Coalition Letter on Regulatory Flexibility Act Reform

Re: Small Business Input in Federal Rulemaking

Dear Chairmen Williams and Jordan and Ranking Members Velazquez and Nadler:

On behalf of millions of small businesses across the country, we urge legislative action to strengthen the meaningful input of small businesses in federal regulatory processes and ensure the intent of the Regulatory Flexibility Act is fulfilled.

The Regulatory Flexibility Act (RFA) of 1980 was signed into law after a bipartisan coalition of small businesses, community leaders, and elected representatives confronted the danger of imposing burdensome red tape on American small businesses. Upon signing the RFA into law, President Carter stated that “small businesses are vital to the growth and to the future of our country” and that regulations “can impose a disproportionate and unfair burden on small businesses.”

The RFA sought to correct this disproportionate burden on small businesses by encouraging federal regulatory agencies to transparently consider the impact of new mandates on small businesses and to minimize negative impacts without compromising the underlying regulatory objectives.

Unfortunately, loopholes in the RFA allow federal regulators to bypass the law’s requirements and misrepresent the costs of new mandates on small businesses because (a) transparency requirements only apply to businesses directly regulated and (b) judges may not punish agencies for ignoring small business concerns.

Federal agencies have on numerous occasions failed to comply with requirements under the RFA. In 2023, the National Federation of Independent Business (NFIB) reviewed comment letters from the Office of Advocacy at the U.S. Small Business Administration (SBA), the independent office responsible for overseeing compliance with the RFA, from the 117^th Congress and found 28 instances where SBA’s Office of Advocacy cited agencies for lack of RFA compliance. SBA’s Office of Advocacy found agencies often improperly certify that rules will not have a significant economic impact on a substantial number of small entities, only consider the direct costs on small businesses, or misrepresent the costs on small businesses from regulation.

For example, SBA’s Office of Advocacy found the Department of Labor’s analysis of the impact of its independent contractor rule “deficient” because it "severely underestimate[d]” the economic impacts of the rule on small business; and “failed to estimate any costs” for small businesses to reclassify independent contractors as employees.

Agency exploitation of the loophole that only requires publishing small business impacts for directly regulated businesses is apparent in the ongoing Basel III Endgame rulemaking. Bank regulators published their perceived impact on large banks but did not publish how new mandates will make small business loans more expensive.

The Environmental Protection Agency/Army Corps of Engineers Waters of the United States (WOTUS) final rule is a case study in agency misrepresentation of a regulation’s costs on small businesses. In their rule, the agencies certified the rule “will not have a significant economic impact on a substantial number of small entities.” For decades, bipartisan administrations have claimed that revising the WOTUS definition will not harm small businesses. Yet the millions of farmers, homebuilders, and other industries heavily dominated by small businesses render such a “certification” implausible. Moreover, they highlight a major problem – small businesses lack the legal recourse to force regulators to take them seriously and judges’ hands are tied when it comes to holding agencies accountable to small business concerns.

Unfortunately, the concerns raised in this letter are not new. In fact, SBA’s Office of Advocacy has sought to close the loopholes over the past 40 years but has not been successful.

Our concern that small businesses are being shut out of the regulatory process are amplified by recent data showing the growth of federal red tape. The National Association of Manufacturers’ most recent study on the cost of regulation shows that the cost per employee to comply with federal regulations is three times greater for small firms than the average costs for manufacturers. Former CBO Director, Douglas Holtz-Eakin recently testified before the Small Business Committee that the costs from regulatory mandates currently being issued are fifty percent greater than under any previous administration.

At a time when we are counting on small business growth to enrich communities and bolster America’s economy, we cannot afford to bury free enterprise under red tape emanating from Washington.

We urge the Committee to prioritize legislation that strengthens and closes loopholes in the Regulatory Flexibility Act.

We thank you for your leadership to create an environment where small businesses can operate, invest and grow. We look forward to working with you on ways to reduce red tape and burdens for small businesses.

Sincerely,

National

Alliance for Chemical Distribution

American Bakers Association

American Bankers Association

American Chemistry Council

American Farm Bureau Federation

American Foundry Society

American Hotel and Lodging Association

American Land Title Association

American Road & Transportation Builders Association

Associated Builders and Contractors

Associated Equipment Distributors

Associated General Contractors of America

Associated Wire Rope Fabricators

Brick Industry Association

Consumer Bankers Association

Consumer Brands Association

Council for Responsible Nutrition

FMI - The Food Industry Association

Independent Electrical Contractors

Independent Lubricant Manufacturers Association

Independent Petroleum Association of America

Innovative Lending Platform Association

International Franchise Association

International Sign Association

Job Creators Network

Leading Builders of America

Metals Service Center Institute

National Association for Surface Finishing

National Association of Home Builders

National Association of Insurance and Financial Advisors

National Association of Wholesaler - Distributors

National Automobile Dealers Association

National Federation of Independent Business (NFIB)

National Funeral Directors Association

National Mining Association

National Parking Association

National Retail Federation

National Roofing Contractors Association

National Rural Electric Cooperative Association

National Small Business Association (NSBA)

