71–250 

112TH CONGRESS REPT. 112–289 " ! HOUSE OF REPRESENTATIVES 1st Session Part 2 

REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011 

NOVEMBER 16, 2011.—Ordered to be printed 

Mr. GRAVES of Missouri, from the Committee on Small Business, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 527] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 527) to amend chapter 6 of title 5, United States Code (commonly known as the Regulatory Flexibility Act), to ensure complete 

analysis of potential impacts on small entities of rules, and for 

other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended 

do pass. 

CONTENTS 

Page 

I. Amendment ................................................................................................. 2 

II. Purpose of the Bill and Summary ............................................................. 8 

III. Background and the Need for Legislation ................................................ 9 

IV. Hearings ....................................................................................................... 13 

V. Committee Consideration ........................................................................... 14 

VI. Committee Votes ......................................................................................... 15 

VII. Section–by–Section Analysis of H.R. 527 .................................................. 27 

VIII. Congressional Budget Cost Estimate ........................................................ 62 

IX. Unfunded Mandates .................................................................................... 65 

X. New Budget Authority, Entitlement Authority, and Tax Expenditures 65 

XI. Oversight Findings ...................................................................................... 65 

XII. Statement of Constitutional Authority ...................................................... 67 

XIII. Congressional Accountability Act .............................................................. 67 

XIV. Federal Advisory Committee Statement ................................................... 67 

XV. Statement of No Earmarks ........................................................................ 67 

XVI. Performance Goals and Objectives ............................................................ 67 


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XVII. Dissenting Views ......................................................................................... 68 

XVIII. Changes in Existing Law Made by the Bill, as Reported ........................ 71 

I. AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SEC. 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Regulatory Flexibility Improvements Act of 2011’’. 

(b) TABLE OF CONTENTS.—The table of contents of this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Clarification and expansion of rules covered by the Regulatory Flexibility Act. 

Sec. 3. Expansion of report of regulatory agenda. 

Sec. 4. Requirements providing for more detailed analyses. 

Sec. 5. Repeal of waiver and delay authority; Additional powers of the Chief Counsel for Advocacy. 

Sec. 6. Procedures for gathering comments. 

Sec. 7. Periodic review of rules. 

Sec. 8. Judicial review of compliance with the requirements of the Regulatory Flexibility Act available after 

publication of the final rule. 

Sec. 9. Jurisdiction of court of appeals over rules implementing the Regulatory Flexibility Act. 

Sec. 10. Clerical amendments. 

Sec. 11. Agency preparation of guides. 

SEC. 2. CLARIFICATION AND EXPANSION OF RULES COVERED BY THE REGULATORY FLEXIBILITY ACT. 

(a) IN GENERAL.—Paragraph (2) of section 601 of title 5, United States Code, is 

amended to read as follows: 

‘‘(2) RULE.—The term ‘rule’ has the meaning given such term in section 551(4) 

of this title, except that such term does not include a rule of particular (and 

not general) applicability relating to rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or to valuations, costs or accounting, or practices relating to such 

rates, wages, structures, prices, appliances, services, or allowances.’’. 

(b) INCLUSION OF RULES WITH INDIRECT EFFECTS.—Section 601 of title 5, United 

States Code, is amended by adding at the end the following new paragraph: 

‘‘(9) ECONOMIC IMPACT.—The term ‘economic impact’ means, with respect to 

a proposed or final rule— 

‘‘(A) any direct economic effect on small entities of such rule; and 

‘‘(B) any indirect economic effect on small entities which is reasonably 

foreseeable and results from such rule (without regard to whether small entities will be directly regulated by the rule).’’. 

(c) INCLUSION OF RULES WITH BENEFICIAL EFFECTS.— 

(1) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Subsection (c) of section 603 

of title 5, United States Code, is amended by striking the first sentence and inserting ‘‘Each initial regulatory flexibility analysis shall also contain a detailed 

description of alternatives to the proposed rule which minimize any adverse significant economic impact or maximize any beneficial significant economic impact 

on small entities.’’. 

(2) FINAL REGULATORY FLEXIBILITY ANALYSIS.—The first paragraph (6) of section 604(a) of title 5, United States Code, is amended by striking ‘‘minimize the 

significant economic impact’’ and inserting ‘‘minimize the adverse significant 

economic impact or maximize the beneficial significant economic impact’’. 

(d) INCLUSION OF RULES AFFECTING TRIBAL ORGANIZATIONS.—Paragraph (5) of 

section 601 of title 5, United States Code, is amended by inserting ‘‘and tribal organizations (as defined in section 4(l) of the Indian Self–Determination and Education 

Assistance Act (25 U.S.C. 450b(l))),’’ after ‘‘special districts,’’. 

(e) INCLUSION OF LAND MANAGEMENT PLANS AND FORMAL RULE MAKING.— 

(1) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Subsection (a) of section 603 

of title 5, United States Code, is amended in the first sentence— 

(A) by striking ‘‘or’’ after ‘‘proposed rule,’’; and 

(B) by inserting ‘‘or publishes a revision or amendment to a land management plan,’’ after ‘‘United States,’’. 

(2) FINAL REGULATORY FLEXIBILITY ANALYSIS.—Subsection (a) of section 604 of 

title 5, United States Code, is amended in the first sentence— 

(A) by striking ‘‘or’’ after ‘‘proposed rulemaking,’’; and 

(B) by inserting ‘‘or adopts a revision or amendment to a land management plan,’’ after ‘‘section 603(a),’’. 

(3) LAND MANAGEMENT PLAN DEFINED.—Section 601 of title 5, United States 

Code, is amended by adding at the end the following new paragraph: 


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‘‘(10) LAND MANAGEMENT PLAN.— 

‘‘(A) IN GENERAL.—The term ‘land management plan’ means— 

‘‘(i) any plan developed by the Secretary of Agriculture under section 

6 of the Forest and Rangeland Renewable Resources Planning Act of 

1974 (16 U.S.C. 1604); and 

‘‘(ii) any plan developed by the Secretary of Interior under section 

202 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 

1712). 

‘‘(B) REVISION.—The term ‘revision’ means any change to a land management plan which— 

‘‘(i) in the case of a plan described in subparagraph (A)(i), is made 

under section 6(f)(5) of the Forest and Rangeland Renewable Resources 

Planning Act of 1974 (16 U.S.C. 1604(f)(5)); or 

‘‘(ii) in the case of a plan described in subparagraph (A)(ii), is made 

under section 1610.5–6 of title 43, Code of Federal Regulations (or any 

successor regulation). 

‘‘(C) AMENDMENT.—The term ‘amendment’ means any change to a land 

management plan which— 

‘‘(i) in the case of a plan described in subparagraph (A)(i), is made 

under section 6(f)(4) of the Forest and Rangeland Renewable Resources 

Planning Act of 1974 (16 U.S.C. 1604(f)(4)) and with respect to which 

the Secretary of Agriculture prepares a statement described in section 

102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 

4332(2)(C)); or 

‘‘(ii) in the case of a plan described in subparagraph (A)(ii), is made 

under section 1610.5–5 of title 43, Code of Federal Regulations (or any 

successor regulation) and with respect to which the Secretary of the Interior prepares a statement described in section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)).’’. 

(f) INCLUSION OF CERTAIN INTERPRETIVE RULES INVOLVING THE INTERNAL REVENUE LAWS.— 

(1) IN GENERAL.—Subsection (a) of section 603 of title 5, United States Code, 

is amended by striking the period at the end and inserting ‘‘or a recordkeeping 

requirement, and without regard to whether such requirement is imposed by 

statute or regulation.’’. 

(2) COLLECTION OF INFORMATION.—Paragraph (7) of section 601 of title 5, 

United States Code, is amended to read as follows: 

‘‘(7) COLLECTION OF INFORMATION.—The term ‘collection of information’ has 

the meaning given such term in section 3502(3) of title 44.’’. 

(3) RECORDKEEPING REQUIREMENT.—Paragraph (8) of section 601 of title 5, 

United States Code, is amended to read as follows: 

‘‘(8) RECORDKEEPING REQUIREMENT.—The term ‘recordkeeping requirement’ 

has the meaning given such term in section 3502(13) of title 44.’’. 

(g) DEFINITION OF SMALL ORGANIZATION.—Paragraph (4) of section 601 of title 5, 

United States Code, is amended to read as follows: 

‘‘(4) SMALL ORGANIZATION.— 

‘‘(A) IN GENERAL.—The term ‘small organization’ means any not–for–profit enterprise which, as of the issuance of the notice of proposed rulemaking— 

‘‘(i) in the case of an enterprise which is described by a classification 

code of the North American Industrial Classification System, does not 

exceed the size standard established by the Administrator of the Small 

Business Administration pursuant to section 3 of the Small Business 

Act (15 U.S.C. 632) for small business concerns described by such classification code; and 

‘‘(ii) in the case of any other enterprise, has a net worth that does 

not exceed $7,000,000 and has not more than 500 employees. 

‘‘(B) LOCAL LABOR ORGANIZATIONS.—In the case of any local labor organization, subparagraph (A) shall be applied without regard to any national 

or international organization of which such local labor organization is a 

part. 

‘‘(C) AGENCY DEFINITIONS.—Subparagraphs (A) and (B) shall not apply to 

the extent that an agency, after consultation with the Office of Advocacy 

of the Small Business Administration and after opportunity for public comment, establishes one or more definitions for such term which are appropriate to the activities of the agency and publishes such definitions in the 

Federal Register.’’. 


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SEC. 3. EXPANSION OF REPORT OF REGULATORY AGENDA. 

Section 602 of title 5, United States Code, is amended— 

(1) in subsection (a)— 

(A) in paragraph (2), by striking ‘‘, and’’ at the end and inserting ‘‘;’’; 

(B) by redesignating paragraph (3) as paragraph (4); and 

(C) by inserting after paragraph (2) the following: 

‘‘(3) a brief description of the sector of the North American Industrial Classification System that is primarily affected by any rule which the agency expects 

to propose or promulgate which is likely to have a significant economic impact 

on a substantial number of small entities; and’’; and 

(2) in subsection (c), to read as follows: 

‘‘(c) Each agency shall prominently display a plain language summary of the information contained in the regulatory flexibility agenda published under subsection (a) 

on its website within 3 days of its publication in the Federal Register. The Office 

of Advocacy of the Small Business Administration shall compile and prominently 

display a plain language summary of the regulatory agendas referenced in subsection (a) for each agency on its website within 3 days of their publication in the 

Federal Register.’’. 

SEC. 4. REQUIREMENTS PROVIDING FOR MORE DETAILED ANALYSES. 

(a) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Subsection (b) of section 603 of 

title 5, United States Code, is amended to read as follows: 

‘‘(b) Each initial regulatory flexibility analysis required under this section shall 

contain a detailed statement— 

‘‘(1) describing the reasons why action by the agency is being considered; 

‘‘(2) describing the objectives of, and legal basis for, the proposed rule; 

‘‘(3) estimating the number and type of small entities to which the proposed 

rule will apply; 

‘‘(4) describing the projected reporting, recordkeeping, and other compliance 

requirements of the proposed rule, including an estimate of the classes of small 

entities which will be subject to the requirement and the type of professional 

skills necessary for preparation of the report and record; 

‘‘(5) describing all relevant Federal rules which may duplicate, overlap, or 

conflict with the proposed rule, or the reasons why such a description could not 

be provided; 

‘‘(6) estimating the additional cumulative economic impact of the proposed 

rule on small entities beyond that already imposed on the class of small entities 

by the agency or why such an estimate is not available; and 

‘‘(7) describing any disproportionate economic impact on small entities or a 

specific class of small entities.’’. 

(b) FINAL REGULATORY FLEXIBILITY ANALYSIS.— 

(1) IN GENERAL.—Section 604(a) of title 5, United States Code, is amended— 

(A) in paragraph (4), by striking ‘‘an explanation’’ and inserting ‘‘a detailed explanation’’; 

(B) in each of paragraphs (4), (5), and the first paragraph (6), by inserting 

‘‘detailed’’ before ‘‘description’’; and 

(C) by adding at the end the following: 

‘‘(7) describing any disproportionate economic impact on small entities or a 

specific class of small entities.’’. 

(2) INCLUSION OF RESPONSE TO COMMENTS ON CERTIFICATION OF PROPOSED

RULE.—Paragraph (2) of section 604(a) of title 5, United States Code, is amended by inserting ‘‘(or certification of the proposed rule under section 605(b))’’ after 

‘‘initial regulatory flexibility analysis’’. 

(3) PUBLICATION OF ANALYSIS ON WEBSITE.—Subsection (b) of section 604 of 

title 5, United States Code, is amended to read as follows: 

‘‘(b) The agency shall make copies of the final regulatory flexibility analysis available to the public, including placement of the entire analysis on the agency’s 

website, and shall publish in the Federal Register the final regulatory flexibility 

analysis, or a summary thereof which includes the telephone number, mailing address, and link to the website where the complete analysis may be obtained.’’. 

(c) CROSS–REFERENCES TO OTHER ANALYSES.—Subsection (a) of section 605 of title 

5, United States Code, is amended to read as follows: 

‘‘(a) A Federal agency shall be treated as satisfying any requirement regarding the 

content of an agenda or regulatory flexibility analysis under section 602, 603, or 

604, if such agency provides in such agenda or analysis a cross-reference to the specific portion of another agenda or analysis which is required by any other law and 

which satisfies such requirement.’’. 

(d) CERTIFICATIONS.—Subsection (b) of section 605 of title 5, United States Code, 

is amended— 


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(1) by inserting ‘‘detailed’’ before ‘‘statement’’ the first place it appears; and 

(2) by inserting ‘‘and legal’’ after ‘‘factual’’. 

(e) QUANTIFICATION REQUIREMENTS.—Section 607 of title 5, United States Code, 

is amended to read as follows: 

‘‘§ 607. Quantification requirements 

‘‘In complying with sections 603 and 604, an agency shall provide— 

‘‘(1) a quantifiable or numerical description of the effects of the proposed or 

final rule and alternatives to the proposed or final rule; or 

‘‘(2) a more general descriptive statement and a detailed statement explaining 

why quantification is not practicable or reliable.’’. 

SEC. 5. REPEAL OF WAIVER AND DELAY AUTHORITY; ADDITIONAL POWERS OF THE CHIEF 

COUNSEL FOR ADVOCACY. 

(a) IN GENERAL.—Section 608 is amended to read as follows: 

‘‘§ 608. Additional powers of Chief Counsel for Advocacy 

‘‘(a)(1) Not later than 270 days after the date of the enactment of the Regulatory 

Flexibility Improvements Act of 2011, the Chief Counsel for Advocacy of the Small 

Business Administration shall, after opportunity for notice and comment under section 553, issue rules governing agency compliance with this chapter. The Chief 

Counsel may modify or amend such rules after notice and comment under section 

553. This chapter (other than this subsection) shall not apply with respect to the 

issuance, modification, and amendment of rules under this paragraph. 

‘‘(2) An agency shall not issue rules which supplement the rules issued under subsection (a) unless such agency has first consulted with the Chief Counsel for Advocacy to ensure that such supplemental rules comply with this chapter and the rules 

issued under paragraph (1). 

‘‘(b) Notwithstanding any other law, the Chief Counsel for Advocacy of the Small 

Business Administration may intervene in any agency adjudication (unless such 

agency is authorized to impose a fine or penalty under such adjudication), and may 

inform the agency of the impact that any decision on the record may have on small 

entities. The Chief Counsel shall not initiate an appeal with respect to any adjudication in which the Chief Counsel intervenes under this subsection. 

‘‘(c) The Chief Counsel for Advocacy may file comments in response to any agency 

notice requesting comment, regardless of whether the agency is required to file a 

general notice of proposed rulemaking under section 553.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 611(a)(1) of such title is amended by striking ‘‘608(b),’’. 

(2) Section 611(a)(2) of such title is amended by striking ‘‘608(b),’’. 

(3) Section 611(a)(3) of such title is amended— 

(A) by striking subparagraph (B); and 

(B) by striking ‘‘(3)(A) A small entity’’ and inserting the following: 

‘‘(3) A small entity’’. 

SEC. 6. PROCEDURES FOR GATHERING COMMENTS. 

Section 609 of title 5, United States Code, is amended by striking subsection (b) 

and all that follows through the end of the section and inserting the following: 

‘‘(b)(1) Prior to publication of any proposed rule described in subsection (e), an 

agency making such rule shall notify the Chief Counsel for Advocacy of the Small 

Business Administration and provide the Chief Counsel with— 

‘‘(A) all materials prepared or utilized by the agency in making the proposed 

rule, including the draft of the proposed rule; and 

‘‘(B) information on the potential adverse and beneficial economic impacts of 

the proposed rule on small entities and the type of small entities that might 

be affected. 

‘‘(2) An agency shall not be required under paragraph (1) to provide the exact language of any draft if the rule— 

‘‘(A) relates to the internal revenue laws of the United States; or 

‘‘(B) is proposed by an independent regulatory agency (as defined in section 

3502(5) of title 44). 

‘‘(c) Not later than 15 days after the receipt of such materials and information 

under subsection (b), the Chief Counsel for Advocacy of the Small Business Administration shall— 

‘‘(1) identify small entities or representatives of small entities or a combination of both for the purpose of obtaining advice, input, and recommendations 

from those persons about the potential economic impacts of the proposed rule 

and the compliance of the agency with section 603; and 

‘‘(2) convene a review panel consisting of an employee from the Office of Advocacy of the Small Business Administration, an employee from the agency makVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000005 Fmt 06659 Sfmt 06621 E:\HR\OC\HR289P2.XXX HR289P2

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ing the rule, and in the case of an agency other than an independent regulatory 

agency (as defined in section 3502(5) of title 44), an employee from the Office 

of Information and Regulatory Affairs of the Office of Management and Budget 

to review the materials and information provided to the Chief Counsel under 

subsection (b). 

‘‘(d)(1) Not later than 60 days after the review panel described in subsection (c)(2) 

is convened, the Chief Counsel for Advocacy of the Small Business Administration 

shall, after consultation with the members of such panel, submit a report to the 

agency and, in the case of an agency other than an independent regulatory agency 

(as defined in section 3502(5) of title 44), the Office of Information and Regulatory 

Affairs of the Office of Management and Budget. 

‘‘(2) Such report shall include an assessment of the economic impact of the proposed rule on small entities, including an assessment of the proposed rule’s impact 

on the cost that small entities pay for energy, and a discussion of any alternatives 

that will minimize adverse significant economic impacts or maximize beneficial significant economic impacts on small entities. 

‘‘(3) Such report shall become part of the rulemaking record. In the publication 

of the proposed rule, the agency shall explain what actions, if any, the agency took 

in response to such report. 

‘‘(e) A proposed rule is described by this subsection if the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget, 

the head of the agency (or the delegatee of the head of the agency), or an independent regulatory agency determines that the proposed rule is likely to result in— ‘‘(1) an annual effect on the economy of $100,000,000 or more; 

‘‘(2) a major increase in costs or prices for consumers, individual industries, 

Federal, State, or local governments, tribal organizations, or geographic regions; 

‘‘(3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States–based enterprises to 

compete with foreign–based enterprises in domestic and export markets; or 

‘‘(4) a significant economic impact on a substantial number of small entities. 

‘‘(f) Upon application by the agency, the Chief Counsel for Advocacy of the Small 

Business Administration may waive the requirements of subsections (b) through (e) 

if the Chief Counsel determines that compliance with the requirements of such subsections are impracticable, unnecessary, or contrary to the public interest.’’. 

SEC. 7. PERIODIC REVIEW OF RULES. 

Section 610 of title 5, United States Code, is amended to read as follows: 

‘‘§ 610. Periodic review of rules 

‘‘(a) Not later than 180 days after the enactment of the Regulatory Flexibility Improvements Act of 2011, each agency shall publish in the Federal Register and place 

on its website a plan for the periodic review of rules issued by the agency which 

the head of the agency determines have a significant economic impact on a substantial number of small entities. Such determination shall be made without regard to 

whether the agency performed an analysis under section 604. The purpose of the 

review shall be to determine whether such rules should be continued without 

change, or should be amended or rescinded, consistent with the stated objectives of 

applicable statutes, to minimize any adverse significant economic impacts or maximize any beneficial significant economic impacts on a substantial number of small 

entities. Such plan may be amended by the agency at any time by publishing the 

revision in the Federal Register and subsequently placing the amended plan on the 

agency’s website. 

‘‘(b) The plan shall provide for the review of all such agency rules existing on the 

date of the enactment of the Regulatory Flexibility Improvements Act of 2011 within 

10 years of the date of publication of the plan in the Federal Register and for review 

of rules adopted after the date of enactment of the Regulatory Flexibility Improvements Act of 2011 within 10 years after the publication of the final rule in the Federal Register. If the head of the agency determines that completion of the review 

of existing rules is not feasible by the established date, the head of the agency shall 

so certify in a statement published in the Federal Register and may extend the review for not longer than 2 years after publication of notice of extension in the Federal Register. Such certification and notice shall be sent to the Chief Counsel for 

Advocacy of the Small Business Administration and the Congress. 

‘‘(c) The plan shall include a section that details how an agency will conduct outreach to and meaningfully include small businesses for the purposes of carrying out 

this section. The agency shall include in this section a plan for how the agency will 

contact small businesses and gather their input on existing agency rules. 

‘‘(d) Each agency shall annually submit a report regarding the results of its review 

pursuant to such plan to the Congress, the Chief Counsel for Advocacy of the Small 

Business Administration, and, in the case of agencies other than independent reguVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000006 Fmt 06659 Sfmt 06621 E:\HR\OC\HR289P2.XXX HR289P2

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latory agencies (as defined in section 3502(5) of title 44) to the Administrator of the 

Office of Information and Regulatory Affairs of the Office of Management and Budget. Such report shall include the identification of any rule with respect to which the 

head of the agency made a determination described in paragraph (5) or (6) of subsection (e) and a detailed explanation of the reasons for such determination. 

‘‘(e) In reviewing a rule pursuant to subsections (a) through (d), the agency shall 

amend or rescind the rule to minimize any adverse significant economic impact on 

a substantial number of small entities or disproportionate economic impact on a specific class of small entities, or maximize any beneficial significant economic impact 

of the rule on a substantial number of small entities to the greatest extent possible, 

consistent with the stated objectives of applicable statutes. In amending or rescinding the rule, the agency shall consider the following factors: 

‘‘(1) The continued need for the rule. 

‘‘(2) The nature of complaints received by the agency from small entities concerning the rule. 

‘‘(3) Comments by the Regulatory Enforcement Ombudsman and the Chief 

Counsel for Advocacy of the Small Business Administration. 

‘‘(4) The complexity of the rule. 

‘‘(5) The extent to which the rule overlaps, duplicates, or conflicts with other 

Federal rules and, unless the head of the agency determines it to be infeasible, 

State and local rules. 

‘‘(6) The contribution of the rule to the cumulative economic impact of all Federal rules on the class of small entities affected by the rule, unless the head 

of the agency determines that such calculations cannot be made and reports 

that determination in the annual report required under subsection (d). 

‘‘(7) The length of time since the rule has been evaluated or the degree to 

which technology, economic conditions, or other factors have changed in the 

area affected by the rule. 

‘‘(f) The agency shall publish in the Federal Register and on its website a list of 

rules to be reviewed pursuant to such plan. Such publication shall include a brief 

description of the rule, the reason why the agency determined that it has a significant economic impact on a substantial number of small entities (without regard to 

whether it had prepared a final regulatory flexibility analysis for the rule), and request comments from the public, the Chief Counsel for Advocacy of the Small Business Administration, and the Regulatory Enforcement Ombudsman concerning the 

enforcement of the rule.’’. 

SEC. 8. JUDICIAL REVIEW OF COMPLIANCE WITH THE REQUIREMENTS OF THE REGULATORY 

FLEXIBILITY ACT AVAILABLE AFTER PUBLICATION OF THE FINAL RULE. 

(a) IN GENERAL.—Paragraph (1) of section 611(a) of title 5, United States Code, 

is amended by striking ‘‘final agency action’’ and inserting ‘‘such rule’’. 

(b) JURISDICTION.—Paragraph (2) of such section is amended by inserting ‘‘(or 

which would have such jurisdiction if publication of the final rule constituted final 

agency action)’’ after ‘‘provision of law,’’. 

(c) TIME FOR BRINGING ACTION.—Paragraph (3) of such section is amended— 

(1) by striking ‘‘final agency action’’ and inserting ‘‘publication of the final 

rule’’; and 

(2) by inserting ‘‘, in the case of a rule for which the date of final agency action is the same date as the publication of the final rule,’’ after ‘‘except that’’. 

(d) INTERVENTION BY CHIEF COUNSEL FOR ADVOCACY.—Subsection (b) of section 

612 of title 5, United States Code, is amended by inserting before the first period 

‘‘or agency compliance with section 601, 603, 604, 605(b), 609, or 610’’. 

SEC. 9. JURISDICTION OF COURT OF APPEALS OVER RULES IMPLEMENTING THE REGULATORY FLEXIBILITY ACT. 

(a) IN GENERAL.—Section 2342 of title 28, United States Code, is amended— 

(1) in paragraph (6), by striking ‘‘and’’ at the end; 

(2) in paragraph (7), by striking the period at the end and inserting ‘‘; and’’; 

and 

(3) by inserting after paragraph (7) the following new paragraph: 

‘‘(8) all final rules under section 608(a) of title 5.’’. 

(b) CONFORMING AMENDMENTS.—Paragraph (3) of section 2341 of title 28, United 

States Code, is amended— 

(1) in subparagraph (D), by striking ‘‘and’’ at the end; 

(2) in subparagraph (E), by striking the period at the end and inserting ‘‘; 

and’’; and 

(3) by adding at the end the following new subparagraph: 

‘‘(F) the Office of Advocacy of the Small Business Administration, when 

the final rule is under section 608(a) of title 5.’’. 


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(c) AUTHORIZATION TO INTERVENE AND COMMENT ON AGENCY COMPLIANCE WITH

ADMINISTRATIVE PROCEDURE.—Subsection (b) of section 612 of title 5, United States 

Code, is amended by inserting ‘‘chapter 5, and chapter 7,’’ after ‘‘this chapter,’’. 

SEC. 10. CLERICAL AMENDMENTS. 

(a) Section 601 of title 5, United States Code, is amended— 

(1) in paragraph (1)— 

(A) by striking the semicolon at the end and inserting a period; and 

(B) by striking ‘‘(1) the term’’ and inserting the following: 

‘‘(1) AGENCY.—The term’’; 

(2) in paragraph (3)— 

(A) by striking the semicolon at the end and inserting a period; and 

(B) by striking ‘‘(3) the term’’ and inserting the following: 

‘‘(3) SMALL BUSINESS.—The term’’; 

(3) in paragraph (5)— 

(A) by striking the semicolon at the end and inserting a period; and 

(B) by striking ‘‘(5) the term’’ and inserting the following: 

‘‘(5) SMALL GOVERNMENTAL JURISDICTION.—The term’’; and 

(4) in paragraph (6)— 

(A) by striking ‘‘; and’’ and inserting a period; and 

(B) by striking ‘‘(6) the term’’ and inserting the following: 

‘‘(6) SMALL ENTITY.—The term’’. 

(b) The heading of section 605 of title 5, United States Code, is amended to read 

as follows: 

‘‘§ 605. Incorporations by reference and certifications’’. 

(c) The table of sections for chapter 6 of title 5, United States Code, is amended— 

(1) by striking the item relating to section 605 and inserting the following 

new item: 

‘‘605. Incorporations by reference and certifications.’’; 

(2) by striking the item relating to section 607 and inserting the following 

new item: 

‘‘607. Quantification requirements.’’; and 

(3) by striking the item relating to section 608 and inserting the following: 

‘‘608. Additional powers of Chief Counsel for Advocacy.’’. 

(d) Chapter 6 of title 5, United States Code, is amended as follows: 

(1) In section 603, by striking subsection (d). 

(2) In section 604(a) by striking the second paragraph (6). 

SEC. 11. AGENCY PREPARATION OF GUIDES. 

