House Report 113-288, Part 2 - 113th Congress (2013-2014)
December 11, 2013, As Reported by the Small Business Committee

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House Report 113-288 - REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2013




[House Report 113-288]
[From the U.S. Government Printing Office]


113th Congress                                            Rept. 113-288
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================



 
            REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2013

                                _______
                                

 December 11, 2013.--Committed to the Committee of the Whole House on 
            the State of the Union and 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. 2542]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 2542) 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.................................9
 III. Need for Legislation...........................................10
  IV. Hearings.......................................................14
   V. Committee Consideration........................................14
  VI. Committee Votes................................................16
 VII. Section-by-Section Analysis of H.R. 2542.......................33
VIII. Congressional Budget Cost Estimate.............................72
  IX. Unfunded Mandates..............................................74
   X. New Budget Authority, Entitlement Authority, and Tax Expenditur74
  XI. Oversight Findings.............................................76
 XII. Statement of Constitutional Authority..........................76
XIII. Congressional Accountability Act...............................76
 XIV. Federal Advisory Committee Statement...........................77
  XV. Statement of No Earmarks.......................................77
 XVI. Statement of Duplication of Federal Programs...................77
XVII. Disclosure of Directed Rule Makings............................77
XVIII.Performance Goals and Objectives...............................77

 XIX. Changes in Existing Law Made by the Bill, as Reported..........77
  XX. Dissenting Views...............................................95

                              I. Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Regulatory 
Flexibility Improvements Act of 2013''.
  (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. Establishment and approval of small business concern size 
standards by Chief Counsel for Advocacy.
Sec. 11. Clerical amendments.
Sec. 12. Agency preparation of guides.
Sec. 13. GAO report.

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 pertaining to the protection of the rights of 
        and benefits for veterans or 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 (including 
                compliance costs and effects on revenue) 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 Rulemaking.--
          (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:
          ``(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 
                        the 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.''.

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--
          (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:

``Sec. 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:

``Sec. 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 2013, 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 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, 
an assessment of the proposed rule's impact on start-up costs for small 
entities, 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.
  ``(g) A small entity or a representative of a small entity may submit 
a request that the agency provide a copy of the report prepared under 
subsection (d) and all materials and information provided to the Chief 
Counsel for Advocacy of the Small Business Administration under 
subsection (b). The agency receiving such request shall provide the 
report, materials and information to the requesting small entity or 
representative of a small entity not later than 10 business days after 
receiving such request, except that the agency shall not disclose any 
information that is prohibited from disclosure to the public pursuant 
to section 552(b) of this title.''.

SEC. 7. PERIODIC REVIEW OF RULES.

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

``Sec. 610. Periodic review of rules

  ``(a) Not later than 180 days after the enactment of the Regulatory 
Flexibility Improvements Act of 2013, 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 2013 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 
2013 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 
(including small business concerns owned and controlled by women, small 
business concerns owned and controlled by veterans, and small business 
concerns owned and controlled by socially and economically 
disadvantaged individuals (as such terms are defined in the Small 
Business Act)) 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.
          ``(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, territorial, 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. The 
agency shall include in the publication a solicitation of public 
comments on any further inclusions or exclusions of rules from the 
list, and shall respond to such comments. 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.''.
  (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. ESTABLISHMENT AND APPROVAL OF SMALL BUSINESS CONCERN SIZE 
                    STANDARDS BY CHIEF COUNSEL FOR ADVOCACY.

  (a) In General.--Subparagraph (A) of section 3(a)(2) of the Small 
Business Act (15 U.S.C. 632(a)(2)(A)) is amended to read as follows:
                  ``(A) In general.--In addition to the criteria 
                specified in paragraph (1)--
                          ``(i) the Administrator may specify detailed 
                        definitions or standards by which a business 
                        concern may be determined to be a small 
                        business concern for purposes of this Act or 
                        the Small Business Investment Act of 1958; and
                          ``(ii) the Chief Counsel for Advocacy may 
                        specify such definitions or standards for 
                        purposes of any other Act.''.
  (b) Approval by Chief Counsel.--Clause (iii) of section 3(a)(2)(C) of 
the Small Business Act (15 U.S.C. 632(a)(2)(C)(iii)) is amended to read 
as follows:
                          ``(iii) except in the case of a size standard 
                        prescribed by the Administrator, is approved by 
                        the Chief Counsel for Advocacy.''.
  (c) Industry Variation.--Paragraph (3) of section 3(a) of the Small 
Business Act (15 U.S.C. 632(a)(3)) is amended--
          (1) by inserting ``or Chief Counsel for Advocacy, as 
        appropriate'' before ``shall ensure''; and
          (2) by inserting ``or Chief Counsel for Advocacy'' before the 
        period at the end.
  (d) Judicial Review of Size Standards Approved by Chief Counsel.--
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is amended by 
adding at the end the following new paragraph:
          ``(9) Judicial review of standards approved by chief 
        counsel.--In the case of an action for judicial review of a 
        rule which includes a definition or standard approved by the 
        Chief Counsel for Advocacy under this subsection, the party 
        seeking such review shall be entitled to join the Chief Counsel 
        as a party in such action.''.

SEC. 11. CLERICAL AMENDMENTS.

  (a) Definitions.--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) Incorporations by Reference and Certifications.--The heading of 
section 605 of title 5, United States Code, is amended to read as 
follows:

``Sec. 605. Incorporations by reference and certifications''.

  (c) Table of Sections.--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) Other Clerical Adendments to Chapter 6.--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. 12. 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.''.

SEC. 13. GAO REPORT.

  Not later than 90 days after the date of enactment of this Act, the 
Comptroller General of the United States shall complete and publish a 
study that examines whether the Chief Counsel for Advocacy of the Small 
Business Administration has the capacity and resources to carry out the 
duties of the Chief Counsel under this Act and the amendments made by 
this Act.

                  II. Purpose of the Bill and Summary

    The purpose of H.R. 2542, the ``Regulatory Flexibility 
Improvements Act of 2013,'' 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 United States Government 
Accountability Office (GAO), reports from the Chief Counsel for 
Advocacy,\1\ and Congressional hearings held by the Committee 
on the Judiciary and the Committee on Small Business 
demonstrates that agencies are still reluctant to comply with 
the analytical requirements of the RFA. Further action is 
evidently needed to force agency compliance.
---------------------------------------------------------------------------
    \1\Pub. 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.
---------------------------------------------------------------------------
    The bill defines and expands which economic effects are to 
be examined by agencies, imposes greater detail in performing 
the analyses, clarifies language concerning applicability of 
the RFA to the Internal Revenue Service (IRS), subjects all 
agencies, including the IRS, to the procedures in Sec. 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, mandates that the Chief 
Counsel promulgate RFA compliance regulations applicable to all 
federal agencies, and transfers the limited function on 
determining size standards of small businesses for purposes 
other than the Small Business Act and the Small Business 
Investment Act of 1958 to the Chief Counsel for Advocacy.

                       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\
---------------------------------------------------------------------------
    \2\The 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.
---------------------------------------------------------------------------
    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. Sec. 706(2)(A). This 
standard presumes that an agency will undertake rational 
rulemaking to: (1) ascertain the 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.
---------------------------------------------------------------------------
    \3\The term ``collection of information'' is a term of art used in 
the Paperwork Reduction Act. See 44 U.S.C. Sec. Sec. 3502(3).
    \4\The 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.
---------------------------------------------------------------------------
    The changes wrought by SBREFA had some effect on agency 
compliance. Lawsuits were filed against agencies, although not 
to 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.
---------------------------------------------------------------------------
    \6\Since 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.
    \7\There are insufficient circumstances to assess the results of 
this so-called ``panel process'' on OSHA regulations.
---------------------------------------------------------------------------
    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, the President issued Executive Order 
(E.O.) 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\
---------------------------------------------------------------------------
    \8\Presidential Memorandum for the Heads of Executive Departments 
and Agencies: Regulatory Flexibility, Small Business, and Job Creation, 
76 Fed. Reg. 3,827, 3,827 (Jan. 21, 2011).
    \9\Id. at 3,828.
    \10\Since 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 or Nuclear 
Regulatory Commission, are not subject to control by the White House or 
subject to presidential executive orders.
---------------------------------------------------------------------------
    Coetaneous with the release of the memorandum on the RFA, 
President Obama issued E.O. 13,563.\11\ While the putative 
purpose of the Order was to clarify the regulatory analytical 
requirements set forth in E.O. 12,866,\12\ Sec. 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, Sec. 610 of the RFA.
---------------------------------------------------------------------------
    \11\76 Fed. Reg. 3,821 (Jan. 21, 2011), reprinted at 3 C.F.R. 215 
(2011). In 2012, President Obama supplemented E.O. 13,563 by issuing 
E.O. 13,610, which emphasized the importance of public participation in 
the periodic review process, provided guidance on prioritization of 
reviews, and set a schedule for agencies to report on their review 
efforts. 77 Fed. Reg. 28,469 (May 14, 2012), reprinted at 3 C.F.R. 258 
(2012).
    \12\Exec. Order No. 12,866, 58 Fed. Reg. 51,735 (Oct. 4, 1993), 
requires federal agencies to perform a cost-benefit analysis for any 
regulation that will have an impact of more than $100 million on the 
economy.
    \13\Exec. Order No. 13,563, Sec. 6, 75 Fed. Reg. at 3,822.
---------------------------------------------------------------------------
    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 findings of the 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 Sec. 610 and 
the receipt of small entity input prior to the publication of 
proposed rules by EPA and OSHA.\15\
---------------------------------------------------------------------------
    \14\SBREFA also requires federal agencies to prepare compliance 
guides for regulations that have a significant economic impact on a 
substantial number of small entities.
    \15\See 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-02-491T); Regulatory Flexibility Act: Key Terms 
Still Need To Be Clarified (2001) (GAO-01-669T); Regulatory Flexibility 
Act: Implementation in EPA Program Offices and Proposed 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) (TGGD-98-75); Regulatory 
Flexibility Act: Agencies' Use of the October 1997 Unified Agenda Often 
Did Not Satisfy Notification Requirements (1998) (GGD-98-61R); 
Regulatory Flexibility Act: Agency Use of the November 1996 Unified 
Agenda Did Not Satisfy Notification Requirements (1997) (GGD/OGC-97-
77R); Regulatory Flexibility Act: Status of Agencies' Compliance (1995) 
(T-GGD-95-112).
---------------------------------------------------------------------------
    Testimony at hearings held by the Committee on Small 
Business during the 106th, 107th, 108th, 109th, 110th, 112th 
and 113th 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 presidential 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. 2542 which are set 
forth in the next section of this report.

