SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT
(Senate - March 29, 1996)

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[Pages S3242-S3246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT

 Mr. BOND. Mr. President, on March 19th by a vote of 100 to 0, 
the Senate passed S. 942, the Small Business Regulatory Enforcement 
Fairness Act, legislation to implement some of the most important 
recommendations of the White House Conference on Small Business. 
Yesterday, the House passed H.R. 3136, the Contract With America 
Advancement Act of 1996 which incorporates the Small Business 
Regulatory Enforcement Fairness Act as amended in the House by the Hyde 
amendment. The Senate has now approved H.R. 3136 by unanimous consent 
and Senator Bumpers and I would like to take this opportunity to 
further explain the purpose of the act. On March 15, we gave a detailed 
explanation of the managers amendment adopted by the Senate prior to 
passage of S. 942. The amendment offered by Representative Hyde is 
substantially similar to S. 942 as passed by the Senate.
  Three changes are worth noting. First, the amendments to the Equal 
Access to Justice Act were revised by the House to take into account 
some of the concerns raised by the administration in the Statement of 
Administration Position. The new language embodies the intent of our 
managers amendment but clarifies that attorneys fees would be awarded 
when there is an unreasonably large difference between an agency demand 
and the final outcome of the case. Second, the House dropped the second 
phase of the Small Business Advocacy Review Panels. Thus the panels now 
only apply at the proposal stage of EPA and OSHA rulemakings. Finally 
the time period for the congressional review of regulations, adopted as 
part of the Nickles-Reid amendment, was extended from 45 to 60 days. We 
expect the authors of the Nickles-Reid amendment will have a detailed 
explanation of the Congressional Review Subtitle.
  In order to provide additional guidance for agencies to comply with 
the requirements of the Small Business Regulatory Enforcement Fairness 
Act, I ask to have printed in the Record a section-by-section analysis 
of the subtitles A through D of act as modified by the Hyde amendment. 
Since there will not be a conference report on the act, this statement 
and a companion statement in the House should serve as the best 
legislative history of the legislation as finally enacted.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

  Small Business Regulatory Enforcement Fairness Act--Joint Managers 
       Statement of Legislative History and Congressional Intent


                     i. summary of the legislation

       The Hyde amendment to H.R. 3136 replaces Title III of the 
     Contract with America Advancement Act of 1996 to incorporate 
     a revised version of the Small Business Regulatory 
     Enforcement Fairness Act of 1996 (the ``Act''). This 
     legislation was originally passed by the Senate as S. 942. 
     The Hyde amendment makes a number of changes to the Senate 
     bill to better implement certain recommendations of the 1995 
     White House Conference on Small Business regarding the 
     development and enforcement of Federal regulations, including 
     judicial review of agency actions under the Regulatory 
     Flexibility Act (RFA). The amendment also provides for 
     expedited procedures for Congress to review agency rules and 
     to enact Resolutions of Disapproval voiding agency rules.
       The goal of the legislation is to foster a more 
     cooperative, less threatening regulatory environment among 
     agencies, small businesses and other small entities. The 
     legislation provides a framework to make federal regulators 
     more accountable for their enforcement actions by providing 
     small entities with an opportunity for redress of arbitrary 
     enforcement actions. The centerpiece of the legislation is 
     the RFA which requires a regulatory flexibility analysis of 
     all rules that have a ``significant economic impact on a 
     substantial number'' of small entities. Under the RFA, this 
     term ``small entities'' includes small businesses, small non-
     profit organizations, and small governmental units.


                    ii. section-by-section analysis

                              Section 301

       This section entitles the Act the ``Small Business 
     Regulatory Enforcement Fairness Act of 1996.''

                              Section 302

       The Act makes findings as to the need for a strong small 
     business sector, the disproportionate impact of regulations 
     on small businesses, the recommendations of the 1995 White 
     House Conference on Small Business, and the need for judicial 
     review of the Regulatory Flexibility Act.