Section 212(a)(5) the Small Business Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 601 note) is amended to read as follows: 

‘‘(5) AGENCY PREPARATION OF GUIDES.—The agency shall, in its sole discretion, 

taking into account the subject matter of the rule and the language of relevant 

statutes, ensure that the guide is written using sufficiently plain language likely to be understood by affected small entities. Agencies may prepare separate 

guides covering groups or classes of similarly affected small entities and may 

cooperate with associations of small entities to distribute such guides. In developing guides, agencies shall solicit input from affected small entities or associations of affected small entities. An agency may prepare guides and apply this 

section with respect to a rule or a group of related rules.’’. 

II. PURPOSE AND BILL SUMMARY

The purpose of H.R. 527, the ‘‘Regulatory Flexibility Improvements Act of 2011,’’ is to amend the Regulatory Flexibility Act 

(RFA) by eliminating interpretive lacunae that agencies have used 

to avoid compliance with the Act. The RFA was enacted in 1980 to 

ensure that federal agencies take into account the disparate impact 

that regulations have on small businesses and other small entities. 

Agencies regularly flouted the requirements of the RFA forcing 

Congress to take action in 1996 with the enactment of the Small 

Business Regulatory Enforcement Fairness Act (SBREFA). 

SBREFA made some significant changes to the RFA with the expectation that it would improve agency compliance. Studies by the 


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9 

1Pub. L. No. 94–305 created the Office of Advocacy within the United States Small Business 

Administration and vested management in a Chief Counsel. The RFA assigned monitoring functions to the Chief Counsel. Therefore, this report uses the terms Chief Counsel for Advocacy 

and Office of Advocacy interchangeably. 2The finding on disproportionate impact was substantiated by an Office of Advocacy study in 

1984 which found concrete economic evidence of differential impacts of regulation by firm size. 

That conclusion was affirmed anew in a 2001 economic research study sponsored by the Office 

of Advocacy. W. Crain & T. Hopkins, The Impact of Regulatory Costs on Small Business (Oct. 

2001). The full report can be found at http://www.sba.gov/advo/research/rs207tot.pdf. 

General Accounting Office, reports from the Chief Counsel for Advocacy,1 and Congressional hearings held by the Committees on the 

Judiciary and the Committee on Small Business demonstrate that 

agencies are still reluctant to comply with the analytical requirements of the RFA. Further action is evidently needed to force agency compliance. 

The bill defines and expands which economic effects are to be examined by agencies, imposes greater detail in performing the analyses, clarifies language concerning the applicability of the RFA to 

the Internal Revenue Service, subjects all agencies, including the 

IRS, to the procedures in § 609 on the SBREFA panel process, 

eliminates barriers to judicial review of RFA compliance for agencies that have a statutory exhaustion requirement after a final rule 

is published before the rule can be challenged in court, and mandates that the Chief Counsel promulgate RFA compliance regulations applicable to all federal agencies. 

III. NEED FOR LEGISLATION

During the 1970s, Congress enacted numerous regulatory statutes. By the end of that decade, businesses, especially small ones, 

were groaning under the weight of federal regulation. Regulatory 

requirements were stifling innovation, limiting small business 

growth, and contributing to the general malaise experienced during 

the latter half of that decade. The Federal Register, the compendium of federal regulatory actions, had grown from a non–weighty 

publication for the obscuranta and arcana of the federal government to a 42,000 page blueprint for regulating many of the aspects 

of modern American life. Small businesses found this crush of federal dictates particularly problematic because those businesses had 

greater difficulty in complying with regulations than their larger 

competitors. 

In a series of hearings during the late 1970s, Congress began focusing on the ever–growing burden federal regulation imposed 

upon small businesses. Small businesses reiterated two major 

themes: 1) they were under–represented in federal regulatory proceedings; and 2) federal agency efforts to impose a ‘‘one–size–fits– 

all’’ body of regulation imposed disproportionate burdens on small 

businesses.2

These findings were supported and reinforced during the 1980 

White House Conference on Small Business. Congress reacted with 

the passage of the RFA. That Act constitutes an additional component of a significantly broader mechanism to control agency decisionmaking—the Administrative Procedure Act (APA). The APA 

prevents an agency from taking actions which are ‘‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with 

the law.’’ 5 U.S.C. § 706(2)(A). This standard presumes that an 

agency will undertake rational rulemaking to: 1) ascertain the 


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3The term ‘‘collection of information’’ is a term of art used in the Paperwork Reduction Act. 

See 44 U.S.C. § 3502(3). 4The RFA only requires agency compliance if the regulation is required to be issued pursuant 

to notice and comment pursuant to § 553 of the APA or some other statute. Interpretative regulations are exempt from the notice and comment requirements. 5 U.S.C. § 553(b)(A). 5 In fact some would argue that the notice and comment period was not a critical component 

of rational rulemaking but the keystone of ‘‘rationale rulemaking’’ in which the agency uses the 

public comment process to find further support for the foregone conclusion of its proposed regulation. 

problem to be solved through regulation; 2) develop potential solutions; 3) seek public comment on proposed solutions and alternatives not considered by the agency; and 4) craft a final rule that 

addresses all relevant criteria. Since the vast majority of entities 

(businesses, not–for–profit organizations, and governmental jurisdictions) regulated by the federal government are small, a rational 

rule should be one that achieves the objectives of the agency without unduly burdening small entities. The RFA, by focusing the 

agency’s analysis on the economic effects on small entities, will 

help the agency promulgate rational rules. 

From the time of enactment until 1996, compliance with the RFA 

was at best sporadic. Agencies faced little threat from non–compliance since judicial review of regulatory flexibility analyses was 

very limited, see Thompson v. Clark, 741 F.2d 401, 405 (D.C. Cir. 

1984), and an agency’s certification decision could not be challenged 

in court. See Colorado State Banking Bd.v. RTC, 926 F.2d 931, 948 

(10th Cir. 1991); Lehigh Valley Farmers v. Block, 640 F. Supp. 

1497, 1520 (E.D. Pa. 1986), aff’d on other grounds, 829 F.2d 409 

(3d Cir. 1987) (district court determination on RFA not raised on 

appeal). Without the ability of court orders, agencies only had to 

comply when it would benefit their rulemaking or could be cajoled 

by the Chief Counsel for Advocacy or the Office of Information and 

Regulatory Affairs (OIRA). Both the Committee on Small Business 

and the Committee on the Judiciary held hearings at which witnesses confirmed the systemic failure by many agencies to comply 

with the RFA. 

Congress responded to this collective disregard by federal agencies with the enactment of SBREFA. The primary change authorized direct judicial review of agency compliance with the RFA, including challenges to agency certifications. SBREFA also mandated 

that Internal Revenue Service (IRS or Service) interpretative regulations that impose a ‘‘collection of information requirement’’ 3 be 

subject to the strictures of the RFA.4 The legislation also recognized that, by the time a proposed rule is published for notice and 

comment, the agency has substantial intellectual capital invested 

in the scope of the proposed rule and is unlikely to change the core 

of its proposal during the notice and comment period.5 Therefore, 

SBREFA requires the Environmental Protection Agency (EPA) and 

the Occupational Safety and Health Administration (OSHA) to obtain input from representatives of small entities prior to the publication of any proposed rule that would have a significant economic 

impact on a substantial number of small entities, i.e., any proposed 

rule for which an initial regulatory flexibility analysis would be 

prepared. 

The changes wrought by SBREFA had some effect on agency 

compliance. Lawsuits were filed against agencies, although not to 


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6Since the changes to the RFA went into effect in late June of 1996 through 2006, a Lexis 

search reveals somewhere around 110 reported cases involving the RFA. By contrast, during the 

first ten years after the enactment of the National Environmental Policy Act (NEPA), there were 

770 reported cases involving that statute. Neither count accurately reflects the true number of 

cases filed because reported cases may involve appeals and there may be multiple reported cases 

involving the same litigation. In other instances, cases that were filed during the respective time 

periods may not have been resolved. Finally, this only represents reported cases and not those 

that were filed but settled or were disposed of without a reported decision. Nevertheless, the 

magnitude of litigation under the RFA was significantly less than under NEPA. 7There are insufficient circumstances to assess the results of this so–called ‘‘panel process’’ 

on OSHA regulations. 8President Memorandum for the Heads of Executive Departments and Agencies: Regulatory 

Flexibility, Small Business and Job Creation, 76 Fed. Reg. 3827, 3827 (Jan. 21, 2011). 9 Id. at 3828. 10Since the Supreme Court decision in Humphrey’s Executor v. United States, 295 U.S. 602 

(1935), independent collegial body agencies, such as the Federal Communications Commission 

Continued 

the extent feared by critics of judicial review.6 Due to the litigation, 

agencies have come to realize that certifications need to be supported by sound economic analysis or face successful challenges to 

compliance with the RFA. Input by small entities has generated 

ideas that improved EPA regulations.7 Despite these ameliorative 

effects of SBREFA, much still needs to be done to ensure that 

agencies comply with the RFA. 

Despite SBREFA and litigation, agencies continued to ignore the 

law. President Bush recognized the importance of the RFA and 

sought to impose greater compliance by the agencies. In a March 

19, 2002 speech, President Bush stated: 

Every agency is required to analyze the impact of new 

regulations on small businesses before issuing them. That 

is an important law. The problem is it is often being ignored. The law is on the books; the regulators do not care 

that the law is on the books. From this day forward they 

will care that the law is on the books. We want to enforce 

the law. 

Subsequent to that speech, President Bush issued Executive Order 

13,272, 67 Fed. Reg. 53,462 (Aug. 16, 2002). The order required 

agencies to adopt standards for complying with the RFA, make 

those standards known to the public, and give the Office of Advocacy the opportunity to comment on proposed rules that will have 

a significant economic impact on a substantial number of small entities prior to publication in the Federal Register. While that Executive Order represents a step in the direction of ensuring the pellucidity of agency procedures to comply with the RFA, it does not 

close the loopholes that currently exist in the Act or prevent agencies from adopting crabbed interpretations of the RFA that enable 

the agencies to elide the analytical responsibilities imposed by Congress more than 30 years ago. 

President Obama also recognized the importance of the RFA. In 

a memorandum to the Executive Branch on January 18, 2011, the 

President noted that the RFA ‘‘establishes a deep national commitment to achieving statutory goals without imposing unnecessary 

burdens on the public.’’ 8 The President went on to direct agencies 

to ‘‘give serious consideration to whether and how it is appropriate 

. . . to reduce regulatory burdens on small businesses, through increased flexibility.’’ 9 In the memorandum, the President requested 

(but could not mandate) independent agencies to comply with its 

terms.10


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or Nuclear Regulatory Commission, are not subject to control by the White House or subject 

to presidential executive orders. 11 76 Fed. Reg. 3,821(Jan. 21, 2010). 12 Executive Order 12,866, 58 Fed. Reg. 51,735 (Oct. 4, 1993), requires federal agencies to per- form a cost–benefit analysis for any regulation that will have an impact of more than $100 million on the economy. 13 Exec. Order 13,563, § 6, 75 Fed. Reg. at 3822. 14SBREFA also requires federal agencies to prepare compliance guides for regulations that 

have a significant economic impact on a substantial number of small entities. Nothing in the 

bills being considered at the hearing modifies that requirement. 15See Regulatory Flexibility Act: Congress should revisit and clarify elements of the act to 

improve its effectiveness (2006) (GAO 06–998T); Regulatory Flexibility Act: Clarification of key 

terms still needed (2002) (GAO–02–491); Regulatory Flexibility Act: Key terms still need to be 

clarified (2001) (GAO–01–669T); Regulatory Flexibility Act: Implementation in EPA Program Offices and the lead rule (2000) (GGD–00–193); Regulatory Flexibility Act: Agencies’ interpretations of review requirements vary (1999) (GGD–99–55); Regulatory Flexibility Act: Implementation of the Small Business Advocacy Review Panel Requirements (1998) (T–GGD–98–75); Regulatory Flexibility Act: Agencies use of the October 1997 Unified Agenda did not satisfy notification requirements (1998) (GGD–98–61R); Regulatory Flexibility Act: Status of Agencies’ Compliance (1995) (T–GGD–95–112). 

Coetaneous with the release of the memorandum on the RFA, 

President Obama issued Executive Order (E.O.) 13,563.11 While the 

putative purpose of the Order was to clarify the regulatory analytical requirements set forth in Executive Order 12,866,12 § 6 of E.O. 

13,563 required agencies to prepare plans for periodic review of 

regulations, including all extant regulations.13 Of course, there already is an existing requirement for periodic review of regulations, 

§ 610 of the RFA. 

Two presidents, in succession, ordered federal agencies to follow 

the RFA, a law that has been in existence for over 30 years. Every 

President from Ronald Reagan to Barack Obama has mandated a 

comprehensive review of existing agency regulations despite the 

fact that the RFA has required such reviews since its enactment 

in 1980. Given the fact that presidents must reiterate what is already in the law to agencies over which they have plenary authority starkly demonstrates the need for revision to the RFA. Furthermore, presidential reminders, through memoranda or executive orders, may be ignored with impunity by independent regulatory 

agencies since presidents are unable to exert regulatory authority 

over such agencies. 

The conclusion that the RFA must be amended despite efforts of 

five presidents is buttressed by the finding of the Government Accountability Office (GAO). GAO has done numerous studies on 

agency compliance with various aspects of the RFA and SBREFA.14

According to GAO, the most significant stumbling block to improved compliance is the lack of definitions for ‘‘significant economic impact’’ and ‘‘substantial number of small entities.’’ GAO 

also notes that this threshold determination of whether a rule will 

have a significant economic impact on a substantial number of 

small entities is critical to compliance with other requirements in 

the RFA, including periodic review of rules under § 610 and the receipt of small entity input prior to the publication of proposed rules 

by EPA and OSHA.15

Testimony at hearings held by the Committee on Small Business 

during the 106th, 107th, 108th, 109th, 110th, and 112th Congresses further supports the need for change. Hearings before the 

Committee found that considerable confusion still reigns on when 

agencies need to conduct regulatory flexibility analyses. Witnesses 

testified that agencies still finds ways to avoid compliance with the 

RFA, even after the enactment of SBREFA and various presiVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000012 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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dential directives to comply. Finally, the testimony was consentient 

in finding that agencies continue to impose unnecessary burdens on 

small businesses as a result of their failure to comply with the 

RFA. 

Nor have the courts been the anodyne that the authors of 

SBREFA contemplated. Courts have not given agency compliance 

with the RFA the same searching scrutiny that they have given to 

compliance with the National Environmental Policy Act (NEPA) 

even though the authors of SBREFA expected judicial review to 

have the same impact on agency decisionmaking that court decisions had on agency compliance with NEPA. See Associated Fisheries of Maine v. Daley, 127 F.3d 104, 114 (1st Cir. 1997). 

Neither the actions of successive presidents, nor the courts, nor 

congressional oversight have tempered the broad discretion that 

agencies have in implementing the RFA. This broad discretion enables them to avoid compliance with the RFA’s underlying analytical requirements. In order to constrain this discretion and ensure 

proper consideration is given to the impact that regulatory actions 

will have on small entities, particularly small businesses, it is necessary to make further amendments to the RFA as set forth in 

H.R. 527 which are set forth in the next section of this memorandum. 

IV. HEARINGS

In the 112th Congress, the Committee held two hearings on H.R. 

527. On March 30, 2011, the Committee convened a hearing titled 

‘‘Reducing Federal Agency Overreach: Modernizing the Regulatory 

Flexibility Act.’’ At the hearing, small business representatives testified about the continued ongoing problems of obtaining adequate 

analyses under the RFA including situations in which court orders 

mandated compliance. The Committee then met on June 15, 2011 

to receive testimony from outside experts on the bill text at a hearing entitled ‘‘Lifting the Weight of Regulations: Growing Jobs by 

Reducing Regulatory Burdens.’’ The witnesses were consentient in 

their view that H.R. 527, particularly granting the Office of Advocacy the authority to issue regulations to implement the RFA, 

would vastly improve agency compliance with the Act. 

In additions to hearings specifically addressing H.R. 527, the 

Committee’s subcommittees investigated agency compliance with 

the RFA in the context of hearings on specific rules and their impact on small businesses. Those hearings were: ‘‘Green Isn’t [sic] 

Always Gold: Are EPA Regulations Stifling Small Business (May 

12, 2011); ‘‘Do Not Enter: How Proposed Hours of Service Trucking 

Rules are a Dead End for Small Businesses (June 14, 2011); and 

‘‘Regulatory Injury: How USDA’s Proposed GIPSA Rule Hurts 

America’s Small Businesses’’ (July 7, 2011). In each instance, the 

failure to fully comply with the RFA led to the proposal of rules 

by the agency that could have a significant deleterious impact on 

small businesses if those rules were adopted in final form unchanged. 

Modifications to improve the RFA were also considered in the 

110th Congress when the Committee held a hearing entitled ‘‘Legislation to Improve the Regulatory Flexibility Act’’ (December 6, 

2007). At that hearing, the Chief Counsel for Advocacy and Small 

Businesses testified that improvements were needed to ensure 


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14 

agencies fully considered the impacts of their proposed and final 

rules on small businesses. Subsequent to that hearing, the Committee reported out legislation, H.R. 4458, the Small Business Regulatory Improvement Act, that addressed some, but not all, of the 

matters resolved in H.R. 527. 

V. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session, with a 

quorum being present, on July 13, 2011 and ordered H.R. 527 reported, as amended, to the House by a voice vote at 3:54 p.m. During the markup, nine amendments were offered. Four amendments 

were adopted, four were rejected and one amendment was withdrawn. Disposition of the amendments is addressed below and is 

based on the order amendments were filed with the Clerk of the 

Committee and not necessarily in the order that they were considered at the markup. 

Amendment Number One filed by Mr. Owens (D–NY) requires 

the agencies, in drafting compliance guides to contact small businesses. The amendment was adopted by voice vote at 1:20 p.m. 

Amendment Number Two filed by Mr. Owens (D–NY) requires 

agencies to specify, in their periodic review plans, how they will obtain input from small businesses. The amendment was adopted by 

voice vote at 1:21 p.m. 

Amendment Number Three filed by Mr. Schrader (D–OR) requires agencies to provide greater detail about the impacts on 

small businesses in their semi–annual regulatory agendas. It also 

requires the agencies to post such material on their websites. The 

amendment was adopted by voice vote at 1:23 p.m. 

Amendment Number Four filed by Ms. Vela ́zquez (D–NY) would 

prohibit the amendments made by H.R. 527 from going into effect 

in any year in which the federal deficit exceeded $500 billion. The 

amendment was not agreed to on a recorded vote of 10 yeas to 13 

noes at 3:53 p.m. 

Amendment Number Five filed by Ms. Vela ́zquez (D–NY) was a 

substitute limiting the changes to a more a detailed statement for 

regulatory flexibility analyses, requiring agencies to consider indirect effects, and making changes to ensure better periodic review 

of rules. The amendment was not agreed to on a recorded vote of 

9 yeas to 14 noes at 3:54 p.m. 

Amendment Number Six filed by Ms. Vela ́zquez (D–NY) was an 

amendment to require the Chief Counsel to estimate the costs incurred in the panels required by § 5 of H.R. 527. The amendment 

was not agreed to on a recorded vote of 10 yeas to 13 noes at 3:47 

p.m. 

Amendment Number Seven filed by Ms. Vela ́zquez (D–NY) would 

have excluded regulations issued by the SBA relating to government contracts and loans from coverage of H.R. 527. The amendment was not agreed to on a recorded vote of 9 yeas to 14 noes at 

3:40 p.m. 

Amendment Number Eight filed by Mr. Critz (D–PA) requires 

agencies specifically to consider energy costs in the report of the 

panels that will be incorporated into the Federal Register notice of 

a proposed rule. The amendment was agreed to by voice vote at 

1:35 p.m. 


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Amendment Number Nine filed by Mr. Critz (D–PA) would have 

established panels to consider the impacts of free trade agreements 

during the panel process pursuant to § 609 of the RFA as amended 

by § 5 of H.R. 527. The amendment was withdrawn at 1:37 p.m. 

VI. COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the recorded votes on the motion to report the legislation and amendments thereto. 

Amendment to H.R. 527 Offered by Mr. Owens of New York 

Add at the end of the bill the following: 

SEC. 10. AGENCY PREPARATION OF GUIDES. 

Section 212(a)(5) the Small Business Regulatory Enforcement 

Fairness Act of 1996 (5 U.S.C. 601 note) is amended to read as follows: 

‘‘(5) AGENCY PREPARATION OF GUIDES.—The agency shall, in 

its sole discretion, taking into account the subject matter of the 

rule and the language of relevant statutes, ensure that the 

guide is written using sufficiently plain language likely to be 

understood by affected small entities. Agencies may prepare 

separate guides covering groups or classes of similarly affected 

small entities and may cooperate with associations of small entities to distribute such guides. In developing guides, agencies 

shall solicit input from affected small entities or associations of 

affected small entities. An agency may prepare guides and 

apply this section with respect to a rule or a group of related 

rules.’’. 

Amendment to H.R. 527 Offered by Mr. Owens of New York 

Page 20, insert after line 5 the following (and redesignate succeeding sections accordingly): 

‘‘(c) The plan shall include a section that details how an agency 

will conduct outreach to and meaningfully include small businesses 

for the purposes of carrying out this section. The agency shall include in this section a plan for how the agency will contact small 

businesses and gather their input on existing agency rules’’. 

Amendment to H.R. 527 Offered by Mr. Schrader of Oregon 

Page 9, insert after line 15 the following (and redesignate succeeding sections accordingly): 

SEC. 3. EXPANSION OF REPORT OF REGULATORY AGENDA. 

Section 602 of title 5, United States Code, is amended— 

(1) in subsection (a)— 

(A) in paragraph (2), by striking ‘‘and’’ at the end; 

(B) by redesignating paragraph (3) as paragraph (4); and 

(C) by inserting after paragraph (2) the following: 

‘‘(3) a brief description of the sector of the North American 

Industrial Classification System that is primarily affected by 

any rule which the agency expects to propose or promulgate 

which is likely to have a significant economic impact on a substantial number of small entities; and’’. 


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(2) in subsection (c), to read as follows: 

‘‘(c) Each agency shall prominently display a plain language summary of the information contained in the regulatory flexibility 

agenda published under subsection (a) on its website within 3 days 

of its publication in the Federal Register. The Office of Advocacy 

of the Small Business Administration shall compile and prominently display a plain language summary of the regulatory agendas 

referenced in subsection (a) for each agency on its website within 

3 days of their publication in the Federal Register.’’. 

Amendment to H.R. 527 Offered by Ms. Vela ́ zquez of New 

York 

Add, at the end of the bill, the following: 

SEC. 10. EFFECTIVE DATE. 

This Act and the amendments made by this Act shall take effect 

on October 1 of the first full fiscal year— 

(1) for which no funding is authorized by law for the Office 

of Advocacy of the Small Business Administration in an 

amount exceeding the level of funding for the Office for fiscal 

year 2011; and 

(2) that follows any fiscal year for which the actual annual 

Federal budget deficit did not exceed $500,000,000,000. 


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sroberts on DSK5SPTVN1PROD with REPORTSInsert graphic folio 23 71250P2.001
18 

Amendment to H.R. 527 Offered by Ms. Vela ́ zquez of New 

York 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Small Business Regulatory Improvement Act of 2011’’. 

SEC. 2. FINDINGS. 

Congress finds the following: 

(1) Small businesses are frequently the source of new products, methods, and innovations. 

(2) A vibrant and growing small business sector is critical to 

creating jobs in a dynamic economy. 

(3) Regulations designed for application to large–scale entities have been applied uniformly to small businesses and other 

small entities. 

(4) Uniform Federal regulatory and reporting requirements 

in many instances have imposed on small businesses and other 

small entities disproportionately burdensome demands, including legal, accounting, and consulting costs. 

(5) Since 1980, Federal agencies have been required to recognize and take account of the differences in the scale and resources of regulated entities but have failed to do so. 

(6) Alternative regulatory approaches that do not conflict 

with the stated objectives of the statutes the regulations seek 

to implement may be available and may minimize the significant economic impact of regulations on small businesses and 

other small entities. 

(7) Federal agencies have failed to analyze and uncover less 

costly alternative regulatory approaches, despite the fact that 

the chapter 6 of title 5, United States Code (commonly known 

as the Regulatory Flexibility Act), requires them to do so. 

(8) Federal agencies continue to interpret chapter 6 of title 

5, United States Code, in a manner that permits them to avoid 

their analytical responsibilities. 

(9) Significant changes are needed in the methods by which 

Federal agencies develop and analyze regulations, receive 

input from affected entities, and develop regulatory alternatives that will lessen the burden or maximize the benefits of 

final rules to small businesses and other small entities. 

(10) It is the intention of the Congress to amend chapter 6 

of title 5, United States Code, to ensure that all impacts, including foreseeable indirect effects, of proposed and final rules 

are considered by agencies during the rulemaking process and 

that the agencies assess a full range of alternatives that will 

limit adverse economic consequences or enhance economic benefits. 

(11) Federal agencies should be capable of assessing the impact of proposed and final rules without delaying the regulatory process or impinging on the ability of Federal agencies 

to fulfill their statutory mandates. 


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SEC. 3. CLARIFICATION AND EXPANSION OF RULES COVERED BY THE 

REGULATORY FLEXIBILITY ACT. 

Section 601 of title 5, United States Code, is amended by adding 

at the end the following new paragraph: 

‘‘(9) ECONOMIC IMPACT.—The term ‘economic impact’ means, 

with respect to a proposed or final rule— 

‘‘(A) any direct economic effect on small entities of such 

rule; and 

‘‘(B) any indirect economic effect on small entities which 

is reasonably foreseeable and results from such rule (without regard to whether small entities will be directly regulated by the rule).’’. 

SEC. 4. REQUIREMENTS PROVIDING FOR MORE DETAILED ANALYSES. 

(a) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Subsection (b) of 

section 603 of title 5, United States Code, is amended to read as 

follows: 

‘‘(b) Each initial regulatory flexibility analysis required under 

this section shall contain a detailed statement describing— 

‘‘(1) the reasons why the action by the agency is being considered; 

‘‘(2) the objectives of, and legal basis for, the proposed rule; 

‘‘(3) the type of small entities to which the proposed rule will 

apply; 

‘‘(4) the number of small entities to which the proposed rule 

will apply or why such estimate is not available; 

‘‘(5) the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate 

of the classes of small entities which will be subject to the requirement, the costs, and the type of professional skills necessary to comply with the rule; and 

‘‘(6) all relevant Federal rules which may duplicate, overlap, 

or conflict with the proposed rule, or the reasons why such a 

description could not be provided.’’. 

(b) FINAL REGULATORY FLEXIBILITY ANALYSIS.— (1) Paragraph (4) of such section is amended by striking ‘‘an 

explanation’’ and inserting ‘‘a detailed explanation’’. 

(2) Paragraph (5) of such section is amended to read as follows: 

‘‘(4) a description of the projected reporting, recordkeeping, 

and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to 

the requirement, the costs, and the type of professional skills 

necessary to comply with the rule; and’’. 

(c) CERTIFICATION OF NO IMPACT.—Subsection (b) of section 605 

of title 5, United States Code, is amended by inserting ‘‘detailed’’ 

before ‘‘statement’’ both places such term appears. 

SEC. 5. PERIODIC REVIEW OF RULES. 

Section 610 of title 5, United States Code, is amended to read as 

follows: 

‘‘§ 610. Periodic review of rules 

‘‘(a) Not later than 180 days after the enactment of the Small 

Business Regulatory Improvement Act of 2011, each agency shall 

publish in the Federal Register and place on its website a plan for 

the periodic review of rules issued by the agency which the head 


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of the agency determines have a significant economic impact on a 

substantial number of small entities. Such determination shall be 

made without regard to whether the agency performed an analysis 

under section 604. The purpose of the review shall be to determine 

whether such rules should be continued without change, or should 

be amended or rescinded, consistent with the stated objectives of 

applicable statutes, to minimize significant economic impacts on a 

substantial number of small entities. Such plan may be amended 

by the agency at any time by publishing the revision in the Federal 

Register and subsequently placing the amended plan on the agency’s website. 

‘‘(b) The plan shall provide for the review of all such agency rules 

existing on the date of the enactment of the Small Business Regulatory Improvement Act of 2011 within 10 years of the date of publication of the plan in the Federal Register and for review of rules 

adopted after the date of enactment of the Small Business Regulatory Improvement Act of 2011 within 10 years after the publication of the final rule in the Federal Register. If the head of the 

agency determines that completion of the review of existing rules 

is not feasible by the established date, the head of the agency shall 

so certify in a statement published in the Federal Register and 

may extend the review for not longer than 2 years after publication 

of notice of extension in the Federal Register. Such certification 

and notice shall be sent to the Chief Counsel for Advocacy and the 

Congress. 