                              IV. Hearings

    H.R. 2542 is, with one significant exception, identical to 
the bill that passed the House by a vote of 263 to 159. The one 
addition is the inclusion of H.R. 585 which was reported out of 
the Committee by a vote of 13 to 8. As a result, the findings 
of the Committee in the previous Congress for H.R. 527 and H.R. 
585 that address the matters set forth in H.R. 2542 are 
incorporated herein by reference.\16\ The findings of the 
previous Congress were confirmed anew in a hearing by the 
Subcommittee on Investigations, Oversight and Regulations 
entitled ``Regulating the Regulators Reducing Burdens on Small 
Business'' on March 14, 2013.
---------------------------------------------------------------------------
    \16\H.R. Rep. No. 112-89, pt. 2, at 13-14 (2011); H.R. Rep. No. 
112-288, at 2 (2011), respectively.
---------------------------------------------------------------------------

                       V. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on September 18, 2013 and ordered H.R. 
2542 reported, as amended, to the House by a voice vote at 3:22 
p.m. During the markup, 19 amendments were offered. Seven 
amendments were adopted and 12 were rejected. Disposition of 
the amendments is addressed below.
    Amendment Number One filed by Mr. Huelskamp (R-KS) requires 
the agencies to provide to small entities, upon their request, 
panel reports and materials and information provided to the 
Chief Counsel for Advocacy within 10 business days of the 
request. The amendment was adopted by voice vote at 2:06 p.m.
    Amendment Number Two filed by Ms. Meng (D-NY) and Mr. 
Barber (D-AZ) would allow an agency to avoid compliance with 
the RFA, as amended by H.R. 2542, by certifying that compliance 
will delay implementation of a rule and increase the likelihood 
that children will be harmed. The amendment was not agreed to 
on a recorded vote of 11 yeas and 12 noes at 3:07 p.m.
    Amendment Number Three filed by Ms. Meng (D-NY) would 
require that initial and final regulatory flexibility analyses 
include a description and estimate of the benefits of the 
proposed rule to small entities. The amendment was not agreed 
to on a recorded vote of 10 yeas and 13 noes at 3:11 p.m.
    Amendment Number Four filed by Ms. Meng (D-NY) would 
require each agency to estimate the benefits of the proposed 
rule and if they exceed the regulation's costs then the agency 
does not have to convene a Small Business Advocacy Review 
panel. The amendment was not agreed to by a voice vote at 2:16 
p.m.
    Amendment Number Five filed by Mr. Barber (D-AZ) requires 
that an agency conduct outreach to and meaningfully include 
women, veteran and socially and economically disadvantaged 
small businesses in their plan to gather input on existing 
agency rules. The amendment was agreed to by voice vote at 2:18 
p.m.
    Amendment Number Six filed by Mr. Barber (D-AZ) requires 
that an assessment of the economic impact of the proposed rule 
on small entities in a panel report includes an assessment of 
the proposed rule's impact on startup costs for small entities. 
The amendment was agreed to by voice vote at 2:20 p.m.
    Amendment Number Seven by Ms. Hahn (D-CA) would require 
that a panel include at least one small entity or their 
representative that shall benefit from or whose health or 
safety would be protected by the proposed rule. The amendment 
was not agreed to by voice vote at 2:23 p.m.
    Amendment Number Eight by Ms. Chu (D-CA) would allow an 
agency to elect not to comply with the RFA, as amended by H.R. 
2542, by certifying that compliance with the terms of H.R. 2542 
would significantly inhibit the ability of the agency to carry 
out its statutory duties. The amendment was not agreed to by 
voice vote at 2:25 p.m.
    Amendment Number Nine by Ms. Chu (D-CA) would require the 
Office of the Chief Counsel for Advocacy to convene a small 
business panel on potential regulations that may be promulgated 
to implement a trade agreement when Congress approves a trade 
agreement. The amendment was not agreed to on a recorded vote 
of 9 yeas and 14 noes at 3:13 p.m.
    Amendment Number 10 by Mr. Tipton (R-CO) allows small 
entities to provide input on the list of rules an agency plans 
to review by requiring agencies to solicit public comment on 
the list of rules when it is published in the Federal Register 
and on the agency's website. The amendment was agreed to by 
voice vote at 2:35 p.m.
    Amendment Number 11 by Mr. Schrader (D-OR) would strike 
section 10 of H.R. 2542 which provides authority to the Small 
Business Administration Office of Advocacy to determine size 
standards for purposes other than the Small Business Act or the 
Small Business Investment Act of 1958. The amendment was not 
agreed to on a recorded vote of 11 yeas and 13 noes at 3:15 
p.m.
    Amendment Number 12 by Ms. Clarke (D-NY) would allow an 
agency not to comply with the RFA, as amended by H.R. 2542, 
with regard to a rule related to terrorism or disaster 
preparedness or response. The amendment was not agreed to on a 
recorded vote of 11 yeas and 13 noes at 3:17 p.m.
    Amendment Number 13 by Ms. Clarke (D-NY) requires a GAO 
study no later than 90 days after the enactment of H.R. 2542 
that examines whether the Office of the Chief Counsel for 
Advocacy has the capacity and resources to carry out its duties 
under H.R. 2542. The amendment was agreed to by voice vote at 
2:47 p.m.
    Amendment Number 14 by Ms. Clarke (D-NY) would strike 
section 2(b) of H.R. 2542 which defines economic impact as 
including both direct economic effects and indirect economic 
effects that are reasonably foreseeable and result from the 
rule. The amendment was not agreed to by voice vote at 2:50 
p.m.
    Amendment Number 15 by Mr. Murphy (D-FL) and Mr. Barber (D-
AZ) exempts rules that protect the rights of and benefits for 
veterans from the definition of ``rule'' in H.R. 2542. The 
amendment was agreed to by voice vote at 2:53 p.m.
    Amendment Number 16 by Mr. Murphy (D-FL) would allow the 
Chief Counsel for Advocacy to take on approval of small 
business size standards only if and when the Chief Counsel 
certifies that he or she has the funding and personnel to take 
on this additional duty. The amendment was not agreed to by 
voice vote at 2:56 p.m.
    Amendment Number 17 by Mr. Schweikert (R-AZ) clarifies that 
indirect economic effects include compliance costs and effects 
on revenue. The amendment was agreed to by voice vote at 2:58 
p.m.
    Amendment Number 18 by Mr. Payne (D-NJ) would have made the 
effective date of H.R. 2542 contingent on a certification from 
the Chief Counsel for Advocacy that H.R. 2542 will not prevent 
any agency from taking appropriate and timely action. The 
amendment was not agreed to on a recorded vote of 9 yeas and 15 
noes at 3:20 p.m.
    Amendment Number 19 by Ms. Velazquez (D-NY) would have 
required the Chief Counsel for Advocacy to establish a 
compliance schedule setting forth a schedule by which agencies 
must comply with section 6 of H.R. 2542 based on the agency's 
budgetary resources. The amendment was not agreed to on a 
recorded vote of 11 yeas to 13 noes at 3:22 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. 2542


                   Offered by Mr. Huelskamp of Kansas

  Page 19, insert after ``interest.'' on line 22 the following:
  ``(g) A small entity or a representative of a small entity 
may submit a request that the agency provide a copy of the 
report prepared under subsection (d) and all materials and 
information provided to the Chief Counsel for Advocacy of the 
Small Business Administration under subsection (b). The agency 
receiving such request shall provide the report, materials and 
information to the requesting small entity or representative of 
a small entity not later than 10 business days after receiving 
such request, except that the agency shall not disclose any 
information that is prohibited from disclosure to the public 
pursuant to 552(b) of title 5, United States Code.''.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Ms. Meng of New York

  Page 30, insert after line 14 the following (and conform the 
table of contents accordingly):

SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE 
                    LAW.

  If the head of an agency certifies that compliance with the 
requirements of this Act or the amendments made by this Act 
would cause a delay in the implementation of a rule (or a land 
management plan) which would result in a significant increase 
in the likelihood that children would be harmed, then such 
agency may elect to comply with the requirements of chapter 6 
of title 5, United States Code, as in effect on the date prior 
to the date of enactment of this Act.
                              ----------                              

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                         Amendment to H.R. 2542


                    Offered by Ms. Meng of New York

  Page 11, line 24, strike ``and''.
  Page 12, line 3, insert after ``entities.'' the following:
          ``(8) describing and estimating the benefits 
        (including those pertaining to health and safety) of 
        the proposed rule to small entities.''.
  Page 12, line 3, strike ``entities.'' and insert the 
following: ``entities; and''.
  Page 12, line 12, strike ``and''.
  Page 12, insert after line 12 the following (and redesignate 
provisions accordingly):
                  (C) in the first paragraph (6), by striking 
                ``and'' at the end;
  Page 12, line 16, insert before the period at the end the 
following:
          ``(8) describing and estimating the benefits 
        (including those pertaining to health and safety) of 
        the proposed rule to small entities.''.
  Page 12, line 16, strike ``entities.'' and insert ``entities; 
and''.
                              ----------                              

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                         Amendment to H.R. 2542


                    Offered by Ms. Meng of New York

  Page 16, line 22, strike ``information on'' and insert the 
following: ``an estimate of''.
  Page 17, line 11, insert before ``shall'' the following: ``, 
except as provided under subsection (g),''.
  Page 19, line 22, insert after ``public interest.'' the 
following:
  ``(g) If the potential beneficial economic impacts (including 
those pertaining to health and safety) estimated under 
subsection (b)(1)(B) exceed the potential adverse economic 
impacts estimated under that subsection, a panel under 
subsection (c) may not be convened.''.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Mr. Barber of Arizona

  Page 21, line 12, insert after ``businesses'' the following: 
``(including small business concerns owned and controlled by 
women, small business concerns owned and controlled by 
veterans, and small business concerns owned and controlled by 
socially and economically disadvantaged individuals (as such 
terms are defined in the Small Business Act))''.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Mr. Barber of Arizona

  Page 18, line 15, insert after ``energy'' the following: ``an 
assessment of the proposed rule's impact on start-up costs for 
small entities,''.
                              ----------                              


                         Amendment to H.R. 2542


                   Offered by Ms. Hahn of California

  Page 17, line 13, insert after ``, including at least one 
such small entity (or their representative) that shall benefit 
from or whose health or safety would be protected by such 
proposed rule,''.
  Page 18, line 2, insert before the period at the end the 
following: ``, and a small entity or a representative of a 
small entity (or their representative) that shall benefit from 
or whose health or safety would be protected by such proposed 
rule''.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Ms. Chu of California

  Page 30, insert after line 14 the following (and conform the 
table of contents accordingly):

SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE 
                    LAW.

  If the head of an agency certifies that compliance with the 
requirements of this Act or the amendments made by this Act 
would significantly inhibit the ability of the agency to carry 
out the statutory duties of the agency, then such agency may 
elect to comply with the requirements of chapter 6 of title 5, 
United States Code, as in effect on the date prior to the date 
of enactment of this Act.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Ms. Chu of California

  Page 19, line 22, insert after ``public interest.'' the 
following:
  ``(g)(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 significant adverse economic impacts or maximize 
significant beneficial economic impacts on small entities.''.
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                         Amendment to H.R. 2542


                   Offered by Mr. Tipton of Colorado

  Page 23, line 11, insert after ``plan.'' the following: ``The 
agency shall include in the publication a solicitation of 
public comments on any further inclusions or exclusions of 
rules from the list, and shall respond to such comments.''.
                              ----------                              


                         Amendment to H.R. 2542


                   Offered by Mr. Schrader of Oregon

  Beginning on page 26, line 4, strike section 10, and conform 
the table of contents accordingly.
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                         Amendment to H.R. 2542


                   Offered by Ms. Clarke of New York

  Page 30, insert after line 14 the following (and conform the 
table of contents accordingly):

SEC. 13. CERTIFICATION PERMITTING COMPLIANCE WITH PRIOR VERSION OF THE 
                    LAW.

  If the head of an agency certifies that compliance with the 
requirements of this Act or the amendments made by this Act 
with regard to a rule is necessary to safeguard the United 
States and its territories in regard to an act or potential act 
of terrorism or to respond or prepare to respond to a disaster, 
then such agency may elect not to comply with the requirements 
of this Act or the amendments made by this Act, and to comply 
with the requirements of chapter 6 of title 5, United States 
Code, as in effect on the date prior to the date of enactment 
of this Act.
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                         Amendment to H.R. 2542


                   Offered by Ms. Clarke of New York

  Page 30, insert after line 14 the following:

SEC. 13. GAO REPORT.

