The Regulatory Flexibility Act Of 1980 PDF Download

The Regulatory Flexibility Act (RFA) of 1980 (5 U.S.C.??601-612) requires federal agencies to assess the impact of their forthcoming regulations on "small entities" (i.e., small businesses, small governments, and small not-for-profit organizations). For example, the act requires the analysis to describe why a regulatory action is being considered; the small entities to which the rule will apply and, where feasible, an estimate of their number; the projected reporting, recordkeeping, and other compliance requirements of the rule; and any significant alternatives to the rule that would accomplish the statutory objectives while minimizing the impact on small entities. This analysis is not required, however, if the head of the agency certifies that the rule will not have a "significant economic impact on a substantial number of small entities." The RFA does not define "significant economic impact" or "substantial number of small entities," thereby giving federal agencies substantial discretion regarding when the act's requirements are triggered. Other requirements in the RFA and elsewhere (e.g., that agencies reexamine their existing rules, develop compliance guides, and convene advocacy review panels) also depend on the whether the agencies determine that their rules have a "significant" impact on a "substantial" number of small entities. GAO has examined the implementation of the RFA many times during the past 20 years, and has consistently concluded that the lack of clear definitions for key terms like "significant economic impact" and "substantial number of small entities" have hindered the act's effectiveness. Therefore, GAO has repeatedly recommended that Congress define those terms, or give the Small Business Administration or some other federal agency the authority and responsibility to do so. H.R. 4458, the "Small Business Regulatory Improvement Act," was introduced on December 12, 2007, and was reported by the House Committee on Small Business the next day. Among other things, H.R. 4458 would define "economic impact" as including indirect effects that are "reasonably foreseeable," and would clarify that agencies' reviews of existing rules should not be limited to rules for which a regulatory flexibility analysis had been conducted. The bill would also require agencies to develop a plan for the review of all existing rules within 10 years, require more details in agencies' analyses and notifications, and require annual reports to Congress on certain agency "determinations" as part of their reviews. Although some of these provisions address long-standing issues, some provisions seem unclear and some may add time and costs to the rulemaking process. Most notably, though, H.R. 4458 does not address GAO's long-standing concerns about the lack of clear definitions for key terms in the RFA. This report will be updated if H.R. 4458 is acted upon, or if other relevant actions occur.