‘‘(c) Each agency shall annually submit a report regarding the results of its review pursuant to such plan to the Congress and, in 

the case of agencies other than independent regulatory agencies (as 

defined in section 3502(5) of title 44, United States Code) to the 

Administrator of the Office of Information and Regulatory Affairs 

of the Office of Management and Budget. Such report shall include 

the identification of any rule with respect to which the head of the 

agency made a determination described in paragraph (5) or (6) of 

subsection (d) and a detailed explanation of the reasons for such 

determination. 

‘‘(d) In reviewing rules under such plan, the agency shall consider the following factors: 

‘‘(1) The continued need for the rule. 

‘‘(2) The nature of complaints received by the agency from 

small entities concerning the rule. 

‘‘(3) Comments by the Regulatory Enforcement Ombudsman 

and the Chief Counsel for Advocacy. 

‘‘(4) The complexity of the rule. 

‘‘(5) The extent to which the rule overlaps, duplicates, or conflicts with other Federal rules and, unless the head of the 

agency determines it to be infeasible, State and local rules. 

‘‘(6) The length of time since the rule has been evaluated or 

the degree to which technology, economic conditions, or other 

factors have changed in the area affected by the rule. 

‘‘(e) The agency shall publish in the Federal Register and on its 

website a list of rules to be reviewed pursuant to such plan. Such 

publication shall include a brief description of the rule, the reason 

why the agency determined that it has a significant economic impact on a substantial number of small entities (without regard to 

whether it had prepared a final regulatory flexibility analysis for 


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21 

the rule), and request comments from the public, the Chief Counsel 

for Advocacy, and the Regulatory Enforcement Ombudsman concerning the enforcement of the rule.’’. 

SEC. 6. CHANGES TO THE REGULATORY FLEXIBILITY ACT TO COMPORT WITH EXECUTIVE ORDER 13272. 

(a) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Section 603 of 

title 5, United States Code, is amended by adding at the end the 

following: 

‘‘(e) An agency shall notify the Chief Counsel for Advocacy of the 

Small Business Administration of any draft rules that may have a 

significant economic impact on a substantial number of small entities either— 

‘‘(1) when the agency submits a draft rule to the Office of Information and Regulatory Affairs at the Office of Management 

and Budget, if submission is required; or 

‘‘(2) if no submission to the Office of Information and Regulatory Affairs is so required, at a reasonable time prior to publication of the rule by the agency.’’. 

(b) INCLUSION IN FINAL REGULATORY FLEXIBILITY ANALYSIS OF

RESPONSE TO COMMENTS ON CERTIFICATION OF PROPOSED RULE.— 

Paragraph (2) of section 604(a) of title 5, United States Code, is 

amended by inserting after ‘‘initial regulatory flexibility analysis’’ 

the following: ‘‘(or certification of the proposed rule under section 

605(b))’’. 


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23 

Amendment to H.R. 527 Offered by Ms. Vela ́ zquez of New 

York 

Page 17, line 12, insert after ‘‘entities.’’ the following: ‘‘Such report shall also include a total cost of conducting the panel described 

in subsection (c)(2) as well as a detailed report of the components 

of that total cost, including expenses of officers and employees of 

the Federal government (at rates authorized for such officers and 

employees under subchapter I of chapter 57 of title 5, United 

States Code) who participate in the panel and the rate of salary or 

basic pay of each officer or employee of the Federal government 

who participates in the panel, prorated to account for time of service on the panel.’’ 

Page 17, insert after line 12 the following (and redesignate succeeding paragraphs accordingly): 

‘‘(3) Not later than 60 days after the end of a fiscal year, the 

Chief Counsel shall submit a consolidated report detailing the 

total cost of all panels conducted pursuant to subsection (c)(2) 

in that fiscal year. This report shall include a detailed description of the components of the total cost, including expenses of 

officers and employees of the Federal government (at rates authorized for such officers and employees under subchapter I of 

chapter 57 of title 5, United States Code) who participate in 

the panel and the rate of salary or basic pay of each officer or 

employee of the Federal government who participates in the 

panel, prorated to account for time of service on the panel.’’. 


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25 

Amendment to H.R. 527 Offered by Ms. Vela ́ zquez of New 

York 

Page 3, line 12, insert before the period at the end the following: 

The amendment made by this subsection shall not apply to a rule 

making by the Administrator of the Small Business Administration 

regarding the contracting, lending, investment, or entrepreneurial 

development programs of the Administrator 

Page 13, insert after line 6 the following: 

(f) APPLICATION TO CERTAIN RULES.—This section and the 

amendments made by this section shall not apply to a rule making 

by the Administrator of the Small Business Administration regarding the contracting, lending, investment, or entrepreneurial development programs of the Administrator. 

Page 15, insert after line 3 the following: 

(c) APPLICATION TO CERTAIN RULES.—This section and the 

amendments made by this section shall not apply to a rule making 

by the Administrator of the Small Business Administration regarding the contracting, lending, investment, or entrepreneurial development programs of the Administrator. 

Page 18, line 17, insert before the period at the end the following: 

The amendment made by this section shall not apply to a rule 

making by the Administrator of the Small Business Administration 

regarding the contracting, lending, investment, or entrepreneurial 

development programs of the Administrator 


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27 

Amendment to H.R. 527 Offered by Mr. Critz of 

Pennsylvania 

Page 17, line 9, insert after ‘‘small entities’’ the following: ‘‘, including an assessment of the proposed rule’s impact on the cost 

that small entities pay for energy,’’. 

Amendment to H.R. 527 Offered by Mr. Critz of 

Pennsylvania 

Page 18, insert after line 11 the following (and redesignate succeeding subsections accordingly): 

‘‘(f)(1) If Congress approves a trade agreement under section 

2191 of title 19, United States Code, then the Chief Counsel for Advocacy of the Small Business Administration shall— 

‘‘(A) identify small entities or representatives of small entities or a combination of both for the purpose of obtaining advice, input, and recommendations from those persons about the 

potential economic impacts of rules implementing or pertaining 

to such trade agreement; and 

‘‘(B) convene a review panel consisting of an employee from 

the Office of Advocacy of the Small Business Administration, 

an employee from relevant agencies or, if appropriate, an employee from the Office of Information and Regulatory Affairs of 

the Office of Management and Budget to review the advice, 

input, and recommendations provided to the Chief Counsel 

under subparagraph (A). 

‘‘(2) Not later than 60 days after the review panel described in 

paragraph (1) is convened, the Chief Counsel for Advocacy of the 

Small Business Administration shall, after consultation with the 

members of such panel, submit a report to Congress. Such report 

shall include an assessment of the economic impact of rules implementing or pertaining to the trade agreement on small entities and 

a discussion of any alternatives that will minimize adverse significant economic impacts or maximize beneficial significant economic 

impacts on small entities.’’. 

VII. SECTION–BY–SECTION ANALYSIS OF H.R. 527 

Section 1. Short title 

Designates the bill as the ‘‘Regulatory Flexibility Improvements 

Act of 2011.’’ 

Section 2. Clarification and expansion of rules covered by the RFA 

Subsection (a)—Definition of ‘‘Rule’’ 

The RFA currently defines a rule as one that is issued pursuant 

to the notice and comment provisions of § 553(b) of the APA. This 

definition is unnecessarily restrictive for no apparent reason. Fundamentally, a rule is any issuance from an agency that does not 

emanate from an adjudication. Appalachian Power Co. v. EPA, 208 

F.3d 1015, 1021 n.13 (D.C. Cir. 2000), quoting Batterton v. Marshall, 648 F.2d 694, 700 (D.C. Cir. 1980). The definition of a rule 

should be consistent, to the extent practicable, with the definitions 

set forth in the APA. That will permit courts, for purposes of interpreting the RFA, to adopt the interpretations they have developed 

under the APA. See White v. Mercury Marine, 129 F.3d 1428, 1434 


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16From a purely logical standpoint, the approval of rates, wages, etc. for a particular entity 

looks more like a license as that term is defined in the APA. However, the definition of a ‘‘license’’ under the APA is quite restrictive and approval of various types of corporate structures 

(such as the approval of a initial public offering by the Securities and Exchange Commission) 

does not constitute a license under the APA. 

(11th Cir. 1997); Greenwood Trust Co. v. Massachusetts, 971 F.2d 

818, 827 (1st Cir. 1992), cert. denied, 506 U.S. 1052 (1993); Doe v. 

DiGenova, 779 F.2d 74, 82 (D.C. Cir. 1985) (legislative use of same 

term in different sections should be given the same meaning and 

interpretation) Therefore, § 2(a) of H.R. 527 eliminates the distinction between § 551(4) of the APA and § 601(2) of the RFA. 

Section 2(a) of the bill does make one necessary distinction between rules as defined under the APA and the RFA. The APA definition of a rule includes any rule of particular applicability relating 

to ‘‘rates, wages, corporate or financial structures, prices, facilities, 

appliances, services, or allowances therefor or to valuations, costs 

or accounting, or practices relating to such rates, wages, structures, 

prices, appliances, services, or allowances.’’ 5 U.S.C. § 551(4). The 

RFA does not apply to any rule that falls within any of the aforementioned categories. Id. at § 601(2). Agencies should not be delayed in approving the financial structure or the like of a specific 

entity as such rule change clearly could not affect a significant 

number of small entities. In contradistinction, the rules for how 

agencies determine rates, wages, or financial structures may have 

a dramatic impact on small entities.16 As a result, the appropriate 

compromise is to define a rule that will cover rates, wages, etc. 

only if the rule can be applied to more than one entity. For example, the definition of a rule under the Committee’s solution would 

include the Federal Communications Commission’s (FCC) regulations for calculating the rates charged by incumbent local exchange 

carriers for unbundled network elements. A rule would not include 

the application of those standards for determining the unbundled 

network element rates for a particular incumbent local exchange 

carrier. To the extent that the determination of the rates are made 

in a rulemaking, this definition ensures that the agency cannot use 

as an excuse for delay the need to comply with the RFA. Furthermore, the amendatory language answers in the affirmative the 

question of whether the RFA covers rules of general applicability 

concerning the calculation of rates, wages, etc. 

Subsection (b)—Inclusion of Indirect Effects 

The RFA requires preparation of a regulatory flexibility analysis 

if the agency determines that the rule will have a significant economic impact on a substantial number of small entities. The original authors of the RFA did not define the term ‘‘economic impact’’ 

following the trend in the National Environmental Policy Act 

(NEPA) in which the term ‘‘significant effect on the environment’’ 

was left open to interpretation. The scope of the economic impacts 

that should be considered for compliance with the RFA has been 

the subject of much discussion and confusion even during the debates on passage. The genesis of the confusion stems from comments made by Senator John Culver (D–IA) (one of the original authors of the RFA). In the section–by–section analysis of the RFA, 

Senator Culver suggested that agencies should assess both indirect 

and direct effects of the proposed regulation. 126 Cong. Rec. 

21,458–59 (1980). 


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17Since the decision to certify a rule was not a justiciable claim under the original version 

of the RFA, the court did not have to decide the issue. 18 American Trucking Ass’n v. EPA, 175 F.3d 1027, 1044–45 (D.C. Cir. 1999), rev’d on other 

grounds, 531 U.S. 457 (2001); Motor & Equip. Mfrs. Ass’n v. Nichols, 142 F.3d 449, 466 (D.C. 

Cir. 1998); United Distr. Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996). Other courts also 

have adopted the D.C. Circuit’s interpretation. White Eagle Coop. Ass’n v. Conner, 553 F.3d 467, 

479–81 (7th Cir. 2009) (producers indirectly regulated under milk marketing so not able to bring 

claim under RFA). 19 If a state does not develop a state implementation plan, the EPA is authorized to develop 

the implementation plan. 20The RFA applies to small businesses, small organizations (not–for–profits), and small governmental jurisdictions which are defined as any governmental entity with a population of less 

than 50,000. No state has less than 50,000 people. Therefore, states are not small governmental 

jurisdictions. 

The issue of indirect effects reappeared when an electric cooperative, Mid–Tex, challenged the Federal Energy Regulatory Commission’s determination to permit the inclusion of construction–work– 

in–progress expenses (CWIP) in the rate base for generating utilities. The inclusion of CWIP forced the Commission to raise the 

rates for wholesale power purchased by electric cooperatives such 

as Mid–Tex. The Commission certified that the proposed rule 

would not have a significant economic impact on a substantial 

number of small entities because the rule only affected large entities—the generators of electric power. The electric cooperatives, in 

their challenge to the regulation, alleged that the Commission 

should have performed a regulatory flexibility analysis on the impact that the decision would have on the purchasers of the power. 

The D.C. Circuit disagreed with the cooperatives’ interpretation of 

the RFA’s legislative history and held that Congressional intent 

with respect to the analysis of indirect effects was ambiguous. The 

court determined, although it did not have to,17 that the use of indirect effects by Senator Culver meant referred to the indirect effects on the entities subject to the regulation not the pass–through 

indirect effects on society in general. Mid–Tex Elec. Coop. v. FERC, 

773 F.2d 327, 342–43 (D.C. Cir. 1985). This conclusion has been reaffirmed on a number of occasions by the D.C. Circuit, the only circuit that has considered the issue.18

By limiting analysis to entities directly regulated, the D.C. Circuit’s interpretation of the RFA enables federal agencies to avoid 

assessing impacts on small entities for some very significant 

rulemakings. Some examples will elucidate this problem. 

The EPA is charged with establishing national ambient air quality standards under the Clean Air Act. Once established, the Clean 

Air Act then grants to the states the authority to develop plans to 

meet those standards.19 Ambient air quality standards can impose 

significant economic harm on businesses that may have to reduce 

their activities in order to comply with the state implementation 

plan and meet the ambient air quality standards. EPA does not 

comply with the RFA when it develops the standards or during the 

approval of the state implementation plans. 

The EPA argues that the RFA does not apply because the ambient air quality standards and state implementation plans only regulate states which are not small entities under the RFA.20 Despite 

this legal legerdemain, a revised ambient air quality standard can 

have a profound impact on the economy and one that is totally 

foreseeable. The EPA identified significant economic consequences 

when it revised its ambient air quality standards for nitrogen oxide 

and particulate matter in the late 1990s. That regulation underVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000029 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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21There are Indian tribes with less populations of less than 50,000. EPA’s conclusion that only 

large governmental entities were being regulated was wrong. 22 Congress recognized the significance of EPA rules on small entities in SBREFA by creating 

a mechanism for those entities to provide input into the development of proposed EPA regulations. 

went substantial economic review, including the development of a 

cost–benefit analysis pursuant to Executive Order 12,866. As a result, EPA was required to identify the foreseeable costs of imposing 

stricter ambient air quality standards on the nation, including 

small entities, even though the exact scope on specific small entities might vary depending based on the state implementation plan. 

If most of the entities are small that must readjust their behavior 

to reduce pollution and they cannot comply, the rule is irrational 

because EPA will not meet its goal of cleaner air. Therefore, an 

analysis of the indirect effects of the ambient air quality standards 

is a critical element in the development of the APA–mandated rational rule. 

Section 303(d) of the Clean Water, 33 U.S.C. § 1313(d), requires 

states to develop lists of impaired waters, i.e., those waters for 

which effluent limitations on point sources (such as factories and 

publicly–owned treatment facilities) do not meet the water quality 

standards applicable to such body of water. The states are then required to establish total maximum daily load (TMDL) for each impaired body to bring into compliance with the applicable water 

quality standard. On July 13, 2000, EPA promulgated new regulations to implement the TMDL program. 65 Fed. Reg. 43,585. The 

EPA certified the final rule because it found that the ‘‘rule established requirements applicable only to EPA, states, territories, and 

Indian tribes. Thus, EPA is not required to prepare a regulatory 

flexibility analysis.’’ 21 Id. at 43,654. EPA reached this conclusion 

even though it found that the changes in the TMDL program would 

result in an annual effect on the economy of more than $100 million. In its Executive Order 12,866 analysis, EPA estimated the 

cost on various industries for complying with updated TMDLs developed by the states. The development and availability of this data 

under the Executive Order belies any notion that EPA’s rules only 

affected states. As with the ambient air quality standards, the economic consequences were large but foreseeable even though the 

exact impact on specific entities was not available. Therefore, EPA 

could and should have developed a regulatory flexibility analysis 

that assessed the impact on small entities. 

If EPA was the only agency where the issue of direct and indirect 

effects occurred, it would deserve a legislative solution given the 

impact that EPA regulations have on small entities.22 However, 

EPA is not the only agency that has avoided RFA compliance due 

to the indirect effects of the regulations they promulgate. For example, the Department of Agriculture never complied with the RFA 

when it promulgated revised regulations for amending forest management plans even though those rules would have significant impact on how the national forests would be managed and would affect thousands of small businesses and rural local governments. 

The IRS proposed to modify the reporting of non–resident alien interest income which could threaten the availability of capital for 

small businesses. The Immigration and Naturalization Service proposed reducing the time limit for extensions of visas to foreign visiVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000030 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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23These regulations are given substantial deference by the courts. See Robertson v. Methow 

Valley Citizens Ass’n, 490 U.S. 332, 356 (1989); Andrus v. Sierra Club, 442 U.S. 347, 358 (1979). 

It is important to note that the Court gives these regulations substantial deference even though 

CEQ issued the rules pursuant to an Executive Order issued by President Carter since NEPA 

had no statutory authorization for CEQ to do anything other than monitor agency compliance 

with NEPA. 24 CEQ regulations define effects of major federal actions to include economic and social impacts. 40 C.F.R. § 1508.8. 

tors which, although not directly regulating any small businesses, 

could have a significant adverse impact on small businesses that 

rely on residents of cold climates wintering in places such as Florida or Arizona. 

To the extent that these rules are significant under Executive 

Order 12,866, the indirect effects would be analyzed in the development of a cost–benefit analysis. However, the impacts would not be 

assessed for cost–effectiveness under the RFA—a gap that makes 

no logical sense and undermines the ability of agencies to craft rational rules as mandated by the APA. 

Given the adverse consequences for small entities of indirect effects, it is imperative that agencies consider the foreseeable indirect effects of their regulatory actions on small entities. The Committee does not find that objections raised by the courts and federal 

agencies—that indirect economic effects cannot be measured with 

any accuracy—valid. The RFA, as already noted, was modeled on 

NEPA, in effect forcing agencies to perform an economic impact 

statement. The Committee believes that the parallels between 

NEPA and the RFA should include the scope of the effects examined. 

According to the regulations promulgated by the Council of Environmental Quality (CEQ),23 the term ‘‘effect’’ means: 

(a) Direct effects, which are caused by the action and 

occur at the same time and place. 

(b) Indirect effects, which are caused by the action and 

are later in time or further removed in distance by are still 

reasonably foreseeable. Indirect effects may include growth 

inducing effects and other effects related to induced 

changes in the pattern of land use, population density or 

growth rate, and related effects on air and water and other 

natural systems, including ecosystems. 

40 C.F.R. § 1508.8. The CEQ regulations go on to state that the 

term ‘‘effects’’ includes economic effects whether direct, indirect, or 

cumulative. Id. Agencies have had to comply with these regulations 

for nearly a quarter of century. If federal agencies are capable of 

developing estimates of indirect effects of major federal actions for 

purposes of NEPA, the agencies should be capable of developing 

the same estimates for compliance with the RFA. This conclusion 

is buttressed by the fact that major federal actions, for purposes of 

NEPA, include rulemakings. Id. at § 1508.18; see also Cellular 

Telephone Taskforce v. FCC, 205 F.3d 82, 94 (D.C. Cir. 2000), cert. 

denied, 531 U.S. 1070 (2001). Thus, federal agencies already are estimating the indirect effects, including economic impacts,24 of some 

of their regulations in order to comply with NEPA. Given that requirement, the Committee is of the opinion that extending the 

NEPA requirement to the RFA would not constitute a hardship 


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25 Numerous parties, but especially federal agencies, opined that authorizing direct judicial 

challenges to RFA compliance would be akin to cracking open Pandora’s jar and prevent federal 

agencies from performing their regulatory functions. As the statistics on estimated number of 

RFA lawsuits demonstrate, the ‘‘sky-is-falling’’ clamor from federal agencies was nothing more 

than, as Macbeth might have put it, sound and fury signifying nothing. In short, the contentions 

of federal agencies are akin to Getrude’s sentiment in Hamlet about ladies doth protesting too 

much. 26 Even though NEPA refers only to mitigation efforts of adverse environmental consequences, 

beneficial impacts on the environment from various alternatives of the major federal action are 

discussed in an environmental impact statement. This especially is true when an agency prepares an environmental impact statement for regulatory changes that have the consequence of 

lowering the amount of pollutants that can be released into the environment. Furthermore, CEQ 

regulations contemplate that a cost-benefit analysis might be relevant to the decisionmaking 

process. 40 C.F.R. § 1502.23. 27This conclusion is supported by classical welfare economic theory which teaches that given 

the selection of a particular policy choice, the one selected should have the greatest ratio of benefits to costs. Such a selection constitutes the most efficient resource allocation. 28 Under definitions utilized by the Small Business Administration, small businesses represent 

more than 95% of the businesses in nearly all of the industrial classifications established by 

the North American Industrial Classification System. Similarly, there are far more governmental jurisdictions with populations under 50,000 than those with more than 50,000. 

that federal agencies contend it would be to estimate indirect economic impacts.25

Section 2(b) adopts a definition of ‘‘economic effect’’ that parallels 

the definition of ‘‘effect’’ utilized by CEQ in its NEPA regulations. 

The definitions of ‘‘direct’’ and ‘‘indirect’’ (especially as it relates to 

foreseeability of economic consequences) effects have the same 

meaning as that developed by CEQ and the courts for interpreting 

the requirements of NEPA. 

Subsection (c)—Rule with Beneficial Effects 

A regulatory flexibility analysis must be prepared whenever an 

agency finds that a proposed or final rule will have a significant 

economic impact on a substantial number of small entities. The 

statute does not limit the economic impacts to only adverse consequences although § 604 requires a final regulatory flexibility 

analysis to include a discussion of an agency’s efforts to minimize 

the significant economic impacts of the final rule but requires no 

discussion of an agency’s efforts to maximize beneficial impacts. 

This limitation on the analysis also falls within the parallelism to 

NEPA which only requires agencies to examine alternatives that 

will mitigate adverse environmental consequences.26 Thus, agencies have interpreted this requirement as obviating the need to perform a regulatory flexibility analysis when the impact of a rule will 

be significant but beneficial. 

This interpretation is incorrect, but it is easy to comprehend how 

agencies reached the conclusion based on § 604’s failure to require 

a discussion of efforts made to maximize beneficial effects. Despite 

the absence of such a mandate, such an analysis would be useful 

because it forces the agency to examine whether it has selected an 

alternative that maximizes the benefits to small entities. If everything is ceteris paribus, an agency should select an alternative that 

maximizes any beneficial economic effect on small entities 27 because small entities (except in very unusual circumstances) will 

represent the vast majority of entities subject to a particular regulation.28

Section 2(c) eliminates this confusion by requiring that agencies 

consider the impact of regulations even if they have a beneficial effect. Under this subsection, a regulatory flexibility analysis will be 

performed whenever the economic impacts of the proposed or final 

rule is significant without regard to whether the impacts are posiVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000032 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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29Letter from Acting Chief Counsel for Advocacy Mark Hayward to Chief of the Forest Service, F. Dale Robertson at 17 (May 16, 1991) (copy of letter available from the Committee’s Chief 

Counsel). In the 1970s, Congress imposed requirements on BLM and the Forest Service to develop plans to guide and control the actions of the agencies in managing land under their jurisdiction. See Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55, 59 (2004) (describing 

land planning obligations of BLM); Ohio Forestry Ass’n v. Sierra Club, 523 U.S. 726, 729 (1998) 

(describing land management plans of Forest Service). 30GAO, Congressional Review Act: Application to the Tongass National Forest Land and Resource Plan 2 (1997) (T–OGC–97–54). 31The Forest Service gains some sustenance from the Supreme Court’s decision in Ohio Forestry Ass’n. In that case, the Court held that a challenge to a forest management plan’s logging 

schedule was not ripe because the logging set forth in the plan was subject to further review 

and revision, including a site specific analysis. The Court contrasted that with the immediacy 

Continued 

tive or negative. This amendment will require agencies to assess alternatives that either mitigate negative economic impacts or enhance positive economic effects. Finally, this subsection should be 

interpreted to prevent agencies from certifying proposed or final 

rules when the impacts are significant but beneficial. 

Subsection (d)—Rules Affecting Tribal Organizations 

Under the current definitions in the RFA, small governmental jurisdictions are those with populations of less than 50,000. The definition typically includes governmental bodies whose power is delegated by the state such as municipalities, water districts, etc. 

Given the intent of the original legislation to focus on the impact 

of regulations on entities that are creatures of state governments, 

it is unclear whether the term ‘‘governmental jurisdiction’’ includes 

tribal organizations. They are sovereign entities that have a special 

relationship with the federal government. Oklahoma Tax Comm’n 

v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 509 (1991). 

The federal government regularly imposes various and often significant regulatory requirements on tribal organizations from those 

related to the operation of tribal organizations to environmental 

controls. Despite the imposition of diverse regulatory requirements 

on tribal organizations, federal agencies fail to perform regulatory 

flexibility analyses on regulations affecting tribal organizations. 

The failure to comply with the RFA is particularly troubling because tribal organizations, like many small governments, do not 

have the infrastructure or resources to interpret and comply with 

federal regulatory requirements. 

Given the adverse consequences on tribal organizations from the 

failure to comply with the RFA, section 2(d) adds tribal organizations to the list of small governmental entities that fall within the 

ambit of the RFA. Federal agencies would have to perform a regulatory flexibility analysis on any proposed or final rule if it had significant economic effects on a substantial number of small tribal organizations, i.e., one with a population of less than 50,000. The 

term tribal organization has the same meaning as that used in 

§ 4(l) of the Indian Self-Determination and Education Assistance 

Act. 

Subsection (e)—Inclusion of Land Management Plans 

The long-standing position of the Office of the Chief Counsel for 

Advocacy has been that land management plans developed by the 

United States Forest Service (Forest Service) and the Bureau of 

Land Management (BLM) are rules that are subject to analysis 

under the RFA.29 GAO also reached the same conclusion.30 Nevertheless, the Forest Service and BLM maintain that their resource 

management plans are not rules.31 Given the potential conVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000033 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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and impact of a final rule. 523 U.S. at 737. Given the fact that the Federal Land Management 

Policy Act uses language very similar to that requiring forest management plans, courts would 

likely use the Supreme Court’s decision in Ohio Forestry Ass’n to reach a similar conclusion 

about BLM’s land management plans. See text accompanying discussion of subsection 2(a), 

supra. Even though the legal consequences may not satisfy the ripeness requirement under Article III of the Constitution, forest management plans do guide the agency’s management of the 

forests and thus will have economic and policy impacts that need to be weighed, including those 

on small businesses and small governmental jurisdictions. 32 Both agencies typically develop environmental impact statements when making major modifications or developing new land management plans. As already noted, CEQ regulations, 40 

C.F.R. § 1508.8 requires agencies to consider economic effects (both direct and indirect) in their 

environmental impact statements. As a result, no rational argument exists for concluding that 

analysis under the RFA would delay the development of a new plan or the adoption of a major 

modification to such plan. 33The fact that the IRS voluntarily seeks comment on proposed rules does not create a mandate that the agency is required to issue the regulations after notice and comment. Cf. Chrysler 

Corp. v. Brown, 441 U.S. 281, 306–10 (1979) (noting that agency going beyond requirements in 

statute does not create justiciable right in court). 

sequences on small entities (both businesses that rely on the resources of the public lands and the communities that border those 

lands), the Forest Service and BLM should assess the impact of 

these plans on small entities under the RFA.32

Section 2(e) of the bill eliminates any questions by requiring the 

Forest Service and BLM to comply with the RFA when they are developing changes to resource management plans. Compliance is 

limited to the development of plans and revisions or amendments 

made thereto but only to the extent that the revisions or amendments require preparation of an environmental impact statement. 