  Not later than 90 days after the date of enactment of this 
Act, the Comptroller General of the United States shall 
complete and publish a study that examines whether the Chief 
Counsel for Advocacy of the Small Business Administration has 
the capacity and resources to carry out the duties of the Chief 
Counsel under this Act and the amendments made by this Act.
                              ----------                              


                         Amendment to H.R. 2542


                   Offered by Ms. Clarke of New York

  Page 3, strike lines 1 through 14, and redesignate provisions 
accordingly.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Mr. Murphy of Florida

  Page 2, line 10, insert after ``does not include'' the 
following: ``a rule pertaining to the protection of the rights 
of and benefits for veterans or''.
                              ----------                              


                         Amendment to H.R. 2542


                    Offered by Mr. Murphy of Florida

  Page 27, insert after line 20 the following:
  (e) Effective Date.--Notwithstanding any other provision of 
this Act, this section, and the amendments made by this 
section, shall take effect only beginning on the date that the 
Chief Counsel for Advocacy of the Small Business Administration 
submits to the Committee on the Judiciary of the House of 
Representatives, the Committee on the Judiciary of the Senate, 
the Committee on Small Business of the House of 
Representatives, and the Committee on Small Business and 
Entrepreneurship of the Senate a certification that the Office 
of Advocacy has sufficient funding and personnel to carry out 
the additional duties and responsibilities provided for in this 
section and the amendments made by this section.
                              ----------                              


                         Amendment to H.R. 2542


                  Offered by Mr. Schweikert of Arizona

  Page 3, line 10, insert after ``indirect economic effect'' 
the following: ``(including compliance costs and effects on 
revenue)''.
                              ----------                              


                         Amendment to H.R. 2542


                   Offered by Mr. Payne of New Jersey

  Page 30, insert after line 14 (and conform the table of 
contents accordingly) the following:

SEC. 13. EFFECTIVE DATE.

  Nothing in this Act or the amendments made by this Act may 
take effect until the date on which the Chief Counsel for 
Advocacy of the Small Business Administration submits a 
certification to Congress that, in the determination of Chief 
Counsel, this Act and the amendments made by this Act will not 
prevent any agency from taking appropriate and timely agency 
action.
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                         Amendment to H.R. 2542


                  Offered by Ms. Velazquez of New York

  Page 19, line 22, insert after ``public interest.'' the 
following:
  ``(g) Agencies may defer compliance with subsections (b) 
through (f) of this section, as amended by the Regulatory 
Flexibility Improvements Act of 2013. The Chief Counsel of the 
Office of Advocacy shall establish a compliance schedule 
setting forth during which fiscal years agencies shall become 
compliant with section 6 of the Act. The Chief Counsel shall 
base that compliance schedule on the budgetary resources 
available to the agencies and the extent to which the rules of 
such agencies have affected small entities.''.
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             VII. Section-by-Section Analysis of H.R. 2542


Section 1. Short title

    Designates the bill as the ``Regulatory Flexibility 
Improvements Act of 2013.''

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 Sec. 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 (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, Sec. 2(a) of H.R. 2542 
eliminates the distinction between Sec. 551(4) of the APA and 
Sec. 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. Sec. 551(4). 
The RFA does not apply to any rule that falls within any of the 
aforementioned categories. Id. at Sec. 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.\17\ 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. Finally, any 
rule that pertains to the protection of the rights and benefits 
for veterans is exempted from the definition of rule.
---------------------------------------------------------------------------
    \17\From 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.
---------------------------------------------------------------------------
            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).
    The issue of indirect effects reappeared when an electric 
cooperative, Mid-Tex, challenged the Federal Energy Regulatory 
Commission's (Commission) 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,\18\ that the use 
of indirect effects by Senator Culver 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.\19\
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    \18\Since 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.
    \19\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).
---------------------------------------------------------------------------
    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.\20\ 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.
---------------------------------------------------------------------------
    \20\If a state does not develop a state implementation plan, the 
EPA is authorized to develop the implementation plan.
---------------------------------------------------------------------------
    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.\21\ 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 underwent substantial economic review, 
including the development of a cost-benefit analysis pursuant 
to E.O. 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 
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.
---------------------------------------------------------------------------
    \21\The 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.
---------------------------------------------------------------------------
    Section 303(d) of the Clean Water Act, 33 U.S.C. 
Sec. 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.''\22\ 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 E.O. 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.
---------------------------------------------------------------------------
    \22\There are Indian tribes with populations of less than 50,000. 
EPA's conclusion that only large governmental entities were being 
regulated was wrong.
---------------------------------------------------------------------------
    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.\23\ 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 
visitors 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.
---------------------------------------------------------------------------
    \23\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.
---------------------------------------------------------------------------
    To the extent that these rules are significant under E.O. 
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),\24\ the term ``effects'' means:
---------------------------------------------------------------------------
    \24\These 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.
---------------------------------------------------------------------------
    (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 farther removed in distance, but 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. Sec. 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 Sec. 1508.18; see also Cellular Phone 
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,\25\ 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 that federal agencies contend it 
would be to estimate indirect economic impacts.\26\
---------------------------------------------------------------------------
    \25\CEQ regulations define effects of major federal actions to 
include economic and social impacts. 40 C.F.R. 1508.8.
    \26\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.
---------------------------------------------------------------------------
    Section 2(b) adopts a definition of ``economic effect'' 
that parallels the definition of ``effects'' 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. Furthermore, the definition clearly 
states that both compliance costs and effects on revenue are 
indirect economic effects.
            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.\27\ 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.
---------------------------------------------------------------------------
    \27\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. Sec. 40 C.F.R. 1502.23.
---------------------------------------------------------------------------
    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\28\ because 
small entities (except in very unusual circumstances) will 
represent the vast majority of entities subject to a particular 
regulation.\29\
---------------------------------------------------------------------------
    \28\This 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.
    \29\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.
---------------------------------------------------------------------------
    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 positive 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.\30\ GAO also reached the 
same conclusion.\31\ Nevertheless, the Forest Service and BLM 
maintain that their resource management plans are not 
rules.\32\ Given the potential consequences 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.\33\
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    \30\Letter 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).
    \31\GAO, Congressional Review Act: Application to the Tongass 
National Forest Land and Resource Plan 2 (1997) (T-OGC-97-54).
    \32\The 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 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.
    \33\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. Sec. 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.
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    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 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.\34\
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    \34\The 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).
---------------------------------------------------------------------------
    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 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.\35\ This has 
been a longstanding position of the Treasury Department and the 
IRS.
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    \35\This 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 190 (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, Sec. 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 Sec. 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. Sec. 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 Sec. Sec. 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 Reference Servs. 
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. 2542 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.
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    The Office of the Chief Counsel for Advocacy has criticized 
that jejune interpretation. The authors of H.R. 2542 also 
consider the IRS interpretation to violate the letter and the 
prophylactic intent of SBREFA.\36\ 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. Blasini-Lluberas, 
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 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, would not 
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.
---------------------------------------------------------------------------
    \36\OIRA is charged with interpreting and implementing the 
Paperwork Reduction Act. 44 U.S.C. Sec. 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).
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    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, and directives 
from Presidents Bush and Obama have not changed the 
intransigent position of the IRS or Treasury Department on RFA 
compliance. H.R. 2542 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 Sec. 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 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.\37\ 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.
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    \37\To 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).
---------------------------------------------------------------------------
    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 statues 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 to have the same 
meaning as that in the RFA. To eliminate potential confusion, 
Sec. 2(f)(2-3) repeals the definitions in Sec. 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 RFA's use of the terms 
``collection of information'' and ``recordkeeping 
requirement.'' Although used for slightly different 
purposes,\38\ 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\39\ to the terms ``collection of information'' and 
``recordkeeping requirement.''
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    \38\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.
    \39\See Ruckelshaus v. Sierra Club, 463 U.S. 680, 691 (1983) 
(applying in pari passu construction of various federal attorneys fee 
shifting statutes).
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            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-for-profit enterprise which is independently owned and 
operated and is not dominant in its field. . . .'' 5 U.S.C. 
Sec. 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,\40\ 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.
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    \40\The Small Business Administrator determines size based on an 
examination of small businesses on a national basis. 13 C.F.R. 
Sec. 121.102(b).
---------------------------------------------------------------------------
    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.\41\ The second interpretation, 
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 and employee standards.\42\ This 
interpretation of EAJA has been rejected by the D.C., Fifth, 
and Seventh Circuits.\43\ 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.
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    \41\National Truck Equipment Ass'n v. NHTSA, 972 F.2d 669, 674 (6th 
Cir. 1992).
    \42\See 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 (1998) (collecting cases in which federal government argued for 
aggregation).
    \43\National Ass'n of Manufacturers v. DOL, 159 F.3d 597, 602 (D.C. 
Cir. 1998) (discussing circuit split).
---------------------------------------------------------------------------
    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.\44\ Since the small organization does 
not control or have direct access to the net worth of its 
members, it should be judged on solely on its resources and not 
those of its members or donors.
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    \44\While 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.
---------------------------------------------------------------------------
    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. 2542. 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, Sec. 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 international 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.\45\
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    \45\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.
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    Finally, Sec. 2(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 Sec. 601(3).

Section 3. Expansion of report of regulatory agenda

    Section 602 of the current RFA requires each agency to 
publish in the Federal Register a regulatory flexibility agenda 
each April and October. By alerting small entities to potential 
consequences of upcoming rules, the authors of the legislation 
expect greater involvement of small entities in the rulemaking 
process ultimately leading to regulations that achieve agency 
objectives without unnecessary burdens. These agendas describe 
which rules an agency expects to issue in the near future that 
are likely to have a significant economic impact on a 
substantial number of small entities. The agencies are required 
to briefly describe the rules; however, in their current form, 
the regulatory flexibility agendas provide almost no insight 
into the potential impacts of the rules on small entities. 
Thus, the regulatory flexibility agendas are of little use to 
most small entities.
    Section 3 expands the information required to be provided 
in the regulatory flexibility agendas thereby increasing 
transparency and providing small entities with a better 
understanding of the potential impacts of a rule an agency 
expects to propose or promulgate. Each agency is required to 
describe the sector of the North American Industrial 
Classification System that is primarily affected by the rules. 
Section 3 also requires the agencies and the Office of Advocacy 
to publish plan language summaries of the information in the 
agendas on their websites.