                              Section 303

       The purpose of the Act is to address some of the key 
     federal regulatory recommendations of the 1995 White House 
     Conference on Small Business. The White House Conference 
     produced a consensus that small businesses should be included 
     earlier and more effectively in the regulatory process. The 
     Act seeks to create a more cooperative and less threatening 
     regulatory environment to help small businesses in their 
     compliance efforts. The Act also provides small businesses 
     with legal redress from arbitrary enforcement actions by 
     making federal regulators accountable for their actions.

            Subtitle A--Regulatory Compliance Simplification

                              Section 311

       This section defines certain terms as used in the subtitle. 
     The term ``small entity'' is currently defined in the RFA to 
     include small business concerns, as defined by the Small 
     Business Act, small nonprofit organizations and small 
     governmental jurisdictions. The process of determining 
     whether a given business qualifies as a small entity is 
     straightforward, using thresholds established by the SBA for 
     Standard Industrial Classification codes. The RFA also 
     defines small organization and small governmental 
     jurisdiction. Any definition established by an agency for 
     purposes of implementing the RFA would also apply to this 
     Act.

[[Page S3243]]

                              Section 312

       The Act requires agencies to publish ``small entity 
     compliance guides'' to assist small entities in complying 
     with regulations which are the subject of a required Reg Flex 
     analysis. The bill does not allow judicial review of the 
     guide itself. However, the agency's claim that the guide 
     provides ``plain English'' assistance would be a matter of 
     public record. In addition, the small business compliance 
     guide would be available as evidence of the reasonableness of 
     any proposed fine on the small entity.
       Agencies should endeavor to make these ``plain English'' 
     guides available to small entities through a coordinated 
     distribution system for regulatory compliance information 
     utilizing means such as the SBA's U.S. Business Advisor, the 
     Small Business Ombudsman at the Environmental Protection 
     Agency, state-run compliance assistance programs established 
     under section 507 of the Clean Air Act, Manufacturing 
     Technology Centers or Small Business Development Centers 
     established under the Small Business Act.

                              Section 313

       The Act directs agencies that regulate small entities to 
     answer inquiries of small entities seeking information on and 
     advice about regulatory compliance. Some agencies already 
     have established successful programs to provide compliance 
     assistance and the amendment intends to encourage these 
     efforts. For example, the IRS, SEC and the Customs Service 
     have an established practice of issuing private letter 
     rulings applying the laws to a particular set of facts. This 
     legislation does not require other agencies to establish 
     programs with the same level of formality as found in the 
     current practice of issuing private letter rulings. The use 
     of toll free telephone numbers and other informal means of 
     responding to small entities is encouraged. This legislation 
     does not mandate changes in current programs at the IRS, SEC 
     and Customs Service, but these agencies should consider 
     establishing less formal means of providing small entities 
     with informal guidance in accordance with this section.
       The Act gives agencies discretion to establish procedures 
     and conditions under which they would provide advice to small 
     entities. There is no requirement that the agency's advice to 
     small businesses be binding as to the legal effects of the 
     actions of other entities. Any guidance provided by the 
     agency applying statutory or regulatory provisions to facts 
     supplied by the small entity would be available as relevant 
     evidence of the reasonableness of any subsequently proposed 
     fine on the small entity.

                              Section 314

       The Act creates permissive authority for Small Business 
     Development Centers (SBDC) to provide information to small 
     entities regarding compliance with regulatory requirements. 
     SBDC's would not become the single-point source of regulatory 
     information, but would supplement agency efforts to make this 
     information widely available. This section is not intended to 
     grant an exclusive franchise to SBDC's for providing 
     information on regulatory compliance.
       There are small business information and technical 
     assistance programs, both federal and state, in various forms 
     in different states. Some of the manufacturing technology 
     centers and other similar extension programs administered by 
     the National Institute of Standards and Technology are 
     providing environmental compliance assistance in addition to 
     general technology assistance. The small business stationary 
     source technical and environmental compliance assistance 
     programs established under section 507 of the Clean Air Act 
     Amendments of 1990 is also providing compliance assistance to 
     small businesses. This section is designed to add to the 
     currently available resources to small businesses.
       Compliance assistance programs can save small businesses 
     money, improve their environmental performance and increase 
     their competitiveness. They can help small businesses learn 
     about cost-saving pollution prevention programs and new 
     environmental technologies. Most importantly, they can help 
     small business owners avoid potentially costly regulatory 
     citations and adjudications. Comments from small business 
     representatives in a variety of fora support the need for 
     expansion of technical assistance programs.