This limitation is appropriate because minor changes to resource 

management plans that are not considered major federal actions 

and are unlikely to impose a significant economic impact on a substantial number of small entities. In contradistinction, preparation 

of environmental impact statements demonstrate that the proposed 

changes to the management plan will be significant. Since BLM 

and the Forest Service already will have to collect economic data 

to prepare an adequate environmental impact statement, analysis 

under the RFA will not pose any undue burdens on the agencies. 

Finally, this limitation ensures that BLM and the Forest Service 

will conserve their analytical resources to focus on those plan 

changes that would have the greatest significance to small entities. 

Subsection (f)—Inclusion of Certain Interpretative Rules of the 

IRS 

The RFA only applies to those regulations that are required to 

be published pursuant to notice and comment rulemaking by either 

§ 553 of the APA or some other statute. Section 553 of the APA exempts interpretative rules from the notice and comment requirements. The Internal Revenue Service (IRS) issues numerous regulations but styles them as interpretative. Prior to the enactment of 

the SBREFA, the IRS determined that it was not required to comply with the RFA because their regulations were interpretative and 

therefore need not be issued pursuant to notice and comment rulemaking.33

Congress attempted to rectify the situation with the enactment 

of SBREFA by requiring IRS compliance with the RFA for any interpretative rule issued that imposes a collection of information requirement on small entities. The IRS has interpreted this amendment by limiting its application, not to any regulation that imposes 

a collection of information (a term taken directly from the Paperwork Reduction Act), but only on those regulations that require 


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34This position is contradicted by the Service’s litigation position that its regulations should 

be given deference that is accorded only to those rules for which the agency intended to have 

the force and effect of law, i.e., thereby actually making law. E.g., Landmark Legal Foundation 

v. IRS, 267 F.3d 1132 (D.C. Cir. 2001); Fior D’Italia v. United States, 242 F.3d 844 (9th Cir. 

2001); Callaway v. Commissioner, 231 F.3d 106 (2d Cir. 2000); Snowa v. Commissioner, 123 

F.3d 90 (4th Cir. 1997). 

Commentators have noted that the Internal Revenue Code is replete with straightforward delegations requiring the IRS to promulgate regulations. J. Coverdale, Court Review of Tax Regulations and Revenue Rulings in the Chevron Era, 64 Geo. Wash. L. Rev. 35 (1995). For example, 

§ 385 of the Code provides: ‘‘[t]he Secretary is authorized to prescribe such regulations as may 

be necessary . . . to determine whether an interest in a corporation is to be treated . . . as 

stock or indebtedness. . . .? In response to a question from then-Chairman Donald A. Manzullo 

(R–IL), Assistant Secretary Olson stated that any regulations implementing § 385 were interpretative. However, no one would doubt that if a corporation did not follow the regulations promulgated pursuant to that section, the Service could find the taxpayer to be in violation of the law. 

Similarly, if the taxpayer failed to comply with the regulations adopted by the Secretary concerning the time for depositing taxes set forth in regulations adopted by the IRS pursuant to 

§ 6302, the taxpayer would find itself facing significant penalties. Nevertheless, the IRS maintains that the regulations are interpretative despite the fact that the Service is exercising its 

discretion when taxes are to be deposited or what constitutes indebtedness. 

The Service’s intransigence and aberrant interpretation of the APA is further placed in stark 

relief by comparison to similar statutes. For example, Title V, Subtitle A of Gramm-Leach-Bliley 

provides: [t]he Federal Trade Commission [FTC], . . . may prescribe regulations clarifying or 

describing the types of institutions which shall be treated as financial institutions for purposes 

of this subchapter.’’ 15 U.S.C. § 6827(4)(E). This permissive authority enables the FTC to include 

other institutions, including credit reporting agencies, as financial institutions, even though they 

were not enumerated in the definitions of financial institutions. This authority is no different 

than the supplementation that the IRS in §§ 385 and 6302 found to be interpretative. Yet the 

FTC argued and the court agreed that the regulations classifying credit reporting agencies as 

financial institutions were valid legislative regulations with the force and effect of law subject 

to Chevron deference. Individual Services Reference Group v. FTC, 145 F. Supp. 2d 6 (D.D.C. 

2001). There is no rational distinction between the permissive authority in Gramm-Leach Bliley 

and the permissive authority in the Internal Revenue Code. Thus, many of the regulations implementing the Code are legislative in nature and burdens are imposed by the Service. 

Nevertheless, nothing in H.R. 527 attempts to make a priori determinations of what regulations should be considered legislative in nature. Nor do the authors of the bill attempt to resolve 

the murky administrative law problem of distinguishing between legislative and interpretative 

rules. 35OIRA is charged with interpreting and implementing the Paperwork Reduction Act. 44 

U.S.C. § 3504. Thus, the IRS is not the implementing agency. As such, its interpretation of that 

Act is not entitled to any deference. Professional Reactor Operator Soc’y v. NRC, 939 F.2d 1047, 

1051 (D.C. Cir. 1991). 

taxpayers to complete a new, never-used form. At a hearing of the 

Committee on Small Business on May 1, 2003, then Assistant Secretary for Tax Policy, the Honorable Pamela F. Olson, testified that 

the Department of Treasury and the IRS do not consider that they 

impose any collection of information requirements; rather collection 

of information requirements, as well as tax burdens, are imposed 

by Congress rather than the agencies.34 This has been a longstanding position of the Treasury Department and the IRS. 

The Office of the Chief Counsel for Advocacy has criticized that 

jejune interpretation. The authors of H.R. 527 also consider the 

IRS interpretation to violate the letter and the prophylactic intent 

of SBREFA.35 The RFA’s definition of the term ‘‘collection of information’’ is identical to that used in the Paperwork Reduction Act. 

There is no evidence that Congress intended the term ‘‘collection of 

information’’ to mean something different in the RFA than it does 

in the Paperwork Reduction Act. Cf. Atlantic Cleaners & Dyers v. 

United States, 286 U.S. 427, 433 (1932); United States v. BlasiniLluberas, 169 F.3d 57, 63 (1st Cir. 1999) (same term in different 

statutes have same meaning unless legislative history demonstrates to the contrary). The evidence of identical treatment of 

the term in the two statutes is evidenced by Congress incorporating 

into the RFA the exact definition of the term ‘‘collection of information’’ as it is used in the Paperwork Reduction Act. In addition, it 

would be illogical to assume that Congress did not intend the term 

‘‘collection of information’’ from the two statutes to be coextensive 


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because Congress was making a legislative modification designed 

to force IRS compliance with the RFA. Clearly, Congress, given the 

testimony in hearings on RFA compliance and reports of the Chief 

Counsel for Advocacy concerning IRS compliance, that it would 

adopt a definition of the term that authorizes the current crabbed 

interpretation of the term ‘‘collection of information.’’ Nor do the 

authors accept the principle that the IRS does not itself impose collection of information requirements not otherwise specified in statute. 

Of all the agencies that have protested and contested the application of the RFA to rulemakings, the IRS remains the most recalcitrant. The Service believes that its obligations to collect revenue 

supersede any mandates from Congress that the IRS considers interference with its statutory mission. The Constitution vested legislative power with Congress not the IRS and the Service has no authority to ignore those dictates. Hearings before the Committee on 

Small Business, comments from the Office of the Chief Counsel for 

Advocacy, comments from the Office of the Chief Counsel for Advocacy, and directives from Presidents Bush and Obama have not 

changed the intransigent position of the IRS or Treasury Department on RFA compliance. H.R. 527 represents the congressional response to the obstinacy of the IRS. 

Section 2(f) eliminates the IRS interpretation that it need only 

comply with the RFA if it is imposing a new form. The subsection 

also recognizes that the IRS believes that Congress is imposing the 

collection of information requirements. Therefore, the bill takes the 

approach that requires compliance with the RFA whenever the 

Service intends to codify a regulation in the Code of Federal Regulations and the regulation or statute that the regulation is interpreting imposes a collection of information requirement. 

The modifications to § 603 should not be viewed by the IRS as 

limiting its economic analysis simply to the cost associated with the 

‘‘collection of information.’’ Rather, the ‘‘collection of information’’ 

simply acts as a trigger for the broader assessment of economic effects of the proposed and final rule. This would include any increases or decreases in payment of taxes resulting from the rule. 

The authors of the bill reject out of hand the IRS’ contention that 

the true economic effect of its regulations stem from the Internal 

Revenue Code. There are a number of instances in which the IRS 

argues that its regulations are substantive and deserve Chevron 

deference. E.g., Bankers Life and Cas. Co. v. United States, 142 

F.3d 973, 978 (7th Cir.), cert. denied, 525 U.S. 961 (1998) (explicating cases in which IRS requested Chevron deference). Since the 

Supreme Court accords Chevron deference only to agency pronouncements which are intended to have the force and effect of law 

in order to fill statutory gaps or resolve legislative ambiguities, 

United States v. Mead Corp., 533 U.S. 218, 230–31 (2001), the IRS 

cannot be heard to argue that its regulations are unable to create 

or eliminate the payment of taxes. To give a more recent example, 

the IRS decided to propose a regulation that would eliminate an exemption the agency itself created for special mobile machinery. 67 

Fed. Reg. 38,913 (June 6, 2002). Eliminating the exemption would 

add hundreds of millions of dollars in tax burdens to companies not 

currently paying certain excise taxes. For the IRS to argue that the 


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36To the extent that the IRS needs to promulgate a regulation in an emergency situation, it 

can find good cause to forgo rulemaking and issue its regulation without analysis under the 

RFA. This exemption should be used sparingly by the Service because compliance with statutory 

mandates or the agency’s own inaction fails to meet the ‘‘good cause’’ exemption in the APA. 

Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir. 1982); Nat’l Ass’n of Farmworkers Organizations v. Marshall, 628 F.2d 604, 622 (D.C. Cir. 1980). In fact, the Ninth Circuit has determined that notice and comment rulemaking can be conducted in situations in which an agency 

is required to issue rules on a weekly basis; something the IRS does not have to do. Riverbend 

Farms, Inc. v. Madigan, 958 F.2d 1479, 1486–87 (9th Cir.), cert. denied, 506 U.S. 999 (1992). 

economic effects of its regulations stem solely from the strictures 

of Congressional mandates is disingenuous. 

Nor is it likely that compliance with the RFA will slow the 

issuance of IRS regulations. Taking the example of the special mobile machinery exemption, the IRS easily could have determined 

the total revenue that the Highway Trust Fund would receive from 

the elimination of the exemption based on the aggregate data it obtains when businesses file for excise tax rebates (this data also 

would provide an accurate estimate of the revenue impact of excise 

tax payments for vehicles currently exempt). The IRS should not 

be exempt from this basic requirement of rulemaking (understanding the scope of the problem and the effect of the proposed solution). Obtaining similar aggregate data to comply with the RFA 

should not slow the development of regulations.36 In fact, without 

this data, the IRS could not make sensible estimates of the amount 

of revenue gain or loss that would occur with a particular regulatory change. The argument that compliance with the RFA would 

slow regulatory development is a red herring and certainly is an 

inadequate rationale for supporting the current IRS practice with 

respect to RFA compliance. 

This conclusion is bolstered by the testimony of Frank Swain at 

the Committee’s May 1, 2003 hearing on RFA compliance by the 

IRS in the 108th Congress. At that hearing, Mr. Swain revealed 

that the Service had in its possession a study it requested from the 

Federal Highway Administration on the economic impact of removing the special mobile machinery regulation. The study by the Federal Highway Administration was dated 1999 and the IRS did not 

promulgate a proposed rule on eliminating the exemption until the 

summer of 2002, nearly three years later. Thus, the assertion that 

the completion of regulatory analyses will slow the development of 

regulations is, at best, specious. 

The RFA adopted the definitions in the Paperwork Reduction Act 

for the terms ‘‘collection of information’’ and ‘‘recordkeeping requirement.’’ Despite the identical nature of the definitions in the 

two pieces of legislation, some agencies, particularly the IRS, might 

argue in court the use of the terms in the two statutes have different meanings. See Atlantic Cleaners & Dyers v. United States, 

286 U.S. 427, 433 (1932) (noting that Congress may use similar 

terms in different statutes to have different meanings). 

The authors of SBREFA, in 1996, always intended that the terms 

utilized in the Paperwork Reduction Act have the same meaning as 

that in the RFA. To eliminate potential confusion, § 2(f)(2–3) repeals the definitions in § 601(7–8) and simply cross-references to 

the relevant portions of the Paperwork Reduction Act as set forth 

in title 44 of the United States Code. This eliminates any possibility that a court would apply a different interpretation to the 

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37 In the Paperwork Reduction Act, the terms trigger a mandatory review of the paperwork 

burdens imposed by the government on citizens. In the RFA, it triggers a mandatory review of 

the economic burdens imposed by the IRS on small entities. Both statutes, therefore, are designed to force agencies to examine ways to reduce burdens on the regulated community. 38See Ruckelshaus v. Sierra Club, 463 U.S. 680, 691 (1983) (applying in pari passu construction of various federal attorneys fee shifting statutes). 39The Small Business Administrator determines size based on an examination of small businesses on a national basis. 13 CFR § 121.102(b). H.R. 585 addresses the issue of size determinations for purposes of the RFA and other regulatory matters that fall outside the scope of the 

Small Business Act and Small Business Investment Act of 1958. That legislation will be discussed in Part III of this memorandum. 40 National Truck Equipment Ass’n v. NHTSA, 972 F.2d 669, 674 (6th Cir. 1992). 

poses,37 the palliative nature of both statutes, with respect to burdens on regulated entities, clearly justifies the application of the in 

pari passu canon of statutory construction 38 to the terms ‘‘collection of information’’ and ‘‘recordkeeping requirement.’’ 

Subsection (g)—Definition of Small Organization 

As already noted, the RFA covers small entities other than small 

businesses. The RFA defines a small organization as ‘‘any not-forprofit enterprise which is independently owned and operated and 

is not dominant in its field. . . .’’ 5 U.S.C. § 601(4). That definition 

fundamentally makes no sense because there is no rational way to 

determine a not-for-profit’s independence or economic dominance. 

The definition raises a number of practical questions. For example, 

on a local level, a rural electric cooperative might be considered 

dominant in the sense that it is the only provider of electric service 

in a rural area. However, on a national basis,39 is the rural electric 

cooperative dominant? Should the electric cooperative be compared 

with other electric cooperatives or with all other businesses in the 

electric utility industry? While some industries may have for-profit 

analogs, other small entities, such as charitable institutions or 

trade associations that can be adversely affected by federal regulations, do not. Furthermore, affiliation standards that the SBA uses 

in its size determinations may not be applicable in the not-for-profit sector, such as whether a trade association should be affiliated, 

for size determination purposes, with its members or whether a 

charitable institution is independently owned and operated by its 

donors. 

In a different context, the courts have grappled with the notion 

of independence of not-for-profit entities. The Equal Access to Justice Act (EAJA) permits certain small entities to recover their legal 

fees should they prevail in litigation against the federal government. EAJA classifies eligible parties as one that does not have a 

net worth in excess of $7,000,000 or more than 500 employees. 

Under EAJA, the question then becomes whether an entity requesting attorneys fees from the government actually fits within its 

zone of protection. Courts, in trying to answer this question, have 

wrestled with the concept of affiliation by assessing whether the 

small entity is affiliated with larger enterprises in a manner that 

defeats the purpose of the EAJA—ensuring that only small entities 

that do not have the financial wherewithal to sue the federal government receive attorneys fees if they prevail in litigation. 

One interpretation, adopted by the Sixth Circuit, would require 

complete aggregation of members’ net worth and employees to determine EAJA eligibility.40 The second intepretation, proffered by 

the federal government on a frequent basis, is that a trade association should be ineligible if any of its members exceed the net worth 


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41See Comment, Corporate Goliaths in the Costume of David: The Question of Association Aggregation under the Equal Access to Justice Act—Should the Whole Be Greater Than Its Parts? 

26 Fla. St. U.L. Rev. 151 (collecting cases in which federal government argued for aggregation). 42 National Ass’n of Manufacturers v. DOL, 159 F.3d 597, 602 (D.C. Cir. 1998) (discussing circuit split). 43While there is some facial appeal to the concept that a small organization could seek assistance from its members (probably through the payment of higher dues), there is no guarantee 

that it would be able to do so. And even if it did, depending on the makeup of the organization, 

that could impose additional burdens on small businesses that might be members of the organization which undercuts the palliative purpose of the RFA. 

and employee standards.41 This interpretation of EAJA has been 

rejected by the D.C., Fifth, and Seventh Circuits.42 These circuits 

determined that EAJA eligibility should be calculated by looking 

solely at the organization that brings the litigation, its net worth, 

and number of employees. 

Given the prophylactic nature of both the EAJA and the RFA 

with respect to small entities, it would make sense to apply the interpretations of the EAJA to the RFA. Thus, one definition of 

‘‘small organization’’ would be to adopt the definition of small entity used by the Sixth Circuit. However, that approach is incompatible with the purposes of the RFA because the capabilities of a 

small organization to comply with regulations is not based on the 

resources of its members but rather on the number of employees 

and net worth the organization controls.43 Since the small organization does not control or have direct access to the net worth of its 

members, it should be judged solely on its resources and not those 

of its members or donors. 

Section 2(g) adopts a two-prong approach to the definition of 

small entity. First, it recognizes that for many not-for-profit organizations there are small for-profit analogs. If there is an existing 

Small Business Administration size standard for a small business, 

the agency should use that definition for small organizations. For 

example, the size standard for electric utilities is one that generates, transmits, or distributes annually 4 million megawatt hours 

and a small not-for-profit electric cooperative would be one that 

generates, transmits or distributes annually 4 million megawatt 

hours. If an organization does not have an equivalent size standard 

under Small Business Administration regulations, then the size of 

the entity shall be that under the EAJA—net worth of $7,000,000 

and not more than 500 employees. Net worth and number of employees should be calculated by examining the not-for-profit organization without aggregating or affiliating the net worth or employees of any member or donor. 

Section 2(g) also provides a definition of small labor organization 

since they have unique characteristics that do not easily fall into 

any other category of small organization as used in the RFA or 

H.R. 527. Agencies do not examine the impact of their regulations 

on local chapters of national and international labor unions. As 

with other small organizations, local chapters may not be able to 

rely on the resources of their parent organizations for compliance 

assistance. Therefore, § 2(g) deems that a local chapter of a labor 

union shall be a small organization for purposes of compliance with 

the RFA without regard to its affiliation with a national or international labor organization. As a result, if the Department of Labor 

imposes a regulation on the operation of a labor union, the Department will have to consider its impact on these local chapters even 

if they are considered to be affiliated with a national or interVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000039 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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44 Nor would the agency have to consider the indirect effects on the individual members since 

those individual members are not an entity, i.e., small business, small non-profit, or small governmental jurisdiction. 45 National Ass’n of Homebuilders v. United States Army Corps of Eng’rs, 417 F.3d 1272, 1286 

(D.C. Cir. 2005). 

national union. However, the agency need not consider the impact 

of the regulation on individual members of the local labor union 

since it is the entity (not the members) subject to the regulation.44

Finally, § 3(g) authorizes an agency to adopt a different definition 

of small organization after the opportunity for notice and comment 

to the extent such different definition is appropriate. The subsection also requires consultation with the Office of the Chief Counsel for Advocacy. Essentially, the process for defining small organizations would be identical to that already in the RFA for small 

businesses under § 601(3). 

Section 3. Requirements Providing for More Detailed Analyses 

Senator Culver, in developing the concept for the RFA, was attempting to mirror the type of in-depth analyses that agencies performed under NEPA when assessing the impact of major federal 

actions that would have a significant impact on the environment. 

The language of the two statutes are sufficiently parallel to the 

point that it makes sense to draw a conclusion that the RFA creates a requirement for an economic impact statement for federal 

rules that will have a significant economic impact on a substantial 

number of small entities. 

This thesis has been accepted by the courts. In Associated Fisheries of Maine v. Daley, 127 F.3d 104 (1st Cir. 1997), Judge Selya, 

writing for the court, stated: 

We think a useful parallel can be drawn between RFA 

§ 604 and the National Environmental Policy Act, which 

furthers a similar objective by requiring the preparation of 

an environmental impact statement (EIS). . . . The EIS 

requirement is meant to inform the agency and the public 

about potential alternatives prior to a final decision on the 

fate of a particular project or rule. . . . Recognizing analogous objectives of the two acts. . . . 

Id. at 114. Judge Selya noted that the analogy seemed fair since 

the EIS requires a detailed statement while the RFA only requires 

a statement. The rectitude of Judge Selya’s reading by D.C. Circuit 

adoption of the parallelism finding.45

NEPA’s success in changing agency culture did not occur immediately after enactment because agencies were initially loath to 

prepare environmental impact statements and upset embedded 

constituencies that benefitted from various federal projects. Activists who disagreed with the need for a particular project used 

NEPA to stop the projects from going forward. While the Supreme 

Court ultimately determined that NEPA is not a substantive statute, see Stryckers Bay Neighborhood Council v. Karlen, 444 U.S. 

223, 227 (1980), the litigation losses by the government forced 

agencies to draft better environmental impact statements. The litigation reinforced the underlying principle of NEPA that ‘‘important 

effects will not be overlooked or underestimated only to be discovered after the resources have been committed or the die otherwise 


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46 Courts have found violations of the RFA when an agency incorrectly certified a rule rather 

than preparing a regulatory flexibility analysis. E.g., Harland Land Co. v. USDA, 186 F. Supp. 

2d 1076, 1097 (E.D. Cal. 2001); North Carolina Fisheries Ass’n v. Daley, 16 F. Supp. 2d 647, 

652 (E.D. Va. 1997). 47The review is an offshoot of the requirement that agencies must consider all relevant statutory factors in order to satisfy the rational decisionmaking standard of the APA. See Citizens 

to Preserve Overton Park v. Volpe, 401 U.S. 402, 418–19 (1971). 

cast.’’ Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 

348 (1989). 

After a number of hearings before various House and Senate 

Committees, Congress determined that agencies were ignoring 

their responsibilities under the RFA. The solution recommended by 

witnesses and ultimately adopted by Congress was judicial review 

of agency compliance with the RFA. SBREFA was premised on the 

threat of judicial review creating an atmosphere that would force 

agencies to comply with the RFA in the same manner and with the 

same completeness that agencies considered environmental impacts 

to avoid challenges of their compliance with NEPA. In other words, 

the authors of SBREFA expected that important economic consequences to small entities would not be overlooked prior to an 

agency’s commitment to a specific regulatory approach. The end-result is not analysis for analysis’ sake, but rather more rational 

rulemaking as dictated by the APA. 

The imposition of judicial review has not had the salutary effect 

that Congress expected. While it has been effective in forcing agencies to perform regulatory flexibility analyses rather than certifications,46 the majority of analyses are perfunctory. The agencies 

comply with the bare minimum specifications without really addressing the important issues—impacts on small entities and alternatives to minimize those impacts. However, this minimalist effort 

appears to satisfy the standard of demonstrating a reasonable effort to comply. A cursory look at a court’s analysis of the adequacy 

of an environmental impact statement demonstrates the distinction 

between a statement pursuant to the RFA and detailed statement 

required by NEPA. 

Judicial review of agency compliance with NEPA is designed to 

ensure that agencies take a ‘‘hard look’’ at environmental consequences. Robertson, 490 U.S. at 350, citing Kleppe v. Sierra Club, 

427 U.S. 390, 410 n.21 (1976). In turn, courts carefully scrutinize 

the environmental impact statement to determine whether the 

agency has addressed each element of the statement: 47 the environmental impact of the proposed action; any unavoidable adverse 

environmental consequences should the proposed action be implemented; alternatives to the proposed action; relationship between 

short and long-term uses of the environment; and commitment of 

any irreversible and irretrievable commitments of resources should 

the proposal be implemented. 42 U.S.C. § 4332(2)(C). Courts do not 

look at the statement as a whole and determine whether the agency made a reasonable effort to address the requirements of NEPA. 

Instead, the courts examine, in detail, each requirement to determine whether the statement adequately addresses that element. 

E.g., Colorado Env’tl Coalition v. Dombeck, 185 F.3d 1162, 1171– 

76 (10th Cir. 1999); City of Carmel-by-the-Sea v. United States 

DOT, 123 F.3d 1142, 1150–60 (9th Cir. 1997). The close scrutiny 


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48 Nothing in H.R. 527 affects the requirements in the IRFA under § 603(c). 

accorded to environmental impact statements by the courts then 

ensures significant consideration of environmental consequences. 

There can be little doubt that the reasonableness standard is appropriate for judicial review of regulatory flexibility analyses. However, the absence of the ‘‘detailed’’ statement requirement has led 

courts to provide only a cursory review of compliance with the requirements of § 604 of the RFA. The limited scope of the review to 

meet the standard of reasonableness has enabled agencies to avoid 

taking a hard look at the economic consequences of their proposed 

and final rules. Carrying the distinction found by Judge Selya in 

Associated Fisheries of Maine, to its logical conclusion suggests 

that the difference in the scrutiny between the two statutes rests 

on the distinction between a ‘‘statement’’ and a ‘‘detailed statement.’’ 

Section 3 modifies the requirements for preparing a regulatory 

flexibility analysis in order to ensure that agencies will give the 

same ‘‘hard look’’ to economic consequences that agencies already 

give to environmental effects pursuant to NEPA. Adoption of this 

stronger standard does not transform the RFA into a decision-forcing statute. Once the agency has taken the ‘‘hard look’’ at the economic consequences of its rulemaking action, application of the rational rulemaking standards inherent in the APA would strongly 

suggest that the agency take those consequences into account when 

crafting a final rule. However, nothing in the RFA mandates a particular regulatory outcome and nothing in H.R. 527 changes that 

abecedarian tenet of the RFA. The agency is at liberty to determine 

that other values outweigh the economic burdens imposed on small 

entities. Cf. Strycker’s Bay Neighborhood Council, Inc. v. Karlen, 

444 U.S. 223, 227–28 (1980); Vermont Yankee Nuclear Power Corp. 

v. NRDC, 435 U.S. 519, 558 (1978) (holding that NEPA does not 

require agency to select least environmentally damaging alternative). 

Subsection (a)—IRFAs 

Section 3(a) amends § 603 by requiring the initial regulatory 

flexibility analysis (IRFA) to contain a ‘‘detailed statement’’ rather 

than a statement. This should lead agencies to prepare IRFAs with 

the same detail and care that are currently required for draft environmental impact statements. 

Currently, an agency, in preparing an IRFA, must provide: (1) 

the rationale for undertaking the proposed rule: (2) a succinct 

statement of the objectives and legal basis for the rule; (3) a description and estimate, where practicable, of the number of small 

entities affected by the proposed rule; (4) a description of the reporting and recordkeeping requirements along with an estimate of 

the skills needed to comply with such requirements; (5) an identification to the extent practicable of overlapping or duplicative federal rules. 5 U.S.C. § 603(b). In addition to these requirements of 

subsection (b), the IRFA also must contain alternatives that will 

minimize adverse or maximize beneficial effects of the proposed 

rule. Id. at § 603(c).48 H.R. 527 makes a number of changes and additions to these analytical requirements as will be outlined below. 

H.R. 527 strikes the term ‘‘succinct’’ from § 603(b)(2) to avoid possible confusion between an overall requirement of a detailed stateVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000042 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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49This also comports with the change made by the Small Business Jobs Act of 2010 in which 

the references to the term ‘‘succinct’’ were deleted from § 604. Pub. L. No. 111–240, § 1601, 124 

Stat. 2504, 2551. 50 An agency might not be able to estimate the number of small entities when the agency is 

preparing a rule that opens up existing markets to new entrants or creates a new market. In 

such circumstances, there are no statistics on the number of small entities in that market. In 

such circumstances, it is probable that the agency, in preparing the proposed rule, has some 

sense of the number of potential new entrants from discussions with industry. Of course, such 

estimates will not have the precision that an agency should have when proposing a modification 

to an existing rule or imposing a new rule on a well-established industry. Nevertheless, an inaccurate estimate (with appropriate caveats concerning the lack of precision) is better than no estimate. Furthermore, the agency should recognize the lack of confidence in the estimate and make 

a specific request in its notice of proposed rulemaking for data on the number of small entities. 

ment and the use of a ‘‘succinct’’ statement of the objectives of the 

rule. Federal agencies will not have to create something new for 

this statement. Rather, they will be able to simply take the summary of the rule that is prepared for publication in the Federal 

Register and add the legal basis (if not already incorporated in the 

summary) and republish it in the IRFA.49

Section 603(b)(3) of the RFA currently requires the IRFA contain, 

when feasible, a description and an estimate of the number of 

small entities affected by the proposed rule. This requirement provides a substantial loophole for agencies to comply with the RFA. 