Section 4. 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 that a useful parallel can be drawn between 
        RFA Sec. 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 the 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 is 
confirmed by the D.C. Circuit adoption of the parallelism 
finding.\46\
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    \46\National Ass'n of Homebuilders v. United States Army Corps of 
Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
---------------------------------------------------------------------------
    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 Strycker's 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 resources have been committed or the die 
otherwise cast.'' Robertson v. Methow Valley Citizens Council, 
490 U.S. 332, 349 (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,\47\ 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.
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    \47\Courts have found violations of the RFA when an agency 
incorrectly certified a rule rather than preparing a regulatory 
flexibility analysis. E.g., Harlan 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).
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    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:\48\ 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. Sec. 4332(2)(C). Courts do not look at 
the statement as 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 
accorded to environmental impact statements by the courts then 
ensures significant consideration of environmental 
consequences.
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    \48\The 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, 418-0919 (1971).
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    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 Sec. 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 4 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. 
2542 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 4(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. 
Sec. 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 Sec. 603(c).\49\ H.R. 2542 makes a number of changes and 
additions to these analytical requirements as will be outlined 
below.
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    \49\Nothing in H.R. 2542 affects the requirements in the IRFA under 
Sec. 603(c).
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    H.R. 2542 strikes the term ``succinct'' from Sec. 603(b)(2) 
to avoid possible confusion between an overall requirement of a 
detailed statement 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.\50\
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    \50\This also comports with the change made by the Small Business 
Jobs Act of 2010 in which the reference to term ``succinct'' were 
deleted from Sec. 604. Pub. L. No. 111 09240, Sec. 1601, 124 Stat. 
2504, 2551.
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    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, Sec. 4(a) strikes the term ``where feasible'' in its 
redraft of Sec. 603(b)(3).\51\
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    \51\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.
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    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. 
Sec. 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 musculo-skeletal 
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) 
addressed this potential conflict because the 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 
Sec. 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 4(a) resolves this problem by 
striking the ``extent practicable'' from the existing 
Sec. 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 4(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 4(a) adds a 
new paragraph (6) to Sec. 603(b) that requires an evaluation of 
the cumulative impact or an explanation why such evaluation 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. 2542, 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 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 
regulatory 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. Sec. 608c,\52\ 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, Sec. 4(a) of H.R. 2542 
adds a new paragraph (7) to Sec. 603(b) of the RFA by requiring 
agencies to describe any disproportionate impact on small 
businesses\53\ or a specific class of small businesses.
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    \52\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).
    \53\The 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.
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            Subsection (b)--FRFAs
    Section 4(b) amends the requirements for completing a FRFA. 
The changes made by the Committee to Sec. 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.\54\ 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, 4(b) requires that the same seven 
analytical elements required in the IRFA by the amended 
Sec. 603(b) be incorporated into the FRFA mandated by the 
amended Sec. 604(b).
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    \54\In addition to removing the term ``succinct'' as already noted, 
see note 50, supra, the Small Business Jobs Act of 2010, also removed 
the term ``summary'' from Sec. 604 of the RFA. Pub. L. No. 111 09240, 
Sec. 1601, 124 Stat. 2504, 2551.
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    The changes made by Sec. 4(b) also comports with the 
parallelism between the RFA and NEPA as noted by the First and 
D.C. Circuits. The expectation is that the agencies, after the 
regulations issued by the Chief Counsel pursuant to Sec. 5 of 
H.R. 2542, 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 Sec. 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 
4(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 
(CFTC) or the Securities and Exchange Commission (SEC)) 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 Internet-based rulemaking 
access, Sec. 4(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.\55\
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    \55\H.R. 2542 does not address whether publication on 
www.regulations.gov satisfies the requirements of the amended Sec. 604. 
That issue is best left to the regulations that will be developed by 
the Office of the Chief Counsel for Advocacy.
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            Subsection (c)--Cross References to Other Analyses
    In an effort to avoid duplication, federal agencies can use 
other analyses to meet the requirements of the RFA but only if 
that analysis 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 
4(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\56\ in the 
same way that a finding of no significant environmental impact 
(FONSI) eliminates an agency's preparation of an environmental 
impact statement.\57\ After the enactment of the RFA in 1980, 
agencies frequently issued boilerplate certifications that 
merely reiterated the language of Sec. 605(b).\58\ 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.\59\
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    \56\Preparation 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.
    \57\40 C.F.R. Sec. 1508.13; see Grand Canyon Trust v. FAA, 290 F.3d 
339, 342 (D.C. Cir. 2002).
    \58\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).
    \59\Lehigh Valley Farmers v. Block, 640 F. Supp. 1497, 1520 (E.D. 
Pa. 1986) (district court determination on RFA was not addressed on 
appeal).
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    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 
assessment 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 4(d) amends Sec. 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.\60\ 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.
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    \60\Technically, 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.
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            Subsection (e)--Quantification Requirement
    Section 4(e) modifies the existing requirements in Sec. 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 Sec. 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.\61\ Section 4(e) amends 
Sec. 607 by making quantification of impacts the default in 
developing an assessment of impacts on small entities.
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    \61\The amendment set forth in Sec. 4(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. Sec. 3516 note.
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    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 market entrants. The agency then 
should not be forced to develop highly suspect numerical 
estimates of the impacts.\62\
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    \62\The 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.
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    New subsection (2) of Sec. 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 (2) 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 5. Repeal of waiver authority and additional powers of Chief 
        Counsel

    This section repeals the provision in Sec. 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. 2542 
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. Sec. 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.\63\ 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 Sec. 608 of the RFA also satisfies the impracticable, 
unnecessary, or contrary to the public interest standard of 
Sec. 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.
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    \63\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).
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            Revised Sec. 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 of deference.\64\ The witnesses were 
responding to the D.C. Circuit's decision in American Trucking 
Ass'n 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).\65\ 
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.
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    \64\Improving and Strengthening the Office of Advocacy: Hearing 
before the Committee on Small Business, 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).
    \65\Although the D.C. Circuit referred to the SBA, it clearly meant 
the Chief Counsel for Advocacy.
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    The situation clearly needs to be rectified. Granting the 
Chief Counsel's interpretation of the RFA deference 
substantially will change the balance between the Chief Counsel 
and the agencies in the development of 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 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 so-called 
``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 
government-wide 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. 11,991 (May 24, 1977), reprinted in 42 Fed. Reg. 26,967 
(May 25, 1977). Even though Congress, in NEPA, did not delegate 
to CEQ any power to issue regulations,\66\ the regulations 
developed by it are accorded substantial deference by the 
courts. Robertson v. Methow Valley Citizens Ass'n, 490 U.S. 
332, 356 (1989).
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    \66\In fact, the powers and functions of CEQ remarkably parallel 
those of the Office of Advocacy.
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    New Sec. 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 Sec. 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. 2542 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. Sec. 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.\67\
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    \67\ The 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.
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    New Sec. 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 Sec. 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 
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.\68\
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    \68\ The Chief Counsel has neither the resources nor the expertise 
to represent private parties in federal administrative enforcement 
proceedings.
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    Amended Sec. 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 Sec. 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 6. Procedures for gathering comments

    Section 609 of the RFA requires three federal agencies, the 
Occupational Safety and Health Administration (OSHA), the 
Environmental Protection Agency (EPA) and the Consumer 
Financial Protection Bureau (CFPB or Bureau), 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.\69\ 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.
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    \69\ The panels are referred to both as Small Business Advocacy 
Review panels and SBREFA panels. SBREFA created the requirement for EPA 
and OSHA. The CFPB was added to the list of agencies that must convene 
panels in the Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Pub. L. No. 111-203, Sec. 1100G, 124 Stat. 1376, 2112 (2010).
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    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.\70\ 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 sense and H.R. 2542 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.
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    \70\At a Committee hearing on CFPB's compliance with the RFA, the 
CFPB Director testified that the Small Business Advocacy Review panels 
helped the Bureau to shape its proposals, been a collaborative process 
between small entities and the Bureau, and have proven to be valuable 
to the CFPB. Know Before You Regulate: The Impact of CFPB Regulations 
on Small Business, 112th Cong., 2d Sess. (2012) 4 (statement of 
Director Richard Cordray).
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    Section 6 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, OSHA and CFPB will 
prepare an IRFA. This parameter unnecessarily narrows the 
regulations that should be the subject of a Sec. 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 6 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. 2542 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. Sec. 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 in an open meeting. 
5 U.S.C. Sec. 552b(b). If an agency set forth in 44 U.S.C. 
Sec. 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 
Sec. 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.\71\
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    \71\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.
---------------------------------------------------------------------------
    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. 
Sec. 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 
Sec. 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 Sec. 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.\72\ The Office of Advocacy should use 
the discretion granted to it in Sec. 609 in a balanced manner 
by finding small entity representatives that can provide 
diverse views on a particular proposed regulation. The 
amendment to Sec. 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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    \72\Federal 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.
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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. 2542's 
rewrite of Sec. 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 currently convened under Sec. 609 are not 
subject to the strictures of the Federal Advisory Committee 
Act. The amendments to that section made by H.R. 2542 should 
not be construed as requiring the General Services 
Administration to comply with the Federal Advisory Committee 
Act.
    New Sec. 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. The assessment also 
is required to discuss the proposed rule's impact on the cost 
that small entities pay for energy and on start-up costs for 
small entities. 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 
Sec. 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 Sec. 553(b)(B) of the APA. For example, EPA may 
need to deal with an imminent public 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.
    Finally, new Sec. 609(g) enhances transparency in the 
rulemaking process by providing small businesses with access to 
panel reports and materials and information used to develop a 
proposed rule. It allows a small entity or a representative of 
a small entity to request that an agency provide a copy of a 
panel report and all materials prepared or utilized in 
developing the proposed rule that were provided by the agency 
to the Chief Counsel for Advocacy. The agency is required to 
provide the report, materials and information to the requesting 
small entity or its representative within 10 business days. Any 
proprietary information utilized by the agency that is not 
subject to disclosure under FOIA shall not be subject to 
disclosure under this section.

Section 7. 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 Sec. 610 and found compliance 
sorely lacking.\73\ 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 Sec. 610 compliance are far more pervasive and endemic. 
Unfortunately, Sec. 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. 2542 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.
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    \73\See note 15, supra.
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    When Sec. 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 Sec. 610 
requires the development of new plans for periodic review 
within 180 days after the enactment. The plan must detail how 
an agency will conduct outreach to and gather input from small 
businesses on existing rules in order to periodically review 
its regulations pursuant to Sec. 610. In addition to 
publication of the plan in the Federal Register, agencies are 
required to place these plans on their websites.\74\
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    \74\This 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 Obama's revisions to E.O. 
12,866.
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    The trigger for periodic review in the revision to Sec. 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 Sec. 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 Sec. 610, 
there is an expectation that the full compliance with the 
periodic review provision will be based on the regulations 
promulgated by the Chief Counsel pursuant to the authority of 
amended Sec. 608.
    Although the revised Sec. 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, Sec. 610(e)(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 Sec. 610(d). These amendments to the 
scope of review also comport with those made to the FRFA under 
Sec. 4 of H.R. 2542.
    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 Sec. 610 requires each agency to report 
annually on the results of its periodic reviews. The current 
version of Sec. 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 Sec. 3502(5) of 
Title 44, United States Code need not submit reports to OIRA.
    Revised subsection 610(f) 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 Ombudsman. The agency is also required 
to solicit and respond to comments from the public on any rules 
that should have been included on or excluded from the list or 
rules to be reviewed. Utilization of the Internet\75\ should 
maximize input from affected small entities. The Committee also 
requires publication in 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\76\ prior to the start of the next calendar year.
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    \75\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 Sec. 610.
    \76\Publication 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.
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    Nothing in the changes made by H.R. 2542 modifies the 
ability of adversely affected entities to challenge agency 
compliance with the periodic review requirements. Given the 
procedures established in the revised Sec. 610 and the 
regulations to be promulgated by the Chief Counsel pursuant to 
amended Sec. 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 8. Judicial review of compliance with the RFA

    Section 8(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 8(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).\77\ 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.
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    \77\There 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.
---------------------------------------------------------------------------
    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.\78\ While that 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.\79\ 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 Sec. 8(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.
---------------------------------------------------------------------------
    \78\The Chief Judicial Officer at the Department of Agriculture 
acts as the Secretary when hearing appeals pursuant to Sec. 15(A) of 
the Agricultural Marketing Agreement Act of 1937. If the 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.
    \79\For 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).
---------------------------------------------------------------------------
    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. 555, 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.\80\ 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.
---------------------------------------------------------------------------
    \80\See National Ass'n of Homebuilders v. United States Army Corps 
of Eng'rs, 417 F.3d 1272, 1286 (D.C. Cir. 2005).
---------------------------------------------------------------------------
    The amendments made in Sec. 8(a)-(b) are not intended to 
authorize challenges to either the agency's RFA compliance or 
the underlying regulation prior to the issuance of a final 
rule. Principles of exhaustion of administrative remedies 
remain 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 8(c) of the bill makes conforming technical 
corrections to Sec. 611. The trigger for any challenge is 
modified from the date of final agency action to publication of 
the final rule.
    Section 8(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 
Sec. 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 Sec. 5 of H.R. 2542 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 Sec. Sec. 601, 603, 604, 
605(b), 609, and 610 of the RFA.