                              Section 315

       This section directs agencies to cooperate with states to 
     create guides that fully integrate federal and state 
     requirements on small businesses. Separate guides may be 
     created for each state, or states may modify or supplement a 
     guide to federal requirements. Since different types of small 
     businesses are affected by different agency regulations, or 
     are affected in different ways, agencies should consider 
     preparing separate guides for the various sectors of the 
     small business community subject to their jurisdiction. 
     Priority in producing these guides should be given to areas 
     of law where rules are complex and where businesses tend to 
     be small. Agencies may contract with outside entities to 
     produce these guides and, to the extent practicable, agencies 
     should utilize entities with the greatest experience in 
     developing similar guides.

                              Section 316

       This section provides that the effective date for the 
     subtitle is 90 days after the date of enactment. The 
     requirement for agencies to publish compliance guides applies 
     to final rules published after the effective date. Agencies 
     have one year from the date of enactment to develop their 
     programs for informal small entity guidance, but these 
     programs should assist small entities with regulatory 
     questions regardless of the date of publication of the 
     regulation at issue.

               Subtitle B--Regulatory Enforcement Reforms

                              Section 321

       This section provides definitions for the terms as used in 
     the subtitle.

                              Section 322

       The Act creates a Small Business and Agriculture Regulatory 
     Enforcement Ombudsman at the SBA to give small businesses a 
     confidential means to comment on the enforcement activity of 
     agency enforcement activities. This might include providing 
     toll-free telephone numbers, computer access points, or mail-
     in forms allowing businesses to comment on the enforcement 
     activities of inspectors, auditors and other enforcement 
     personnel. As used in this section of the bill, the term 
     ``audit'' is not intended to refer to audits conducted by 
     Inspectors General. This Ombudsman would not replace or 
     diminish any similar ombudsman programs in other agencies.
       Concerns have arisen in the Inspector General community 
     that those Ombudsmen might have new enforcement powers that 
     would conflict with those currently held by the Inspector 
     Generals. Nothing in the Act is intended to supersede or 
     conflict with the provisions of the Inspector General Act of 
     1978, as amended, or to otherwise restrict or interfere with 
     the activities of any Office of the Inspector General.
       The Ombudsman will compile the comments of small businesses 
     and provide an annual evaluation similar to a ``customer 
     satisfaction'' rating for different agencies, regions, or 
     offices. The goal of this rating system is to see whether 
     agencies and their personnel are in fact treating small 
     businesses more like customers than potential criminals. 
     Agencies will be provided an opportunity to comment on the 
     Ombudsman's draft report, is currently the practice with 
     reports by the General Accounting Office. The final report 
     may include a section in which an agency can address any 
     concerns that the Ombudsman does not choose to address.
       The Act states that the Ombudsman shall ``work with each 
     agency with regulatory authority over small businesses to 
     ensure that small business concerns that receive or are 
     subject to an audit, on-site inspection, compliance 
     assistance effort, or other enforcement related communication 
     or contact by agency personnel are provided with a means to 
     comment on the enforcement activity conducted by such 
     personnel.'' The SBA shall publicize the existence of the 
     Ombudsman generally to the small business community and also 
     work cooperatively with enforcement agencies to make small 
     businesses aware of the program at the time of agency 
     enforcement activity. The Ombudsman shall report annually to 
     Congress based on substantiated comments received from small 
     business concerns and the Boards, evaluating the enforcement 
     activities of agency personnel including a rating of the 
     responsiveness to small business of the various regional and 
     program offices of each agency. The report to Congress shall 
     in part be based on the findings and recommendation of the 
     Boards as reported by the Ombudsman to affected agencies. 
     While this language allows for comment on the enforcement 
     activities of agency personnel in order to identify potential 
     abuses of the regulatory process, it does not provide a 
     mandate for the boards and the Ombudsman to create a public 
     performance rating of individual agency employees.
       The goal of this section is to reduce the instances of 
     excessive and abusive enforcement actions. Those actions 
     clearly originate in the acts of individual enforcement 
     personnel. Sometimes the problem is with the policies of an 
     agency, and the goal of this section is also to change the 
     culture and policies of Federal regulatory agencies. At other 
     times, the problem is not agency policy, but individuals who 
     violate the agency's enforcement policy. To address this 
     issue, the legislation includes a provision to allow the 
     Ombudsman, where appropriate, to refer serious problems with 
     individuals to the agency's Inspector General for proper 
     action.
       The intent of the Act is to give small businesses a voice 
     in evaluating the overall performances of agencies and agency 
     offices in their dealings with the small business community. 
     The purpose of the Ombudsman's reports is not to rate 
     individual agency personnel, but to assess each program's or 
     agency's performance as a whole. The Ombudsman's report to 
     Congress should not single out individual agency employees 
     by name or assign an individual evaluation or rating that 
     might interfere with agency management and personnel 
     policies.
       The Act also creates Regional Small Business Regulatory 
     Fairness Boards at the SBA to coordinate with the Ombudsman 
     and to provide small businesses a greater opportunity to 
     track and comment on agency enforcement policies and 
     practices. These boards provide an opportunity for 
     representatives of small businesses to come together on a 
     regional basis to assess the enforcement activities of the 
     various federal regulatory agencies. The boards may meet to 
     collect information about these activities, and report