The Office of Advocacy calculates that there are more than 25 million small businesses in the United States based on aggregate data 

from the IRS. Size standards established by the Small Business 

Administration demonstrate that more than 95% of the businesses 

in each industrial classification are small. Thus, most entities subject to any regulation are likely to be small. An agency that fails 

to provide a relatively accurate estimate of the number of small entities affected by a proposed rule, cannot undertake rational rulemaking because the agency has no idea of the scope of the affected 

universe. The failure to provide an accurate estimate of the number 

of small entities affected would be akin to a federal agency stating 

that it has no way to determine the environmental consequences of 

building a dam on a river and therefore cannot complete an environmental impact statement. Such a rationale would not be accepted by any court and agencies should not be able to shirk their duty 

to understand the scope of the regulated universe simply because 

they might have to gather actual data on the number of small entities. As a result, § 3(a) strikes the term ‘‘where feasible’’ in its redraft of § 603(b)(3).50

The current requirement for completion of an IRFA requires the 

agency to identify, to the extent practicable, all relevant duplicative, overlapping, and conflicting rules. 5 U.S.C. § 603(b)(5). As with 

the requirement for estimating the number of small entities, the 

proviso ‘‘to the extent practicable’’ creates a loophole that allows 

the agency to prepare an irrational rule. Two classic examples elucidate the problem. The ergonomics standard established by the 

Department of Labor in 2000 (and subsequently overturned by a 

joint resolution pursuant to the Congressional Review Act) mandated that businesses develop plans to eliminate musucloskeletal 

disorders. One way to perform this task in skilled nursing facilities 

is to purchase mechanical lifts for patients. However, regulations 

promulgated by the Centers for Medicare and Medicaid Services 

(CMS) permit a patient to reject being lifted by mechanical device. 

Nothing in the final ergonomics rule or the final regulatory flexibility analysis (FRFA) addresses this potential conflict because the 


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Department of Labor never identified the CMS rules as creating a 

problem. Another example involves the requirement for notifying 

communities of underground storage facilities pursuant to § 312/ 

313 of the Emergency Planning and Community Right to Know 

Act. EPA required gas stations to notify EPA that they had underground storage tanks with gasoline so EPA could provide that information to local communities. However, this information already 

was being provided to local fire departments under other regulatory regimes. The Office of the Chief Counsel for Advocacy had 

to intervene before EPA redressed the duplicative reporting requirement. Had EPA actually made the effort to comply with the 

RFA, it would have identified the duplication and avoided promulgation of an additional reporting burden on small businesses. 

It is difficult to understand how an agency can draft rational 

rules without knowing how its proposed or final regulatory solution 

will mesh with other existing federal requirements imposed by 

itself or other agencies. While the Office of Information and Regulatory Affairs in the Office of Management and Budget (OIRA) can 

play a role in identifying these overlaps and conflicts, the primary 

role must be the agency drafting the regulation because it is the 

agency that has the obligation to create a rational rule—not OIRA 

or the Office of Advocacy. Section 3(a) resolves this problem by 

striking the ‘‘extent practicable’’ from the existing § 603(b)(5). Thus, 

an agency, in drafting proposed regulations, will have to identify 

duplicative, overlapping, and conflicting regulations. Obviously, 

agencies will need to start an interagency dialog in order to identify duplicative, overlapping, or inconsistent regulatory requirements. This should improve the rationality of agency rulemaking 

and prevent the tunnel-vision (the agency has to promulgate this 

rule, so why concern itself with what other agencies have done) 

that federal regulators currently wear in implementing the directives of Congress. The new requirement in the IRFA also should 

assist OIRA in carrying out its regulatory coordination function set 

forth in E.O. 12,866. 

Section 3(a) adds a new requirement for preparation of an IRFA. 

One of the biggest problems that small entities face is not the imposition of any one particular regulatory requirement; rather it is 

the accumulation of burdens from many regulatory requirements 

from all federal agencies that can have a significant effect on the 

capital available for small businesses to expand their enterprises. 

Any assessment of the impact of a rule on small entities, particularly small businesses, cannot be even reasonably accurate without 

understanding how the proposed rule interplays with the already 

extant burden on the entities subject to the regulation. To be sure, 

this assessment will be difficult. Section 3(a) adds a new paragraph 

(6) to § 603(b) that requires an evaluation of the cumulative impact 

or an explanation why such cumulative impact is not possible. It 

is likely that an agency would have to inquire with OIRA, the Office of Advocacy and other federal agencies to compile the cumulative economic impact data. As with other provisions of the RFA, 

as amended by H.R. 527, nothing in the cumulative impact evaluation prevents an agency from determining that other factors are 

more significant than the costs imposed on small entities and continuing with the rulemaking process. Identification will provide the 

agency, the affected public, and Congress with a better assessment 


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51 A detailed discussion of marketing orders and the Regulatory Flexibility Act can be found 

in Pineles, Marketing Orders and the Administrative Process: Fitting Round Fruit into Square 

Baskets, 5 San Joaquin Ag. L. Rev. 89 (1995). 52The classic example of this situation occurred when the EPA was trying to determine 

whether to control volatile organic chemicals associated with filling gasoline tanks in cars. Evaporation of volatile organic chemicals from gasoline is a major contributor to ground level ozone 

and smog. There are two primary mechanisms for controlling such evaporation—modification of 

gasoline tanks in cars or by reconfiguring the fuel pump to prevent the escape of gasoline vapors 

as an automobile’s gas tank is being filled. Modification of the fuel pump would disproportionately fall on small businesses while modifying the gas tank in cars would fall on big businesses. 

Although EPA ultimately selected the reconfiguration of gasoline station pumps (ergo the reason 

for the rubber hoses on the nozzles of gas pumps), had it needed to specifically identify the disproportionate impact on small businesses, it might have selected a different regulatory approach. 53 In addition to removing the term ‘‘succinct’’ as already noted, see note 48, supra, the Small 

Business Jobs Act of 2010 also removed the term ‘‘summary’’ from § 604 of the RFA. Pub. L. 

No. 111–240, § 1601, 124 Stat. 2504, 2551. 

of the implementation of statutory mandates. Furthermore, the 

identification may help the agency develop alternatives that impose 

less cumulative impact while still achieving an agency’s statutory 

objective. 

While the RFA requires identification of impacts on small entities, not all small entities are necessarily equally affected by a proposed rule. For example, many of the marketing orders established 

by the United States Department of Agriculture (USDA) pursuant 

to the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. 

§ 608c,51 will have different effects on producers, handlers (essentially wholesalers), and processors. Even within one class of growers, the regulations implementing marketing orders may have disparate impacts between independent growers and those associated 

with agricultural cooperatives. This simply represents one example 

of numerous regulations in which a proposed rule might have very 

different consequences on different classes of small businesses. In 

fact, the Office of the Chief Counsel for Advocacy criticized USDA 

for conflating various impacts of its rules on marketing orders to 

find that the proposed rule would not have a significant economic 

impact on a substantial number of small entities even though a 

class of small businesses would be severely harmed. To rectify this 

situation and force agencies to better understand the potential consequences of their proposed rules, § 3(a) of H.R. 527 adds a new 

paragraph (7) to § 603(b) of the RFA by requiring agencies to describe any disproportionate impact on small businesses 52 or a specific class of small businesses. 

Subsection (b)—FRFAs 

Section 3(b) amends the requirements for completing a FRFA. 

The changes made by the Committee to § 604 ensure the development of a detailed statement that forces agencies to give a ‘‘hard 

look’’ at the final rule stage to the economic consequences of the 

final rule. The bill adds the term ‘‘detailed’’ to the statement requirement where currently only a statement is required.53 Use of 

the detailed statement in the preparation of a FRFA does not mandate any particular outcome in an agency rulemaking. Rather, it 

simply assures that an agency, the public, Congress, and the courts 

fully understand the scope and impact of a final rule on small entities. Furthermore, § 3(b) requires that the same seven analytical 

elements required in the IRFA by the amended § 603(b) be incorporated into the FRFA mandated by the amended § 604(b). 

The changes made by § 3(b) also comport with the parallelism between the RFA and NEPA as noted by the First and D.C. Circuits. 


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54 H.R. 527 does not address whether publication on www.regulations.gov satisfies the requirements of the amended § 604. That issue is best left to the regulations that will be developed 

by the Office of the Chief Counsel for Advocacy. 

The expectation is that the agencies, after the regulations issued 

by the Chief Counsel pursuant to § 4 of H.R. 527, and the courts 

will interpret in the same manner the term ‘‘detailed statement’’ 

currently contained in NEPA. The FRFA should evidence the agency’s hard look at the economic consequences of the final rule and 

provide appropriate grist for the mill of judicial review. 

Current law mandates the agency summarize, in the FRFA, the 

comments received in response to an IRFA. While it is true that 

all IRFAs lead to the preparation of a FRFA, not all FRFAs are developed in response to an IRFA. An agency may initially certify a 

rule pursuant to § 605(b) and then receive sufficient comment that 

the rule will have a significant economic impact on a substantial 

number of small entities. The agency then would prepare a FRFA. 

However, the agency would be under no obligation to summarize 

the comments that it received in response to the certification in the 

FRFA. This simply represents an oversight by the authors of the 

RFA and SBREFA. An adequate FRFA should entail the summarization of comments received in response to a certification at the 

proposed rule stage. The process of summarization assists the Congress, the courts, and the regulated community in identifying those 

cost considerations that the agency failed to recognize at the proposed rule stage. The simple step of making an affirmative identification will help agencies perform better cost assessments at the 

initial stage of rulemaking and avoid unnecessary delays in the development of a final rule. Section 3(b) rectifies this problem by requiring the summarization of comments on a certification made at 

the proposed rule stage. 

Current requirements in the RFA mandate federal agencies to 

publish the FRFA in the Federal Register or, in lieu thereof, a 

summary with information specifying where an individual can obtain the full analysis. Since the enactment of SBREFA in 1996, numerous initiatives within the government have utilized the explosive growth of the Internet and Internet-based communication. 

Many agencies participate in the general website for regulatory 

matters, www.regulations.gov. Agencies that do not participate in 

that website (many of the independent agencies, such as the Commodities Futures Trading Commission or the Securities and Exchange Commission) have their own electronic interfaces for accepting and publishing regulatory material on the web. Continued 

growth of electronic availability of rulemaking documents and 

dockets is beneficial for both small entities and federal agencies. 

Since the RFA has not been amended since the growth of Internetbased rulemaking access, § 3(b) updates the publication requirements for the FRFA by requiring that it be placed on the agency 

website. Publication on the agency’s website and publication of the 

link to a website in the Federal Register notice of the final rule 

does not obviate the obligation that currently exists in the RFA to 

publish the FRFA or summary thereof in the Federal Register 

along with the final rule.54

Subsection (c)—Cross References to Other Analyses 

In an effort to avoid duplication, federal agencies can use other 

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55Preparation of a certification at the proposed rule stage does not foreclose an agency from 

preparing a FRFA at the final rule stage due to comments filed after the proposed rule was 

published. The change in the agency position cannot be considered a failure; rather it demonstrates the principle of agency edification by the public inherent in the notice and comment 

process. 56 40 C.F.R. § 1508.13; see Grand Canyon Trust v. FAA, 290 F.3d 339, 342 (D.C. Cir. 2002). 57 Chief Counsel for Advocacy, United States Small Business Administration, Annual Report 

of the Chief Counsel for Advocacy on the Implementation of the Regulatory Flexibility Act: Calendar Year 1993 15–16 (1994). 58Lehigh Valley Farmers v. Block, 640 F. Supp. 1497, 1520 (E.D. Pa. 1986) (district court determination on RFA was not addressed on appeal). 

ysis satisfies the requirements of the RFA. For example, a federal 

agency can use an environmental impact statement to the extent 

that analysis assesses alternatives which would be less burdensome or more beneficial to small entities. See Associated Fisheries 

of Maine, 127 F.3d at 115. Utilization of existing analyses is beneficial by reducing the work done by the agencies and the documentation that small entities must review during the rulemaking 

process. Unfortunately, agencies fail to provide adequate cross-references to these other documents. For example, some agencies will 

state in their IRFA or FRFA that alternatives were examined to reduce the adverse consequences and a discussion can be found in 

the statement of basis and purpose. Generic cross-references then 

force interested small entities to wade through dozens, if not hundreds, of pages in the Federal Register or on an agency website to 

determine whether the IRFA or FRFA was adequate. The indefiniteness of the cross-references is especially problematic at the proposed rule stage because the inability to quickly identify alternatives will tend to dissuade small entities from filing comments. 

Section 3(c) resolves this problem by mandating that agencies 

make sufficiently specific cross-references to other analyses that 

satisfy the requirements of the IRFA or FRFA. The expectation is 

that the specificity must be sufficient so that a small entity can 

turn directly to the part of the cross-referenced analysis that addresses the component of the IRFA or FRFA. 

Subsection (d)—Certifications 

The RFA authorizes an agency head or delegatee to certify that 

a proposed rule will not have a significant economic impact on a 

substantial number of small entities. Certification obviates the 

need for preparation of an IRFA or FRFA 55 in the same way that 

a finding of no significant environmental impact (FONSI) eliminates an agency’s preparation of an environmental impact statement.56 After the enactment of the RFA in 1980, agencies frequently issued boilerplate certifications that merely reiterated the 

language of § 605(b).57 Small entities had no way of ascertaining 

why these certifications were issued and courts were prohibited 

from even examining the certification as part of the rulemaking 

record.58

Congress attempted to rectify the problem of boilerplate certifications with the enactment of SBREFA. Since July 1, 1996, agencies are required to provide a factual basis for the certification. 

This amendment has not improved agency certifications. Many still 

reiterate the statutory language without further exegesis. Some 

refer back to other material in the statement of basis and purpose 

without identifying the cross-referenced material. Still others provide some factual basis for the certification. No agency provides the 

detail in its certification that can be found in an environmental asVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000047 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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59Technically, it would be incorrect for the agency to certify a rule for which notice and comment is not required because the RFA trigger is notice and comment. Nevertheless, many agencies, out of an abundance of caution, certify these rules. If they are going to do so, then the 

agencies should be required to explain what they are doing and why they are doing it. 60The amendment set forth in § 3(e) is further supported by the enactment in 2000 of the 

Data Quality Act and that Act’s requirement that agencies provide accurate data in all of their 

functions, including rulemaking. The Data Quality Act requires the Office of Management and 

Budget to issue guidelines to all agencies ensuring that the soundness of the data they present 

to the public. 44 U.S.C. § 3516 note. 

sessment accompanying a FONSI. Given the fact that the RFA parallels NEPA (as already noted), it is appropriate for agencies to 

supply in their certifications, the same detail that accompanies an 

environmental assessment. Furthermore, requiring greater specificity and detail in the certification will force the agency to develop 

a better assessment of the potential economic effects on small entities before they publish a proposed rule. This should lead to improved agency decisionmaking. 

Section 3(d) amends § 605(b) by requiring the preparation of a 

detailed statement supporting the certification decision. The section 

also mandates that the agency provide the legal rationale for any 

certification as well as a factual basis. This requirement is unfortunately necessary because agencies frequently certify proposed and 

final rules based on the inapplicability of the RFA to the rulemaking process in the first instance. For example, agencies often 

certify a rule in which the agency has forgone notice and comment 

under the APA. The Committee believes that it is appropriate for 

an agency to explain to the both the small entity community and 

any reviewing court these legal conclusions about the basis for its 

decision.59 If the FRFA is to be reviewed under the same standard 

as a final EIS prepared pursuant to NEPA, then the logical conclusion to the statutes’ parallelism is for the certification under the 

RFA to be reviewed by a court under the same scrutiny that it 

would apply to a FONSI under NEPA. 

Subsection (e)—Quantification Requirement 

Section 3(e) modifies the existing requirements in § 607 of the 

RFA concerning the quantification of effects on small entities. 

Agencies are required to provide a numerical or descriptive analysis of the effects on small entities. Rational rulemaking requires 

an agency to understand the scope of the regulated community, the 

costs currently faced by those entities, and the economic consequences of any regulatory action. Under § 607, agencies can avoid 

developing sound numerical data and can provide general descriptions, such as the regulation will increase costs to small entities. 

The absence of objective numerical data makes it more difficult for 

small entities to assess the significance of any regulatory change. 

Agencies should make every effort to obtain objective data supporting a regulatory change including the estimated consequences 

to small entities.60 Section 3(e) amends § 607 by making quantification of impacts the default in developing an assessment of impacts 

on small entities. 

There may be circumstances in which it is difficult, if not impossible, to provide accurate quantification of a rule’s impact on small 

entities. For example, if a regulation is opening a new market, the 

agency may not be able to determine the universe of potential marVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000048 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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61The inaccurate estimates would be subject to challenge under the Data Quality Act in any 

event. If the quantifiable effects are sufficiently suspect simply due to the paucity of available 

data, it makes no logical sense for the agency to quantify such effects only to have them challenged under the Data Quality Act and adds no benefit to an agency’s rulemaking, its analyses 

under the RFA or to the small entities. 62 E.g., NRDC v. Evans, 316 F.3d 904, 911 (9th Cir. 2003); Utility Solid Waste Activities 

Group v. EPA, 236 F.3d 749, 754–55 (D.C. Cir. 2001); Levesque v. Block, 723 F.2d 175, 185 (1st 

Cir. 1983). 

ket entrants. The agency then should not be forced to develop highly suspect numerical estimates of the impacts.61

New subsection (b) of § 607 of the RFA authorizes agencies to 

provide a more general description of the impacts on small entities 

if quantification is not practicable or reliable. The reliability factor 

in new subsection (b) should incorporate the standards of data established by each agency pursuant to the Data Quality Act. If an 

agency determines that it is unable to provide a quantification and 

still meet the criteria of the Data Quality Act, the agency shall provide a detailed statement explaining why it cannot provide the 

quantification. Ultimately, the quality and accuracy of the data will 

be the subject of regulations drafted by the Office of the Chief 

Counsel for Advocacy. 

Section. 4. Repeal of waiver authority and additional powers of 

Chief Counsel 

This section repeals the provision in § 608 authorizing the head 

of an agency to waive completion of a FRFA for up to 180 days if 

the agency cannot complete the FRFA by the time the rule needs 

to be published. In lieu of that waiver, H.R. 527 grants additional 

powers to the Office of the Chief Counsel for Advocacy. 

Repeal of Waiver Authority 

The RFA allows an agency to waive the requirements for an 

IRFA and delay for up to 180 days the preparation of a FRFA. This 

provision is unnecessary. Notice and comment rulemaking is not 

required if the agency, for good cause finds it impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. § 553(b)(B). The 

courts have interpreted this provision as authorizing an agency to 

forgo notice and comment rulemaking in true emergencies in which 

delayed promulgation would do real harm.62 An agency that establishes good cause to forgo notice and comment need not comply 

with the RFA because the analytical requirements are only triggered if the rule must be promulgated pursuant to notice and comment rulemaking. The conditions under which a waiver would 

issue under § 608 of the RFA also satisfies the impracticable, unnecessary, or contrary to the public interest standard of § 553(b)(B) 

of the APA. Since agencies would not be required to comply with 

the RFA under such circumstances no good rationale exist to have 

such a waiver provision. 

Revised § 608—Additional Powers for the Office of the Chief 

Counsel for Advocacy 

In two hearings on the Office of Advocacy, the Committee received testimony suggesting that the Chief Counsel for Advocacy’s 

findings on compliance with the RFA should be accorded some type 


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63 Improving and Strengthening the Office of Advocacy: Hearing before the Committee on 

Small Business, United States House of Representatives, 107th Cong. 1st Sess. (2001) 11 (statement of Giovanni Coratolo); 65 (statement of Deputy Chief Counsel for Advocacy Kay Ryan); 

Improving the Office of Advocacy: Hearing before the Committee on Small Business, 106th 

Cong., 2d Sess. (2000) 12 (statement of James Morrison). 64 Although the D.C. Circuit referred to the SBA, it clearly meant the Chief Counsel for Advocacy. 

of deference.63 The witnesses were responding to the D.C. Circuit’s 

decision in American Trucking Association v. EPA, 175 F.3d 1027 

(D.C. Cir. 1999), rev’d in part and aff’d in part, Whitman v. American Trucking Ass’n, 531 U.S. 457 (2001). In that case, the D.C. 

Circuit stated: ‘‘[t]he SBA, however, neither administers nor has 

any policymaking role under the RFA; at most its role is advisory. 

. . . Therefore we do not defer to the SBA’s interpretation of the 

RFA.’’ 175 F.3d at 1044, citing Scheduled Airlines Traffic Offices v. 

Department of Defense, 87 F.3d 1356, 1361 (D.C. Cir. 1996).64 Absent some action by Congress, courts are unlikely to grant the 

Chief Counsel’s interpretations of the RFA any deference. And if 

the courts do not do so, it also is highly improbable that other federal agencies will do so. 

The situation clearly needs to be rectified. Obtaining deference of 

the RFA will substantially change the balance between the Chief 

Counsel and agencies in developing regulations. Currently, the Office of Advocacy simply must cajole the agencies to make regulatory 

modifications or otherwise revise their certifications or regulatory 

flexibility analyses. The Chief Counsel has little power to coerce 

changes that would be beneficial to small businesses or other small 

entities. However, an Office of Advocacy accorded deference in interpreting the RFA can represent, in conjunction with its authority 

to file amicus briefs in court, a substantial power to coerce regulatory modifications. If an agency does not comply properly with 

the RFA, the threat of the Chief Counsel ‘‘intervening’’ in court and 

expressing an opinion, which the court will give substantial deference, that the agency did not comply with the RFA could lead to 

a remand of the regulation. Therefore, the agency is likely to negotiate changes in RFA compliance that might in turn result in subsequent modifications to the rule that would reduce burdens on 

small entities. 

One potential option would be to amend the RFA by mandating 

that courts and agencies give substantial deference to the views of 

the Chief Counsel concerning compliance with the RFA. This appears to be the tersest solution to the D.C. Circuit’s dismissal of 

Advocacy’s comments. However, brevity in this circumstance is unworkable for a variety of reasons. First, the personnel of the Office 

of the Chief Counsel for Advocacy can change at the behest of the 

President. Each new Chief Counsel can adopt different interpretations of the RFA. If that is the case, then it is possible that an 

agency may receive inconsistent interpretations of the RFA; in 

turn, that makes it more difficult for the agency to develop a consistent methodology for assessing the impact on small entities. Furthermore, the courts have held that the level of deference afforded 

an agency is dramatically reduced if the agency is constantly 

changing the interpretation of a statute. Thomas Jefferson University v. Shalala, 512 U.S. 504, 515 (1994). And the constantly shifting sands of Chief Counsel interpretations is not the gravest barrier to achieving deference; the Chief Counsel’s interpretations still 


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must overcome the standards established by the Supreme Court in 

Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984) and United 

States v. Mead Corp., 533 U.S. 218 (2001). 

Courts start an analysis of a statute by first determining whether Congress spoke explicitly and clearly on the point in question. 

If so, Chevron dictates that the courts go no further; interpretations offered by the agency that are inconsistent with a clear mandate from Congress receive no deference and are invalid. 467 U.S. 

at 842–43. If the agency interpretation is consistent with the clear 

language of the statute, courts must uphold the agency interpretation. Id. This is often referred to as ‘‘Chevron Part One’’ analysis. 

The real deference accorded the agency comes pursuant to the socalled ‘‘Chevron Part Two’’ analysis. Under that standard, an agency’s interpretation of an ambiguous statute or statutory lacuna 

filled by the agency is accorded substantial deference if the interpretation or gap-filling regulation is rational. Id. In essence, as between two equally valid or rational interpretations of an ambiguity 

in a statute, the agency’s interpretation wins under ‘‘Chevron Part 

Two.’’ 

Not all pronouncements from an agency are eligible for deference 

under the ‘‘Chevron Part Two’’ test. For the answer to that question, one must look to the Court’s decision in United States v. 

Mead Corp. According to that case, Chevron deference exists not on 

some inflexible line, but rather on a continuum depending on the 

intent of Congress and the agency’s procedures for developing the 

interpretation. 533 U.S. at 227–31. The keystone for Chevron deference is whether Congress ‘‘would expect the agency to be able to 

speak with the force of law.’’ Id. at 229. The Court noted that ‘‘a 

very good indicator of delegation meriting Chevron treatment in express congressional authorizations to engage in the process of rulemaking . . . that produces regulations . . . for which deference is 

claimed.’’ Id. Since notice and comment rulemaking represents a 

formal administrative procedure to reach an agency decision, the 

Court concluded that it would be logical to assume Congress intended the agency pronouncement in such circumstances to have 

the force and effect of law. Id. at 230. Thus, regulations arising 

from notice and comment rulemaking would be afforded full Chevron deference. 

Given the state of the caselaw and the objectives of empowering 

the Chief Counsel, the best alternative for ensuring the Chief 

Counsel’s interpretation of the RFA would be given Chevron deference is to require the Chief Counsel to promulgate governmentwide rules which all agencies must follow in complying with the 

RFA. This is a well-trodden path followed by federal agencies in 

the implementation of the RFA’s parallel statute—NEPA. After enactment of NEPA, all federal agencies developed their own, often 

inconsistent approaches, to compliance. In 1977, President Carter 

issued an executive order mandating the Council of Environmental 

Quality (CEQ) to ‘‘issue regulations to Federal agencies for the implementation of the procedural provisions of the Act [NEPA] (42 

U.S.C. 4332(2)).’’ E.O. No. 11,991 (May 24, 1977), reprinted in 42 

Fed. Reg. 26,967 (1977). Even though Congress, in NEPA, did not 


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65 In fact, the powers and functions of CEQ remarkably parallel those of the Office of Advocacy. 66The Supreme Court considers these independent regulatory commissions, at least in part, 

creatures of Congress. Humphrey’s Executor v. United States, 295 U.S. 602, 628 (1935). Therefore, Congress can restrict their independence by requiring them to comply with the regulations 

adopted by the Chief Counsel. 

delegate to CEQ any power to issue regulations,65 the regulations 

developed by it are accorded substantial deference by the courts. 

Robertson v. Methow Valley Citizens Ass’n, 490 U.S. 332, 356 

(1990). 

New § 608(a) provides that the Chief Counsel for Advocacy shall 

promulgate regulations governing agency compliance with the RFA. 

The Chief Counsel should follow the pattern established by CEQ— 

draft baseline regulations that all agencies must follow but grant 

the agencies the authority to supplement those regulations to meet 

their own needs. These regulations promulgated by the Chief Counsel must be done pursuant to notice and comment rulemaking because it ensures adequate participation of all interested parties and 

comports with the Supreme Court’s determination in United States 

v. Mead that notice and comment rulemaking assures the agency 

(in this case the Chief Counsel) will be granted Chevron deference. 

The revised § 608 also authorizes federal agencies to supplement 

the Chief Counsel’s rules. However, these supplemental regulations 

cannot conflict with the regulations promulgated by the Chief 

Counsel. To ensure the absence of conflict, federal agencies wishing 

to supplement the rules must consult with the Chief Counsel in an 

effort to eliminate conflicts but may issue the rules without the approval of the Chief Counsel. H.R. 527 could have taken the approach that supplemental agency rules could not be adopted unless 

the Chief Counsel approved them. That path represents bad policy 

for two reasons. First, one agency should not have the authority to 

disapprove another agency’s regulations; if the delegation of power 

was improper, Congress should act by passing legislation modifying 

the delegation of authority. Second, Chief Counsel approval would 

be an executive branch employee interfering with the operation of 

independent agencies such as the Federal Communications Commission, the Nuclear Regulatory Commission, and the Federal 

Trade Commission. Even though these agencies must obtain approval of their collection of information requests from OIRA, Congress recognized their independence from the executive branch by 

granting them the power to override a disapproval by simply majority vote of the commissioners. 44 U.S.C. § 3507(f)(1). It sets a bad 

precedent to authorize, on an ad hoc basis, an executive branch 

agency, approving or disapproving the actions of an independent 

collegial body regulatory commission.66

New § 608(b) provides the Chief Counsel with the same power to 

intervene in individual agency adjudications that the Chief Counsel 

has to file an amicus brief under § 612 of the RFA. There have been 

instances in which the Chief Counsel attempted to intervene in adjudications before federal agencies due to the significance of the 

issues raised by the adjudication but was rebuffed because the administrative law judge determined that the Chief Counsel was not 

a proper party to the proceeding. This is particularly important because some agencies, such as the Agricultural Marketing Service, 

the Federal Energy Regulatory Commission, and the National 

Labor Relations Board make significant policy determinations in 


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67The Chief Counsel has neither the resources nor the expertise to represent private parties 

in federal administrative enforcement proceedings. 

adjudicatory proceedings. The clear grant of a right to intervene 

will eliminate this problem. 

