advocacy 
comment; therefore, DOJs compliance with section 3(c) cannot be assessed.
Department of Labor
E.O. 13272 Compliance
The Department of Labor (DOL) posts its RFA policies and procedures online, complying with section 3(a) 
of E.O. 13272. The Employee Benefits Security Administration (EBSA) notified Advocacy by mail and 
email of rules that may have a significant impact on a substantial number of small entities as required by 
section 3(b) of E.O. 13272. The Mine Safety and Health Administration (MSHA) and the Occupational 
Safety and Health Administration (OSHA) sent Advocacy drafts via mail, in compliance with 3(b).  
    All three agencies published final rules in FY 2006 that were the subject of Advocacy comment and dis-
cussed Advocacys comments with specificity, in compliance with Section 3(c) of E.O. 13272. Advocacy 
submitted comments to OSHA on its Notice of a Regulatory Flexibility Act Review of Lead in Construction 
standard and its Proposed Electric Power Generation, Transmission, and Distribution; Electrical Protective 
Equipment Rule; however, no further action has been taken on these initiatives. OSHA and MSHA fre-
quently participate in Advocacy small business regulatory roundtables on occupational safety and health, and 
mine safety and health issues. OSHAs Office of Small Business Assistance has been proactive in discussing 
small business issues with Advocacy. As part of the SBREFA process, OSHA has contacted Advocacy to 
discuss rules that may have a significant economic impact on a substantial number of small entities and 
where a SBREFA panel is expected. In FY 2006, EBSA submitted a final rule on electronic filing of Form 
5500. EBSA delayed the annual filing requirement in this final rule, directly addressing and implementing 
Advocacys recommended regulatory alternative. 
Occupational Safety and Health Administration
Issue: Section 610 Review of Lead in Construction Standard. On June 6, 2005, the Occupational Safety 
and Health Administration (OSHA) announced a review of its lead in construction standard in accordance 
with Section 610 of the RFA, which requires federal agencies to review their regulations periodically to 
determine whether they should be continued without change, amended, or rescinded in order to minimize 
any significant economic impacts of the rule on a substantial number of small entities. Many small busi-
nesses in the residential and commercial renovation businesses are affected by the OSHA requirements, and 
face potentially duplicative and overlapping requirements with other federal regulations.
    Advocacy hosted a small business regulatory roundtable on September 22, 2005, to discuss the impact 
of OSHAs current regulation on small businesses. The roundtable featured presentations from OSHA, 
HUD, and EPA, each of which has regulations governing lead hazards. Many small business representa-
tives in attendance believed that OSHA should open a formal notice and comment rulemaking process to 
revise its lead in construction standard to make it less costly and burdensome. Following the roundtable, 
Advocacy filed a public comment letter on October 28, 2005, with OSHA, recommending that it begin a 
formal notice and comment rulemaking process to develop a final lead in construction standard, since its 
existing interim final standard was issued in 1993 without such a process. OSHA is currently reviewing the 
comments it received and has yet to announce its intentions for further action.

Issue: Electric Power Generation, Transmission and Distribution Rule. On June 15, 2005, OSHA pro-
posed to update the existing standard for the construction of electric power transmission and generation 
installations to make them more consistent with the more recently promulgated general industry standard. 
The proposal would also make miscellaneous changes to both standards, including adding provisions re-
lated to host employers and contractors, flame-resistant clothing, training, and electrical protective equip-
ment.
    Advocacy participated in the SBREFA panel process in 2003 and hosted a conference call of the small 
entity representatives following publication of the proposed rule to obtain their input. Further, Advocacy 
filed a public comment letter on January 9, 2006, and attended an OSHA public hearing on the proposed 
rule. Advocacy recommended that OSHA consider changes to the proposal, consistent with the finding of 
the SBREFA panel, concerning the host-contractor provisions, training, and protective clothing. OSHA is 
currently reviewing the comments it received and has yet to announce it intentions for further action.

Issue: Proposed Occupational Exposure to Hexavalent Chromium Rule. OSHA issued its final rule for 
occupational exposure to hexavalent chromium on February 28, 2006. The final rule lowered the permissi-
ble exposure level (PEL) from 52 micrograms per cubic meter of air (for an 8-hour time-weighted average) 
to 5, with an action level of 2.5. The new rule will require many small businesses to implement engineering 
and other controls to reduce employee exposures. 
    Advocacy was involved in the rulemaking process from the initiation of a SBREFA panel in 2003 
through promulgation of the final rule. Advocacy participated on the SBREFA panel, conferred with repre-
sentatives of small businesses likely to be affected in several industries (including chemical, alloy, and 
pigment manufacturing, electroplating, welding, and aerospace), and filed a public comment letter. Advo-
cacy also discussed this issue at several of its small business labor safety roundtables, which included pres-
entations by small business representatives likely to be affected by the standard. The Office of Advocacy 
also communicated directly with OMB and OSHA on an interagency basis.
    OSHAs final rule, issued on February 28, 2006, established a PEL of 5 g/m3. However, based on rec-
ommendations from the SBREFA panel, the agency excluded uses of Portland cement, chromium copper 
arsenate, and certain industries with very low exposures, and provided exceptions for intermittent users and 
large aircraft painting. OSHA estimates that the cost savings to small businesses from changing the PEL and 
excluding Portland cement is $520 million. In addition, OSHA allowed a four-year phase-in of engineering 
controls, which provides other significant but unquantified cost savings.
    
Issue: Cranes and Derricks in Construction Rule. OSHA initiated a SBREFA panel on August 18, 2006, 
on the cranes and derricks in construction rule, a draft proposed rule that had been produced through a ne-
gotiated rulemaking process. Most of the contentious issues concerning the proposal had already been de-
bated at length and resolved to the extent possible. The panel report due by October 2006 was expected to 
recommend that OSHA review and submit for public comment a number of recommendations made by 
small entity representatives, including whether the certification of crane operators should be required and 
whether some small boom cranes and building material vendors could be exempted from the standard alto-
gether. 
    Advocacy participated in the SBREFA panel, conferring with representatives from affected small 
businesses. Advocacy also discussed this issue at several of its small business labor safety roundtables, 
including presentations by small business representatives likely to be affected by the standard. OSHA ex-
pects to issue a proposed rule for formal comment in 2007.

Issue: Electronic Filing of Annual Reports. On August 30, 2005, EBSA published a proposed rule to 
implement the agencys announced intention to require a wholly electronic filing system for submission of 
Form 5500 filings for plan years beginning January 1, 2007, with the first due in 2008. EBSA provided 
Advocacy a prepublication copy for review and comment on the rules IRFA. 
    On September 29, 2005, Advocacy hosted a roundtable to obtain the input of small businesses and 
stakeholders on the proposed rules potential economic impact. Personnel from EBSA attended the round-
table. The roundtable participants voiced concern that requiring electronic filing may inhibit some firms 
from providing benefits to their employees and that the cost of implementing electronic filing would be 
cost prohibitive.
    As a result of the comments received from small businesses, Advocacy submitted a public comment 
letter to EBSA on October 14, 2005. Advocacys comment letter encouraged EBSA to consider additional 
significant alternatives to the implementation of the rule. Specifically, Advocacy encouraged EBSA to con-
sider a delayed compliance date for small entities, as well as penalty abatement for inadvertent noncompli-
ance during the initial year of implementation.
    EBSA published the final rule on July 21, 2006. The final rule requires the electronic filing of Form 
5500, beginning with plans years starting on January 1, 2008, with the first filings being submitted in 2009. 
EBSA has estimated that the delayed implementation will result in $3 million in cost savings. EBSA ad-
dressed Advocacys comments and plans to evaluate whether to abate penalties incurred because of inad-
vertent noncompliance during the initial year of implementation. 
Department of State
E.O. 13272 Compliance
The Department of State (State) has not made its policies and procedures publicly available as required by 
section 3(a) of E.O. 13272. State did not submit any draft rules to Advocacy in FY 2006, because the agency 
did not believe that any rule would have a significant impact on a substantial number of small entities. How-
ever, Advocacy submitted a comment letter on the proposed exchange visitor program, noting that the State 
Departments certification was improper because it lacked a factual basis. State has not published final rules 
in FY 2006 that were the subject of Advocacy comments; therefore, it compliance with section 3(c) of E.O. 
13272 cannot be assessed. Advocacy anticipates training staff from State in FY 2007. 