Section 9. Jurisdiction of Court of Appeals for challenges to rules 
        implementing RFA

    Section 9 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, 
U.S.C. Sec. Sec. 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 to authorizing challenges to Chief 
Counsel regulations, Sec. 9(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 
9(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 10. Establishment and approval of Small Business Concern Size 
        Standards by the Chief Counsel for Advocacy

    In 1992, Senators Dale Bumpers (D-AR) and Malcolm Wallop 
(R--WY) were incensed at actions taken by the Nuclear 
Regulatory Commission (NRC) to increase fees for byproduct 
users of fissile material under the Atomic Energy Act. The NRC 
did not perform an adequate assessment of these fee increases 
on small entities as required by the RFA. In establishing these 
fees, the NRC utilized a different set of definitions than had 
been set by the SBA under Sec. 3 of the Small Business Act. 
Senators Bumpers and Wallop sponsored an amendment to the Small 
Business Act requiring that federal agencies wishing to adopt a 
definition of small business that varied from those promulgated 
by the Small Business Administration (SBA) pursuant to its 
Sec. 3 authority must issue the new size standard for notice 
and comment and then obtain approval of the Administrator of 
the SBA.
    While the Administrator has significant acumen in setting 
size standards, that expertise is limited to the use of size 
standards for purposes of the Small Business Act and Small 
Business Investment Act of 1958. As a result, the Administrator 
is not the proper official to determine size standards for 
purposes of other agencies' regulatory activities. The 
Administrator is not fluent with the vast array of federal 
regulatory programs, is not in constant communication with 
small entities that might be affected by another federal 
agency's regulatory regime, and does not have the analytical 
expertise to assess the regulatory impact of a particular size 
standard on small entities. Furthermore, the Administrator's 
standards are: very inclusive, not developed to comport with 
other agencies' regulatory regimes, and lack sufficient 
granularity to examine the impact of a proposed rule on a 
spectrum of small businesses. When other agencies have sought 
the approval of the Administrator under the amendments made to 
Sec. 3 of the Small Business Act by Senators Bumpers and 
Wallop, the Office of Size Standards consulted with personnel 
in the Office of Advocacy on the rectitude of an agency's 
definition of small business that varied from those set forth 
in the SBA's regulations interpreting the Small Business Act.
    Given this rationale, it is appropriate to split the size 
standard functions in the Small Business Act. Section 10 of 
H.R. 2542 provides that the Administrator shall establish size 
standards to carry out the purposes of the Small Business Act 
or Small Business Investment Act of 1958. Section 10 then 
delegates the authority to approve a size standard for purposes 
of all other statutes to the Chief Counsel. The Chief Counsel 
is only entitled to rule on size standards for definitions of 
small business concerns if the agency issuing the regulation 
does not adopt a size standard approved by the Administrator 
for carrying out the purposes of the Small Business Act or 
Small Business Investment Act. This will constrain the number 
of size standard decisions by the Chief Counsel and allow 
agencies to utilize already established standards rather than 
have to go through the Chief Counsel for approval of each 
standard. If a federal agency adopts, as a definition of small 
business, a size standard approved by the Administrator, the 
federal agency need not seek approval of the Chief Counsel 
pursuant to Sec. 3 of the Small Business Act as amended by H.R. 
2542. The determination of a size standard for other regulatory 
purposes has no effect on the requirements of an agency that 
wishes to develop a definition of small business as set forth 
in Sec. 601(3) of the RFA. Thus, there are two different size 
standard approvals that the Chief Counsel may be forced to 
make: 1) the size determination for analyzing the proposed and 
final rule pursuant to the RFA; and 2) the definition of a 
small business that may be included in the text of the final 
rule.
    Nothing in the legislation requires that the agency 
promulgating a regulation must utilize the size standards in 
its rules for purposes of complying with the RFA. However, it 
would be logical for the agency to explain the rationale for 
adopting different definitions in the statement of basis and 
purpose as well as any FRFA or certification. To be sure, an 
agency may use a different definition of small business for 
purposes of compliance with the RFA if the agency adopts the 
Administrator's definition of small business in the rule at 
issue.
    An alternative to the approach taken in H.R. 2542 would be 
for the Administrator to make all size standard determinations 
with the concurrence of the Chief Counsel on those size 
standards developed to implement statutes other than the Small 
Business Act or Small Business Investment Act. Adoption of that 
regulatory regime could lead to the anomalous result of the 
Chief Counsel and Administrator making different determinations 
on the same size standard. Under Sec. 601 of the RFA, the 
default size standard for agency compliance with the RFA are 
the ones adopted by the Administrator and set forth in Part 121 
of Title 13, Code of Federal Regulations. However, the RFA 
permits the agency to utilize a different standard in complying 
with the RFA after consultation with the Chief Counsel for 
Advocacy. The agency then uses that standard for its initial 
and final regulatory flexibility analyses which results in the 
agency adopting a small business exemption identical to the 
definition of a small business in its regulatory flexibility 
analyses. Since that definition is different than the one 
adopted by the Administrator, the agency must seek the approval 
of the Administrator. If the Administrator disapproves that 
standard, then a small business exemption that the Chief 
Counsel and the agency thought was appropriate would not be put 
into effect.\81\ H.R. 2542 avoids these potentially anomalous 
results by vesting the Chief Counsel with the sole authority to 
make size decisions for the purposes of other regulatory 
programs.
---------------------------------------------------------------------------
    \81\This could be particularly problematic if the size standard 
adopted by the agency with the concurrence of the Chief Counsel is 
larger than the size standard promulgated by the Administrator. The 
Administrator might feel such an expansion of the term ``small 
business'' inappropriate.
---------------------------------------------------------------------------
    Section 10(c) makes conforming changes in Sec. 3(a)(3). The 
Chief Counsel is added to ensure that size standards vary from 
industry to industry as is appropriate given the context of the 
rulemaking for which the Chief Counsel has been asked to 
approve a definition of small business.
    The Chief Counsel's decision on size standards should be 
rational and subject to judicial review. Section 10(d) 
authorizing judicial review eliminates litigation over whether 
Congress intended a private right of action under Cort v. Ash, 
422 U.S. 66 (1975), or whether the decision was left to the 
discretion of the agency pursuant to Heckler v. Chaney, 470 
U.S. 821 (1985).
    To be sure, the Office of Advocacy could be placed in the 
odd circumstance of being a respondent in an action in which it 
is defended by the Department of Justice while at the same time 
filing an amicus brief against the Department of Justice on 
whether the agency complied with the RFA. Given the fact, the 
Chief Counsel's ``intervention'' in the RFA compliance aspect 
of the case is as an amicus rather than as a party, the 
Committee does not believe the odd litigation stance will prove 
problematic to the court reviewing the case or the Department 
of Justice's defense of the Chief Counsel. The odd alignment of 
defendants and friends of the court should not complicate 
judicial review because courts often face challenges in which 
one party challenging an agency action may agree with the 
agency in opposition to a stance taken by another party 
challenging the same rules. Despite the potential alignment of 
interests, the Department of Justice should be able to fulfill 
its obligations to defend the Chief Counsel on the size 
standard decision\82\ even though the Chief Counsel may be 
filing an amicus brief in opposition to the Justice 
Department's other agency defendant. Finally, given the nature 
of the claims and the record on review, the Department of 
Justice's defense of the action will reveal client confidences 
concerning the development of the rule to a ``party'' opposed 
to the rule.
---------------------------------------------------------------------------
    \82\It is very unlikely that the Chief Counsel will condemn an 
agency's compliance with the RFA because of a size standard used in the 
regulation was approved by the Chief Counsel. That actually would be 
the height of irrational decisionmaking.
---------------------------------------------------------------------------
    Nothing in these changes made by H.R. 2542 are designed to 
authorize a specific challenge to the size determination made 
by the agency and the Office of Advocacy pursuant to 
Sec. 601(3). To the extent that a party believes that the size 
standard utilized in complying with the RFA was unreasonable, 
the adversely affected small entity may challenge the agency's 
compliance with the RFA as set forth in Sec. 611.
    The changes made in H.R. 2542 will not represent a 
significant strain on the resources of the Office of the Chief 
Counsel for Advocacy. According to data from the SBA, there 
have been 27 requests by other agencies under the authority of 
amended section 3 of the Small Business Act since the date of 
amendment in 1992. That works out to between one to two 
requests per year. Even that may be an overestimate since the 
vast majority of requests were made by the Federal 
Communications Commission to implement its authority to auction 
spectrum under Sec. 309(j) of the Communications Act of 1934, 
47 U.S.C. Sec. 309(j). Given that the number of such auctions 
will continue to diminish as the government runs out of 
spectrum to auction, the Office of the Chief Counsel for 
Advocacy should have sufficient resources to handle the 
authority transferred to it under this legislation.

Section 11. Clerical amendments

    Section 11 contains appropriate clerical amendments needed 
to make the United States Code consistent with the changes 
sought by the Committee.

Section 12. Agency preparation of guides

    Section 212(a)(5) of SBREFA requires agencies to prepare 
compliance guides for any rule for which a FRFA was prepared. 
Under the existing law, agencies may consult with small 
entities in the development of these guides. Section 12 
requires agencies to solicit input from affected small entities 
or associations of affected small entities in the development 
of compliance guides.
    Since small entities represent most of the entities subject 
to regulations, soliciting input from small entities in 
preparing compliance guides will help agencies to develop 
better guides. Small entities can identify potential compliance 
problems with a regulation in advance so an agency is able to 
address those problems in the compliance guide. This 
collaborative process will provide the agency with the best 
opportunity for obtaining full compliance from small entities 
by ensuring that the compliance guide is comprehensive and 
raises appropriate awareness of regulatory compliance 
requirements.

Section 13. GAO Report

    Section 13 requires the GAO to examine whether the Chief 
Counsel for Advocacy of the Small Business Administration has 
the capacity and resources to carry out its duties under H.R. 
2542. The GAO's study must be completed and published not later 
than 90 days after H.R. 2542's enactment.

