House Bill Helps Small Business by Improving the Regulatory Flexibility Act

By Sullivan, Thomas M. | The Small Business Advocate, December/January 2007 | Go to article overview

House Bill Helps Small Business by Improving the Regulatory Flexibility Act


Sullivan, Thomas M., The Small Business Advocate


A new bill is making its way through Congress that will help small business by improving the Regulatory Flexibility Act (RFA); the bill would require federal agencies to analyze indirect impacts of their proposed rules. The House Small Business Committee unanimously approved the bill, the Small Business Regulatory Improvement Act (H.R. 4458), on December 13.

The bill's three RFA improvements will help ensure fair treatment of small businesses in the regulatory process. They are: consideration of foreseeable indirect impacts of proposed regulations, periodic review of existing regulations, and turning Executive Order 13272, "Proper Consideration of Small Entities in Agency Rulemaking" into permanent law.

Background of H.R. 4458. The RFA mandates that federal agencies consider the potential economic impact of proposed federal regulations on small entities and examine regulatory alternatives that achieve the agencies' public policy goals while minimizing small entity impacts. The Office of Advocacy is responsible for monitoring agency compliance with the law.

Passage of the Small Business Regulatory Enforcement Fairness Act (SBREFA) in 1996 improved agency compliance with the RFA, but even with SBREFA, some agencies were not complying with the RFAs requirements. Therefore, on August 13, 2002, President Bush signed Executive Order 13272, "Proper Consideration of Small Entities in Agency Rulemaking." It directs federal agencies to implement written procedures and policies for measuring the economic impact of their regulatory proposals on small entities. It also requires agencies to notify Advocacy of draft rules that are expected to have a significant economic impact on a substantial number of small entities and to give appropriate consideration to Advocacy's comments.

Indirect Economic Effects. One of the biggest concerns with the RFA is that it does not require agencies to analyze indirect impacts. Agencies are required to consider the direct economic impact of a regulatory action on small entities, but that analysis can overlook obvious side effects and fail to provide decision-makers with a full understanding of a rule's likely impact on small entities.

One example of this is the 2002 Immigration and Naturalization Service's (INS) rule on B-2 tourist visas. The proposed rule eliminated the minimum six-month admission period for foreign tourists and placed the onus of explaining the length of stay on the foreign visitor. Because the proposal applied to visitors to the United States, INS certified that it would not have a significant economic impact on a substantial number of small entities In fact, small travel agents and other firms stood to lose approximately $2 billion in revenues as a result. …

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House Bill Helps Small Business by Improving the Regulatory Flexibility Act
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