The section also makes clear that the right to intervene as a 

party in an adjudication does not grant the Chief Counsel the authority to appeal any decision by the administrative law judge either to another body in the agency (such as an appeal to the full 

Commission) or to federal court. The role of the Chief Counsel in 

adjudicatory proceedings is vital but limited to advising the decisionmakers of the significance of the issues to small entities rather 

than as a real party in interest. Given these concerns and the possibility that small entities might request the assistance of the Chief 

Counsel in an individual adjudication, the better policy is to exclude the Chief Counsel from intervening in adjudications in which 

the agency is authorized to impose a fine or penalty. It is the expectation that the Chief Counsel will refer to this restriction when 

a small entity requests intervention in an individual enforcement 

proceeding to deny that request. In sum, the intervention rights 

granted in this subsection are not designed to allow the small entity to substitute the Chief Counsel for adequate retention of private 

counsel.67

Amended § 608(c) authorizes the Chief Counsel to file comments 

on any notice of proposed rulemaking without regard to whether 

the notice had been issued pursuant to § 553 of the APA. This language ensures the Chief Counsel’s role as the primary advocate for 

small entities in federal agency decisionmaking and not just on 

agency compliance with the RFA. 

Section 5. Procedures for gathering comments 

SBREFA required two federal agencies, the Occupational Safety 

and Health Administration (OSHA) and the Environmental Protection Agency (EPA), to consider, prior to publication of a proposed 

rule in which an IRFA will be prepared, the concerns of small entities. Section 609(b) of the RFA establishes the procedures for obtaining the input of small entities. The procedures require the formation of a panel of federal employees, including a representative 

from the Office of Advocacy (the organizer of the panel) who then 

obtain input on the potential economic impacts from selected small 

entity representatives. After receiving the input, the panel submits 

a report to the agency and requires the agency to respond to the 

panel report in the proposed rule. The agency is at liberty to modify the proposal according to the recommendations of the panel report but is not required to do so. 

The Committee on Small Business received testimony in hearings that the panel process needs expansion to other federal agencies and requires technical changes to ensure optimal participation 

by small entities. The process established in § 609(b) makes a valuable contribution to agency understanding of the impacts of its proposals on small entities. In fact, during a hearing on the H.R. 2345 

(a predecessor bill), during the 108th Congress, the Chief Counsel 

for Advocacy, Tom Sullivan, recommended that the process be expanded to all agencies. The argument of the Chief Counsel (whose 

employees would have to deal with the SBREFA panels) makes 


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sense and H.R. 527 adopts the recommendation to expand the 

SBREFA panel process to all agencies when they are proposing a 

rule that will have a significant economic impact on a substantial 

number of small entities or the proposed rule qualifies as a major 

rule under the Congressional Review Act. The SBREFA procedures 

will increase the value of the prepublication input to federal agencies and enhance the rationality of the rulemaking process. 

Section 5 modifies the standards for determining which proposed 

rules will be subject to the panel process. Current law limits the 

rules to those for which EPA and OSHA will prepare an IRFA. 

This parameter unnecessarily narrows the regulations that should 

be the subject of a § 609 panel and allows the agencies to make a 

self-interested determination to avoid the panel process. A more appropriate standard would be any rule for which the covered agencies decide to prepare an IRFA or for any rule that a covered agency or OIRA determines to be a major rule under standards identical to those found in § 804 of the Congressional Review Act. Except in the most unusual circumstances (such as a regulation on 

natural gas pipelines or automobile manufacturers), a major rule 

will affect a substantial number of small entities and the agency 

preparing the rule will benefit from small entity input. 

The Committee on Small Business has heard informally from the 

Office of the Chief Counsel for Advocacy that questions remain concerning the kind of material made available by the covered agencies. Section 5 clarifies that the agency provide the Chief Counsel 

and the employees of that Office all materials prepared or utilized 

in developing the proposed rule including a copy of the draft rule. 

The covered agencies also are required to provide information on 

the impacts, whether positive or negative, on small entities. Agencies should be as forthcoming with material as possible. To the extent that information utilized by the agency is not subject to disclosure as proprietary information under the Freedom of Information 

Act (FOIA), appropriate non-disclosure agreements with the Office 

of Advocacy would be appropriate. The Office of Advocacy is an executive branch agency within the federal government and should be 

assumed to operate under the same prohibitions against the release of predecisional documents or proprietary information that 

apply to all federal agencies under FOIA. 

Special procedures must be applied with respect to rules drafted 

by the IRS. If certain small entities receive the actual draft of a 

proposed tax rule, those entities may be able to take advantage of 

that information in tax planning or through business transactions. 

Clearly, this is a legitimate concern and H.R. 527 does not require 

the IRS provide the exact language of any draft proposed rule. For 

example, the IRS would state it is planning to modify the calculation of certain depreciable assets but would not be required to provide the exact date for the regulation to take effect. However, the 

IRS would be expected to provide sufficient information to enable 

the small entities to make sensible comments to the panel. 

Provision of draft regulations by independent regulatory agencies 

(those collegial body organizations set forth in 44 U.S.C. § 3502(5)) 

also raises potential problems. Under their organic statutes, these 

collegial bodies only can take action if a majority of the members 

of the collegial body approve the action. The Government in Sunshine Act prohibits the members from conducting business except 


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68 In many instances rules from these collegial bodies, such as the FCC, tend not to have very 

specific regulatory language. More often than not, the proposed rules read more akin to advanced notices of proposed rulemaking without even tentative conclusions. 69Federal agencies promulgating regulations would have a bias to select small entity representatives, to the extent possible, that would support the regulatory position of the agency. 

in an open meeting. 5 U.S.C. § 552b(b). If an agency set forth in 

44 U.S.C. § 3502(5) was to submit a draft regulation to the Office 

of Advocacy, prior to a meeting, that could be taken as akin to the 

conduct of business not in an open meeting. The importance of the 

Government in Sunshine Act should not be underestimated. Therefore, the agencies are not required to submit the draft proposed 

rule to the Office of Advocacy. Under the revised § 609, collegial 

bodies only should submit sufficient information so that small entities understand the scope of the proposed regulation in order to 

make their input to the panel worthwhile.68

The Committee also recognizes that E.O. 12,866 by its own terms 

does not cover these independent regulatory agencies. Since the Supreme Court’s decision in Humphrey’s Executor v. United States, 

295 U.S. 602 (1935), these agencies are not considered part of the 

executive branch and their regulatory activities are not considered 

subject to oversight by OIRA. To avoid any entanglement between 

the executive branch and these independent regulatory agencies, 

the panel reports are prepared by an employee of the agency and 

an employee of the Office of Advocacy. OIRA employees only will 

be a part of the panel process for those agencies not set forth in 

44 U.S.C. § 3502(5). 

Disputes have arisen between the Office of Advocacy and agencies over the definition of small entity representative. The conflict 

stems from an inconsistency in the drafting of § 609(b). The Office 

of Advocacy is to identify individuals representative of small entities for obtaining advice but the panel is only required to collect advice and recommendations from individual small entity representatives identified by the agency after consultation with the Office of 

Advocacy. For example, EPA limits its universe of small entity representatives only to actual businesses affected; in contrast, the Office of Advocacy is willing to hear from trade association executives 

and lawyers who represent small entities. 

The language in § 609 is not a model of clarity and requires 

amendment to ameliorate disputes between the Office of Advocacy 

and other federal agencies that serve on the panel. New subsection 

609(c) that accords to the Office of Advocacy the sole responsibility 

of selecting the small entity representatives. The Office of Advocacy 

has the greatest contact with small entities and is least likely to 

select biased representatives.69 The Office of Advocacy should use 

the discretion granted to it in § 609 in a balanced manner by finding small entity representatives that can provide diverse views on 

a particular proposed regulation. The amendment to § 609 also 

ends the dispute over the universe of potential small entity representative by authorizing the Office of Advocacy to select either 

small entities or their representatives for providing advice to the 

panel. Under this language, the Office of Advocacy may select individual small entities, lawyers or consultants who represent small 

entities, or officials from trade associations whose members include 

small entities. 


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Section 609 currently requires the panel to receive recommendations and draft a report that becomes part of the rulemaking 

record. The panel should receive advice and recommendations from 

small entities. The panel should discuss these issues but it is inappropriate for a panel to write a report conveying the concerns of 

small entities. H.R. 527’s rewrite of § 609 adds a new subsection (d) 

that mandates the Chief Counsel for Advocacy to draft the report. 

In drafting the report, the Chief Counsel must consult with the 

other panel members to ensure that the report accurately reflects 

the views of small entities. This change ensures that the Office of 

Advocacy, being an independent voice for small entities, will provide a more robust representation of small entity views than a report from a panel that includes personnel from the agency that 

crafted the rule and the agency that might review the rule—OIRA. 

Furthermore, the small entities are more likely to participate if 

they know that the Chief Counsel is charged with conveying their 

views to the rulemaking record. 

The panels that currently convened under § 609 are not subject 

to the strictures of the Federal Advisory Committee Act. The 

amendments to that section made by H.R. 527 should not be construed as requiring the General Services Administration to comply 

with the Federal Advisory Committee Act. 

New § 609(d) also modifies the contents of the report. Currently, 

the report simply provides a litany of issues raised by small entity 

representatives as filtered by the panel. While this information is 

useful, reasoned decisionmaking, including appropriate consideration of all statutory factors (one of which is the impact on small 

entities), requires a report of greater detail. A requirement has 

been added that the report contain an assessment of the proposed 

rule on small entities and a discussion of alternatives that will 

maximize beneficial or minimize adverse economic consequences. 

By requiring this information at a preproposal stage, the agency 

will have the opportunity to modify the regulation or amend its 

IRFA should it wish to do so. Furthermore, the inclusion of this report early in the rulemaking record will provide small entities with 

a base of ideas upon which to suggest other alternatives during the 

rulemaking process. The inclusion of alternatives also can assist 

the agency in demonstrating to the courts that it approached the 

rulemaking process with an open mind. PLMRS Narrowband Corp. 

v. FCC, 182 F.3d 995, 1002 (D.C. Cir. 1999); United Steelworkers 

of American v. Marshall, 647 F.2d 1189, 1208 (D.C. Cir. 1980). The 

report need not be an exhaustive peroration of alternatives but 

should be sufficient to provide both the agency and the regulated 

community with some ideas on what alternatives are available. 

However, the report should include alternatives, to the extent possible, that are not being considered by the agency in the preparation of its IRFA. 

There may be exceptional circumstances where an agency finds 

it impracticable, unnecessary or contrary to the public interest to 

receive input at the prepoposal stage. New § 609(f) creates a procedure by which the agency can seek a waiver of the panel process. 

Waivers only should be granted in the same exceptional circumstances similar to those that would permit an agency to forgo 

notice and comment rulemaking pursuant to § 553(b)(B) of the 

APA. For example, EPA may need to deal with an imminent public 


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70See note 15, supra. 71This should not be a substantial burden on agencies since all executive branch agencies had 

to come up with a plan to review all existing reviews pursuant to President’s Obama’s revisions 

to E.O. 12,866. 

health problem and has sufficient time to issue a rule for a brief 

notice and comment period but does not have the lead time to conduct a panel process. That would be the type of circumstance in 

which the Chief Counsel might consider a waiver of the panel process. 

Section 6. Periodic review of rules 

Section 610 of the RFA mandates that agencies periodically review their rules that have a significant economic impact on a substantial number of small entities. GAO has done a number of studies of agency compliance with § 610 and found compliance sorely 

lacking.70 GAO concludes that the problem relates back to the 

threshold determination of whether the regulation will have a significant economic impact on a substantial number of small entities. 

While GAO’s conclusion is correct, the problems with § 610 compliance are far more pervasive and endemic. Unfortunately, § 610 was 

not a paragon of clear statutory drafting; the language is easily interpreted in a manner by which agencies can avoid compliance. 

Nevertheless, periodic review of regulations is an excellent idea because it forces agencies to examine their regulatory structures 

given changes in the marketplace. Rather than trying to correct 

unclear drafting, H.R. 527 completely revises the section through 

the development of procedures that ensure agencies will periodically review those regulations which have a significant economic 

impact on small entities. 

When § 610 was first enacted, agencies were required to develop 

plans for periodic review. These plans are now more than 30 years 

old. An investigation by the Committee on Small Business in 1997 

and 1998 found that many agencies cannot find their plans; given 

the passage of time, it is less likely that those plans can be unearthed. Rather than having agencies dig through archives for 30 

year old plans, revised § 610 requires the development of new plans 

for periodic review within 180 days after the enactment. In addition to publication of the plan in the Federal Register, agencies are 

required to place these plans on their websites.71

The trigger for periodic review in the revision to § 610 will be 

whether the agency head determines that the regulation has a significant economic impact on a substantial number of small entities. 

The language is written in the present tense meaning that the regulation is subject to review if at the time of review of the regulation, the rule has a significant economic impact on a substantial 

number of small entities. The provision grants the agency appropriate flexibility in determining when to conduct periodic review 

based on current circumstances not events that happened a number of years before the review. In ensuring that the review occurs 

based on current conditions, language in the amended § 610 makes 

it explicit that the decision for review is independent of whether 

the agency developed a FRFA at the time of the rule’s original promulgation. Despite the flexibility provided by § 610, there is an expectation that the full compliance will with the periodic review will 


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be based on the regulations promulgated by the Chief Counsel pursuant to the authority of § 608. 

Although the revised § 610 tracks the scope of the review currently in the RFA, there were a number of modifications designed 

to make the review more thorough. The review now must include 

comments from the Regulatory Enforcement Ombudsman and the 

Office of Advocacy to ensure that the agency receives the most current information on the affect of a rule including how agencies may 

be enforcing (or abusing) the regulation. The revision also requires 

the agency to consider the rule’s contribution to the cumulative impact of federal regulatory burden on small businesses. However, 

given the complexity of such calculation, § 610(d)(6) allows the head 

of the agency to explain why such calculation cannot be made and 

include such statements in the report that the agency files pursuant to new § 610(e). These amendments to the scope of review also 

comport with those made to the FRFA under § 3 of H.R. 527. 

Periodic review commences from the date of enactment of the 

Act. The plan must provide for review of all regulations in force at 

the time of enactment within ten years of the date of enactment. 

A regulation in effect on enactment may not have a significant economic impact on a substantial number of small entities and should 

not be reviewed. However, five years after enactment the regulation may have that impact; if the agency had not previously reviewed the regulation or made a determination that the regulation 

did not have a significant economic impact on a substantial number 

of small entities after publication of the plan of review, the head 

of the agency would determine at the time the regulation came up 

for review whether it should be reviewed. In short, the determination of ‘‘significance’’ and ‘‘substantial’’ should be made as close to 

the review date as possible and based on the most current information available. Regulations promulgated after enactment of the legislation must be reviewed within ten years after the publication of 

the final rule in the Federal Register. Agencies are authorized to 

extend the review process for no more than 2 years. Agencies have 

the resources to complete the review within 12 years. Unlike the 

current statute, the agency head delaying the review must notify 

the Chief Counsel for Advocacy because of the Chief Counsel’s responsibility to monitor agency compliance with the RFA. 

A new mandate in § 610 requires the agency to report annually 

on the results of its periodic reviews. The current version of § 610 

can be interpreted as allowing a review to take place without it 

being memorialized. Submission of a report will enable the Office 

of Advocacy, House and Senate Committees, and OIRA to take appropriate action to ensure compliance or question the determinations on specific rules. To protect the independence of collegial body 

commissions (such as the SEC or CFTC), the agencies identified in 

§ 3502(5) of Title 44, United States Code need not submit reports 

to OIRA. 

Revised subsection 610(e) requires the agency to place on its 

website a list of rules to be reviewed annually as well as a brief 

description of the rule, the agency’s preliminary determination on 

why the regulation has a significant economic impact on a substantial number of small entities, and a request for comments from the 

public, the Chief Counsel and the Regulatory Enforcement OmVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000058 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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72 It would be up to the Office of the Chief Counsel for Advocacy to determine how 

www.regulations.gov fits into the Internet publication requirement of § 610. 73Publication of the list in the April or May Federal Register’s semi-annual agenda would not 

provide sufficient notice to small entities on the rules for which the agency has already commenced review since the beginning of the calendar year. 74There are cases in which the courts, after much judicial prestidigitation, found that exhaustion was not required. E.g., Furlong v. Shalala, 238 F.3d 227 (2d Cir. 2001); American 

Lithotripsy Soc’y v. Thompson, 215 F. Supp. 2d 23 (D.D.C. 2002). However, these court cases 

are not sufficiently definitive with respect to the availability of review outside the Departmental 

appeals process to ensure small entity access to federal courts for RFA challenges. Therefore, 

these cases do not militate against making the change to the RFA. 75The Chief Judicial Officer at the Department of Agriculture acts as the Secretary when 

hearing appeals pursuant to § 15(A) of the Agricultural Marketing Agreement Act of 1937. If 

they Secretary thought the rule was irrational, the Secretary should not have issued it in the 

first instance. Upon further reflection, it is highly unlikely that the Secretary would find his 

or her initial decision to be irrational. 

budsman. Utilization of the Internet 72 should maximize input from 

affected small entities. The Committee also requires publication of 

the Federal Register and the agency can combine the publication 

of the list of rules for review in conjunction with its semi-annual 

agenda in the Federal Register 73 prior to the start of the next calendar year. 

Nothing in the changes made by H.R. 527 modifies the ability of 

adversely affected entities to challenge agency compliance with the 

periodic review requirements. Given the procedures established in 

the revised § 610 and the regulations to be promulgated by the 

Chief Counsel pursuant to amended § 608, the determination of 

whether a particular regulation should be reviewed is subject to judicial challenge and is not committed to agency discretion under 

Heckler v. Chaney, 470 U.S. 821 (1985) and its progeny. 

Section 7. Judicial review of compliance with the RFA 

Section 7(a) modifies the current requirement that judicial review of the RFA is limited to ‘‘final agency action.’’ Instead, judicial 

review will be available when the agency publishes the final rule. 

Section 7(b) modifies the jurisdiction of courts by inserting the parenthetical ‘‘or which would have such jurisdiction if publication of 

the final rule constituted final agency action.’’ 

The changes are made due to concerns that certain procedural 

requirements for challenging agency regulations could dramatically 

delay small entity challenges to the agency compliance with the 

RFA. For example, under the Medicare program, challenges to 

CMS regulations must first run the gauntlet of the Department of 

Health and Human Services administrative law judges and departmental appeals boards. See Shalala v. Illinois Council on Long 

Term Care, Inc., 529 U.S. 1 (2000).74 Similarly, regulations issued 

to implement marketing orders under the Agricultural Marketing 

Agreement Act must go through a statutory exhaustion process before an administrative law judge and then the Chief Judicial Officer. United States v. Ruzicka, 329 U.S. 287 (1946). These formal 

statutory exhaustion requirements, often the vestiges of legislation 

enacted prior to the APA, are an anachronism in the context of informal rulemaking. 

These agencies are utilizing a pre-APA decisionmaking process to 

determine if the regulation complied with the APA by building a 

record supplemental to the one developed during the rulemaking. 

These statutory exhaustion requirements enable covered agencies 

to take a second look at its own regulatory issuances.75 While that 


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76For example, the Chief Judicial Officer within the Department of Agriculture has, with one 

exception, never overturned the Secretary’s regulation implementing a marketing order. And the 

only circumstance in which that was done was to benefit the largest central marketing organization of oranges and lemons grown in California (a marketing order that no longer exists). 77See National Association of Homebuilders v. United States Army Corps of Eng’rs, 417 F.3d 

1272, 1286 (D.C. Cir. 2005). 

process may be beneficial to the agency in building a record to 

demonstrate the rationality of their rules, it enables the agencies 

to cavalierly dismiss the requirements of the APA and RFA by ensuring those assessments are addressed in a formal adjudication 

after the regulation is promulgated. Due to the cost involved of essentially conducting two separate litigations (an adjudication within the agency and a challenge at the federal court level), small entities generally will be foreclosed from challenging an agency’s RFA 

analysis. It certainly takes a courageous small entity to absorb the 

cost of dual litigation in order to get into federal court recognizing 

the likelihood that the original challenge before a federal agency 

will almost certainly favor the federal agency.76 This severely undermines the rationale used by the drafters of SBREFA to mandate 

judicial review—the threat of a relatively quick, unbiased review of 

agency action in federal court would lead to improved compliance 

with the RFA. If an agency can avoid that (due to cost) in order 

to supplement its record ex post facto then the deterrent effect of 

judicial review is negated. Not surprisingly, CMS and the Agricultural Marketing Service remain two of the agencies that have had 

the worst record of complying with the RFA. As a result, the 

changes set forth in § 7(a)–(b) ensure access to judicial review of 

challenges to agency compliance with the RFA without having to 

exhaust any post-promulgation internal agency adjudication on the 

underlying rule. 

The amendments could lead to piecemeal litigation on the final 

rule; judicial review on RFA compliance would then be followed at 

some later date by a challenge to the rationality of the rule. However, the response to this contention is the Supreme Court’s finding 

that ‘‘procedural rights’’ are special, Lujan v. Defenders of the 

Wildlife, 504 U.S. 55, 572 n.7 (1992) and someone complaining of 

an agency’s failure to comply with NEPA ‘‘may complain of that 

failure at the time the failure takes place for the claim can never 

get riper.’’ Ohio Forestry Ass’n, Inc. v. Sierra Club, 523 U.S. 726, 

737 (1998). Given the parallels between the RFA and NEPA already recognized by the courts, then a challenge to agency compliance with the RFA can never be riper than it is when the agency 

promulgates the final rule, irrespective of whether the substance of 

the underlying rule requires review through some additional agency procedures.77 Furthermore, the likelihood of duplicative litigation is constrained by the limited number of agencies at which further agency appeals are required to challenge a final rule. Finally, 

it is important to note that the agencies that can take advantage 

of this statutory exhaustion process are among the worst in complying with the RFA—the Agricultural Marketing Service (AMS) 

and CMS. Therefore, the benefits of speeding judicial review of 

RFA compliance and the need to protect the ‘‘special procedural 

rights inherent in the RFA’’ outweigh the costs to the federal judiciary of piecemeal litigation. 

The amendments made in § 7(a)–(b) are not intended to authorize 

challenges to either the agency’s RFA compliance or the underlying 


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regulation prior to the issuance of a final rule. Principles of exhaustion of administrative remedies remains the most prudent course 

by allowing the agency to correct deficiencies with its RFA compliance in the final rule. However, once the agency has had the opportunity to make corrections in the final rule, it seems foolhardy to 

allow the agency to get another crack at correcting its RFA compliance after issuance of the final rule. The amendment is intended 

to allow federal courts to do what they do best—review agency compliance with statutes governing agency decisionmaking. Federal 

courts will not benefit from any supplementation of the record because federal courts have nearly 60 years of determining compliance with the APA, more than 30 years of reviewing environmental 

impact statements under NEPA, and about 35 years of ensuring 

adequate agency release of information under the Freedom of Information Act. RFA compliance is no more difficult and additional 

agency adjudication under the principle of exhaustion past the final 

rule simply will be of no benefit to the court. Finally, recalcitrant 

agencies like CMS and AMS, rather than risking immediate litigation over RFA compliance, will take the initiative, to improve their 

RFA compliance during the rulemaking process. 

Section 7(c) of the bill makes conforming technical corrections to 

§ 611. The trigger for any challenge is modified from the date of 

final agency action to publication of the final rule. 

Section 7(d) clarifies the Chief Counsel’s amicus authority. In the 

past, the Department of Justice has challenged the scope of the 

Chief Counsel’s brief on the occasions that the Chief Counsel has 

prepared a brief under § 612. In one instance (prior to the enactment of SBREFA), the Department of Justice questioned whether 

the brief could address the rationality of the rule and compliance 

with the RFA. The authors of SBREFA attempted to clarify this by 

authorizing the amicus brief to address the adequacy of the rulemaking record with respect to small entities. Given the changes 

being made in § 4 of the H.R. 527 concerning the promulgation of 

implementing rules by the Office of Advocacy, it is appropriate to 

specify that the Chief Counsel has the authority to address compliance with §§ 601, 604, 605(b), 609, and 610 of the RFA. 

Section 8. Jurisdiction of Court of Appeals for challenges to rules 

implementing RFA 

Section 8 recognizes that certain actions taken by the Chief 

Counsel may adversely affect the rights of small entities. The regulations concerning the implementation of the RFA, and any subsequent changes to those rules should be subject to judicial review by 

small entities that believe the rules do not properly implement the 

RFA. Any small entity would be entitled to challenge the Chief 

Counsel’s decision pursuant to the requirements of the Administrative Orders Review Act, 28 U.S.C. §§ 2341–51. Given the importance of these rules and their impact on federal rulemaking, a federal appeals court appears to be the most appropriate venue for review. In some instances, challenges to agency decisions, such as 

those concerning ambient air quality standards under the Clean 

Air Act or licenses for use of spectrum under the Communications 

Act of 1934, as amended, must be brought in the D.C. Circuit. It 

would be inappropriate to force small entities to retain counsel and 

prosecute an appeal solely in the District of Columbia. In addition 


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to authorizing challenges to Chief Counsel regulations, § 10(b) also 

makes appropriate technical and conforming changes to the RFA 

and the Administrative Orders Review Act. 

As already noted, the Department of Justice has argued that limitations should exist on the scope of the amicus brief filed by the 

Chief Counsel. The RFA simply represents one component of the 

necessary considerations for developing a rational rule as mandated by the APA. A limitation on the scope of the amicus brief 

would place the Chief Counsel in the odd position of arguing that 

the agency did not comply with the RFA but could then not draw 

the obvious conclusion—the procedural failure constitutes a violation of the rational rulemaking mandated by the APA. See Motor 

Vehicle Mfrs. Ass’n v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 

(1983); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 

418–19 (1971). Furthermore, the analysis performed by the agency 

pursuant to the RFA can demonstrate that the rule itself is irrational even if the agency complied with the RFA. Thompson v. 

Clark, 741 F.2d 401, 405 (D.C. Cir. 1984). The Chief Counsel 

should not be prohibited from reaching conclusions of law concerning the rationality of an agency?s rule in an amicus brief. Section 8(c) clarifies that the Chief Counsel has the authority in its 

amicus briefs to comment on compliance with the rationality of the 

rule as well as the procedures for complying with the APA and the 

RFA. 

Section 9. Clerical amendments 

Section 9 contains appropriate clerical amendments needed to 

make the United States Code consistent with the changes made by 

the Committee in H.R. 527. 

VIII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 527 would amend the RFA to require federal agencies to 

provide more detailed analyses of the impacts of their proposed and 

final rules on small entities, including small businesses. The bill 

also requires federal agencies to seek out the input of small entities 

prior to publication of significant proposed rules. Finally, the legislation revises the already extant requirement of agencies to review 

periodically their existing regulations. 

Based on information from the Office of the Chief Counsel for 

Advocacy and other agencies, the Congressional Budget Office estimates that implementing H.R. 527 would cost $80 million over the 

2012–2016 period subject to appropriation of the necessary 

amounts. Pay-as-you go procedures do not apply to this legislation 

because it would not affect direct spending or revenues. 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, August 24, 2011. 

Hon. SAM GRAVES, Chairman, Committee on Small Business, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 527, the Regulatory Flexibility Improvements Act of 2011. 


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If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

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

Summary: H.R. 527 would amend the Regulatory Flexibility Act 

(RFA). The bill would expand the number of rules covered by the 

RFA and require agencies to perform additional analysis of regulations that affect small businesses. Finally, the legislation would 

provide new authorities to the Small Business Administration’s 

(SBA’s) Office of Advocacy to intervene in agency rulemaking. 