                VIII. Congressional Budget Cost Estimate

    H.R. 2542 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. 2542 would cost $45 
million over the 2014-2018 period subject to appropriation of 
the necessary amounts. Pay-as-you-go procedures apply to this 
legislation because it could affect direct spending by agencies 
not funded through annual appropriations.
                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 18, 2013.
Hon. Sam Graves,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Buget Office has 
prepared the enclosed cost estimate for H.R. 2542, the 
Regulatory Flexibility Improvements Act of 2013.
    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. 2542--Regulatory Flexibility Improvements Act of 2013

    Summary: H.R. 2542 would amend the Regulatory Flexibility 
Act (RFA) to expand the number of rules covered by the act and 
to require agencies to perform additional analysis of 
regulations that affect small businesses. The legislation also 
would provide new authorities to the Small Business 
Administration's (SBA's) Office of Advocacy to intervene and 
provide support for agency rulemaking. Finally, H.R. 2542 would 
require the Government Accountability Office (GAO) to report on 
the implementation of the legislation.
    CBO estimates that implementing H.R. 2542 would cost $45 
million over the 2014-2018 period, 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. CB0 estimates, 
however, that any net increase in spending by those agencies 
would not be significant. Enacting H.R. 2542 would not affect 
revenues.
    H.R. 2542 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. 2542 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 funding for agencies that 
issue regulations affecting small businesses.

----------------------------------------------------------------------------------------------------------------
                                                            By fiscal year, in millions of dollars--
                                               -----------------------------------------------------------------
                                                   2014       2015       2016       2017       2018    2014-2018
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level.................          5          9         12         12         12         50
Estimated Outlays.............................          4          7         10         12         12         45
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
legislation will be enacted near the start of calendar year 
2014, that the necessary amounts will be appropriated each 
year, and that spending will follow historical patterns for 
similar activities.
    CBO is unaware of any comprehensive information on the 
current level 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 rules, regardless of size, are 
promulgated by the Departments of Transportation, Homeland 
Security, and Commerce, and the Environmental Protection Agency 
(EPA). Most major rules (those with an estimated economic 
impact on the economy of more than $100 million per year) are 
issued by the Departments of Health and Human Services and 
Agriculture and EPA.
    H.R. 2542 would broaden the definition of a ``rule'' for 
rulemaking purposes to include agency guidance documents and 
policy statements. The bill also would expand the scope of the 
regulatory analysis for proposed and final rules to include an 
examination of indirect economic effects on small businesses 
and a more detailed analysis of the possible economic 
consequences of the rule for small businesses and allow the 
analysis to be provided to a requesting small business. The 
legislation defines indirect economic effects as any impact 
that is reasonably foreseeable. The legislation also would 
require agencies to prepare reports on the cumulative economic 
impact on small businesses of new and existing regulations.
    Implementing H.R. 2542 would increase the amount of 
regulatory analysis that agencies would need to prepare, and it 
would expand the role of the SBA's Office of Advocacy and the 
Office of Management and Budget's 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 agencies 
indicates that the new requirements would increase the cost to 
issue a few hundred of the thousands of federal regulations 
issued annually. Based on that information, CBO estimates that 
administrative costs in some regulatory agencies, the SBA's 
Office of Advocacy, and OIRA would increase by a total of about 
$12 million annually, subject to the availability of 
appropriated funds. We expect that it would take about three 
years to reach that level of effort. The GAO report would cost 
less than $500,000 to complete in fiscal year 2014.
    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. 2542 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.
    Intergovernmental and private-sector impact: H.R. 2542 
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 September 5, 2013, CBO 
transmitted a cost estimate for H.R. 2542 as ordered reported 
by the House Committee on the Judiciary on July 31, 2013. Both 
versions of the bill contain similar provisions regarding 
amending the Regulatory Flexibility Act and the estimated costs 
are the same.
    Estimate prepared by: Federal Spending: Matthew Pickford 
and Susan Willie; Impact on State, Local, and Tribal 
Governments: Melissa Merrell; Impact on the Private Sector: 
Paige Piper/Bach.
    Estimate approved by: Theresa A. Gullo, Deputy Assistant 
Director for Budget Analysis.

                         IX. Unfunded Mandates

    H.R. 2542 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 
Sec. 402 of the Congressional Budget Act of 1974.
    The Committee believes that the cost estimate provided by 
the Congressional Budget Office exhibits a serious 
misunderstanding of the rulemaking process. Consequently, the 
cost estimate significantly overestimates the cost of complying 
with the new requirements of H.R. 2542.
    First, the Congressional Budget Office admits that there 
are no credible studies on the actual cost of writing federal 
regulations. The 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 Sec. 6 
of H.R. 2542. Under H.R. 2542, the prepublication panel 
requirement, which currently only applies to CFPB, EPA and 
OSHA, would be extended to all agencies. The CBO asserts that 
federal agencies will be required to use ``panels of experts to 
evaluate regulations.'' This misstates who participates in the 
prepublication panel process. The participants in the panel 
process include small business representatives and a panel of 
government employees which includes a representative from the 
covered agency, a representative from the Office of Information 
and Regulatory Affairs and a representative of the Office of 
Advocacy. The prepublication panel requirement is an outreach 
tool that allows agencies to get input on regulatory proposals 
that are under development from affected small businesses. 
Agencies identify small businesses that will affected by the 
regulatory proposal and small businesses provide the agency 
with recommendations on how to reduce adverse or increase 
positive consequences of the proposed rule on small businesses. 
The small business recommendations must be included in a report 
that is published along with the proposed rule. Agencies 
already have extant procedures to gather input from interested 
parties on regulations according to the plans developed in 
response to E.O. 13,563 and executed pursuant to E.O. 13,610. 
For example, at a May 8, 2013 hearing before the Committee, the 
Under Secretary for Policy of the Department of Transportation 
testified that they have been conducting outreach through 
Department-wide public meetings and utilizing existing advisory 
committees to engage with the public and address small business 
concerns. The prepublication panel requirement simply codifies 
existing outreach procedures and ensures that the input of 
small businesses on a particular regulatory proposal is 
memorialized. Thus, the Committee does not believe that the 
type of outreach required adds any cost to the process of 
writing regulations since agencies are already conducting 
outreach pursuant to E.O.'s 13,563 and 13,610. Furthermore, the 
Chief Counsel for Advocacy analyzes proposed rules that affect 
small businesses already. Preparing the panel 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 examine the 
indirect effects of significant rules, conduct more detailed 
analyses of the possible economic consequences of significant 
rules and evaluate the cumulative economic impact of rules on 
small businesses under H.R. 2542. While the Congressional 
Budget Office suggests the fact that these requirements will 
increase costs, the Committee disputes that conclusion. 
Agencies are already required to estimate indirect effects for 
and conduct an assessment of the costs and benefits of 
regulations that are subject to the strictures of E.O. 12,866. 
Agencies also already are estimating the indirect effects, 
including economic impacts, of some of their regulations to 
comply with the National Environmental Policy Act. Furthermore, 
agencies are already required to take into consideration 
cumulative effects of regulations under E.O. 13,610. Thus, the 
Committee believes that there will be significant overlap 
between the regulatory analysis already done by agencies and 
what is required for H.R. 2542. This substantially undermines 
the rationale for this portion of CBO's cost estimate.
    Fourth, agencies (other than independent collegial bodies) 
are reviewing their existing regulations to comply with E.O.'s 
13,563 and 13,610. Agencies published their final retrospective 
review plans in August 2011 to comply with E.O. 13,563. 
Subsequently, E.O. 13,610, which supplemented E.O. 13,563, was 
issued to institutionalize regular assessment of significant 
regulations. In response to a question from Chairman Graves at 
a September 21, 2011 hearing on implementation of E.O. 13,563, 
then Office of Information and Regulatory Affairs Administrator 
Sunstein stated that the agencies could conduct the review of 
all existing federal regulations, including outreach to the 
regulated community, under current budgetary constraints. The 
current Office of Information and Regulatory Affairs 
Administrator was asked, in a question for the record following 
a July 24, 2013 hearing, to explain how agencies are both doing 
their existing work and conducting retrospective reviews. 
Administrator Shelanski responded by stating that, ``agencies 
are prioritizing their regulatory work based upon their 
respective agency goals and priorities, as well as guidance 
provided by the President's Executive Orders.'' If agencies are 
capable of conducting retrospective reviews within their 
existing budgetary constraints and able to prioritize the 
reviews along with their goals and priorities, there should not 
be a significant cost to comply with the requirements of H.R. 
2542, i.e. agencies can comply with the new analytical 
requirements within existing budget constraints.
    For the foregoing reasons, the Committee does not adopt the 
cost estimate provided by the Congressional Budget Office and 
believes that agencies will be able to comply with the 
requirements of H.R. 2542 by utilizing the procedures and 
analysis that is already used to comply with Executive Orders 
12,866, 13,563, and 13,610. 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. 2542 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, Sec. 8, cls. 1, 3, 
and 18; Art. IV, Sec. 3, cl. 2, and the Sixteenth Amendment of 
the Constitution of the United States.

                 XIII. Congressional Accountability Act

    H.R. 2542 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

               XIV. Federal Advisory Committee Statement

    H.R. 2542 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. 2542 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. Statement of Duplication of Federal Programs

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, no provision of H.R. 2542 establishes or reauthorizes a 
program of the federal government known to be duplicative of 
another Federal program, a program that was included in any 
report from the GAO pursuant to Section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

               XVII. Disclosure of Directed Rule Makings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, H.R. 2542 requires the Chief Counsel for Advocacy of the 
Small Business Administration to develop and issue regulations 
related to RFA compliance. The Chief Counsel is required, after 
an opportunity for notice and comment, to issue regulations not 
later than 270 days after the date of enactment of the 
legislation to govern federal agency compliance with Chapter 6 
of Title 5 of the United States Code. This ensures, as stated 
elsewhere in the report, that agencies implement the RFA in a 
consistent manner.

                XVIII. 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. 2542 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.

       XIX. 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.
     * * * * * * *
[605. Avoidance of duplicative or unnecessary analyses.]
605. Incorporations by reference and certifications.
     * * * * * * *
[607. Preparation of analyses.
[608. Procedure for waiver or delay of completion.]
607. Quantification requirements.
608. Additional powers of Chief Counsel for Advocacy.

Sec. 601. Definitions

  For purposes of this chapter--
          [(1) the term]
          (1) Agency._The term ``agency'' means an agency as 
        defined in section 551(1) of this title[;].
          [(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 pertaining to the 
        protection of the rights of and benefits for veterans 
        or 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.
          [(3) the term]
          (3) Small business._The term ``small business'' has 
        the same meaning as the term ``small business concern'' 
        under section 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 Register[;].
          [(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.
          [(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 Register[;].
          [(6) the term]
          (6) Small entity._The term ``small entity'' shall 
        have the same meaning as the terms ``small business'', 
        ``small organization'' and ``small governmental 
        jurisdiction'' defined in paragraphs (3), (4) and (5) 
        of this section[; and].
          [(7) the term ``collection of information''--
                  [(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--
                          [(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
                          [(ii) answers to questions posed to 
                        agencies, instrumentalities, or 
                        employees of the United States which 
                        are to be used for general statistical 
                        purposes; and
                  [(B) shall not include a collection of 
                information described under section 3518(c)(1) 
                of title 44, United States Code.
          [(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 (including 
                compliance costs and effects on revenue) 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 the 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)).

Sec. 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 rulemaking[, 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
          [(3)] (4) the name and telephone number of an agency 
        official knowledgeable concerning the items listed in 
        paragraph (1).

           *       *       *       *       *       *       *

  [(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.