[[Page S3244]]

     and make recommendations to the Ombudsman about the impact of 
     agency enforcement policies or practices on small businesses. 
     The boards will consist of owners, operators or officers of 
     small entities who are appointed by the Administrator of the 
     Small Business Administration. Prior to appointing any board 
     members, the Administrator must consult with the leadership 
     of the Congressional Small Business Committees. There is 
     nothing in the bill that would exempt the boards from the 
     Federal Advisory Committee Act, which would apply according 
     to its terms. The Boards may accept donations of services 
     such as the use of a regional SBA office for conducting their 
     meetings.

                              Section 323

       The Act directs all federal agencies that regulate small 
     businesses to develop policies or programs providing for 
     waivers or reductions of civil penalties for violations by 
     small businesses in certain circumstances. This section 
     builds on the current Executive Order on small business 
     enforcement practices and is intended to allow agencies 
     flexibility to tailor their specific programs to their 
     missions and charters. Agencies should also consider the 
     ability of a small entity to pay in determining penalty 
     assessments under appropriate circumstances. Each agency 
     would have discretion to condition and limit the policy or 
     program on appropriate conditions. For purposes of 
     illustration, these could include requiring the small 
     business to act in good faith, requiring that violations be 
     discovered through participation in agency supported 
     compliance assistance programs, or requiring that violations 
     be corrected within a reasonable time.
       An agency's policy or program could also provide for 
     suitable exclusions. Again, for purposes of illustration, 
     these could include circumstances where the small entity has 
     been subject to multiple enforcement actions, the violation 
     involves criminal conduct, or poses a grave threat to worker 
     safety, public health, safety or the environment.
       In establishing their programs, it is up to each agency to 
     develop the boundaries of their program and the specific 
     circumstances for providing for a waiver or reduction of 
     penalties, but once establish, an agency must implement its 
     program in an evenhanded fashion. Agencies may distinguish 
     among types of small entities and among classes of civil 
     penalties. Some agencies have already established formal or 
     informal policies or programs that would meet the 
     requirements of this section. For example, the Environmental 
     Protection Agency has adopted a small business enforcement 
     policy that satisfies this section. While this legislation 
     sets out a general requirement to establish penalty waiver 
     and reduction programs, some agencies may be subject to other 
     statutory requirements or limitations applicable to the 
     agency or to a particular program. For example, this section 
     is not intended to override, amend or affect provisions of 
     the Occupational Health and Safety Act or the Mine Safety and 
     Health Act that may impose specific limitations on the 
     operation of penalty reduction or waiver programs.