CBO estimates that implementing H.R. 527 would cost $80 million over the 2012–2016 period to expand the RFA, assuming appropriation of the necessary funds. Enacting the bill could affect direct spending by agencies not funded through annual appropriations; therefore, pay-as-you-go procedures apply. CBO estimates, 

however, that any net increase in spending by those agencies would 

not be significant. Enacting H.R. 527 would not affect revenues. 

H.R. 527 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would not affect the budgets of state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 527 is shown in the following table. The costs 

of this legislation fall within budget functions 370 (commerce and 

housing credit), 800 (general government), and all budget functions 

that include agencies that issue regulations affecting small businesses. 

By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2012- 

2016 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ...................................................... 10 15 20 20 20 85 

Estimated Outlays ........................................................................ 8 14 18 20 20 80 

Basis of Estimate: For this estimate, CBO assumes that the legislation will be enacted near the end of fiscal year 2011, that the 

necessary amounts will be appropriated near the start of each fiscal year, and that spending will follow historical patterns for similar activities. 

CBO is unaware of any comprehensive information on the current costs of spending for regulatory activities governmentwide. 

However, according to the Congressional Research Service, federal 

agencies issue 3,000 to 4,000 final rules each year. Most are promulgated by the Departments of Transportation, Homeland Security, and Commerce, and the Environmental Protection Agency 

(EPA). Agencies that issue the most major rules (those with an estimated economic impact on the economy of more than $100 million 

per year) include the Department of Health and Human Services, 

the U.S. Department of Agriculture, and EPA. 

H.R. 527 would broaden the definition of a ‘‘rule’’ for rulemaking 

purposes to include agency guidance documents and policy stateVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000063 Fmt 06659 Sfmt 06602 E:\HR\OC\HR289P2.XXX HR289P2

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ments. The bill also would expand the scope of the regulatory analysis for proposed and final rules to examine any indirect economic 

effects on small businesses and to provide a more detailed analysis 

of the possible economic consequences of the rule to small businesses. The legislation equates indirect economic effects with any 

impact that is reasonably foreseeable. The legislation also would 

require agencies to publicly report on the cumulative economic impact of any new regulations on the costs of existing regulations to 

small businesses. Implementing H.R. 527 would increase the number of agencies that need to prepare regulatory analysis and also 

would increase the role of the SBA’s Office of Advocacy and the Office of Information and Regulatory Affairs (OIRA) in the rulemaking process. Finally, the legislation would require more federal 

agencies to use panels of experts to evaluate regulations and to 

prepare reports on the economic impact of proposed regulations on 

small business. 

Information from OIRA, SBA, and some federal regulatory agencies indicates that the new requirements under the bill would increase the cost to issue a few hundred of the thousands of federal 

regulations issued annually. Based on that information, CBO estimates that requiring the additional analysis would increase administrative costs to regulatory agencies, the SBA’s Office of Advocacy, 

and OIRA by $20 million annually, subject to the availability of appropriated funds. We expect that it would take about three years 

to reach that level of effort. 

Under current law and executive orders, all agencies must prepare a regulatory analysis prior to issuing a final rule. That analysis includes the purpose of the regulatory action, the number and 

types of small businesses to which the rule will apply, the projected 

reporting and compliance costs of the rule, and any significant alternatives that would accomplish the objectives of the rule while 

minimizing the economic impact on small business and other activities. 

An agency can waive the requirement for a part of the regulatory 

analysis if it can certify that the proposed rule will not have a significant economic impact on a substantial number of small businesses. If a proposed rule is expected to have a significant economic 

impact, the agency is required to notify the Small Business Administration’s Office of Advocacy and provide it with an opportunity to 

comment on the rule. In addition, EPA, the Occupational Safety 

and Health Administration, and the Consumer Financial Protection 

Bureau are required to convene panels of experts to evaluate any 

proposed regulation that may have a significant economic impact. 

Those panels consist of federal employees from the rulemaking 

agency, the Office of Management and Budget, and SBA who work 

to ensure that small business viewpoints are considered prior to 

the issuance of a final rule. Moreover, under current law, agencies 

are required to periodically review the economic impact of existing 

rules that may have an impact on small businesses. 

Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. Enacting H.R. 

527 could affect direct spending by agencies not funded through annual appropriations; therefore, pay-as-you-go procedures apply. 


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CBO estimates, however, that any net increase in spending by 

those agencies would not be significant. 

Intergovernmental and private-sector impact: H.R. 527 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Previous CBO estimate: On August 24, 2011, CBO transmitted 

a cost estimate for H.R. 527 as ordered reported by the House Committee on the Judiciary on July 7, 2011. The pieces of legislation 

are similar, and the CBO cost estimates are the same. 

Estimate prepared by: Federal spending: Matthew Pickford; Impact on state, local, and tribal governments: Melissa Merrell; Impact on the private sector: Paige Piper/Bach. 

Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

IX. UNFUNDED MANDATES

H.R. 527 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act, Pub. L. 

No. 104–4, and would impose no costs on state, local or tribal governments. 

X. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House, the Committee provides the following opinion and estimate 

with respect to new budget authority, entitlement authority and 

tax expenditures. 

The Committee does not adopt as its own the estimate of new 

budget authority contained in the cost estimate prepared by the Director of the Congressional Budget Office pursuant to § 402 of the 

Congressional Budget Act of 1974. 

The Committee believes that the cost estimate provided by the 

Congressional Budget Office seriously misconstrues the process of 

writing regulations. As a result, the estimate provided by the Congressional Budget Office significantly overestimates the cost of 

complying with the new requirements of H.R. 527. 

First, the Congressional Budget Office admits that there are no 

credible studies on the actual cost of writing federal regulations. 

That conclusion is buttressed by a review of federal appropriations 

legislation which does not specifically allocate funds to the writing 

and drafting of regulations. 

Second, the Congressional Budget Office’s cost estimate is primarily based on the use of prepublication panels in § 5 of H.R. 527. 

Under that procedure, all agencies would have to prepare a report 

on recommendations of small businesses on how to reduce adverse 

or increase positive consequences of the proposed rule on small 

businesses and publish such report along with the proposed rule in 

the Federal Register. The main effort is the preparation of a report 

by the Office of the Chief Counsel for Advocacy based on input 

from the agency and small business representatives. In short, this 

process simply formalizes the already extant procedures that agencies use to obtain input from interested parties as they develop the 

proposed rules. According to all of the plans developed by federal 


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agencies in response to E.O. 13,563, each agency has procedures 

designed to obtain input from the public. As part of this process, 

the agencies would be required to focus some of this outreach to 

small businesses or their representatives. The Committee does not 

believe that this type of outreach, which already is conducted, adds 

any cost to the process of writing regulations. The other cost is the 

actual preparation of the report by the Office of the Chief Counsel 

for Advocacy. Since the report would lay the basis for any subsequent comments on the proposed rule prepared by the Office of the 

Chief Counsel for Advocacy, the preparation of the reports simply 

would move the process to a different point in that Office’s normal 

course of business in reviewing regulations published in the Federal Register. 

Third, federal agencies would be required to estimate the costs 

of indirect effects of significant rules under H.R. 527. While the 

Congressional Budget Office suggests the fact that this will increase costs, the Committee disputes that conclusion. Agencies already are required to estimate indirect effects for regulations that 

are subject to the strictures of E.O. 12,866. The Committee believes 

that there will be significant overlap between those two sets of 

rules—thereby substantially undermining this portion of the Congressional Budget Office estimate for H.R. 527. 

Fourth, in response to E.O. 13,563, agencies (other than independent collegial body agencies) published final plans in August to 

establish procedures for reviewing all existing federal agency regulations. In response to a question from Chairman Graves at a September 21, 2011 hearing on the implementation of E.O. 13,563, Administrator Sunstein stated that the agencies could conduct the review of all existing federal regulations, including outreach to the 

regulated community, under current budget constraints. If agencies 

are capable preparing these plans (which total over 800 pages) and 

do these reviews within existing budgets, there should not be a significant cost to comply with the requirements of H.R. 527, i.e., the 

agencies could comply with the new analytical requirements within 

existing budget constraints. 

Fifth, every President since President Carter has drafted Executive Orders that impose various analytical requirements, whether 

with respect to rulemaking or compliance with NEPA, on federal 

agencies. In some cases, those requirements are significantly greater than that imposed by legislation. For example, E.O. 12,866 imposes cost-benefit analysis requirements on federal agencies even 

when federal statutes do not. Nevertheless, agencies are able to 

comply with the requirements of these executive orders within existing budgets. If agencies are able to comply with Executive Orders that modify agency procedural requirements without the expenditure of additional funds, the agencies certainly should be able 

to comply with requirements of H.R. 527 without additional outlays. 

Sixth, every President from President Reagan forward has ordered agencies to review all agency regulations and eliminate unnecessary or costly rules. Clearly this has a significant cost to federal agencies. H.R. 527 provides a statutory procedure that, if properly enforced, would obviate any need for Presidents to issue a 

mandate to review agency regulations. The estimate from the Congressional Budget Office fails to take account of this. 


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For the foregoing reasons, the Committee does not adopt the cost 

estimate provided by the Congressional Budget Office and believes 

that procedures to draft regulations will be incorporated into agency budgets as is current compliance with Executive Order 12,866 

or Executive Order 13,563. The bill does not contain any new entitlement authority, tax expenditures, or tax revenue. 

XI. OVERSIGHT FINDINGS

In accordance with clause (2)(b)(1) of Rule X of the Rules of the 

House, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 527 are incorporated into the descriptive portions of 

this report. 

XII. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the authority for this 

legislation in Art. I, § 8, cls. 1, 3, and 18; Art. IV, § 3, cl. 2, and 

the Sixteenth Amendment of the Constitution of the United States. 

XIII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 527 does not relate to the terms and conditions of employment or access to public services or accommodations within the 

meaning of § 102(b)(3) of Pub. L. No. 104–1. 

XIV. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 527 does not establish or authorize the establishment of any 

new advisory committees as that term is defined in the Federal Advisory Committee Act, 5 U.S.C. App. 2. 

XV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 527 does not contain any 

congressional earmarks, limited tax benefits or limited tariff benefits as defined in subsections (e), (f) or (g) of clause 9 of rule XXI 

of the Rules of the House. 

XVI. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House, 

the Committee establishes the following performance related goals 

and objectives for this legislation: 

H.R. 527 includes a number of provisions designed to 

strengthen agency compliance with the Regulatory Flexibility Act, reduce confusion among agencies concerning 

compliance with the Regulatory Flexibility Act and streamline determinations associated with size standards for the 

purposes of statutes other than the Small Business Act 

and Small Business Investment Act of 1958. 


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1 Agencies subject to the panel process include the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Consumer Financial Protection Bureau. 2Office of Advocacy, U.S. Small Business Administration, ‘‘Report on the Regulatory Flexibility Act for FY 2010’’ (Washington, D.C., February 2011), 5. 3 H.R. 4458, the Small Business Regulatory Improvement Act (110th Congress). 

XVII. DISSENTING VIEWS

H.R. 527—THE REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011

Background 

In 1980, Congress enacted the Regulatory Flexibility Act (RFA) 

to respond to concerns that the uniform application of federal regulations imposed disproportionate burdens on small firms. In order 

to minimize the burden of regulations on small businesses, the 

RFA mandates that federal agencies consider the potential economic impact of federal regulations on small entities. Federal agencies accomplish this goal by analyzing regulations for their impact 

on small businesses. In addition to these requirements, select agencies provide further outreach to small firms by conducting small 

business advocacy reviews (SBAR) panels.1 The results of these 

interventions are used to tailor regulations in a manner that results in lower compliance costs for small firms. 

By many measures, the efforts taken under the RFA have been 

very successful. During FY 2010, the Office of Advocacy claims that 

efforts undertaken through the RFA yield nearly $15 billion in foregone regulatory costs for small businesses.2 Such results included 

regulatory savings across a wide-range of agencies including the 

Environmental Protection Agency, the Federal Aviation Administration, the Federal Acquisition Regulation Council, the Securities 

and Exchange Commission, and the Small Business Administration. It is notable that significant savings were achieved at a considerable number of agencies that are not subject to the SBAR 

panel process. 

While the success of RFA is indisputable, small businesses have 

requested additional relief from federal regulations. As a result, the 

committee passed legislation in the 110th Congress which strengthened the RFA.3 While H.R. 527 incorporates the fundamental provisions of this prior legislation, it adds sweeping new powers to the 

Office of Advocacy, imposes substantial requirements across all federal agencies, and does so at significant cost to the taxpayer. 

Impact of Legislation 

This legislation makes unequivocally sweeping changes to the 

RFA and its implementation. Among the most notable modifications are greatly expanding the powers of the SBA’s Office of Advocacy and imposing costly new requirements on agencies. The legislation fails to authorize any new funding for these new requireVerDate Mar 15 2010 21:08 Nov 19, 2011 Jkt 071250 PO 00000 Frm 00068 Fmt 6604 Sfmt 6604 E:\HR\OC\HR289P2.XXX HR289P2

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4 Congressional Budget Office, Cost Estimate for H.R. 527, August 24, 2011. 

5 Congressional Budget Office, Cost Estimate for H.R. 1882, May 28, 1999 and Cost Estimate 

for H.R. 4458, February 6, 2008. 6Letter to Ranking Member Velazquez from Thomas M. Sullivan Chief Counsel of the Office 

of Advocacy, detailing the costs of expanding the SBAR panel process, dated May 18, 2004. 7The number of additional agencies that would be subject to the SBAR panel process under 

H.R. 527 is between 50 and 70. This number could fluctuate depending on whether a particular 

agency located within a Cabinet Department will convene a panel at the agency-level or departmental-level. To be conservative, this analysis uses a number at the lower end of this range. 

ments and it is unlikely that Advocacy’s current budget of $9 million and staffing level of 46 employees will be sufficient to administer the additional responsibilities. 

Ignores substantial costs 

Although during the markup of H.R. 527 proponents stated that 

the legislation would incur no additional costs, committee Democrats disagree. While the CBO estimated a five-year $80 million 

cost for the implementation of H.R. 527,4 committee Democrats 

performed a separate cost analysis of the legislation. The rationale 

for doing so was that CBO’s own cost estimate for H.R. 4458 from 

the 110th Congress was greater than that for H.R. 527, while the 

scope of H.R. 4458 was actually more limited than H.R. 527. Based 

on analysis of prior Congressional Budget Office (CBO) cost estimates 5 and of official correspondence with the Office of Advocacy,6

committee Democrats find that this legislation would actually cost 

$291,250,000 over a five-year window or approximately $58 million 

per year. 

In developing this analysis, staff used the CB0 cost estimates for 

H.R. 4458 (2007, 110th Congress) and H.R. 1882 (1999, 106th Congress). Similar to H.R. 527, H.R. 4458 included provisions requiring 

more detailed regulatory flexibility analyses, strengthening the section 610 periodic review process, and requiring agencies to consider 

indirect effects in their analyses. CB0 determined that these provisions in H.R. 4458, which H.R. 527 also contains, would cost $20 

million per year or $100 million over the five-year period. Other 

major drivers of the cost estimate were the provisions of H.R. 527 

that would subject Internal Revenue Service (IRS) interpretative 

rules and land management plans of the Bureau of Land Management and the U.S. Forest Service to the RFA. In addition, H.R. 527 

subjects rules pertaining to tribal organizations to the RFA and requires agencies to consider rules that have beneficial effects. It is 

estimated that these provisions would cost approximately $5.5 million per year to implement. 

The largest portion of costs pertaining to H.R. 527 emanate from 

the expansion of the SBAR panel process. In 1999, the committee 

reported H.R. 1882 which subjected the IRS to the SBAR panel 

process. The CBO estimated this cost at approximately $1.5 million 

per year, while the additional costs due to changes in the panel 

process would cost $0.5 million per year, for a total cost of $2 million per year. Based on this estimate, as well as information contained in official correspondence to the committee, these figures 

were extrapolated to the approximately 55 additional agencies that 

would be subject to the SBAR panel process under H.R. 527.7 Within these 55 agencies, 5 were considered to have the highest costs 

of $1.5 million per year, which would be on par with the IRS SBAR 

panel cost estimate in H.R. 1882. Ten agencies were considered to 


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have the next highest costs of $1 million per year; twenty to have 

costs of $0.5 million per year; and the final twenty to have costs 

of $0.25 million per year. Based on this analysis, the expansion of 

the panel process alone would cost $32.5 million per year. 

While such changes could provide additional cost savings to 

small businesses, this benefit has not been quantified. Instead, the 

committee has only heard anecdotal testimony. Given this, it is unclear that the nearly $60 million annual cost of implementing H.R. 

527 will yield any additional saving for small businesses. As a result, it may only add to the deficit, without any real benefit form 

small firms. 

Ranking Member Vela ́zquez offered three amendments that 

would have addressed the costly nature of H.R. 527. A substitute 

was offered and defeated by a vote of 9 to 14 that was based on 

H.R. 4458 from the 110th, which would have provided meaningful 

relief to small businesses at a lower cost to taxpayers. An amendment was also offered that would have required the Office of Advocacy to report on the costs of the SBAR panel process. This was defeated by a vote of 10 to 13. Finally, an amendment was offered 

that would have permitted the legislation to be implemented only 

if it had no cost and if the federal deficit was less than half a trillion dollars in the prior year. Given the insistence by the legislation’s proponents that H.R. 527 would have no cost, it was surprising that this amendment was defeated by a vote of 10 to 13. 

Delays issuance of important regulations 

Taken together, the changes included in H.R. 527 will create 

delays for agencies issuing regulations. By subjecting the agencies 

to the SBAR panel process and requiring more detailed analyses, 

agencies would face delays in implementing rules. The panel process requires the submission of information to the Office of Advocacy, the convening of the panel, and the submission of a report on 

panel proceedings. This could take up to 60 days to fulfill these requirements, delaying agencies’ action on rulemakings. In addition, 

H.R. 527 will require agencies to provide more detailed analyses, 

which would include an assessment of the indirect costs of a rule. 

This analysis of indirect effects could require substantial time and 

resources, as such estimates are often not readily evident and require more in depth study and research. 

The impact of these bureaucratic delays could be significant on 

individuals or businesses seeking immediate government action. 

For example, this could impede rules pertaining to food safety, consumer protection, health and safety, and Veterans’ assistance. It 

could also adversely impact rules that would protect families from 

fraudulent practices in the mortgage industry or safeguard children 

from toxic toys. With regard to the SBA, which administers programs to assist small business, H.R. 527 could ironically hurt the 

very entities that it is seeking to assist by delaying regulations implementing small business financing, contracting, or entrepreneurial development initiatives. 


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71 

8 5 U.S.C. § 553. 

Impairs the stewardship of the environmental and public 

lands 

H.R. 527 applies the RFA to Bureau of Land Management (BLM) 

and U.S. Forest Service (USFS) land management plans. Land 

management plans address the need for restoration and conservation to enhance the resilience of ecosystems to a variety of threats. 

Plans proactively address adverse environmental impacts and emphasize the maintenance and restoration of watershed health, 

which protect and enhance America’s water resources. They also 

provide for the diversity of species and wildlife habitat and foster 

sustainable forests and lands and their contribution to vibrant 

rural economies. 

Applying the RFA to land management plans, would allow corporate interests, such as those engaged in the timber, energy, and 

mining industries, to challenge land management plans which restrict commercial activity in national parks and public lands. This 

could delay and block land management plans that restrict access 

to federal lands for commercial use or development. 

Turns the Office of Advocacy into a super-regulator 

Section 4 of H.R. 527 requires the Office of Advocacy to issue regulations subject to the notice and comment rulemaking provisions 

of the Administrative Procedures Act8 for the RFA, which will confer such regulations with Chevron deference, effectively giving the 

regulations the force of law. As a result, the Chief Counsel will now 

be involved in federal agency decision-making and not just on matters pertaining to agency compliance with the RFA. 

By broadening the Office of Advocacy’s role in the rulemaking 

process, the balance between the office and federal agencies will 

change dramatically. Currently, the office may simply file a comment letter on a particular proposed rule and the agency may or 

may not heed its advice. However, if H.R. 527 is enacted, the Office 

of Advocacy will be accorded with judicial deference in interpreting 

the RFA, which will provide it with substantial power to coerce regulatory modifications. This could adversely affect federal agencies 

ability to protect consumers, workers, and the environment. 

Conclusion 

H.R. 527 would dramatically expand the powers of the Office of 

Advocacy, including requiring the office to issue RFA regulations, 

greatly increasing its role in judicial proceedings, and subjecting all 

RFA agencies to the SBAR panel processes. In doing so, it makes 

no effort to ensure that sufficient resources and personnel are provided, instead leaving taxpayers with the bill. If H.R. 527 is 

enacted, agencies could be hamstrung in their efforts to accomplish 

their rulemaking and administrative responsibilities, leaving many 

regulations—including those that are consumer-, environmentally-, and worker-oriented—delayed or, in the worst case, 

unimplemented. 

NYDIA M. VELA ́ ZQUEZ. 


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72 

XVIII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

TITLE 5, UNITED STATES CODE 

PART I—THE AGENCIES GENERALLY 

* * * * * * * 

CHAPTER 6—THE ANALYSIS OF REGULATORY 

FUNCTIONS 

Sec. 

601. Definitions. 

* * * * * * * 

ø605. Avoidance of duplicative or unnecessary analyses.¿ 

605. Incorporations by reference and certifications. 

* * * * * * * 

ø607. Preparation of analyses. 

ø608. Procedure for waiver or delay of completion.¿ 

607. Quantification requirements. 

608. Additional powers of Chief Counsel for Advocacy. 

§ 601. Definitions 

For purposes of this chapter— 

ø(1) the term¿ 

(1) AGENCY.—The term ‘‘agency’’ means an agency as defined 

in section 551(1) of this titleø;¿. 

ø(2) the term ‘‘rule’’ means any rule for which the agency 

publishes a general notice of proposed rulemaking pursuant to 

section 553(b) of this title, or any other law, including any rule 

of general applicability governing Federal grants to State and 

local governments for which the agency provides an opportunity for notice and public comment, except that the term 

‘‘rule’’ does not include a rule of particular applicability relating to rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or to valuations, costs or accounting, or practices relating to such rates, wages, structures, prices, appliances, services, or allowances;¿ 

(2) RULE.—The term ‘‘rule’’ has the meaning given such term 

in section 551(4) of this title, except that such term does not include a rule of particular (and not general) applicability relating to rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or to valuations, costs or accounting, or practices relating to such rates, wages, structures, prices, appliances, services, or allowances. 

ø(3) the term¿ 

(3) SMALL BUSINESS.—The term ‘‘small business’’ has the 

same meaning as the term ‘‘small business concern’’ under secVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000072 Fmt 06604 Sfmt 06601 E:\HR\OC\HR289P2.XXX HR289P2

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tion 3 of the Small Business Act, unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Registerø;¿. 

ø(4) the term ‘‘small organization’’ means any not-for-profit 

enterprise which is independently owned and operated and is 

not dominant in its field, unless an agency establishes, after 

opportunity for public comment, one or more definitions of such 

term which are appropriate to the activities of the agency and 

publishes such definition(s) in the Federal Register;¿ 

(4) SMALL ORGANIZATION.— 

(A) IN GENERAL.—The term ‘‘small organization’’ means 

any not-for-profit enterprise which, as of the issuance of the 

notice of proposed rulemaking— 

(i) in the case of an enterprise which is described by 

a classification code of the North American Industrial 

Classification System, does not exceed the size standard established by the Administrator of the Small 

Business Administration pursuant to section 3 of the 

Small Business Act (15 U.S.C. 632) for small business 

concerns described by such classification code; and 

(ii) in the case of any other enterprise, has a net 

worth that does not exceed $7,000,000 and has not 

more than 500 employees. 

(B) LOCAL LABOR ORGANIZATIONS.—In the case of any 

local labor organization, subparagraph (A) shall be applied 

without regard to any national or international organization of which such local labor organization is a part. 

(C) AGENCY DEFINITIONS.—Subparagraphs (A) and (B) 

shall not apply to the extent that an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions for such term which are 

appropriate to the activities of the agency and publishes 

such definitions in the Federal Register. 

ø(5) the term¿ 

(5) SMALL GOVERNMENTAL JURISDICTION.—The term ‘‘small 

governmental jurisdiction’’ means governments of cities, counties, towns, townships, villages, school districts, or special districts, and tribal organizations (as defined in section 4(l) of the 

Indian Self-Determination and Education Assistance Act (25 

U.S.C. 450b(l))), with a population of less than fifty thousand, 

unless an agency establishes, after opportunity for public comment, one or more definitions of such term which are appropriate to the activities of the agency and which are based on 

such factors as location in rural or sparsely populated areas or 

limited revenues due to the population of such jurisdiction, and 

publishes such definition(s) in the Federal Registerø;¿. 

ø(6) the term¿ 

(6) SMALL ENTITY.—The term ‘‘small entity’’ shall have the 

same meaning as the terms ‘‘small business’’, ‘‘small organizaVerDate Mar 15 2010 18:43 Nov 19, 2011 Jkt 71250 PO 00000 Frm 000073 Fmt 06604 Sfmt 06601 E:\HR\OC\HR289P2.XXX HR289P2

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tion’’ and ‘‘small governmental jurisdiction’’ defined in paragraphs (3), (4) and (5) of this sectionø; and¿. 

ø(7) the term ‘‘collection of information’’— 

ø(A) means the obtaining, causing to be obtained, soliciting, or requiring the disclosure to third parties or the 

public, of facts or opinions by or for an agency, regardless 

of form or format, calling for either— 

ø(i) answers to identical questions posed to, or identical reporting or recordkeeping requirements imposed 

on, 10 or more persons, other than agencies, instrumentalities, or employees of the United States; or 

ø(ii) answers to questions posed to agencies, instrumentalities, or employees of the United States which 

are to be used for general statistical purposes; and 

ø(B) shall not include a collection of information described under section 3518(c)(1) of title 44, United States 

Code. 

ø(8) RECORDKEEPING REQUIREMENT.—The term ‘‘recordkeeping requirement’’ means a requirement imposed by an 

agency on persons to maintain specified records.¿ 

(7) COLLECTION OF INFORMATION.—The term ‘‘collection of information’’ has the meaning given such term in section 3502(3) 

of title 44. 

(8) RECORDKEEPING REQUIREMENT.—The term ‘‘recordkeeping 

requirement’’ has the meaning given such term in section 

3502(13) of title 44. 

(9) ECONOMIC IMPACT.—The term ‘‘economic impact’’ means, 

with respect to a proposed or final rule— 

(A) any direct economic effect on small entities of such 

rule; and 

(B) any indirect economic effect on small entities which 

is reasonably foreseeable and results from such rule (without regard to whether small entities will be directly regulated by the rule). 

(10) LAND MANAGEMENT PLAN.— 

(A) IN GENERAL.—The term ‘‘land management plan’’ 

means— 

(i) any plan developed by the Secretary of Agriculture 

under section 6 of the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1604); 

and 

(ii) any plan developed by the Secretary of Interior 

under section 202 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1712). 

(B) REVISION.—The term ‘‘revision’’ means any change to 

a land management plan which— 

(i) in the case of a plan described in subparagraph 

(A)(i), is made under section 6(f)(5) of the Forest and 

Rangeland Renewable Resources Planning Act of 1974 

(16 U.S.C. 1604(f)(5)); or 

(ii) in the case of a plan described in subparagraph 

(A)(ii), is made under section 1610.5–6 of title 43, Code 

of Federal Regulations (or any successor regulation). 


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(C) AMENDMENT.—The term ‘‘amendment’’ means any 

change to a land management plan which— 

(i) in the case of a plan described in subparagraph 

(A)(i), is made under section 6(f)(4) of the Forest and 

Rangeland Renewable Resources Planning Act of 1974 

(16 U.S.C. 1604(f)(4)) and with respect to which the 

Secretary of Agriculture prepares a statement described 

in section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)); or 

(ii) in the case of a plan described in subparagraph 

(A)(ii), is made under section 1610.5–5 of title 43, Code 

of Federal Regulations (or any successor regulation) 

and with respect to which the Secretary of the Interior 

prepares a statement described in section 102(2)(C) of 

the National Environmental Policy Act of 1969 (42 

U.S.C. 4332(2)(C)). 