           *       *       *       *       *       *       *


Sec. 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, [or] 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 
requirement[.] or a recordkeeping requirement, and without 
regard to whether such requirement is imposed by statute or 
regulation.
  [(b) Each initial regulatory flexibility analysis required 
under this section shall contain--
          [(1) a description of the reasons why action by the 
        agency is being considered;
          [(2) a succinct statement of the objectives of, and 
        legal basis for, the proposed rule;
          [(3) a description of and, where feasible, an 
        estimate of the number of small entities to which the 
        proposed rule will apply;
          [(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;
          [(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;
          (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) [Each 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) * * *

           *       *       *       *       *       *       *

  [(d)(1) For a covered agency, as defined in section 
609(d)(2), each initial regulatory flexibility analysis shall 
include a description of--
          [(A) any projected increase in the cost of credit for 
        small entities;
          [(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
          [(C) advice and recommendations of representatives of 
        small entities relating to issues described in 
        subparagraphs (A) and (B) and subsection (b).
  [(2) A covered agency, as defined in section 609(d)(2), 
shall, for purposes of complying with paragraph (1)(C)--
          [(A) identify representatives of small entities in 
        consultation with the Chief Counsel for Advocacy of the 
        Small Business Administration; and
          [(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).]

Sec. 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, 
[or] 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, 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 [an 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 [minimize 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
          [(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.
  [(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.

[Sec. 605. Avoidance of duplicative or unnecessary analyses]

Sec. 605. Incorporations by reference and certifications

  [(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.]
  (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 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.

           *       *       *       *       *       *       *


[Sec. 607. Preparation of analyses

  [In 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.

[Sec. 608. Procedure for waiver or delay of completion

  [(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.
  [(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.]

Sec. 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. 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 
2013, 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.

Sec. 609. Procedures for gathering comments

  (a) * * *
  [(b) Prior to publication of an initial regulatory 
flexibility analysis which a covered agency is required to 
conduct by this chapter--
          [(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;
          [(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;
          [(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;
          [(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 after 
        consultation with the Chief Counsel, on issues related 
        to subsections 603(b), paragraphs (3), (4) and (5) and 
        603(c);
          [(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
          [(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.
  [(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.
  [(d) For purposes of this section, the term ``covered 
agency'' means--
          [(1) the Environmental Protection Agency;
          [(2) the Consumer Financial Protection Bureau of the 
        Federal Reserve System; and
          [(3) the Occupational Safety and Health 
        Administration of the Department of Labor.
  [(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:
          [(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.
          [(2) Special circumstances requiring prompt issuance 
        of the rule.
          [(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--
          (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, an assessment of the proposed rule's 
impact on start-up costs for small entities, 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.
  (g) A small entity or a representative of a small entity may 
submit a request that the agency provide a copy of the report 
prepared under subsection (d) and all materials and information 
provided to the Chief Counsel for Advocacy of the Small 
Business Administration under subsection (b). The agency 
receiving such request shall provide the report, materials and 
information to the requesting small entity or representative of 
a small entity not later than 10 business days after receiving 
such request, except that the agency shall not disclose any 
information that is prohibited from disclosure to the public 
pursuant to section 552(b) of this title.

           *       *       *       *       *       *       *


[Sec. 610. Periodic review of rules

  [(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.
  [(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--
          [(1) the continued need for the rule;
          [(2) the nature of complaints or comments received 
        concerning the rule from the public;
          [(3) the complexity of the rule;
          [(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
          [(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.
  [(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.]

Sec. 610. Periodic review of rules

  (a) Not later than 180 days after the enactment of the 
Regulatory Flexibility Improvements Act of 2013, 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 2013 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 2013 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 (including small business concerns owned and 
controlled by women, small business concerns owned and 
controlled by veterans, and small business concerns owned and 
controlled by socially and economically disadvantaged 
individuals (as such terms are defined in the Small Business 
Act)) 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.
          (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, territorial, 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. The agency shall include in the publication a 
solicitation of public comments on any further inclusions or 
exclusions of rules from the list, and shall respond to such 
comments. 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. 611. Judicial review

  (a)(1) For any rule subject to this chapter, a small entity 
that is adversely affected or aggrieved by [final agency 
action] such rule is entitled to judicial review of agency 
compliance with the requirements of sections 601, 604, 605(b), 
[608(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), [608(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.
  (3) [(A)] A small entity may seek such review during the 
period beginning on the date of [final 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.
  [(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--
          [(i) one year after the date the analysis is made 
        available to the public, or
          [(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.]

           *       *       *       *       *       *       *


Sec. 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

Sec. 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; [and]
                  (E) the Board, when the order was entered by 
                the Surface Transportation Board[.]; and
                  (F) the Office of Advocacy of the Small 
                Business Administration, when the final rule is 
                under section 608(a) of title 5.

Sec. 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--
          (1) * * *

           *       *       *       *       *       *       *

          (6) all final orders under section 812 of the Fair 
        Housing Act; [and]
          (7) all final agency actions described in section 
        20114(c) of title 49[.]; and
          (8) all final rules under section 608(a) of title 5.

           *       *       *       *       *       *       *

                              ----------                              


SMALL BUSINESS ACT

           *       *       *       *       *       *       *


SEC. 3. DEFINITIONS.

  (a) Small Business Concerns.--
          (1) * * *
          (2) Establishment of size standards.--
                  [(A) In general.--In addition to the criteria 
                specified in paragraph (1), the Administrator 
                may specify detailed definitions or standards 
                by which a business concern may be determined 
                to be a small business concern for the purposes 
                of this Act or any other Act.]
                  (A) In general.--In addition to the criteria 
                specified in paragraph (1)--
                          (i) the Administrator may specify 
                        detailed definitions or standards by 
                        which a business concern may be 
                        determined to be a small business 
                        concern for purposes of this Act or the 
                        Small Business Investment Act of 1958; 
                        and
                          (ii) the Chief Counsel for Advocacy 
                        may specify such definitions or 
                        standards for purposes of any other 
                        Act.

           *       *       *       *       *       *       *

                  (C) Requirements.--Unless specifically 
                authorized by statute, no Federal department or 
                agency may prescribe a size standard for 
                categorizing a business concern as a small 
                business concern, unless such proposed size 
                standard--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(iii) is approved by the 
                        Administrator.]
                          (iii) except in the case of a size 
                        standard prescribed by the 
                        Administrator, is approved by the Chief 
                        Counsel for Advocacy.
          (3) Variation by industry and consideration of other 
        factors.--When establishing or approving any size 
        standard pursuant to paragraph (2), the Administrator 
        or Chief Counsel for Advocacy, as appropriate shall 
        ensure that the size standard varies from industry to 
        industry to the extent necessary to reflect the 
        differing characteristics of the various industries and 
        consider other factors deemed to be relevant by the 
        Administrator or Chief Counsel for Advocacy.

           *       *       *       *       *       *       *

          (9) Judicial review of standards approved by chief 
        counsel.--In the case of an action for judicial review 
        of a rule which includes a definition or standard 
        approved by the Chief Counsel for Advocacy under this 
        subsection, the party seeking such review shall be 
        entitled to join the Chief Counsel as a party in such 
        action.

           *       *       *       *       *       *       *

                              ----------                              


 SECTION 212 OF THE SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT 
                                OF 1996

SEC. 212. COMPLIANCE GUIDES.

  (a) Compliance Guide.--
          (1) * * *

           *       *       *       *       *       *       *

          [(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 small 
        entities. An agency may prepare guides and apply this 
        section with respect to a rule or a group of related 
        rules.

           *       *       *       *       *       *       *


                          XX. Dissenting Views

                               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 rules 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.
---------------------------------------------------------------------------
    \1\Agencies subject to the panel process include the Environmental 
Protection Agency, the Occupational Safety and Health Administration, 
and the Consumer Financial Protection Bureau.
---------------------------------------------------------------------------
    By many measures, the efforts taken under the RFA have 
already been very successful, calling into question the need 
for additional RFA legislation in the first place. During FY 
2012, the Office of Advocacy claims that efforts undertaken 
through the RFA yielded nearly $2.4 billion in foregone 
regulatory costs for small businesses.\2\ Such results included 
regulatory savings across a wide-range of agencies including 
the Department of Labor, Department of Transportation, 
Environmental Protection Agency, and the Small Business 
Administration (SBA). It is notable that significant savings 
were achieved at a considerable number of agencies not subject 
to the SBAR panel process.
---------------------------------------------------------------------------
    \2\Office of Advocacy, U.S. Small Business Administration, ``Report 
on the Regulatory Flexibility Act for FY 2012,'' at 3 (Washington, 
D.C., Feb. 2013).
---------------------------------------------------------------------------
    While the success of RFA is indisputable, the Committee has 
nevertheless pursued additional legislation in this area. In 
the 112th Congress, the Committee and the full House passed 
H.R. 527, the Regulatory Flexibility Improvements Act of 2011, 
but it failed to become public law. H.R. 2542, the Regulatory 
Flexibility Improvements Act of 2013, incorporates the House-
passed version of H.R. 527 from the 112th Congress and combines 
it with H.R. 585, the Small Business Size Standard Flexibility 
Act of 2011, also passed by the Committee during the 112th 
Congress. Identical to its predecessor legislation, H.R. 2542 
gives extensive 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

    H.R. 2542 makes far-reaching changes to the Regulatory 
Flexibility Act (RFA) and its implementation. In doing so, the 
legislation makes it significantly easier for opponents to stop 
and delay the issuance of regulations throughout the 
government. As a result, federal agencies will face 
considerable obstacles in protecting human health, worker 
safety, consumers, and the environment.
    It is also important to recognize that the Congressional 
Budget Office (CBO) scored the cost of H.R. 2542 at $45 million 
for the five-year budget window between 2014-2018 (note that 
the prior CBO estimate for this legislation in the 112th 
Congress was nearly double this estimate; this issue is 
discussed in detail below). However, it does not authorize any 
new funding for these new requirements. It is highly improbable 
that Advocacy's post-sequester budget of $8.5 million and 
staffing level of 46 employees will be sufficient to administer 
the additional responsibilities contained in H.R. 2542.

Impedes Health, Safety, and Consumer Protection Regulation

    Taken together, the changes included in H.R. 2542 will 
create delays for agencies issuing regulations. 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 substances.
    In this regard, Rep. Meng offered an amendment that would 
have specified that an agency does not have to comply with the 
requirements of the legislation if doing so would cause a delay 
that would result in a significant increase in the likelihood 
that children would be harmed. It was not agreed to by a vote 
of 11 ayes to 12 nays. By not including this amendment, 
regulations that would protect children could be delayed or 
made less effective. Rep. Hahn also offered an amendment to 
address public safety concerns with the legislation. Her 
amendment would have required that at least one small entity 
(or their representative) that would benefit from or whose 
health or safety would be protected by the proposed rule shall 
be included in a panel. The amendment was not agreed to by 
voice vote, thus preventing the full spectrum of small business 
perspectives to be considered during a panel. To ensure that 
the interests of small businesses, who can be both exporters 
and consumers, were incorporated into trade agreements, Rep. 
Chu offered an amendment to require the Office of Advocacy to 
convene a panel for any trade agreement that is approved by 
Congress. This amendment was not agreed to by a vote of 9 ayes 
to 14 nays. Its exclusion will limit the examination of trade 
agreements' impact on smaller firms. Rep. Murphy offered an 
amendment to exempts rules pertaining to the protection and 
rights of veterans from this legislation and it was agreed to 
by voice vote. Providing such protection will minimize the 
legislation's impact on veterans.
    Further, the legislation requires agencies to analyze the 
indirect effects of proposed rules. This mandate would require 
wasteful new analyses that could be applied to virtually any 
action an agency attempts to undertake, no matter how unclear 
the connection is to small business interests. When added to 
the existing procedural and analytical steps that agencies must 
already take, the legislation would serve only to further delay 
rulemakings and make it nearly impossible for agencies to 
fulfill their mission of protecting the public. Rep. Clarke 
offered an amendment to address this matter and strike this new 
requirement, but it was not agreed to by voice vote. By failing 
to incorporate this amendment, the legislation maintains its 
broad mandate to incorporate indirect effects into RFA 
analyses, allowing opponents of certain regulations to seek 
further delays.