Issue: Proposed Exchange Visitor Program; Training and Internship Programs Rule. The Department 
of State issued proposed new regulations on April 7, 2006, for designating U.S. government, academic, and 
private sector entities to conduct educational and cultural exchange programs pursuant to the Mutual Edu-
cational and Cultural Exchange Act of 1961, as amended (also known as the Fulbright-Hays Act). Under 
this statute, designated program sponsors under the J-1 visa program across a variety of industries facilitate 
the entry into the United States of more than 275,000 exchange participants each year. The proposed rule 
would impose a variety of new requirements on designated program sponsors before they could accept a 
participant into their exchange program. For example, designated program sponsors would have to verify 
the participants prior academic/work experience, English proficiency, and finances; conduct in-person 
interviews with potential trainees in their home country; develop a detailed individualized training plan 
(Form DS-7002); and provide oversight, counseling, and evaluations during the course of the exchange 
program. In addition, the proposed rule includes special provisions related to aviation flight training 
schools that limit the ratio of on-the-job training to classroom study (to a ratio of one month to four) and 
reduce the maximum duration of the training program from 24 to 18 months. Small business aviation flight 
schools operating as designated J-1 sponsors claim the proposed rule would be economically detrimental to 
them.
    The issue of the State Departments proposed rule was raised during Advocacys regular aviation 
safety roundtable on April 20, 2006. Representatives of small aviation flight schools operating under the J-
1 visa program claimed that the rule would have a significant economic impact on these businesses. The 
Department of State had certified the rule under the RFA. On May 30, 2006, Advocacy filed a public com-
ment letter stating that the certification was improper because it lacked a factual basis and may be incorrect. 
Advocacy recommended that the State Department either provide a factual basis for its RFA certification or 
prepare and publish an initial regulatory flexibility analysis (IRFA) for public comment before proceeding 
with this rule. Advocacy noted that it understood that that there are important security implications associ-
ated with this proposed rule (particularly with respect to aviation flight training schools and foreign nation-
als training to be pilots here) and deferred to the Department of State and others to assess the security im-
plications of this and other programs. 
Department of Transportation 
E.O. 13272 Compliance 
The Department of Transportation (DOT) has made progress in complying with E.O. 13272. DOT has 
posted its RFA policy on its website, in compliance with section 3(a) of E.O. 13272. DOT submitted draft 
rules electronically to Advocacy in 2006, as required by 3(b) of E.O. 13272. Advocacy has established 
strong working relationships with a few key personnel who seek Advocacys participation or input on 
agency rulemakings. In fact, some DOT offices routinely request Advocacys attendance at briefings on 
rulemaking they believe may have an impact on small entities. No agencies in the DOT published final 
rules in FY 2006 that were the subject of Advocacy comments; therefore, DOTs section 3(c) compliance 
with E.O. 13272 cannot be assessed. 
Federal Aviation Administration
Issue: Washington, DC, Metropolitan Area Special Flight Rules Area. The Federal Aviation Admini-
stration (FAA) issued the proposed rule on the Washington, DC, metropolitan area special flight rules area 
on August 4, 2005. This proposed rule would essentially codify current flight restrictions for certain aircraft 
operating in the Washington, DC, metropolitan area that were adopted in the wake of the terrorist attacks of 
September 11, 2001. The proposed rule would create a special flight rules area (SFRA) around Washing-
ton, DC, and impose flight operation requirements on aircraft operations within that area. These provisions 
would generally require aircraft operators to: 1) file and activate a flight plan before entering (or re-
entering) the restricted area; 2) maintain radio communication with air traffic control; and 3) obtain and 
display a discrete transponder code while operating within the area. The FAA has concluded that while 
these restrictions are likely to cause considerable burdens to both air traffic control and the aviation indus-
try within the affected area, they are needed for security reasons. Small businesses expressed serious con-
cerns about the impact of the proposed rule on small aviation businesses operating within the area. 
    This proposed rule was discussed during Advocacys regular aviation safety roundtable on October 20, 
2005. In response to comments raised by small businesses, Advocacy filed a public comment letter with the 
agency on February 6, 2006, recommending that the FAA carefully consider small business comments and 
alternatives to its proposed rule, and publish a revised IRFA for additional comment before finalizing the 
rule. 

Issue: Thermal/Acoustic Insulation Installed on Transport Category Airplanes Rule. The FAA issued 
its final Thermal/Acoustic Insulation rule in 2003, with a compliance date of September 2, 2005. The rule 
was intended to apply to the replacement of thermal insulation blankets used on the fuselage of airplanes. 
However, before the final compliance date, industry representatives became aware that some of the lan-
guage in the rule was ambiguous and that the rule, as written, would have had a much broader impact than 
originally envisioned. This would have meant that far more airplanes and components would have been 
subject to the rule, and that entire inventories of spare parts would have been rendered unusable.
    Small business representatives raised the issue of FAAs final Thermal/Acoustic Insulation rule during 
Advocacys regular aviation safety roundtable on July 14, 2005. In response, Advocacy helped organize a 
meeting with FAA personnel to discuss the rule and the ambiguities in the language. Based on these discus-
sions, the agency agreed that the rule required clarification and agreed to issue a revised regulation. 
    On December 30, 2006, FAA issued a revised final rule that narrowed the original rules scope and ex-
empted certain airplanes and components. Because the final rule narrowed the scope (and therefore the 
cost) of the original rule, the agency did not perform an economic analysis. However, industry representa-
tives estimated cost savings of $149 million ($74 million in certification costs and $75 million in invento-
ried spare parts) from the revisions.
National Highway Traffic Safety Administration
Issue: Proposed Reporting of Early Warning Information Rule. In accordance with the Transportation 
Recall Enhancement, Accountability, and Documentation (TREAD) Act, the National Highway Traffic 
Safety Administration (NHTSA) promulgated regulations in 2003 that required manufacturers of more than 
500 vehicles per year to report tire and other equipment warranty claims to the agency in order to identify 
potential defects. Manufacturers of trailers and other vehicles filed a petition for reconsideration requesting 
that more small businesses be exempt from the reporting requirements. While the petition for reconsidera-
tion was denied by the agency, NHTSA did agree to reconsider the rule within two years of its implementa-
tion date.
    On March 16, 2006, Advocacy hosted a small business regulatory roundtable to discuss the early warn-
ing rule with manufacturers of small trailers and recreational and marine vehicles, as well as agency per-
sonnel, to discuss how the reporting requirements could be made less costly and burdensome. As a result, 
NHTSA proposed a rule that would eliminate the reporting of product evaluation field reports, revise the 
definition of fire to eliminate two precursors to fire (sparks and smoldering) and add one term (melt), mod-
ify the reporting of fuel systems for medium-heavy vehicles and buses, and limit certain time periods for 
data elements. 
    The cost savings from this rule are unknown at this time. The revisions could change the annual report-
ing costs for some manufacturers. In addition, NHTSA has agreed that it will issue a second proposed 
rulemaking that will look at the more complicated issues of whether reporting thresholds can be adjusted or 
eliminated. The second, forthcoming rulemaking has the potential to result in more significant cost savings.
Pipeline and Hazardous Materials Safety Administration 
Issue: Hazardous Materials Safety Requirements for External Product Piping on Cargo Tanks 
Transporting Flammable Liquids. The Pipeline and Hazardous Materials Safety Administration 
(PHMSA), formerly the Research and Special Programs Administration (RSPA), issued a proposed rule on 
December 20, 2004, regulating external product piping (wetlines) on cargo tank motor vehicles. The rule 
limited to one liter the amount of flammable liquid that could remain in each wetline after drainage. Advo-
cacy worked with small businesses and trade associations to analyze the potential impacts of the proposed 
regulation. As part of this process, Advocacy held a roundtable to discuss the proposal and obtain data from 
industry personnel on March 24, 2005. In April 2005, Advocacy sent interagency comments to PHMSA on 
this proposed regulation. On June 7, 2006, having determined that further regulation would not produce 
the level of benefits we originally expected and that the quantifiable benefits of proposed regulatory ap-
proaches would not justify the corresponding costs,(34) the agency withdrew its notice of proposed rule-
making. PHMSAs decision to withdraw the rule resulted in $39.4 million in first-year cost savings and 
$1.15 million in recurring annual savings for small entities.

Department of the Treasury
E.O. 13272 Compliance 
The Department of the Treasury (Treasury) made its policies and procedures available to the public online 
in compliance with section 3(a) of E.O. 13272. Three agencies within Treasury create regulations of most 
concern to small businesses: the Internal Revenue Service (IRS), the Office of the Comptroller of the Cur-
rency (OCC), and the Office of Thrift Supervision (OTS). 
    While Treasury and the IRS have not notified Advocacy of any draft proposed rules under section 3(b), 
Advocacy has been invited to, and has participated in, several prepublication and some predrafting meet-
ings on IRS regulatory proposals regarding potential effects on small businesses. Both OCC and OTS no-
tify Advocacy in accordance with the requirements of section 3(b). 
    During FY 2006, Advocacy has had a vigorous ongoing conversation with IRS about the RFA. Spe-
cifically, Advocacy has met with the IRS chief counsel and plans regular meetings to ensure improved RFA 
compliance by the IRS. As a result of ongoing discussions, the IRS has planned several RFA trainings for 
its staff in early FY 2007. Treasury and the IRS published one final rule in FY 2006 on which Advocacy 
commented. Treasury and the IRS addressed Advocacys comments (without specific reference to Advo-
cacy) thereby complying with section 3(c). Advocacy did not file any comments with OCC or OTS in FY 
2006. 