                              Section 324

       This section provides that the subtitle takes effect 90 
     days after the date of enactment.

           Subtitle C--Equal Access to Justice Act Amendments

                           Sections 331 & 332

       The Act amends the Equal Access to Justice Act to assist 
     eligible small businesses in recovering their attorneys fees 
     and expenses in certain instances when unreasonable agency 
     demands for fines or civil penalties in enforcement actions 
     are not sustained by the court or by an administrative law 
     judge. While this is a significant change from current law, 
     the legislation is not intended to result in the awarding of 
     attorneys fees as a matter of course. Rather, the legislation 
     is intended to assist in changing the culture among 
     government regulators to increase the reasonableness and 
     fairness of their enforcement practices. Past agency practice 
     too often has been to treat small businesses like suspects. 
     One goal of this bill is to encourage government regulatory 
     agencies to treat small businesses as partners sharing in a 
     common goal of informed regulatory compliance. Government 
     enforcement attorneys often take the position that they must 
     zealously advocate for their client, in this case a 
     regulatory agency, to the maximum extent permitted by law, as 
     if they were representing an individual or other private 
     party. But in the new regulatory climate for small businesses 
     under this legislation, government attorneys with the 
     advantages and resources of the federal government behind 
     them in dealing with small entities must adjust their actions 
     accordingly and not routinely issue original penalties or 
     other demands at the high end of the scale merely as a way of 
     pressuring small entities to agree to quick settlements.
       The Equal Access to Justice Act (EAJA) provides a means for 
     prevailing parties to recover their attorneys fees in a wide 
     variety of civil and administrative actions between eligible 
     parties and the government. This bill amends the EAJA to 
     create a new avenue for small entities to recover their 
     attorneys fees where the government makes excessive demands 
     in enforcing compliance with a statutory or regulatory 
     requirement, either in an adversary adjudication or judicial 
     review of the agency's enforcement action, or in a civil 
     enforcement action. In these situations, the test for 
     recovering attorneys fees is whether the agency or government 
     demand that led to the administrative or civil action is 
     substantially in excess of the final outcome of the case so 
     as to be unreasonable when compared to the final outcome 
     (whether a fine, injunctive relief or damages) under the 
     facts and circumstances of the case.
       The comparison called for in the Act is always between a 
     ``demand'' by the government for injunctive and monetary 
     relief taken as a whole and the final outcome of the case in 
     terms of injunctive and monetary relief taken as a whole. As 
     used in these amendments, the term ``demand'' means an 
     express written demand that leads to an adversary 
     adjudication or civil action. A written demand by the 
     government for performance or payment qualifies under this 
     section regardless of form, including an original fine, 
     penalty notice, demand letter, citation or otherwise. In the 
     case of an adversary adjudication, the demand would often be 
     a statement of the ``Definitive Penalty Amount.'' In the case 
     of a civil action brought by the United States, the demand 
     could be in the form of a demand for settlement issued prior 
     to commencement to the litigation. In a civil action to 
     review the determination of an administrative proceeding, the 
     demand could be the demand that led to such proceeding. 
     However, the term ``demand'' should not be read to extend to 
     a mere recitation of facts and law in a complaint. The bill's 
     definition of the term ``demand'' expressly excludes a 
     recitation of the maximum statutory penalty in the complaint 
     or elsewhere when accompanied by an express demand for a 
     lesser amount. This definition is not intended to suggest 
     that a statement of the maximum statutory penalty somewhere 
     other than the complaint, which is not accompanied by an 
     express demand for a lesser amount, is per se a demand, 
     but would depend on the circumstances.
       This test should not be a simple mathematical comparison. 
     The Committee intends for it to be applied in such a way that 
     it identifies and corrects situations where the agency's 
     demand is so far in excess of the true value of the case, as 
     demonstrated by the final outcome, that it appears the 
     agency's assessment or enforcement action did not represent a 
     reasonable effort to match the penalty to the actual facts 
     and circumstances of the case.
       In addition, the bill excludes attorneys fee awards in 
     connection with willful violations, bad faith actions and in 
     special circumstances that would make such an award unjust. 
     These additional factors are intended to provide a ``safety 
     valve'' to ensure that the government is not unduly deterred 
     from advancing its case in good faith. Special circumstances 
     are intended to include both legal and factual considerations 
     which may make it unjust to require the public to pay 
     attorneys fees, even in situations where the ultimate award 
     is significantly less than the amount demanded. Special 
     circumstances could include instances where the party seeking 
     fees engaged in a flagrant violation of the law, endangered 
     the lives of others, or engaged in some other type of conduct 
     that would make the award of the fees unjust. The actions 
     covered by ``bad faith'' include the conduct of the party 
     seeking fees both at the time of the underlying violation, 
     and during the enforcement action. For example, if the party 
     seeking fees attempted to elude government officials, cover 
     up its conduct, or otherwise impede the Government's law 
     enforcement activities, then attorney's fees should not be 
     awarded.
       The bill also increases the maximum hourly rate for 
     attorneys fees under the EAJA from $75 to $125. Agencies 
     could avoid the possibility of paying attorneys fees by 
     settling with the small entity prior to final judgement. The 
     Committee anticipates that if a settlement is reached, all 
     further claims of either party, including claims for 
     attorneys fees, could be included as part of the settlement. 
     The government may obtain a release specifically including 
     attorneys fees under EAJA.
       Additional language is included in the Act to ensure that 
     the legislation did not violate of the PAYGO requirements of 
     the Budget Act. This language requires agencies to satisfy 
     any award of attorneys fees or expenses arising from an 
     agency enforcement action from their discretionary 
     appropriated funds, but does not require that an agency seek 
     or obtain an individual line item or earmarked appropriation 
     for these amounts.