Fails to account for recent Executive Orders

    In 2011, President Obama issued Executive Order (EO) 13563, 
calling for agencies to retrospectively review existing 
regulations. Shortly thereafter, EO 13579 was issued applying 
this requirement to independent regulatory agencies. In 2012, 
EO 13610 was issued to institutionalize these requirements and 
to increase public participation in the regulatory process. 
Though previously introduced and passed Committee and the House 
in the 112th Congress, H.R. 2542 has not been updated to 
accommodate the impact of these executive orders even though 
the Committee has held two Committee hearings this year. 
Testimony during these hearings on such retrospective reviews 
has shown that departments and agencies have produced more than 
two dozen regulatory review plans, with over 500 regulatory 
reform initiatives. Just a small fraction of the rules already 
finalized will produce billions of dollars of savings in the 
near term. H.R. 2542 duplicates these efforts unnecessarily, 
imposing new costs and complexity to address a problem that is 
already being addressed government-wide.

Puts the environmental and public lands at risk

    The legislation 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. In order to protect and enhance America's 
water resources, plans proactively address adverse 
environmental impacts and emphasize the maintenance and 
restoration of watershed health. 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 result in the exploitation 
of critical habitats and environmental resources.

Gives SBA 's Office of Advocacy unilateral power to slowdown any and 
        all regulation

    The legislation will enable the Office of Advocacy to be 
involved in federal agency decision-making and not just on 
matters pertaining to agency compliance with the RFA as they 
are now. By broadening the Office of Advocacy's role in the 
rulemaking process, the balance between the office and federal 
agencies will change dramatically. To address this concern, 
Rep. Chu offered an amendment that would have allowed an agency 
to avoid convening a panel if doing so would inhibit an agency 
from carrying out its statutory duties. This amendment was not 
agreed to by voice vote. Similarly, Rep. Payne offered an 
amendment that would have prevented the legislation from being 
implemented until the Office of Advocacy certifies to Congress 
that it will not prevent agencies from taking appropriate and 
timely actions. This amendment was not agreed to by voice vote. 
By not incorporating either of Rep. Chu and Rep. Payne's 
amendments, the legislation will make it more difficult for 
agencies' to carry out their basic missions.
    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. 2542 is enacted, the Office of 
Advocacy will be accorded with judicial deference in 
interpreting the RFA, providing the office with substantial 
power to coerce regulatory modifications. This could adversely 
affect federal agencies ability to protect consumers, workers, 
and the environment.

Fails to account for the benefits of rulemakings and promote 
        transparency

    Federal rulemaking confer large benefits on society through 
increasing human health and safety. To this point, the Office 
of Management Budget (OMB) has estimated that the annual 
benefits of major Federal regulations reviewed by OMB from 
October 1, 2002, to September 30, 2012, for which agencies 
estimated and monetized both benefits and costs, are in the 
aggregate between $193 billion and $800 billion, while the 
estimated annual costs are in the aggregate between $57 billion 
and $84 billion. H.R. 2542, however, fails to recognize only 
costs of regulations and not the benefits they provide to the 
public. For these reasons, Rep. Meng offered an amendment that 
would have required that the initial and final regulatory 
analyses include a description and estimate of the benefits of 
the proposed rule to small entities. This amendment was not 
agreed to by a vote of 10 ayes to 13 nays. Rep. Meng offered an 
additional amendment on this subject that would have required 
each agency to estimate the benefits of the proposed rule and 
if they exceeded the regulation's costs, then the agency would 
not have to convene a panel under the RFA. This amendment was 
not agreed to by voice vote. Without either of Rep. Meng's 
amendments, the legislation fails to provide information 
concerning the benefits of proposed regulations for small 
businesses.
    Along similar lines, Rep. Barber offered an amendment that 
will increase the transparency of the panel process. His 
amendment will require that the Office of Advocacy's report 
summarizing each panel include an assessment of the proposed 
rule's impact on the costs to startup a small business. This 
amendment was agreed to by voice vote.

Diverts scarce taxpayer dollars away from key priorities

    Given the current fiscal situation and the recent 
sequester, it is hard to justify the diversion of limited 
taxpayer dollars to modify the RFA--legislation that is already 
producing impressive results. As the Office of Advocacy has 
stated, the RFA was successful in reducing small businesses' 
regulatory costs by $2.4 billion for last year alone. To fully 
assess whether the Office of Advocacy has the resources and 
capacity to carry out H.R. 2542, an amendment offered by Rep. 
Clarke, and agreed to by voice vote, will require that the GAO 
to undertake a study to assess whether the Office has the 
resources to implement the legislation.
    Taxpayer dollars should instead be used to restore the 
budgets of domestic programs that were hurt the most by the 
sequester. As noted, over a five-year period, it is expected 
that this legislation would cost nearly $50 million, while the 
true cost, based on prior CBO scores, is likely closer to $100 
million. Such sums could be used to fully restore the budget to 
services essential to the creation of new entrepreneurial 
opportunities such as the SBA's Small Business Development 
Center, Women's Business Center, Veteran's Business 
Development, and SCORE programs. In an effort to mitigate the 
legislation's impact on women, minorities, and veterans, an 
amendment offered by Rep. Barber and passed by voice vote will 
require agencies conducting periodic reviews of regulations to 
reach out to small business owned by women, veterans, and 
minorities.
    Finally, with regard to the SBA, H.R. 2542 could hurt the 
very entities that it is seeking to assist by delaying 
regulations implementing small business financing, contracting, 
and entrepreneurial development initiatives.

Creates excessive and unnecessary bureaucracy

    This legislation splits the size standard functions in the 
Small Business Act. It provides that the Administrator shall 
establish size standards to carry out the purposes of the Small 
Business Act or Small Business Investment Act of 1958. It then 
delegates the authority to approve a size standard for purposes 
of all other statutes to the Chief Counsel of Advocacy. In 
practice, the Chief Counsel will approve size standards for 
agencies seeking to use a size standard other than approved by 
the Administrator for carrying out the purposes of the Small 
Business Act or Small Business Investment Act. Under current 
practice, if an agency seeks to use a different size standard 
it must get approval from the Administrator of SBA, unless 
specifically given the authority to do so in law. For RFA 
purposes only under current practice, an agency can use a 
different size standard if it consults with Advocacy and 
provides an opportunity for notice and comment in the Federal 
Register. Rep. Murphy offered an amendment to prevent this 
authority from going into effect unless the Office of Advocacy 
certifies it has the funding and personnel to carry out the 
section. This amendment was not agreed to by voice vote, 
creating a situation where the Office of Advocacy will be given 
new responsibilities, but without commensurate funding. Such a 
situation will cause the Office of Advocacy to reduce its 
efforts in core areas, including broadly advocating for the 
interests of small businesses.
    Requiring Advocacy to take on size standard determinations, 
even in this limited capacity, will require them to deviate 
from their current mission of advocating for small businesses 
in the regulatory process. Approval of a size standard can be 
time consuming and require different skill sets than the Office 
currently has. In addition, adding this capacity at Advocacy 
would duplicate the SBA's Office of Size Standard mission. To 
put a finer point on these concerns, former Chief Counsel for 
Advocacy Frank Swain testified before the Committee that the 
Office of Advocacy should not take on the new responsibilities 
outlined in the legislation. To address this issue, Rep. 
Schrader offered an amendment to strike this new authority, 
which creates a duplicate sizes standard office in the Office 
of Advocacy and does not eliminate the existing SBA Office of 
Size Standards. This amendment was not agreed to by a vote of 
11 ayes to 13 nays. By leaving this new authority in the 
underlying legislation, the SBA will have duplicative entities 
determining size standards. Such an outcome is a waste of 
taxpayer dollars.
    In attempt to provide a more rational and budgetary-
sensitive rollout of this legislation, Ranking Member Velazquez 
offered an amendment that would have required the Office of 
Advocacy to establish a compliance schedule that will determine 
when agencies shall become compliant with the new government-
wide requirements to convene panels. The amendment would have 
required the Office of Advocacy to base its decision on the 
budgetary resources available to agencies and to the extent 
those agencies' regulations have typically affected small 
businesses. This amendment was not agreed to by a vote of 11 
ayes to 13 nays. Without this amendment, the legislation will 
be implemented across the entire government at the same time, 
irrespective of agencies' budget situation. As a result, some 
agencies may not have the resources to implement the new panel 
requirements effectively and would do without the benefit of 
learning the lessons that would have come with a tiered 
implementation.

Does not provide agencies with flexibility to respond to disasters or 
        acts of terrorism

    The underlying legislation repeals section 608 of the RFA, 
permitting agencies to waive or delay completing an initial 
regulatory flexibility analysis in the event of an emergency. 
By doing so, the legislation could lead to situations where an 
agency would be blocked from responding to a tragedy quickly 
and effectively. Disasters are all too common and terrorism 
continues to be a threat. Ensuring that agencies are not 
unnecessarily prevented from helping the public or protecting 
the homeland in a timely manner should be a priority. For this 
reason, Rep. Clarke offered an amendment that would have 
specified that an agency does not have to comply with the 
legislation if the head of an agency certifies that a specific 
rulemaking is necessary either safeguard the United States and 
its territories in regard to an act or potential act of 
terrorism or to respond or prepare to respond to a disaster. 
This amendment was not agreed to by a vote of 11 ayes to 13 
nays. Failure to include this amendment could lead to 
situations where regulations critical to disaster response or 
national security are unnecessarily delayed due to RFA 
proceedings.

    SPECIAL NOTE ON CONGRESSIONAL BUDGET OFFICE (CBO) COST ESTIMATE

    The CBO provided a cost estimate for H.R. 2542 that found 
that the legislation would cost $45 million over a five-year 
period. However, this estimate is entirely inconsistent with 
prior CBO's scores and as a result seemingly unreliable for the 
purposes of floor consideration. During the 112th Congress, CBO 
provided a cost estimate for identical legislation passed by 
the Committee that was $86 million over a five-year period. The 
legislation, H.R. 527 and H.R. 585, is wholly contained within 
H.R. 2542. The only addition to H.R. 2542 is a provision that 
would place further responsibilities on federal agencies, 
thereby increasing the cost of the legislation further. CBO 
provided no rationale for this change in the cost estimate and 
did not provide any explanation when asked by Committee staff. 
Given the massive discrepancies and CBO's inability to provide 
clarification on this matter, CBO's cost estimate for H.R. 2542 
is highly questionable and should be used with the utmost 
caution.

                               CONCLUSION

    H.R. 2542 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 panel 
processes. This would give opponents of regulations powerful 
tools to stop them. Doing so would leave many individuals, as 
well as the environment, without the protections that federal 
agencies are charged with providing. As a result, many 
regulations--including those related to consumer protection, 
the environment, and health and safety--would be delayed or, in 
the worst case, unimplemented.
                                                Nydia M. Velazquez.