Issue: Income Attributable to Domestic Production Activity. On November 4, 2005, Treasury and the 
IRS published a proposed rule under section 199 of the Internal Revenue Code to inform taxpayers that 
engage in domestic production, as defined in section 199, how to calculate allowable deductions for such 
activities. Advocacy did not receive this rule from Treasury and the IRS before the rules publication. 
    On November 30, 2005, Advocacy held a roundtable to discuss the impact of the proposed rule on small 
entities. The consensus was that the simplified calculation method should be made more widely available. The 
stakeholder participants also expressed great concern about the complexity of the rule.
    On January 3, 2006, Advocacy submitted a public comment letter to Treasury and the IRS. The pro-
posed rule provided that employer taxpayers with $25 million or less in annual revenue could use a simpli-
fied process for calculating the deduction. As a result of recommendations from Advocacy, Treasury and 
the IRS increased the accessibility of the simplified deduction method calculation by expanding it to in-
clude employers that generate annual gross receipts of $100 million or less, generating cost savings for 
small businesses. The amount of savings was not possible to calculate. The issue of complexity was not 
addressed.

Issue: Escrow Accounts, Trusts, and Other Funds Used During Deferred Exchanges of Like-Kind 
Property. On February 7, 2006, Treasury and the IRS published a proposed rule that affects qualified in-
termediaries that facilitate exchanges of like-kind property. An initial regulatory flexibility analysis was 
part of the proposed rule. On March 23, 2006, Advocacy hosted a roundtable attended by small business 
stakeholders and personnel from Treasury and the IRS. Business owners described the potential financial 
consequences of the proposed rule on their current operations, explaining that they could lose, on average, 
50 percent of their gross revenue if the proposed rule were finalized.
    On May 8, 2006, Advocacy submitted a public comment to Treasury and the IRS, noting that the IRFA 
did not provide significant alternatives to the proposed rule, nor did it describe the economic impact on the 
regulated entities.  Advocacys comment encouraged Treasury and the IRS to publish an amended IRFA in 
the Federal Register. Currently Treasury and the IRS are working with Advocacy to explore options for 
improving and publishing an amended IRFA subject to comments. As of September 30, 2006, Treasury and 
the IRS had not published an amended IRFA or final rule.
Department of Veterans Affairs
E.O. 13272 Compliance
The Department of Veterans Affairs (VA) provides its RFA policies to the public online to comply with 
section 3(a) of E.O. 13272, while continuing to take a position that most of its regulations do not affect 
small entities. The VA fully complies with section 3(b) of E.O. 13272, by notifying Advocacy of proposed 
regulatory actions that may have a significant impact on a substantial number of small entities. Advocacy 
has reviewed these notifications for FY 2006, and verifies that most of this years regulations did not affect 
small entities. The VA did not publish any final rules in FY 2006 that were the subject of Advocacy com-
ment; therefore, VAs compliance with section 3(c) cannot be assessed.
Environmental Protection Agency
E.O. 13272 Compliance
The Environmental Protection Agency (EPA) has complied with section 3(a) of E.O. 13272 by making its 
policies and procedures with respect to the Regulatory Flexibility Act publicly available on its website. In 
FY 2006, EPA provided Advocacy with all of its draft rules before or at the time they were sent to OMB 
for review, in compliance with section 3(b) of E.O. 13272. Advocacy provided seven public comment let-
ters to EPA in FY 2006, and EPA adequately responded to Advocacys comments in accordance with sec-
tion 3(c) of E.O. 13272.

Issue: Resource Conservation and Recovery Act, Burden Reduction Rule. On April 4, 2006, EPA pub-
lished a final rule designed to reduce some recordkeeping, reporting, and inspection burdens imposed on 
hazardous waste generators, transporters, and disposal facilities by the Resource Conservation and Recov-
ery Act (RCRA). EPA promulgated the burden reduction rule in response to recommendations from Advo-
cacy and small business representatives on ways to streamline burdensome requirements that have little 
corresponding environmental benefit. The final rule reduces the amount of time some records must be re-
tained, allows additional types of professionals to certify compliance with waste handling rules, decreases 
the frequency of some self-inspections, and eases reporting requirements. The final rule is estimated to re-
sult in annual cost savings of $3 million per year.

Issue: Clean Air Act Requirements to Control Mobile Source Air Toxics (MSAT). On March 29, 2006, 
EPA published a proposed Clean Air Act rule that would require petroleum refineries to reduce concentra-
tions of benzene, an air toxic, in gasoline. The rule would also require portable gasoline container manufac-
turers and light-duty highway vehicles to reduce the amount of benzene that is lost through evaporation. 
EPA convened a SBREFA review panel on September 7, 2005, with 11 small entity representatives. As a 
result of the recommendations of the panel, EPA proposed several flexibilities for small refiners, small 
gasoline container manufacturers, and light-duty vehicle manufacturers. These flexibilities include giving 
small refiners more lead time to achieve compliance, establishing a program for benzene averaging, bank-
ing, and trading among refiners, and allowing a refiner or manufacturer that can demonstrate economic 
hardship to have additional time to comply with the standard. The delayed implementation of the MSAT 
standard for small businesses is estimated to result in $12 million in first-year cost savings, with an addi-
tional $12 million in recurring annual cost savings for the following four years. 

Issue: Clean Water Act Section 316(b), Phase III Cooling Water Intake Structures. On June 1, 2006, 
the U.S. Environmental Protection Agency signed a final Clean Water Act rule designed to protect fish and 
other aquatic species from being killed when they are pulled into cooling water intakes. As originally 
planned by EPA, the rule would have required more than 700 facilities to install devices to prevent aquatic 
losses, including an estimated 82 facilities owned by small entities. Following the completion of a 
SBREFA review panel in early 2004, EPA concluded that facilities with relatively low intake flows typi-
cally do not cause aquatic losses and proposed an exemption for facilities that have a cooling water intake 
flow of 50 million gallons per day or less. The exemption contained in the final rule removes virtually all 
small businesses from the rules coverage. According to estimates prepared by the American Public Power 
Association, the recommendations of the SBREFA panel have resulted in cost savings of $74 million for 
small entities such as municipal utilities, pulp and paper companies, and chemical plants.

Issue: Toxics Release Inventory Rule. On October 4, 2005, EPA published a proposed rule providing the 
first significant small business relief from toxics release inventory (TRI) reporting since 1994, when EPA 
introduced the first short form, called the Form A, replacing the longer (five-page) Form R. Section 
313 of the Emergency Planning and Community Right to Know Act established the TRI reporting require-
ment that facilities which process, use, or manufacture a listed chemical file an annual Form R, describing 
the amounts of chemicals handled by the facility. Small businesses have long been concerned that the an-
nual reporting requirement imposes a large paperwork burden with little environmental benefit, particularly 
for thousands of filers with zero discharges or emissions. The TRI reporting requirement has been a small 
business priority environmental issue over the last decade and more. The October 2005 EPA proposal al-
lows more small firms to use the shorter Form A, saving them time and money. 
       EPA first issued the Form A in November 1994. At that time, EPA reserved the form for reports with a 
500-pound reportable amount threshold, or the total production-related wastes. In October 2005, EPA 
found that it could cover more than 99 percent of toxic releases and other waste management activities by 
raising the 500-pound threshold to 5,000 pounds, allowing an additional 12,200 forms of a total of nearly 
82,000 forms to use Form A. Furthermore, the Form A was made available for the first time to reporters of 
a special category of chemicals accounting for an additional 2,703 reports.
    This proposal, representing the culmination of Advocacy TRI activity over the past 10 years, is ex-
pected to save 165,000 hours per year in filing and processing of reports, by EPAs estimate.  Advocacy 
recommended that EPA expand the eligibility of reports for Form A to provide relief to small firms, and 
EPAs proposal does exactly that.  EPA estimates cost savings of about $7.4 million per year. A final rule 
was expected by December 2006. 