                              Section 333

       The new provisions of the EAJA apply to civil actions and 
     adversary adjudications commenced on or after the date 14 
     days after the date of enactment.

           Subtitle D--Regulatory Flexibility Act Amendments

                              Section 341

       The bill expands the coverage of the RFA to include IRS 
     interpretive rules that provide for a ``collection of 
     information'' from small entities. Many IRS rulemakings 
     involve ``interpretative rules'' that IRS contends need not 
     be promulgated pursuant to section 553 of the Administrative 
     Procedures Act. However, these interpretative rules may have 
     significant economic effects on small entities and should be 
     covered by the RFA. The amendment applies to those IRS 
     interpretative rulemakings that are published in the Federal 
     Register for notice and comment and that will be codified in 
     the Code of Federal Regulations. This limitation is intended

[[Page S3245]]

     to exclude from the RFA other, less formal IRS publications 
     such as revenue rulings, revenue procedures, 
     announcements, publications or private letter rulings.
       The requirement that IRS interpretative rules comply with 
     the RFA is further limited to those involving a ``collection 
     of information.'' The term ``collection of information'' is 
     defined in the Act to include the obtaining, causing to be 
     obtained, soliciting of facts or opinions by an agency 
     through a variety of means that would include the use of 
     written report forms, schedules, or reporting or other record 
     keeping requirements. It would also include any requirements 
     that require the disclosure to third parties of any 
     information. The intent of this phrase ``collection of 
     information'' in the context of the RFA is to include all IRS 
     interpretive rules of general applicability that lead to or 
     result in small entities making calculations, keeping 
     records, filing reports or otherwise providing information to 
     IRS or third parties.
       While the term ``collection of information'' also is used 
     in the Paperwork Reduction Act (Title 44 U.S.C. Section 
     3502(4)(``PRA''), the purpose of the term in the context of 
     the RFA is different that the purpose of the term in the PRA. 
     Thus, while some courts have interpreted the PRA to exempt 
     from its requirements certain recordkeeping requirements that 
     are explicitly required by statute, such an interpretation 
     would be inappropriate in the context of the RFA. If a 
     collection of information is explicitly required by the Code, 
     the effect might be to limit the possible regulatory 
     alternatives available to the IRS in the proposed rulemaking, 
     but would not exempt the IRS from conducting a regulatory 
     flexibility analysis.
       Some IRS interpretative rules merely reiterate or restate 
     the statutorily required tax liability. While a small 
     entity's tax liability may be a burden, the RFA cannot act to 
     supersede the statutorily required tax rate. However, most 
     IRS interpretative rules involve some aspect of defining or 
     establishing requirements for compliance with the Code, or 
     otherwise require small entities to maintain records to 
     comply with the Code, and would now be covered by the RFA. 
     One of the primary purposes of the RFA is to reduce the 
     compliance burdens on small entities whenever possible under 
     the statute. To accomplish this purpose, the IRS should take 
     an expansive approach in interpreting the phrase ``collection 
     of information'' when considering whether to conduct a 
     regulatory flexibility analysis.
       The Act provides for judicial review of the RFA, and the 
     courts generally are given broad discretion to formulate 