National Stone Sand & Gravel Association

National U.S. India Chamber of Commerce

Small Business & Entrepreneurship Council

Small Business Investor Alliance

The Toy Association

Treated Wood Council

U.S. Chamber of Commerce

Alabama

Albertville Chamber of Commerce

Central Baldwin Chamber of Commerce

Arizona

Chandler Chamber of Commerce

Greater Flagstaff Chamber of Commerce

Greater Phoenix Chamber

Lake Havasu Area Chamber of Commerce

Nogales Santa Cruz County Chamber of Commerce

Northwest Valley Chamber of Commerce

Tucson Metro Chamber

Arkansas

Holiday Island Chamber of Commerce

California

Buellton Chamber of Commerce

Carlsbad Chamber of Commerce

Coalition of California Chambers - Orange County

Fremont Chamber of Commerce

La Verne Chamber of Commerce

Long Beach Area Chamber of Commerce

Los Angeles Area Chamber of Commerce

Palos Verdes Peninsula Chamber of Commerce

Rancho Cordova Area Chamber of Commerce

San Juan Capistrano Chamber of Commerce

Western States Trucking Association

Yorba Linda Chamber of Commerce

Colorado

Alamosa County Chamber of Commerce

Denver Metro Chamber of Commerce

Greater Woodland Park Chamber

Vail Valley Partnership

Florida

Coral Gables Chamber of Commerce

Lakeland Chamber of Commerce

Georgia

Habersham County Chamber of Commerce

Murray County Chamber of Commerce

Guam

Guam Chamber of Commerce

Idaho

Boise Metro Chamber of Commerce

Jerome Chamber of Commerce

Pocatello-Chubbuck Chamber of Commerce, Inc.

Illinois

Dixon Chamber of Commerce & Main Street

Edwardsville/Glen Carbon Chamber of Commerce

GLMV Chamber of Commerce

Greater Rockford Chamber of Commerce

Joliet Region Chamber of Commerce & Industry

Sauk Valley Area Chamber of Commerce

The Greater Springfield Chamber of Commerce

West Suburban Chamber of Commerce & Industry

Indiana

Crossroads Chamber Indiana

Indiana Chamber of Commerce

South Bend Regional Chamber

Iowa

Quad Cities Chamber of Commerce

Kansas

Grant County Chamber of Commerce

Greater Topeka Chamber

Louisiana

Greenwood Chamber of Commerce

Maryland

Talbot County Chamber of Commerce

Massachusetts

Metro South Chamber of Commerce

Michigan

Battle Creek Area Chamber of Commerce

Detroit Regional Chamber

Hartland Area Chamber of Commerce

Jackson County Chamber of Commerce

Oscoda-AuSable Chamber of Commerce

Minnesota

Greater Mankato Growth

Minnesota Chamber of Commerce

Mississippi

Hancock County Chamber of Commerce

Missouri

Greater Kansas City Chamber of Commerce

Montana

Billings Chamber of Commerce

Montana Chamber of Commerce

Nevada

Vegas Chamber

New Jersey

New Jersey State Chamber of Commerce

New York

Capital Region Chamber

North Country Chamber of Commerce

Sullivan County Chamber of Commerce

North Carolina

The Caldwell Chamber

North Dakota

Greater North Dakota Chamber

Oklahoma

Broken Arrow Chamber of Commerce

Edmond Area Chamber of Commerce

Oregon

Canby Area Chamber of Commerce

Gresham Area Chamber of Commerce

Lincoln City Chamber of Commerce

Oregon Business & Industry

Roseburg Area Chamber of Commerce

Pennsylvania

Blair County Chamber of Commerce

Columbia Montour Chamber of Commerce

Hanover Area Chamber of Commerce

Harrisburg Regional Chamber

Huntingdon County Chamber of Commerce

Lancaster Chamber of Commerce

Pennsylvania Chamber of Business and Industry

Pittsburgh Airport Area Chamber of Commerce

Schuylkill Chamber of Commerce

South Carolina

Greater Columbia Chamber of Commerce

Texas

Alvin-Manvel Area Chamber of Commerce

Coppell Chamber of Commerce

Irving Hispanic Chamber of Commerce

Utah

ChamberWest Chamber of Commerce

Salt Lake Chamber

St. George Area Chamber of Commerce

Virginia

Central Fairfax Chamber of Commerce

Loudoun County Chamber of Commerce

Washington

Burlington Chamber of Commerce

Greater Lake Stevens Chamber of Commerce

Mercer Island Chamber of Commerce

Pullman Chamber of Commerce & Visitor Center

Shelton-Mason County Chamber of Commerce

Wyoming

Casper Area Chamber of Commerce

Greater Cheyenne Chamber of Commerce

Riverton Chamber and Visitors Center

Rock Springs Chamber of Commerce

Wyoming State Chamber of Commerce

cc: Members of the Committee on Small Business

Members of the Committee on the Judiciary

About the author

Thomas M. Sullivan

Thomas M. Sullivan is senior vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.

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