Issue: Spill Prevention Control and Countermeasure Rule. On December 12, 2005, EPA proposed 
streamlining requirements for small facilities that handle below a certain threshold of oil as well as facili-
ties with oil-filled equipment under the Spill Prevention, Control, and Countermeasure (SPCC) rule. The 
SPCC rule requires facilities that manage above 1,320 gallons of oil to implement measures to prevent and 
contain oil discharges. The 2002 amendments promulgated by the agency created widespread problems for 
the regulated industry, and EPA took steps to review the SPCC requirements, in collaboration with Advo-
cacy. EPAs notice of data availability regarding small facilities in November 2004 was based in large part 
on the Office of Advocacys June 2004 letter to EPA. EPA was expected to issue a final rule by December 
2006.
    EPA utilized Advocacys recommendations for revisions in two distinct areas: small facilities (under 
10,000 gallons aggregate capacity for oil) and oil-filled equipment. EPA proposed that the requirements 
for small facilities be streamlined to allow the facilities to self-certify compliance, instead of using a pro-
fessional engineer and to permit additional flexibility for tank integrity testing and security requirements. 
With respect to small facilities, EPAs proposal is estimated to save $22.5 million per year for all busi-
nesses annualized at a 3 percent discount rate. Since it is estimated that 80 percent of the facilities would 
be owned by small businesses, these revisions would result in $17.6 million in small business savings. 
Facilities with oil-filled equipment would have the option of preparing an oil spill contingency plan and a 
written commitment of manpower, equipment, and materials in lieu of providing expensive secondary 
containment around the equipment. For oil-filled equipment, EPA estimates savings of $56.7 million per 
year for all businesses. Advocacy estimates that these revisions would result in $28.4 million per year in 
small business savings.  
Federal Acquisition Regulation Council
E.O. 13272 Compliance
The policies and procedures required by section 3(a) that were provided by DOD apply also to the Federal 
Acquisition Regulation Council (FAR Council). This regulatory entity has not provided Advocacy with 
notification as required by section 3(b) of E.O. 13272. However, Advocacy has an open invitation to attend 
the regulatory councils deliberations and has access to the predecisional deliberative rulemaking process. 
Advocacy has made significant input on several other predecisional regulations this past fiscal year. The 
Office of Advocacy worked very closely with OIRA and the FAR Council to improve the regulatory analy-
sis process. The FAR Council has had several RFA training sessions to increase its awareness and under-
standing of the RFA requirements. The FAR Council did not publish final rules in FY 2006 that were the 
subject of Advocacy comments; therefore, the FAR Councils compliance with section 3(c) cannot be as-
sessed.
Federal Communications Commission
E.O. 13272 Compliance
In FY 2005, the Federal Communications Commission sent Advocacy a letter stating its commitment to up-
hold the spirit of E.O. 13272 and review its rules for impacts on small entities while maintaining that as an 
independent agency, it is not covered by the executive order. The FCC maintained this position through FY 
2006. The FCC consistently mails Advocacy proposed and final rules that have a significant impact on a 
substantial number of small entities after the rule has been adopted and released to the general public, but 
before it is sent to the Federal Register. This provides Advocacy with additional time to review proposed 
rules before the comment deadline, but does not necessarily meet the requirements of E.O. 13272 section 
3(b).(35) In FY 2006, the agency addressed Advocacys comments in its final rules as required by section 
3(c) of E.O. 13272. 
    The FCCs compliance with the RFA improved this past year but is still inconsistent, varying between 
bureaus and across subject matter. The two major telecommunications issues that Advocacy engaged on 
this year are examples of this dichotomy. In its implementation of the Junk Fax Prevention Act, the FCC 
did an admirable job of considering small business impacts and taking steps to minimize them. However, 
the FCCs compliance with the RFA in the Universal Service proceeding was less than desirable. Advocacy 
continues to attempt to engage the FCC early in the rulemaking process, but the FCC has not taken advan-
tage of the offer. Advocacy has made repeated offers to train the FCCs media bureau on how to comply 
with the RFA. The FCC has not responded and no training is currently scheduled.
    As stated in previous reports, Advocacy believes one of the reasons the FCC has not had consistent 
compliance with the RFA is its tendency to issue vague proposed rulemakings or even a series of hypo-
thetical questions to the public, which would be more appropriate for a notice of inquiry. Without specific 
rules, the agency cannot accurately estimate the impacts and assess alternatives to the rule, nor can small 
businesses comment meaningfully. The FCC has continually rejected Advocacys recommendations to 
propose more concrete rules. 

Issue: Junk Fax Prevention Act. On January 18, 2006, Advocacy filed a public comment letter on the 
FCCs proposed rule implementing the Junk Fax Prevention Act of 2005 (JFPA), which codified an exemp-
tion to the FCCs do-not-fax rules for unsolicited commercial faxes sent to recipients with whom a business 
has an established business relationship (EBR). Advocacy recommended that the FCC not limit the EBR 
duration to 18 months following a purchase or transaction and three months after an inquiry, as the neces-
sary recordkeeping would be burdensome to small businesses. While small businesses track their transac-
tions, many small businesses do not have systems in place to track inquiries by customers. Advocacy rec-
ommended that the FCC exempt small businesses from the requirement to provide a cost-free mechanism 
for recipients of unsolicited fax advertisements to send do-not-fax requests because it is economically bur-
densome. Advocacy recommended that if the FCC were to decide that small businesses should not be ex-
empt, it should allow small businesses to use alternatives to toll-free numbers such as email, Web-based 
systems, or the designation of a third party to receive do-not-fax requests.
    On March 13, 2006, Advocacy met with the FCC to present a list of recommendations that the FCC (1) 
grant an exemption for small businesses from the requirement to provide a cost-free mechanism for recipi-
ents of unsolicited fax advertisements to send do-not-fax requests, (2) not establish a time limit on an estab-
lished business relationship at this time, and (3) allow 30 days to respond to a do-not-fax request. 
    In addition, Advocacy made the following recommendations. While the burden of proof for an EBR 
should be on the sender, the FCC should allow senders to rely on general records to prove an EBR and not 
require any particular form of recordkeeping. The FCC should create a safe harbor for communications of 
fax numbers that would be presumed to be voluntary, such as business cards, letterhead, email footers, ad-
vertisements, brochures, and websites. The JFPA requires a clear and conspicuous notice that the fax 
recipient can opt out of receiving any more faxes from the sender. The FCC should adopt the same defini-
tion for clear and conspicuous notice that the FCC uses in its rules on mobile services commercial mes-
sages. 
    On April 6, 2006, the FCC issued final rules that adopted almost all of the recommendations proposed 
by Advocacy. Advocacy believes that the rule achieves the FCCs regulatory goal of preventing transmis-
sion of unsolicited commercial faxes while minimizing the regulatory burdens on small businesses.

Issue: Universal Service Rule. On June 15, 2006, Advocacy filed a public comment letter with the FCC to 
urge the agency to conduct an IRFA before it adopts a rule changing the safe harbor percentage for small 
wireless carriers and imposing Universal Service obligations on Voice over Internet Protocol (VoIP) pro-
viders. Universal Service is a program that defrays the cost of providing basic telecommunications service 
in high-cost areas. VoIP providers are telecommunications companies that provide service over the Internet 
instead of using the conventional telephone network.
    The FCC had announced that it intended to require VoIP providers to contribute for the first time to 
Universal Service, and the rate chosen for VoIP contributions was higher than for other types of telecom-
munications. The FCC based this final rule on a proposed rule issued in 2004 that asked broad questions 
about whether IP-enabled services (such as VoIP) should be regulated and whether they should contribute 
to Universal Service. The proposed rule did not propose any specific regulations, and the IRFA released 
with the proposal reflected this lack of specificity. Advocacy was not notified by the FCC before the rule 
was published. 
    Advocacys letter cautioned the FCC that it had not analyzed the economic impacts on small busi-
nesses of increasing the safe harbor percentage or imposing Universal Service obligations on VoIP provid-
ers. Advocacy recommended that the FCC postpone adopting a final rule on this issue until it has had an 
opportunity to complete an IRFA. The FCC declined to postpone the rule and adopted a final rule on June 
27, 2006, requiring VoIP providers to contribute to Universal Service. Concurrent with that order, the FCC 
released a proposed rule asking for comment on the regulatory requirements it had just adopted. Advocacy 
was not notified prepublication of this action. After further discussion with small businesses and Advocacy, 
the FCC revised its reporting requirements on July 27, 2006, allowing small VoIP contributors to file a 
reduced set of information in conjunction with its Universal Service contributions, thus lowering the regu-
latory burden.
    In response to the proposed rule, Advocacy spoke with representatives of small telecommunications car-
riers and small interconnected VoIP providers and held a roundtable to discuss the small business implica-
tions of the plans. On August 8, 2006, Advocacy filed a public comment letter responding to the proposed 
rule. Advocacy asked the agency to consider the impact of several issues upon small businesses: the safe 
harbor rate for both wireless and VoIP providers, the reporting requirements for contributing to the USF, and 
the timeframe in which they were required to comply. Advocacy also presented significant alternatives in-
cluding a lower safe harbor rate, removing the requirements for preapproval of traffic studies, waiving penal-
ties for incorrectly estimating future revenue, simplifying reporting forms, raising the de minimis exemption, 
and choosing a different contribution methodology. As of September 30, 2006, the FCC had not issued a 
final rule in response to this supplemental rulemaking.

Issue: Section 610 Review. On October 27, 2005, Advocacy filed a letter with the FCC in response to its 
public notice asking for comment on a review of rules adopted by the agency in 1993 through 1995, and 
whether they should be continued without change, amended, or rescinded, consistent with Section 610 of 
the Regulatory Flexibility Act. Section 610 requires each federal agency to plan for, and conduct, the peri-
odic review of its rules that have or will have a significant economic impact on a substantial number of 
such small entities. Advocacy was not notified prepublication.
    Advocacy commended the FCC for the steps it has taken to comply with Section 610 and encouraged 
the agency to consider the comments presented and respond to the recommendations made by small busi-
nesses. Advocacy found several of the comments of particular note because of the potential significant im-
pact on small businesses. The FCC provided no electronic means of filing comments. Advocacy encour-
aged the FCC to allow small businesses to file comments electronically in response to future Section 610 
reviews. As of September 30, 2006, the FCC had not responded to this letter.