     appropriate remedies under the facts and circumstances of 
     each individual case. The rights of judicial review and 
     remedial authority of the courts provided in the Act as to 
     IRS interpretative rules should be applied in a manner 
     consistent with the purposes of the Anti-Injunction Act (26 
     U.S.C. 7421), which may limit remedies available in 
     particular circumstances. The RFA, as amended by the Act, 
     permits the court to remand a rule to an Agency for further 
     consideration of the rule's impact on small entities. The 
     amendment also directs the court to consider the public 
     interest in determining whether or not to delay enforcement 
     of a rule against small entities pending agency compliance 
     with the court's findings. In the context of IRS 
     interpretative rulemakings, this language should be read to 
     require the court to give appropriate deference to the 
     legitimate public interest in the assessment and collection 
     of taxes reflected by the Anti-Junction Act. The court should 
     not exercise its discretion more broadly than necessary under 
     the circumstances or in a way that might encourage excessive 
     litigation.
       If an agency is required to publish an initial regulatory 
     flexibility analysis, the agency also must publish a final 
     regulatory flexibility analysis. In the final regulatory 
     flexibility analysis, agencies will be required to describe 
     the impacts of the rule on small entities and to specify the 
     actions taken by the agency to modify the proposed rule to 
     minimize the regulatory impact on small entities. Nothing in 
     the bill directs the agency to choose to regulatory 
     alternative that is not authorized by the statute granting 
     regulatory authority. The goal of the final regulatory 
     flexibility analysis is to demonstrate how the agency has 
     minimized the impact on small entities consistent with the 
     underlying statute and other applicable legal 
     requirements.

                              Section 342

       The bill removes the current prohibition on judicial review 
     of agency compliance with the RFA and allows adversely 
     affected small entities to seek judicial review of agency 
     compliance with the Act within one year after final agency 
     action, except where a provision of law requires a shorter 
     period for challenging a final agency action. The prohibition 
     on judicial enforcement of the RFA is contrary to the general 
     principle of administrative law, and it has long been 
     criticized by small business owners. Many small business 
     owners believe that agencies have given lip service at best 
     to RFA, and small entities have been denied legal recourse to 
     enforce the Act's requirements.
       The amendment is not intended to encourage or allow 
     spurious lawsuits which might hinder important governmental 
     functions. The one-year limitation on seeking judicial review 
     ensures that this legislation will not permit indefinite, 
     retroactive application of judicial review. The bill does not 
     subject all regulations issued since the enactment of the RFA 
     to judicial review. After the effective date, if the court 
     finds that a final agency action was arbitrary, capricious, 
     an abuse of discretion or otherwise not in accordance with 
     the law, the court may set aside the rule or order the agency 
     to take other corrective action. The court may also decide 
     that the failure to comply with the RFA warrants remanding 
     the rule to the agency or delaying the application of the 
     rule to small entities pending completion of the court 
     ordered corrective action. However, in some circumstances, 
     the court may find that there is good cause to allow the rule 
     to be enforced and to remain in effect pending the corrective 
     action.