§ 602. Regulatory agenda 

(a) During the months of October and April of each year, each 

agency shall publish in the Federal Register a regulatory flexibility 

agenda which shall contain— 

(1) * * * 

(2) a summary of the nature of any such rule under consideration for each subject area listed in the agenda pursuant to 

paragraph (1), the objectives and legal basis for the issuance 

of the rule, and an approximate schedule for completing action 

on any rule for which the agency has issued a general notice 

of proposed rulemakingø, and¿; 

(3) a brief description of the sector of the North American Industrial Classification System that is primarily affected by any 

rule which the agency expects to propose or promulgate which 

is likely to have a significant economic impact on a substantial 

number of small entities; and 

ø(3)¿ (4) the name and telephone number of an agency official knowledgeable concerning the items listed in paragraph 

(1). 

* * * * * * * 

ø(c) Each agency shall endeavor to provide notice of each regulatory flexibility agenda to small entities or their representatives 

through direct notification or publication of the agenda in publications likely to be obtained by such small entities and shall invite 

comments upon each subject area on the agenda.¿ 

(c) Each agency shall prominently display a plain language summary of the information contained in the regulatory flexibility agenda published under subsection (a) on its website within 3 days of 

its publication in the Federal Register. The Office of Advocacy of the 

Small Business Administration shall compile and prominently display a plain language summary of the regulatory agendas referenced in subsection (a) for each agency on its website within 3 

days of their publication in the Federal Register. 

* * * * * * * 


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§ 603. Initial regulatory flexibility analysis 

(a) Whenever an agency is required by section 553 of this title, 

or any other law, to publish general notice of proposed rulemaking 

for any proposed rule, øor¿ publishes a notice of proposed rulemaking for an interpretative rule involving the internal revenue 

laws of the United States, or publishes a revision or amendment to 

a land management plan, the agency shall prepare and make available for public comment an initial regulatory flexibility analysis. 

Such analysis shall describe the impact of the proposed rule on 

small entities. The initial regulatory flexibility analysis or a summary shall be published in the Federal Register at the time of the 

publication of general notice of proposed rulemaking for the rule. 

The agency shall transmit a copy of the initial regulatory flexibility 

analysis to the Chief Counsel for Advocacy of the Small Business 

Administration. In the case of an interpretative rule involving the 

internal revenue laws of the United States, this chapter applies to 

interpretative rules published in the Federal Register for codification in the Code of Federal Regulations, but only to the extent that 

such interpretative rules impose on small entities a collection of information requirementø.¿ or a recordkeeping requirement, and 

without regard to whether such requirement is imposed by statute 

or regulation. 

ø(b) Each initial regulatory flexibility analysis required under 

this section shall contain— 

ø(1) a description of the reasons why action by the agency is 

being considered; 

ø(2) a succinct statement of the objectives of, and legal basis 

for, the proposed rule; 

ø(3) a description of and, where feasible, an estimate of the 

number of small entities to which the proposed rule will apply; 

ø(4) a description of the projected reporting, recordkeeping 

and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will 

be subject to the requirement and the type of professional 

skills necessary for preparation of the report or record; 

ø(5) an identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict 

with the proposed rule.¿ 

(b) Each initial regulatory flexibility analysis required under this 

section shall contain a detailed statement— 

(1) describing the reasons why action by the agency is being 

considered; 

(2) describing the objectives of, and legal basis for, the proposed rule; 

(3) estimating the number and type of small entities to which 

the proposed rule will apply; 

(4) describing the projected reporting, recordkeeping, and 

other compliance requirements of the proposed rule, including 

an estimate of the classes of small entities which will be subject 

to the requirement and the type of professional skills necessary 

for preparation of the report and record; 

(5) describing all relevant Federal rules which may duplicate, 

overlap, or conflict with the proposed rule, or the reasons why 

such a description could not be provided; 


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(6) estimating the additional cumulative economic impact of 

the proposed rule on small entities beyond that already imposed 

on the class of small entities by the agency or why such an estimate is not available; and 

(7) describing any disproportionate economic impact on small 

entities or a specific class of small entities. 

(c) øEach initial regulatory flexibility analysis shall also contain 

a description of any significant alternatives to the proposed rule 

which accomplish the stated objectives of applicable statutes and 

which minimize any significant economic impact of the proposed 

rule on small entities.¿ Each initial regulatory flexibility analysis 

shall also contain a detailed description of alternatives to the proposed rule which minimize any adverse significant economic impact 

or maximize any beneficial significant economic impact on small entities. Consistent with the stated objectives of applicable statutes, 

the analysis shall discuss significant alternatives such as— 

(1) * * * 

* * * * * * * 

ø(d)(1)For a covered agency, as defined in section 609(d)(2), each 

initial regulatory flexibility analysis shall include a description of— 

ø(A) any projected increase in the cost of credit for small entities; 

ø(B) any significant alternatives to the proposed rule which 

accomplish the stated objectives of applicable statutes and 

which minimize any increase in the cost of credit for small entities; and 

ø(C) advice and recommendations of representatives of small 

entities relating to issues described in subparagraphs (A) and 

(B) and subsection (b). 

ø(2) A covered agency, as defined in section 609(d)(2), shall, for 

purposes of complying with paragraph (1)(C)— 

ø(A) identify representatives of small entities in consultation 

with the Chief Counsel for Advocacy of the Small Business Administration; and 

ø(B) collect advice and recommendations from the representatives identified under subparagraph (A) relating to issues described in subparagraphs (A) and (B) of paragraph (1) and subsection (b).¿ 

§ 604. Final regulatory flexibility analysis 

(a) When an agency promulgates a final rule under section 553 

of this title, after being required by that section or any other law 

to publish a general notice of proposed rulemaking, øor¿ promulgates a final interpretative rule involving the internal revenue laws 

of the United States as described in section 603(a), or adopts a revision or amendment to a land management plan, the agency shall 

prepare a final regulatory flexibility analysis. Each final regulatory 

flexibility analysis shall contain— 

(1) * * * 

(2) a statement of the significant issues raised by the public 

comments in response to the initial regulatory flexibility analysis (or certification of the proposed rule under section 605(b)), 

a statement of the assessment of the agency of such issues, 


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and a statement of any changes made in the proposed rule as 

a result of such comments; 

* * * * * * * 

(4) a detailed description of and an estimate of the number 

of small entities to which the rule will apply or øan explanation¿ a detailed explanation of why no such estimate is 

available; 

(5) a detailed description of the projected reporting, recordkeeping and other compliance requirements of the rule, including an estimate of the classes of small entities which will be 

subject to the requirement and the type of professional skills 

necessary for preparation of the report or record; 

(6) a detailed description of the steps the agency has taken 

to øminimize the significant economic impact¿ minimize the 

adverse significant economic impact or maximize the beneficial 

significant economic impact on small entities consistent with 

the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the 

alternative adopted in the final rule and why each one of the 

other significant alternatives to the rule considered by the 

agency which affect the impact on small entities was rejected; 

and 

ø(6) for a covered agency, as defined in section 609(d)(2), a 

description of the steps the agency has taken to minimize any 

additional cost of credit for small entities.¿ 

(7) describing any disproportionate economic impact on small 

entities or a specific class of small entities. 

ø(b) The agency shall make copies of the final regulatory flexibility analysis available to members of the public and shall publish 

in the Federal Register such analysis or a summary thereof.¿ 

(b) The agency shall make copies of the final regulatory flexibility 

analysis available to the public, including placement of the entire 

analysis on the agency’s website, and shall publish in the Federal 

Register the final regulatory flexibility analysis, or a summary 

thereof which includes the telephone number, mailing address, and 

link to the website where the complete analysis may be obtained. 

ø§ 605. Avoidance of duplicative or unnecessary analyses 

ø(a) Any Federal agency may perform the analyses required by 

sections 602, 603, and 604 of this title in conjunction with or as a 

part of any other agenda or analysis required by any other law if 

such other analysis satisfies the provisions of such sections.¿ 

§ 605. Incorporations by reference and certifications 

(a) A Federal agency shall be treated as satisfying any requirement regarding the content of an agenda or regulatory flexibility 

analysis under section 602, 603, or 604, if such agency provides in 

such agenda or analysis a cross-reference to the specific portion of 

another agenda or analysis which is required by any other law and 

which satisfies such requirement. 

(b) Sections 603 and 604 of this title shall not apply to any proposed or final rule if the head of the agency certifies that the rule 

will not, if promulgated, have a significant economic impact on a 


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substantial number of small entities. If the head of the agency 

makes a certification under the preceding sentence, the agency 

shall publish such certification in the Federal Register at the time 

of publication of general notice of proposed rulemaking for the rule 

or at the time of publication of the final rule, along with a detailed 

statement providing the factual and legal basis for such certification. The agency shall provide such certification and statement 

to the Chief Counsel for Advocacy of the Small Business Administration. 

* * * * * * * 

ø§ 607. Preparation of analyses 

øIn complying with the provisions of sections 603 and 604 of this 

title, an agency may provide either a quantifiable or numerical description of the effects of a proposed rule or alternatives to the proposed rule, or more general descriptive statements if quantification 

is not practicable or reliable. 

ø§ 608. Procedure for waiver or delay of completion 

ø(a) An agency head may waive or delay the completion of some 

or all of the requirements of section 603 of this title by publishing 

in the Federal Register, not later than the date of publication of 

the final rule, a written finding, with reasons therefor, that the 

final rule is being promulgated in response to an emergency that 

makes compliance or timely compliance with the provisions of section 603 of this title impracticable. 

ø(b) Except as provided in section 605(b), an agency head may 

not waive the requirements of section 604 of this title. An agency 

head may delay the completion of the requirements of section 604 

of this title for a period of not more than one hundred and eighty 

days after the date of publication in the Federal Register of a final 

rule by publishing in the Federal Register, not later than such date 

of publication, a written finding, with reasons therefor, that the 

final rule is being promulgated in response to an emergency that 

makes timely compliance with the provisions of section 604 of this 

title impracticable. If the agency has not prepared a final regulatory analysis pursuant to section 604 of this title within one hundred and eighty days from the date of publication of the final rule, 

such rule shall lapse and have no effect. Such rule shall not be repromulgated until a final regulatory flexibility analysis has been 

completed by the agency.¿ 

§ 607. Quantification requirements 

In complying with sections 603 and 604, an agency shall provide— 

(1) a quantifiable or numerical description of the effects of the 

proposed or final rule and alternatives to the proposed or final 

rule; or 

(2) a more general descriptive statement and a detailed statement explaining why quantification is not practicable or reliable. 


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§ 608. Additional powers of Chief Counsel for Advocacy 

(a)(1) Not later than 270 days after the date of the enactment of 

the Regulatory Flexibility Improvements Act of 2011, the Chief 

Counsel for Advocacy of the Small Business Administration shall, 

after opportunity for notice and comment under section 553, issue 

rules governing agency compliance with this chapter. The Chief 

Counsel may modify or amend such rules after notice and comment 

under section 553. This chapter (other than this subsection) shall 

not apply with respect to the issuance, modification, and amendment of rules under this paragraph. 

(2) An agency shall not issue rules which supplement the rules 

issued under subsection (a) unless such agency has first consulted 

with the Chief Counsel for Advocacy to ensure that such supplemental rules comply with this chapter and the rules issued under 

paragraph (1). 

(b) Notwithstanding any other law, the Chief Counsel for Advocacy of the Small Business Administration may intervene in any 

agency adjudication (unless such agency is authorized to impose a 

fine or penalty under such adjudication), and may inform the agency of the impact that any decision on the record may have on small 

entities. The Chief Counsel shall not initiate an appeal with respect 

to any adjudication in which the Chief Counsel intervenes under 

this subsection. 

(c) The Chief Counsel for Advocacy may file comments in response 

to any agency notice requesting comment, regardless of whether the 

agency is required to file a general notice of proposed rulemaking 

under section 553. 

§ 609. Procedures for gathering comments 

(a) * * * 

ø(b) Prior to publication of an initial regulatory flexibility analysis which a covered agency is required to conduct by this chapter— 

ø(1) a covered agency shall notify the Chief Counsel for Advocacy of the Small Business Administration and provide the 

Chief Counsel with information on the potential impacts of the 

proposed rule on small entities and the type of small entities 

that might be affected; 

ø(2) not later than 15 days after the date of receipt of the 

materials described in paragraph (1), the Chief Counsel shall 

identify individuals representative of affected small entities for 

the purpose of obtaining advice and recommendations from 

those individuals about the potential impacts of the proposed 

rule; 

ø(3) the agency shall convene a review panel for such rule 

consisting wholly of full time Federal employees of the office 

within the agency responsible for carrying out the proposed 

rule, the Office of Information and Regulatory Affairs within 

the Office of Management and Budget, and the Chief Counsel; 

ø(4) the panel shall review any material the agency has prepared in connection with this chapter, including any draft proposed rule, collect advice and recommendations of each individual small entity representative identified by the agency 


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after consultation with the Chief Counsel, on issues related to 

subsections 603(b), paragraphs (3), (4) and (5) and 603(c); 

ø(5) not later than 60 days after the date a covered agency 

convenes a review panel pursuant to paragraph (3), the review 

panel shall report on the comments of the small entity representatives and its findings as to issues related to subsections 

603(b), paragraphs (3), (4) and (5) and 603(c), provided that 

such report shall be made public as part of the rulemaking 

record; and 

ø(6) where appropriate, the agency shall modify the proposed 

rule, the initial regulatory flexibility analysis or the decision on 

whether an initial regulatory flexibility analysis is required. 

ø(c) An agency may in its discretion apply subsection (b) to rules 

that the agency intends to certify under subsection 605(b), but the 

agency believes may have a greater than de minimis impact on a 

substantial number of small entities. 

ø(d) For purposes of this section, the term ‘‘covered agency’’ 

means— 

ø(1) the Environmental Protection Agency; 

ø(2) the Consumer Financial Protection Bureau of the Federal Reserve System; and 

ø(3) the Occupational Safety and Health Administration of 

the Department of Labor. 

ø(e) The Chief Counsel for Advocacy, in consultation with the individuals identified in subsection (b)(2), and with the Administrator 

of the Office of Information and Regulatory Affairs within the Office of Management and Budget, may waive the requirements of 

subsections (b)(3), (b)(4), and (b)(5) by including in the rulemaking 

record a written finding, with reasons therefor, that those requirements would not advance the effective participation of small entities in the rulemaking process. For purposes of this subsection, the 

factors to be considered in making such a finding are as follows: 

ø(1) In developing a proposed rule, the extent to which the 

covered agency consulted with individuals representative of affected small entities with respect to the potential impacts of 

the rule and took such concerns into consideration. 

ø(2) Special circumstances requiring prompt issuance of the 

rule. 

ø(3) Whether the requirements of subsection (b) would provide the individuals identified in subsection (b)(2) with a competitive advantage relative to other small entities.¿ 

(b)(1) Prior to publication of any proposed rule described in subsection (e), an agency making such rule shall notify the Chief Counsel for Advocacy of the Small Business Administration and provide 

the Chief Counsel with— 

(A) all materials prepared or utilized by the agency in making the proposed rule, including the draft of the proposed rule; 

and 

(B) information on the potential adverse and beneficial economic impacts of the proposed rule on small entities and the 

type of small entities that might be affected. 

(2) An agency shall not be required under paragraph (1) to provide the exact language of any draft if the rule— 


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(A) relates to the internal revenue laws of the United States; 

or 

(B) is proposed by an independent regulatory agency (as defined in section 3502(5) of title 44). 

(c) Not later than 15 days after the receipt of such materials and 

information under subsection (b), the Chief Counsel for Advocacy of 

the Small Business Administration shall— 

(1) identify small entities or representatives of small entities 

or a combination of both for the purpose of obtaining advice, 

input, and recommendations from those persons about the potential economic impacts of the proposed rule and the compliance of the agency with section 603; and 

(2) convene a review panel consisting of an employee from the 

Office of Advocacy of the Small Business Administration, an 

employee from the agency making the rule, and in the case of 

an agency other than an independent regulatory agency (as defined in section 3502(5) of title 44), an employee from the Office 

of Information and Regulatory Affairs of the Office of Management and Budget to review the materials and information provided to the Chief Counsel under subsection (b). 

(d)(1) Not later than 60 days after the review panel described in 

subsection (c)(2) is convened, the Chief Counsel for Advocacy of the 

Small Business Administration shall, after consultation with the 

members of such panel, submit a report to the agency and, in the 

case of an agency other than an independent regulatory agency (as 

defined in section 3502(5) of title 44), the Office of Information and 

Regulatory Affairs of the Office of Management and Budget. 

(2) Such report shall include an assessment of the economic impact of the proposed rule on small entities, including an assessment 

of the proposed rule’s impact on the cost that small entities pay for 

energy, and a discussion of any alternatives that will minimize adverse significant economic impacts or maximize beneficial significant economic impacts on small entities. 

(3) Such report shall become part of the rulemaking record. In the 

publication of the proposed rule, the agency shall explain what actions, if any, the agency took in response to such report. 

(e) A proposed rule is described by this subsection if the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget, the head of the agency (or the 

delegatee of the head of the agency), or an independent regulatory 

agency determines that the proposed rule is likely to result in— 

(1) an annual effect on the economy of $100,000,000 or more; 

(2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local governments, tribal 

organizations, or geographic regions; 

(3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United 

States-based enterprises to compete with foreign-based enterprises in domestic and export markets; or 

(4) a significant economic impact on a substantial number of 

small entities. 

(f) Upon application by the agency, the Chief Counsel for Advocacy of the Small Business Administration may waive the requirements of subsections (b) through (e) if the Chief Counsel determines 


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that compliance with the requirements of such subsections are impracticable, unnecessary, or contrary to the public interest. 

* * * * * * * 

ø§ 610. Periodic review of rules 

ø(a) Within one hundred and eighty days after the effective date 

of this chapter, each agency shall publish in the Federal Register 

a plan for the periodic review of the rules issued by the agency 

which have or will have a significant economic impact upon a substantial number of small entities. Such plan may be amended by 

the agency at any time by publishing the revision in the Federal 

Register. The purpose of the review shall be to determine whether 

such rules should be continued without change, or should be 

amended or rescinded, consistent with the stated objectives of applicable statutes, to minimize any significant economic impact of 

the rules upon a substantial number of such small entities. The 

plan shall provide for the review of all such agency rules existing 

on the effective date of this chapter within ten years of that date 

and for the review of such rules adopted after the effective date of 

this chapter within ten years of the publication of such rules as the 

final rule. If the head of the agency determines that completion of 

the review of existing rules is not feasible by the established date, 

he shall so certify in a statement published in the Federal Register 

and may extend the completion date by one year at a time for a 

total of not more than five years. 

ø(b) In reviewing rules to minimize any significant economic impact of the rule on a substantial number of small entities in a manner consistent with the stated objectives of applicable statutes, the 

agency shall consider the following factors— 

ø(1) the continued need for the rule; 

ø(2) the nature of complaints or comments received concerning the rule from the public; 

ø(3) the complexity of the rule; 

ø(4) the extent to which the rule overlaps, duplicates or conflicts with other Federal rules, and, to the extent feasible, with 

State and local governmental rules; and 

ø(5) the length of time since the rule has been evaluated or 

the degree to which technology, economic conditions, or other 

factors have changed in the area affected by the rule. 

ø(c) Each year, each agency shall publish in the Federal Register 

a list of the rules which have a significant economic impact on a 

substantial number of small entities, which are to be reviewed pursuant to this section during the succeeding twelve months. The list 

shall include a brief description of each rule and the need for and 

legal basis of such rule and shall invite public comment upon the 

rule.¿ 

§ 610. Periodic review of rules 

(a) Not later than 180 days after the enactment of the Regulatory 

Flexibility Improvements Act of 2011, each agency shall publish in 

the Federal Register and place on its website a plan for the periodic 

review of rules issued by the agency which the head of the agency 

determines have a significant economic impact on a substantial 


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number of small entities. Such determination shall be made without 

regard to whether the agency performed an analysis under section 

604. The purpose of the review shall be to determine whether such 

rules should be continued without change, or should be amended or 

rescinded, consistent with the stated objectives of applicable statutes, to minimize any adverse significant economic impacts or maximize any beneficial significant economic impacts on a substantial 

number of small entities. Such plan may be amended by the agency 

at any time by publishing the revision in the Federal Register and 

subsequently placing the amended plan on the agency’s website. 

(b) The plan shall provide for the review of all such agency rules 

existing on the date of the enactment of the Regulatory Flexibility 

Improvements Act of 2011 within 10 years of the date of publication 

of the plan in the Federal Register and for review of rules adopted 

after the date of enactment of the Regulatory Flexibility Improvements Act of 2011 within 10 years after the publication of the final 

rule in the Federal Register. If the head of the agency determines 

that completion of the review of existing rules is not feasible by the 

established date, the head of the agency shall so certify in a statement published in the Federal Register and may extend the review 

for not longer than 2 years after publication of notice of extension 

in the Federal Register. Such certification and notice shall be sent 

to the Chief Counsel for Advocacy of the Small Business Administration and the Congress. 

(c) The plan shall include a section that details how an agency 

will conduct outreach to and meaningfully include small businesses 

for the purposes of carrying out this section. The agency shall include in this section a plan for how the agency will contact small 

businesses and gather their input on existing agency rules. 

(d) Each agency shall annually submit a report regarding the results of its review pursuant to such plan to the Congress, the Chief 

Counsel for Advocacy of the Small Business Administration, and, in 

the case of agencies other than independent regulatory agencies (as 

defined in section 3502(5) of title 44) to the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget. Such report shall include the identification of 

any rule with respect to which the head of the agency made a determination described in paragraph (5) or (6) of subsection (e) and a 

detailed explanation of the reasons for such determination. 

(e) In reviewing a rule pursuant to subsections (a) through (d), the 

agency shall amend or rescind the rule to minimize any adverse significant economic impact on a substantial number of small entities 

or disproportionate economic impact on a specific class of small entities, or maximize any beneficial significant economic impact of the 

rule on a substantial number of small entities to the greatest extent 

possible, consistent with the stated objectives of applicable statutes. 

In amending or rescinding the rule, the agency shall consider the 

following factors: 

(1) The continued need for the rule. 

(2) The nature of complaints received by the agency from 

small entities concerning the rule. 

(3) Comments by the Regulatory Enforcement Ombudsman 

and the Chief Counsel for Advocacy of the Small Business Administration. 


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(4) The complexity of the rule. 

(5) The extent to which the rule overlaps, duplicates, or conflicts with other Federal rules and, unless the head of the agency determines it to be infeasible, State and local rules. 

(6) The contribution of the rule to the cumulative economic 

impact of all Federal rules on the class of small entities affected 

by the rule, unless the head of the agency determines that such 

calculations cannot be made and reports that determination in 

the annual report required under subsection (d). 

(7) The length of time since the rule has been evaluated or the 

degree to which technology, economic conditions, or other factors have changed in the area affected by the rule. 

(f) The agency shall publish in the Federal Register and on its 

website a list of rules to be reviewed pursuant to such plan. Such 

publication shall include a brief description of the rule, the reason 

why the agency determined that it has a significant economic impact on a substantial number of small entities (without regard to 

whether it had prepared a final regulatory flexibility analysis for 

the rule), and request comments from the public, the Chief Counsel 

for Advocacy of the Small Business Administration, and the Regulatory Enforcement Ombudsman concerning the enforcement of the 

rule. 

§ 611. Judicial review 

(a)(1) For any rule subject to this chapter, a small entity that is 

adversely affected or aggrieved by øfinal agency action¿ such rule 

is entitled to judicial review of agency compliance with the requirements of sections 601, 604, 605(b), ø608(b),¿ and 610 in accordance 

with chapter 7. Agency compliance with sections 607 and 609(a) 

shall be judicially reviewable in connection with judicial review of 

section 604. 

(2) Each court having jurisdiction to review such rule for compliance with section 553, or under any other provision of law, (or 

which would have such jurisdiction if publication of the final rule 

constituted final agency action) shall have jurisdiction to review 

any claims of noncompliance with sections 601, 604, 605(b), 

ø608(b),¿ and 610 in accordance with chapter 7. Agency compliance 

with sections 607 and 609(a) shall be judicially reviewable in connection with judicial review of section 604. 

ø(3)(A) A small entity¿ 

(3) A small entity may seek such review during the period beginning on the date of øfinal agency action¿ publication of the final 

rule and ending one year later, except that, in the case of a rule 

for which the date of final agency action is the same date as the 

publication of the final rule, where a provision of law requires that 

an action challenging a final agency action be commenced before 

the expiration of one year, such lesser period shall apply to an action for judicial review under this section. 

ø(B) In the case where an agency delays the issuance of a final 

regulatory flexibility analysis pursuant to section 608(b) of this 

chapter, an action for judicial review under this section shall be 

filed not later than— 

ø(i) one year after the date the analysis is made available to 

the public, or 


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ø(ii) where a provision of law requires that an action challenging a final agency regulation be commenced before the expiration of the 1-year period, the number of days specified in 

such provision of law that is after the date the analysis is 

made available to the public.¿ 

* * * * * * * 

§ 612. Reports and intervention rights 

(a) * * * 

(b) The Chief Counsel for Advocacy of the Small Business Administration is authorized to appear as amicus curiae in any action 

brought in a court of the United States to review a rule or agency 

compliance with section 601, 603, 604, 605(b), 609, or 610. In any 

such action, the Chief Counsel is authorized to present his or her 

views with respect to compliance with this chapter, chapter 5, and 

chapter 7, the adequacy of the rulemaking record with respect to 

small entities and the effect of the rule on small entities. 

* * * * * * * 

TITLE 28, UNITED STATES CODE 

* * * * * * * 

PART VI—PARTICULAR PROCEEDINGS 

* * * * * * * 

CHAPTER 158—ORDERS OF FEDERAL AGENCIES; 

REVIEW 

* * * * * * * 

§ 2341. Definitions 

As used in this chapter— 

(1) * * * 

* * * * * * * 

(3) ‘‘agency’’ means— 

(A) * * * 

* * * * * * * 

(D) the Secretary, when the order is under section 812 

of the Fair Housing Act; øand¿ 

(E) the Board, when the order was entered by the Surface Transportation Boardø.¿; and 

(F) the Office of Advocacy of the Small Business Administration, when the final rule is under section 608(a) of title 

5. 

§ 2342. Jurisdiction of court of appeals 

The court of appeals (other than the United States Court of Appeals for the Federal Circuit) has exclusive jurisdiction to enjoin, 

set aside, suspend (in whole or in part), or to determine the validity 

of— 


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(1) * * * 

* * * * * * * 

(6) all final orders under section 812 of the Fair Housing Act; 

øand¿ 

(7) all final agency actions described in section 20114(c) of 

title 49ø.¿; and 

(8) all final rules under section 608(a) of title 5. 

Jurisdiction is invoked by filing a petition as provided by section 

2344 of this title. 

* * * * * * * 

SMALL BUSINESS REGULATORY ENFORCEMENT 

FAIRNESS ACT OF 1996 

TITLE II—SMALL BUSINESS 

REGULATORY FAIRNESS 

SEC. 201. SHORT TITLE. 

This title may be cited as the ‘‘Small Business Regulatory Enforcement Fairness Act of 1996’’. 

* * * * * * * 

SEC. 212. COMPLIANCE GUIDES. 

(a) COMPLIANCE GUIDE.— 

(1) * * * 

* * * * * * * 

ø(5) AGENCY PREPARATION OF GUIDES.—The agency shall, in 

its sole discretion, taking into account the subject matter of the 

rule and the language of relevant statutes, ensure that the 

guide is written using sufficiently plain language likely to be 

understood by affected small entities. Agencies may prepare 

separate guides covering groups or classes of similarly affected 

small entities and may cooperate with associations of small entities to develop and distribute such guides. An agency may 

prepare guides and apply this section with respect to a rule or 

a group of related rules.¿ 

(5) AGENCY PREPARATION OF GUIDES.—The agency shall, in 

its sole discretion, taking into account the subject matter of the 

rule and the language of relevant statutes, ensure that the guide 

is written using sufficiently plain language likely to be understood by affected small entities. Agencies may prepare separate 

guides covering groups or classes of similarly affected small entities and may cooperate with associations of small entities to 

distribute such guides. In developing guides, agencies shall solicit input from affected small entities or associations of affected 


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small entities. An agency may prepare guides and apply this 

section with respect to a rule or a group of related rules. 

* * * * * * * 

Æ 


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