Issue: Childrens Television Obligations of Digital Television Broadcasters. On August 18, 2006, Ad-
vocacy met with officials of the FCC to discuss the agencys initial regulatory flexibility analysis (IRFA) 
for its proposed Childrens Television Obligations of Digital Television Broadcasters rule. The proposal 
addressed the obligation of television licensees to provide educational programming for children and the 
requirement that television licensees protect children from excessive and inappropriate commercial mes-
sages. Advocacy was not notified prepublication.
    Advocacy noted that the FCC neglected to publish the IRFA for the proposed rule and recommended 
that the agency do so for a reasonable comment period. Advocacy also recommended that the FCC consider 
the following alternatives: exempting small broadcasters who already provide public affairs content from 
the educational and informational programming requirements under the proposed rule, allowing broadcast-
ers to rely on certifications from programming providers that website addresses displayed during core pro-
gramming requirements meet the FCC requirements, and allowing broadcasters to certify that at least 50 
percent of the core programming that counts toward meeting the new requirements has not aired within the 
previous seven days.
    On September 29, 2006, the FCC issued a final rule that declined to limit the applicability of the new 
educational and informational programming requirements to multicast streams that do not already offer 
educational or public affairs programming. The FCC stated that the revised processing guideline translates 
the existing three-hour guideline to the digital environment in a manner that is both fair to broadcasters and 
meets the needs of the child audience. Further, the FCC does not expect compliance to be burdensome, but 
Advocacy will revisit this issue if there is evidence that it imposes an undue burden on broadcasters. The 
FCC did allow broadcasters to certify compliance with the revised limitation on the repeat of educational 
and informational digital programming adopted under the multicasting guideline rather than requiring them 
to identify each program episode. Broadcaster licensees instead must retain records sufficient to document 
the accuracy of their certification, including records of actual program episodes aired, and must make such 
documentation available to the public upon request.

Issue: Wireless Spectrum Auctions. On September 20, 2006, Advocacy filed a public comment letter 
with the FCC in response to a proposal addressing the eligibility of spectrum auction applicants for desig-
nated entity benefits. The FCC regularly auctions off spectrum licenses, which grant the right to operate a 
wireless service (such as cellphones or pagers) at a certain frequency. Designated entities are small busi-
nesses, businesses owned by minorities and/or women, and rural telephone companies. The principal bene-
fit given to designated entities is bidding credit, which exempts a small business from paying a percentage 
of the entities bid. The FCC is seeking to balance two goals given to it by Congress: (1) to provide desig-
nated entities with reasonable flexibility to obtain financing from investors, and (2) to prevent ineligible 
entities from receiving designated entity benefits by circumventing the intent of the rules to obtain those 
benefits indirectly. Advocacy was not notified prepublication.
    Advocacy supported the FCCs effort to promote small business participation in spectrum auctions and 
urged the FCC to analyze the impact on small businesses and explore regulatory alternatives. The measures 
discussed by the FCC will have a significant impact on small businesses, as they will add reporting re-
quirements, impose regulatory mandates, or place restrictions on a designated entitys ability to negotiate 
and contract with third parties. Advocacy recommended that the FCC publish an analysis of these burdens 
in a supplemental initial regulatory flexibility analysis giving small businesses an opportunity to comment 
on the impact and alternatives. As of September 30, 2006, the FCC had not issued a final rule or supple-
mental rulemaking.
Federal Trade Commission
E.O. 13272 Compliance 
The Federal Trade Commission (FTC) has made its policies and procedures publicly available as required 
by section 3(a) of E.O. 13272. The FTC has notified Advocacy through Advocacys email notification sys-
tem of draft rules that may have a significant impact on a substantial number of small entities, as required 
by section 3(b) of E.O. 13272. The FTC did not publish any final rules in FY 2006 that were the subject of 
any Advocacy comment; therefore, the FTCs compliance with section 3(c) cannot be assessed. FTC staff 
have not yet received RFA training.

Issue: Identity Theft. On September 18, 2006, Advocacy filed a public comment letter with the Federal 
Trade Commission to discuss the regulatory impacts and available alternatives in response to the FTCs pro-
posed rule on identity theft red flags. The FTC sought comment on guidelines for creditors on identity theft 
red flags, which are patterns, practices, and specific forms of activity that indicate the possible existence of 
identity theft. The proposed rule requires financial institutions and creditors to establish reasonable policies 
and procedures for implementing the red flag guidelines as well as how to address discrepancies on credit 
reports.
    Advocacy spoke with representatives of small businesses from a variety of different industries to de-
termine the impact of the proposed rule. Small businesses believe that the economic impact of the rule will 
be significant. While they are supportive of the overall goals of the rulemaking, they believe that it will 
take a substantial amount of time for them to review the 31 red flags identified by the FTC and determine 
which are relevant to their businesses, develop the policy, write the policy, and train employees. Advocacy 
presented significant alternatives based on its outreach. These alternatives included: delay the implementa-
tion, create a shortened red flag list, and provide a certification form. Advocacy also recommended that the 
FTC issue a compliance guide for small businesses to walk them through each step in the program. As of 
September 30, 2006, the FTC had not issued a final rule or a supplemental rulemaking.
Securities and Exchange Commission
E.O. 13272 Compliance
The Securities and Exchange Commission (SEC) has not made its RFA compliance procedures available as 
required by section 3(a) of E.O. 13272. However, the SEC utilizes Advocacys email notification system to 
provide its draft and final rules on a regular basis, complying with section 3(b) of E.O 13272. The SEC did 
not publish any final rules in FY 2006 that were the subject of any Advocacy comment; therefore, the 
SECs compliance with section 3(c) cannot be assessed.
    The SEC has demonstrated a commitment to working with the public and the Office of Advocacy to 
balance the impacts of its regulatory actions on small businesses. In particular, Advocacy has worked with 
the SEC and its Office of Small Business Policy on the small business impacts of the Sarbanes-Oxley Act 
of 2002 (SOX), which introduced a new requirement of internal controls reporting for companies that sub-
mit audited financial reports. 

Issue: Advisory Committee on Smaller Public Companies. Based on recommendations by small busi-
ness representatives and Advocacy, the SEC chartered the Advisory Committee on Smaller Public Compa-
nies on March 23, 2005, to assess the recent changes to securities law and changed circumstances required 
by SOX. On April 23, 2006, the advisory committee published its final report and recommendations, and 
advised the SEC to defer the implementation of the new section 404 internal control audit requirements 
until there is an adequate framework in place to account for the size differences between smaller and larger 
companies. Advocacy wrote a public comment letter supporting the advisory committees recommenda-
tions. On April 27, 2006, Advocacy submitted another comment letter to the SEC in response to an SEC 
request for comments on compliance experience with section 404 internal control reporting requirements. 
Advocacy cited evidence solicited by the advisory committee establishing that section 404 reporting re-
quirements would impose a disproportionate cost on smaller public companies and are likely to present 
major barriers for those companies seeking capital. Advocacy urged the SEC to provide flexibility for small 
companies to comply with SOX, as recommended by the advisory committee. 

Issue: Proposed Extension of Small Public Company Compliance Deadline for New Internal Control 
Reporting Requirements. In response to one recommendation by the SECs advisory committee, the SEC 
proposed to provide small businesses an additional extension of time for implementation of section 404 of 
the Sarbanes-Oxley Act. This proposed rule would give smaller public companies a five-month extension for 
a management assessment report and a 17-month extension for an auditors attestation report. Small public 
companies would submit a management report with their first annual report the first fiscal year ending on or 
after December 17, 2007. These entities would not be required to submit an auditors attestation report until 
the next years annual report, or the fiscal year ending on or after December 15, 2008. Advocacy submitted 
two comment letters to the SEC in September 2006 supporting the proposed extension of time for section 
404 compliance and providing input on a section 404 management guidance the SEC is developing. SECs 
proposed action is estimated to save nonaccelerated filers (smaller public companies) approximately $5.5 
billion in compliance costs. 
Small Business Administration
E.O. 13272 Compliance
The Small Business Administration (SBA) has made its RFA policies and procedures available online and 
provides Advocacy notification of draft rules that may have a significant impact on a substantial number of 
small entities, as required by sections 3(a) and 3(b) of E.O. 13272. As a result of RFA training and contin-
ued discussions on draft rules, SBA personnel have sought Advocacy input earlier in the regulatory devel-
opment process. SBA did not publish any final rules in FY 2006 that were the subject of Advocacy com-
ment; therefore, SBAs compliance with section 3(c) cannot be assessed.