                              Section 343

       The bill requires agencies to publish their factual, policy 
     and legal reasons when making a certification under section 
     605 of the RFA that the regulations will not impose a 
     significant economic impact on a substantial number of small 
     entities.

                              Section 344

       The bill amends the existing requirements of RFA section 
     609 for small business participation in the rulemaking 
     process by incorporating a modified version of S. 917, the 
     Small Business Advocacy Act, introduced by Senator Domenici, 
     to provide early input from small business into the 
     regulatory process. For proposed rules with a significant 
     economic impact on a substantial number of small entities, 
     EPA and OSHA would have to collect advice and recommendations 
     from small businesses to better inform the agency's 
     regulatory flexibility analysis on the potential impacts of 
     the rule. The House version drops the provision of the Senate 
     bill that would have required the panels to re-convene prior 
     to publication of the final rule.
       The agency promulgating the rule would consult with the 
     SBA's Chief Counsel for Advocacy to identify individuals who 
     are representative of affected small businesses. The Agency 
     would designate a senior level official to be responsible for 
     implementing this section and chairing an interagency review 
     panel for the rule. Before the publication of an initial 
     regulatory flexibility analysis for a proposed EPA or OSHA 
     rule, the SBA's Chief Counsel for Advocacy will gather 
     information from individual representatives of small 
     businesses and other small entities, such as small local 
     governments, about the potential impacts of that proposed 
     rule. This information will then be reviewed by a panel 
     composed of members from EPA or OSHA, OIRA, and the 
     Chief Counsel. The panel will then issue a report on those 
     individuals' comments, which will become part of the 
     rulemaking record. The review panel's report and related 
     rulemaking information will be placed in the rulemaking 
     record in a timely fashion so that others who are 
     interested in the proposed rule may have an opportunity to 
     review that information and submit their own responses for 
     the record before the close of the agency's public comment 
     period for the proposed rule. The legislation includes 
     limits on the period during which the review panel 
     conducts its review. It also creates a limited process 
     allowing the Chief Counsel to waive certain requirements 
     of the section after consultation with the Office of 
     Information and Regulatory Affairs and small businesses.

                              Section 345

       This section provides that the effective date of the RFA 
     amendment is 90 days after enactment. Proposed rules 
     published after the effective date must be accompanied by an 
     initial regulatory flexibility analysis or a certification 
     under section 605 of the RFA. Final rules published after the 
     effective date must be accompanied by a final regulatory 
     flexibility analysis or a certification under section 605 of 
     the RFA, regardless of when the rule was first proposed. Thus 
     judicial review shall apply to any final regulation published 
     after the effective date regardless of when the rule was 
     proposed. However, IRS interpretive rules proposed prior to 
     enactment will not be subject to the amendments made in this 
     subchapter expanding the scope of the RFA to include IRS 
     interpretive rules. Thus, the IRS could finalize previously 
     proposed interpretive rules according to the terms of 
     currently applicable law, regardless of when the final 
     interpretive rule is published.


           small business regulatory enforcement fairness act

 Mr. BUMPERS. Mr. President, I want to associate myself with 
the remarks of the distinguished chairman of our committee and the 
principle author of S. 942. He and I, as well as our staffs, worked 
together on this bill in a true spirit of bipartisanship. The shortness 
of time between the markup of S. 942 and consideration on the floor did 
not permit the staff to prepare a full-blown report, as we usually do. 
Instead, we have offered this section-by-section analysis as a joint 
explanatory statement by the managers, even though there was not a 
formal conference on this bill. The House chose to amend S. 942 in 
several respects. The chairman and I were consulted about these 
changes, and we agree that they are helpful. It is our hope that anyone 
reading this statement will treat it exactly as they would a formal 
Senate committee report since it reflects the consensus views of many 
Senators on

[[Page S3246]]

both sides of the aisle who have participated in completion of S. 942, 
which is now title III, in H.R. 3136.

                          ____________________