Issue: The Women-Owned Small Business Federal Contract Assistance Program. On June 15, 2006, 
SBA issued a proposed rulemaking in the Federal Register to implement the Women-Owned Small Busi-
ness Federal Contract Assistance Program as authorized under the Small Business Reauthorization Act of 
2000. The Small Business Reauthorization Act of 2000 authorizes contracting officers to restrict competi-
tion to eligible women-owned small businesses (WOSBs) for certain federal contracts in industries in 
which SBA has determined that WOSBs are underrepresented or substantially underrepresented in federal 
procurement. This section further requires SBA to conduct a study to identify the industries in which 
WOSBs are underrepresented and substantially underrepresented in federal procurement.
    Based on conversations with affected WOSBs, Advocacy filed a public comment letter on July 17, 
2006. While SBA complied with the RFA by providing an IRFA, Advocacy urged SBA to consider revis-
ing its IRFA based on the findings of the statutorily mandated study. 
Conclusion 
The RFA provides federal agencies with specific procedures to address the economic impacts of their regu-
lations on small entities, and consider regulatory alternatives to reduce those impacts. Advocacy has wit-
nessed a change in the culture of federal and state agencies, as more officials have become aware of their 
regulations unintended effects on small entities and the economy. This progress can be directly attributed 
to RFA training, as Advocacy has trained more than 48 agencies in RFA compliance in three years. Advo-
cacy anticipates that the new online RFA training introduced in FY 2006 can increase the number of agen-
cies and federal agency rule writers trained. 
    In FY 2006, Advocacy staff noticed continued improvement in agency compliance with E.O. 13272 
and the RFA. Most agencies notify Advocacy of rules that may have a significant impact on a substantial 
number of small entities and respond to Advocacys comments when they publish the final rules in the 
Federal Register. 
    Advocacy continued to be involved more often at the prepublication stage, enabling agencies to write 
better rules that reflect the real-world concerns voiced by small businesses. Advocacys Office of Economic 
Research provided data on small businesses, such as the number of entities and industry sectors affected by a 
particular rule. Advocacy held SBREFA panels and roundtables to give small businesses and their trade as-
sociations a forum to discuss rulemakings on topics such as industrial safety and environmental regulations. 
Advocacy staff regularly reviewed proposed regulations and provided preproposal consultation, interagency 
review under E.O. 12866, interagency and formal comments to the agency, and congressional testimony on 
regulations. 
    Advocacys interventions and assistance helped produce more than $7.25 billion in first-year cost savings 
and $117 million in annual savings for small businesses in FY 2006. These savings demonstrate that the RFA 
is succeeding in persuading many agencies to take actions and implement alternatives that reduce the regula-
tory burden on small entities.  Although some agencies do not yet fully comply with the RFA, great progress 
has been made since the laws enactment in 1980. Educating agencies on RFA compliance will be a continu-
ing priority for Advocacy in FY 2007. Advocacy is hopeful that this training will help agencies fully under-
stand the requirements of the RFA and the importance of including small entitiy impacts in their rulemaking 
process.  

4
Making the States Flexible: Small Business Regulatory 
Flexibility Model Legislation Initiative

In December 2002, Advocacy presented model regulatory flexibility legislation for the states based on the 
federal Regulatory Flexibility Act. The intent of the model legislation is to foster a climate for entrepreneu-
rial success in the states so that small businesses will continue to create jobs, produce innovative new prod-
ucts and services, bring more Americans into the economic mainstream, and broaden the tax base. 
    
    This legislation is a win-win for small business and for effective government. Its good practice to 
make sure regulations dont pinch our efforts to grow economically. 
    Peter C. Groff, Colorado Senate  
President Pro Tem
    
    The American Legislative Exchange Council (ALEC) adopted the legislation as a model bill, and nu-
merous state legislators, stakeholders, and small business advocacy organizations have pursued its passage 
in various states.(36) According to Advocacys state model legislation, successful state-level regulatory 
flexibility laws address the following areas: 1) a small business definition that is consistent with state prac-
tices and permitting authorities; 2) a requirement that state agencies perform an economic impact analysis 
on the effect of a rule on small business before they regulate; 3) a requirement that state agencies consider 
less burdensome alternatives for small businesses that still meet the agencys regulatory goals; 4) a provi-
sion that requires state governments to review all of their regulations periodically; and 5) judicial review to 
give the law teeth.
    
    Governor Bredesens executive order establishing regulatory flexibility for small business owners 
will ensure entrepreneurs spend less time cutting red tape and more time creating jobs in Tennessee.
     Todd Stottlemyer, President and CEO, National Federation of Independent Business 
    
    In 2006, 11 states introduced regulatory flexibility legislation (Alabama, Colorado, Illinois, Kansas, 
Michigan, Mississippi, Nebraska, New Jersey, Pennsylvania, South Dakota, Washington), and two states 
enacted it (Colorado and South Dakota) to enhance their current rulemaking system (Table 4.1). Georgia 
Governor Sonny Perdue and Tennessee Governor Phil Bredesen implemented regulatory flexibility through 
executive orders in 2006.
    Since 2002, 34 state legislatures have considered regulatory flexibility legislation,(37) and 19 states 
have implemented regulatory flexibility through executive orders or legislation.(38) (See Table 4.2 and 
Chart 4.1 for current status.) 
    In states that have passed regulatory flexibility laws, the Office of Advocacy works with the small busi-
ness community, state legislators, and state government agencies to assist with implementation and to ensure 
the laws effectiveness. The implementation stage brings new challenges and opportunity to the model legisla-
tion initiative.
    The Office of Advocacy is strengthened by regional advocates located in the Small Business Admini-
strations 10 regions across the country. These are the chief counsel for advocacys direct link to small 
business owners, state and local government bodies, and organizations that support the interests of small 
entities. The regional advocates help identify regulatory concerns of small businesses by monitoring the 
impact of federal and state policies at the grassroots level. Their work goes far to develop programs and 
policies that encourage fair regulatory treatment of small businesses and help ensure their future growth 
and prosperity. 
    The text of Advocacys model legislation, updated versions of the state regulatory flexibility legislative 
activity map, and regional advocate contact information can be found on the Advocacy website at 
http://www.sba.gov/advo/laws/law_modeleg.html. 
Success Stories
Arkansas: The Importance of Regulatory Flexibility for Arkansas 
Small Businesses
In February 2005, Arkansas Governor Mike Huckabee signed Executive Order (EO) 05-04, requiring agen-
cies to evaluate the economic impact of proposed regulations on small businesses and to consider less bur-
densome alternatives. Also under the executive order, agencies must submit this analysis to the Arkansas 
Department of Economic Development (ADED) Small and Minority Business Unit, which is responsible 
for the oversight of the states regulatory flexibility program. 
    During the 2005 General Assembly, a law passed requiring the Arkansas Department of Labor (DOL) 
to license elevator contractors, elevator mechanics and elevator inspectors. Additionally, the Elevator 
Safety Board, within the DOL, was in the process of updating its regulations for the first time in 10 years. 
Outdated regulations often resulted in contractors having to obtain variances through a cumbersome proc-
ess simply to utilize newer technologies recognized in the latest American Society of Mechanical Engi-
neers (ASME) safety codes for elevators and escalators.

    Small businesses employ almost half the workforce and provide valuable ownership opportunities 
for women and minorities. This executive order establishing regulatory flexibility for small business 
owners is a way for state government to ensure that the concerns of the small business community are 
addressed and that small business are protected.   
     Arkansas Governor Mike Huckabee 

    As the Elevator Safety Board and the agency proceeded through the regulatory flexibility process, two 
expensive small business compliance issues became apparent. First, elevators installed from 1963 to 1973, 
which previously had not been required to install fire service, were going to be required to do so under the 
revised rules. The Safety Division found that approximately 337 elevators in Arkansas could be affected, and 
of those, 200 were located in small businesses. The cost to install the fire service was estimated at approxi-
mately $10,000 per elevator. 
    The second compliance issue dealt with a retrofit requirement for hydraulic elevators that have a flat-
bottom hydraulic jack, or a single-bottom cylinder. The most recent ASME code required the replacement 
of the cylinder with a double cylinder or one with a safety bulkhead to prevent the elevator from falling if 
an in-ground cylinder ruptured. The agency intially estimated that approximately 350 elevators installed 
prior to 1980 might be affected, and of those, 208 were located in small businesses. The least expensive 
retrofit would cost approximately $10,000 per elevator. 
    As the agency received input from the ADED Small and Minority Business Unit, a third issue was 
identified. Small speciality installation contractors felt that it was overly burdensome to license and test 
their employees in the same manner as a mechanic working for a larger company. They argued that eleva-
tor mechanics who only install wheelchair accessibility lifts should not be subject to the same stringent 
testing required of those who install commercial elevators in high-rise buildings. 
    As a result of the Arkansas regulatory flexibility law, the Elevator Safety Board and DOL received 
comments and input from the ADED Small and Minority Business Unit and a number of other small busi-
nesses. Each party recognized the public safety issues involved and approached the process cooperatively. 
The final regulations, effective September 1, 2006, reflected this collaborative process and flexible regula-
tory methods.
    Owners of elevators without fire service or with a flat-bottom hydraulic jack were given five years to 
come into compliance. The regulations allow for an exception from these requirements in cases of demon-
strated undue hardship where reasonable safety is assured. Also, a restricted class of license with a less 
stringent testing requirement was created for elevator mechanics that exclusively install wheelchair acces-
sibility lifts.
    This example demonstrates a how a strong regulatory flexibility law facilitates a working relationship 
between small business stakeholders and regulating agencies. The result is a set of rules that will be less 
harmful to small businesses while accomplishing the agency goal of elevator safety. 
    
Table 4.1 State Regulatory Flexibility Legislation, 2006 
Legislative Activity
Four states enacted regulatory flexibility legislation or an executive order in 2006

Colorado (HB 1041)

South Dakota (SB 74, SB 75)

Georgia (EO)

Tennessee (EO)


Eleven states introduced regulatory flexibility legislation in 2006

Alabama (HB 320)

Michigan (HB 5849 /HB 5850/ HB 5812)

Pennsylvania (HB 236/SB  842) 

Connecticut (HB 1041)

Mississippi (HB 1113/  SB 2881)

South Dakota (SB 74/SB 75)

Illinois (HB 5388)

Nebraska (LB 1170)

Washington (HB 1445)

Kansas (HB 2821)

New Jersey (A 2327/SB 1335)




Table 4.2 State Regulatory Flexibility Legislation, Status as of 
October 2006 
13 states and one territory have active regulatory flexibility statutes

Arizona

Missouri 

Oklahoma 

Virginia 

Connecticut

Nevada 

Oregon 

Wisconsin

Hawaii

New York

Puerto Rico


Indiana 

North Dakota

South Carolina



29 states have partial or partially used regulatory flexibility statutes

Alaska 

Iowa

New Hampshire

Texas

Arkansas (EO) 

Kentucky

New Jersey

Utah

California

Maine

New Mexico 

Vermont

Colorado

Maryland

North Carolina 

Washington 

Delaware 

Massachusetts

Ohio

West Virginia

Florida 

Michigan

Pennsylvania 


Georgia 

Minnesota

Rhode Island


Illinois

Mississippi

South Dakota






7 states, 2 territories, and the District of Columbia have no regulatory flexibility statutes

Alabama

Idaho

Montana

Wyoming

District of Columbia

Kansas

Nebraska


Guam

Louisiana

Virgin Islands













Chart 4.1 Mapping State Regulatory Flexibility Provisions, FY 
2006

 




Appendix A 
Supplementary Tables 
Table A.1 Cabinet Department RFA Procedures in Compliance 
with  Section 3(a) of E.O. 13272

Department

Document made available at:

Agriculture

http://www.ocio.usda.gov/directives/doc/DR1512-001.pdf

Commerce

www.ogc.doc.gov/ogc/legreg/testimon/108f/guidelines.htm

Defense

DOD has not submitted procedures separate from the FAR Council/ 
GSAs submission.

Education

www.ed.gov/legislation/FedRegister/finrule/2003-2/051203d.html

Energy

www.gc.doe.gov/rulemaking/eo13272.pdf

Health and Human Services

www.hhs.gov/execsec/smallbus.html

Homeland Security

www.tsa.gov/assets/pdf/Regulatory-Flexibility-Act%20-EO-
13272_signed.pdf

Coast Guard

www.uscg.mil/hq/g-m/regs/reghome.html

Housing and Urban Development

www.hud.gov/offices/osdbu/policy/impact.cfm

Interior

http://elips.doi.gov/elips/release/3207.htm

Justice

www.usdoj.gov/olp/execorder13272.pdf

Labor

www.dol.gov/dol/regs/guidelines.htm

State

The Department of State has not submitted written procedures.

Transportation

http://regs.dot.gov/docs/eo-13272.pdf

Treasury

www.treas.gov/regs/2002-rfa-
compliance.pdf?IMAGE.X=24\&IMAGE.Y=8

Veterans Affairs

www.va.gov/osdbu/resources/index.htm



Note:  The following independent agencies that regulate small entities have not submitted written procedures under Section 
3(a) of E.O. 13272:  the Export-Import Bank of the United States, the Farm Credit Administration, the Federal Communi-
cations Commission (submitted a letter saying not covered by executive orders), the Federal Emergency Management 
Agency, the Federal Housing Finance Board, the Federal Maritime Commission, the Federal Reserve System, and the Se-
curities and Exchange Commission.

Table A.2  RFA Training in Federal Agencies, FY 2003-2006

In fulfillment of E.O. 13272, Advocacy trained regulatory staff from the following federal departments and 
agencies on how to comply with the Regulatory Flexibility Act from July 2003 through September 2006.

Department of Agriculture
	Animal and Plant Health Inspection Service
Department of Commerce
	National Oceanic and Atmospheric Administration 
	Manufacturing and Services
	Patent and Trademark Office
Department of Education
Department of Energy
Department of Health and Human Services
	Centers for Medicare and Medicaid Services
	Food and Drug Administration
Department of Homeland Security
	Bureau of Citizenship and Immigration Services
	Bureau of Customs and Border Protection
	Transportation Security Administration
	United States Coast Guard
Department of Housing and Urban Development 
	Community Planning and Development
	Fair Housing and Equal Opportunity
	Manufactured Housing
	Public and Indian Housing
Department of the Interior
	Bureau of Indian Affairs
	Bureau of Land Management
	Fish and Wildlife Service
	Minerals Management Service
	National Park Service
	Office of Surface Mining, Reclamation, and Enforcement
Department of Justice
	Bureau of Alcohol, Tobacco, and Firearms
Department of Labor
	Employee Benefits Security Administration
	Employment and Training Administration
	Employment Standards Administration
	Mine Safety and Health Administration
	Occupational Safety and Health Administration
Department of Transportation
	Federal Aviation Administration
	Federal Highway Administration
	Federal Motor Carrier Safety Administration
	Federal Railroad Administration
	National Highway Traffic Safety Administration
	Research and Special Programs Administration
Department of the Treasury
	Financial Crimes Enforcement Network
	Financial Management Service
	Internal Revenue Service
	Office of the Comptroller of the Currency
	Tax and Trade Bureau
Department of Veterans Affairs
Independent Federal Agencies
	Access Board
	Environmental Protection Agency 
	Federal Communications Commission
	Federal Deposit Insurance Corporation
	Federal Election Commission
	General Services Administration/FAR Council
	Securities and Exchange Commission
	Small Business Administration




Table A.3 SBREFA Panels through Fiscal Year 2006
Rule Subject
Date 
Convened
Report 
Completed
NPRM1
Final Rule 
Published
Environmental Protection Agency

Non-Road Diesel Engines

03/25/97

05/23/97

09/24/97

10/23/98

Industrial Laundries Effluent  
   Guideline

06/06/97

08/08/97

12/12/97

Withdrawn2

Stormwater Phase 2

06/19/97

08/07/97

01/09/98

12/08/99

Transport Equipment Cleaning  
   Effluent Guideline

07/16/97

09/23/97

06/25/98

08/14/00

Centralized Waste Treatment  
   Effluent Guideline

11/06/97

01/23/98

01/13/99

12/22/00

Underground Injection Control  
   Class V Wells

02/17/98

04/17/98

07/29/98

12/07/99

Ground Water

04/10/98

06/09/98

05/10/00

11/08/06

Federal Implementation Plan for  
   Regional Nitrogen Oxides 
   Reductions
06/23/98

08/21/98

10/21/98

04/28/06

Section 126 Petitions

06/23/98

08/21/98

09/30/98

05/25/99

Radon in Drinking Water

07/09/98

09/18/98

11/02/99


Long Term 1 Enhanced Surface  
   Water Treatment

08/21/98

10/19/98

04/10/00

01/14/02

Filter Backwash Recycling

08/21/98

10/19/98

04/10/00

06/08/01

Light Duty Vehicles/Light Duty 
   Trucks Emissions And Sulfur 
    in Gasoline

08/27/98

10/26/98

05/13/99

02/10/00

Arsenic in Drinking Water

03/30/99

06/04/99

06/22/00

01/22/01

Recreational Marine Engines

06/07/99

08/25/99

10/05/01 
08/14/02

11/08/02

Diesel Fuel Sulfur Control  
   Requirements

11/12/99

03/24/00

06/02/00

01/18/01

Lead Renovation and  
   Remodeling Rule

11/23/99

03/03/00

01/10/06


Metal Products and Machinery 
   Effluent Guideline
12/09/99

03/03/00

01/03/01

05/13/03

Concentrated Animal Feedlots 
    Effluent Guideline

12/16/99

04/07/00

01/12/01

02/12/03

Reinforced Plastics Composites

04/06/00

06/02/00

08/02/01

04/21/03

Stage 2 Disinfection Byproducts

04/25/00

06/23/00



Long Term 2 Enhanced Surface  
   Water Treatment

04/25/00

06/23/00

08/11/03
08/18/03
01/04/06
01/05/06
Emissions from Non-Road and  
   Recreational Engines and  
   Highway Motorcycles

05/03/01

07/17/01

10/05/01
08/14/02
11/08/02

Construction and Development  
   Effluent Guideline

07/16/01

10/12/01

06/24/02

Withdrawn

Aquatic Animal Production Industry

01/22/02

06/19/02

09/12/02

08/23/04

Lime IndustryAir Pollution

01/22/02

03/25/02

12/20/02

01/05/04

Non-Road Diesel Emissions 
   Tier 4 Rules

10/24/02

12/23/02

05/23/03

06/29/04

Cooling Water Intake Structures 
   Phase III Facilities

02/27/04

04/27/04

11/24/04

06/15/06

Section 126 Petition (2005 Clean Air 
   Implementation Rule)

04/27/05

06/27/05

08/24/05

04/28/06

Federal Implementation Plan for  
   Regional Nitrogen Oxides (2005  
   Clean Air Implementation Rule)

04/27/05

06/27/05

08/24/05

04/28/06

Mobile Source Air Toxics   
   Control of Hazardous Air 
   Pollutants From Mobile Sources

09/07/05

11/08/06

03/29/06


Occupational Safety and Health Administration

Tuberculosis

09/10/96

11/12/96

10/17/97

Withdrawn4

Safety and Health Program Rule

10/20/98

12/19/98

Withdrawn


Ergonomics Program Standard

03/02/99

04/30/99

11/23/99

 11/14/005

Electric Power Generation,  
   Transmission, and Distribution

04/01/03

06/30/03

06/15/05


Confined Spaces in Construction

09/26/03

11/24/03 



Occupational Exposure to  
   Respirable Crystalline Silica Dust

10/21/03

12/19/03



Occupational Exposure to  
   Hexavalent Chromium

01/30/04

04/20/04

10/04/04

02/28/06

Cranes and Derricks in Construction

06/18/06






1	Notice of proposed rulemaking (NPRM).
2	Proposed rule was withdrawn August 18, 1999. EPA does not plan to issue a final rule.
3	Proposed rule was withdrawn on April 26, 2004. EPA does not plan to issue a final rule.
4	Proposed rule was withdrawn on December 31, 2003. OSHA does not plan to issue a final rule. 
5	President Bush signed Senate J. Res. 6 on March 20, 2001, which eliminated this final rule under the Congressional Re-
view Act.



Appendix B The Regulatory Flexibility Act

The following text of the Regulatory Flexibility Act of 1980, as amended, is taken from Title 5 of the 
United States Code, Sections 601612. The Regulatory Flexibility Act was originally passed in 1980 (P.L. 
96-354). The act was amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (P.L. 
104-121).

Appendix C Executive Order 13272

Appendix D Abbreviations 

ADED		Arkansas Department of Economic Development
ALEC		American Legislative Exchange Council
AMS		Agricultural Marketing Service
APA		Administrative Procedure Act
APPA		American Public Power Association
APHIS		Animal and Plant Health Inspection Service
ASME		American Society of Mechanical Engineering
CMS		Centers for Medicare and Medicaid Services
CHD		critical habitat designation
DFARS		Defense Federal Acquisition Supplement
DHS		Department of Homeland Security
DOC		Department of Commerce
DOD		Department of Defense
DOE		Department of Energy
DOI		Department of the Interior
DOJ		Department of Justice
DOL		Department of Labor
DOT		Department of Transportation
EBR		established business relationship
EBSA		Employee Benefits Security Administration
Education	Department of Education
E.O.		Executive Order
EPA		Environmental Protection Agency
FAA		Federal Aviation Administration
FAR		Federal Acquisition Regulation
FCA		Farm Credit Administration
FCC		Federal Communications Commission 
FDA		Food and Drug Administration
FDIC		Federal Deposit Insurance Corporation
FHFB		Federal Housing Finance Board
FMC		Federal Maritime Commission
FMVSS		Federal Motor Vehicle Safety Standard
FRFA		final regulatory flexibility analysis
FRS		Federal Reserve System
FSIS		Food Safety and Inspection Service
FTC		Federal Trade Commission
FWS		Fish and Wildlife Service
FY		fiscal year
GRS		groundfish retention standard
GSA		General Services Administration
GIPSA		Grain Inspection, Packers and Stockyard Administration
HCFA		Health Care Financing Agency, now renamed, see CMS
HHA		home health agency
HHS		Department of Health and Human Services
HUD		Department of Housing and Urban Development
IP		Internet Protocol 
IRFA		initial regulatory flexibility analysis
IRS		Internal Revenue Service
JFPA		Junk Fax Protection Act
MSAT		mobile source air toxics
MSHA		Mine Safety and Health Administration
MTSA		Maritime Transportation Security Act
NASA		National Aeronautics and Space Administration
NASE		National Association for the Self-Employed
NFIB		National Federation of Independent Business
NHTSA		National Highway Traffic Safety Administration
NMFS		National Marine Fisheries Service
NPRM		notice of proposed rulemaking
NPS		National Park Service
OASIS		Outcome and Assessment Information Set
OCC		Office of the Comptroller of the Currency
OIRA		Office of Information and Regulatory Affairs
OMB		Office of Management and Budget
OTA		other transaction agreements
OSHA		Occupational Safety and Health Administration
OTS		Office of Thrift Supervision
PBT		persistent, bioaccumulative, and toxic
PEL		permissible exposure limit
PHMSA		Pipeline and Hazardous Materials Safety Administration
P.L.		Public Law
PTO		Patent and Trademark Office
RCRA		Resource Conservation and Recovery Act
RFA		Regulatory Flexibility Act
RFID		radio frequency identification 
RSPA		Research and Special Programs Administration, now renamed, see PHMSA
SBA		Small Business Administration
SBEC		Small Business & Entrepreneurship Council
SBREFA	Small Business Regulatory Enforcement Fairness Act 
SEC		Securities and Exchange Commission
SER		small entity representative
SFRA		special flight rules area
SOX		Sarbanes-Oxley Act
SPCC		Spill Prevention Control and Countermeasures
State		Department of State
TREAD		Transportation Recall Enhancement, Accountability, and Documentation Act
Treasury		Department of the Treasury
TRI		toxics release inventory
TSA		Transportation Security Administration
TWIC		transportation worker identification credential
USDA		United States Department of Agriculture
U.S.C.		United States Code
VA		Department of Veterans Affairs
VoIP		Voice over Internet Protocol
WOSB		women-owned small business



ENDNOTES

1.  Regulatory Flexibility Act, Pub. L. No. 96-354  2, 94 Stat. 1164 (1980) (codified at 5 U.S.C.  601).  The full law as 
amended appears as Appendix B of this report.
2.  5 U.S.C.  603.  
3.  5 U.S.C.  605(b).  This certification must be published with the proposed rule or at the time of the publication of the final 
rule in the Federal Register and is subject to public comment in order to ensure that the certification is warranted.   
4.  5 U.S.C.  603(b).
5.  5 U.S.C.  603(c).
6.  5 U.S.C.  604.
7.  Id. at  604(a).
8.  5 U.S.C.  601-612 (2000). 
9.  5 U.S.C.  609 (b), (d).
10. Id. 
11. 5 U.S.C.  611(a), 612(b).  
12. Exec. Order No. 13272, 67 Fed. Reg. 53,461 (Aug. 16, 2002), available on the Office of Advocacy website at 
http://www.sba.gov/advo/laws/eo13272.pdf.  The full order is reprinted in this report as Appendix  C.  
13. Id.  3(a).  A list of Cabinet Department agencies that have made their RFA procedures available online pursuant to Sec-
tion 3(a) of E.O. 13272 is listed in Table A.1 of this report.  
14. Id.  3(b).  
15. Id. 3(c).  
16. 15 U.S.C.  634(b). 
17.  15 U.S.C.  631(a) (DECLARATION OF  POLICY)
18. 15 U.S.C.  634(b)(3).
19. See supra, note 1.
20. 5 U.S.C.  612(a). 
21. See supra, note 3.
22. See Table 2.2 for a detailed summary of cost savings for FY 2006.
23. See Chapter 3 for a detailed discussion of federal agency compliance and interventions by the Office of Advocacy in fiscal 
year 2006.
24. Exec. Order No. 13272  3(a). See Table A.1 in Appendix A for a summary of compliance with section 3(a) of E.O. 
13272. 
25. Id. at  3(b).  
26. Exec. Order No. 12866, 58 Fed. Reg. 51,735 (Sept. 30, 1993) subjects any significant regulatory action,which gener-
ally means a rule that will have an annual effect on the economy of $100 million or more, to review by the OIRA. E.O. 
12866 requires the agency to select the regulatory alternative that imposes the least burden on society consistent with 
maintaining an agencys regulatory objectives.
27. Id. at 3(c).  
28.  Exec. Order No. 13272  2(b).  
29. A list of the RFA training sessions conducted since FY 2003 can be found in Appendix A, Table A.2 of this report.
30. A regulatory certification is a promise by the head of an agency under 605(b) of the RFA that the rule when promulgated 
will not have a significant economic impact on a substantial number of small entities. 
31. Advocacys online training is designed for federal government employees, but has also been made available to the general 
public. Online visitors to the URL will be prompted to obtain a password from the Office of Advocacy prior to further ac-
cessing the training site.
32. Advocacy sent formal letters to agencies in response to a variety of agency actions including proposed rules, public no-
tices, agency meetings, guidance documents, and requests for comments. Advocacy also sent letters to introduce reports 
and information from Small Business Advocacy Review Panels and to highlight congressional testimony by Advocacy 
staff.
33. 13 CFR 121.802. See also 37 CFR 1.27.
34. 71 Fed.Reg. 32,909 (June 7, 2006).
35. The FCCs position is that their ex parte rule does not permit them to provide Advocacy drafts in a manner consistent with 
section 3(b).
36. Organizations include the National Federation of Independent Business (NFIB), state chambers of commerce, the U.S. 
Chamber of Commerce, the Small Business & Entrepreneurship Council (SBEC), and the National Association for the 
Self-Employed (NASE).
37. These states are Alabama, Alaska, California, Colorado, Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, 
Kansas, Kentucky, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North 
Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, 
Washington, and Wisconsin.
38. These states are Alaska, Arkansas, Colorado, Connecticut, Georgia, Indiana, Kentucky, Massachusetts, Missouri, North 
Dakota, New Mexico, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, and Wis-
consin.