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Small Business Regulatory Relief Signed Into Law

Thursday, April 25, 1996

OnLine

This spring, Congress and the White House gave small business owners something they have wanted for decades: relief from some of the regulations that govern all aspects of business.

When the newly elected Republican majority arrived in Washington last year, regulatory relief was one of their top priorities. This year, small businesses finally got their wish: As part of legislation to raise the federal debt ceiling, Congress attached a provision that included some regulatory reform. President Clinton signed the bill March 29, 1996.

Although the final version of the bill didn't contain everything the Republicans and many small business owners wanted, it did take a few big steps:

• All federal agencies, including the Internal Revenue Service, now must publish detailed, plain English explanations of how they worked to minimize the effect new regulations will have on small businesses. An earlier law required many federal agencies to do this, but exempted the IRS. Applying it to the IRS was a top priority of small businesses.
• The bill gives small businesses the right to demand "judicial review" of regulations. If small businesses think a new regulation would harm their business, they can go to court to ask that the regulation be set it aside or corrected.
• The bill also lets Congress review new regulations for 60 days before they go into effect. If Congress does not like a proposed regulation, this gives them the time to pass legislation barring the regulation.
• The bill creates an independent ombudsman position, giving small businesses someone they can complain to confidentially about their treatment by federal regulators.

The Republicans and small businesses didn't get everything they asked for. They wanted agencies to be required to review regularly all regulations to see if they still make sense and should be kept or updated, or if they should be dumped. Critics worried this would overburden agencies already understaffed because of budget cuts. Republicans dropped this issue after reportedly hearing that the President would veto regulatory reform if this measure remained in the bill.

Small business groups lobbied for additional regulatory relief for 16 years, ever since the Regulatory Flexibility Act of 1980 was passed. They didn't think that bill did enough for small businesses and were unhappy that it didn't apply to the IRS.

Complying with tax regulations costs many small businesses a good bit of money. According to the National Federation of Independent Business, for every $100 small businesses pay in taxes, they spend $386 to comply with tax laws and regulations.

Not everyone thinks this legislation is a good idea. The president of the New York State Bar Association wrote to Senate Majority Leader Bob Dole, R-Kan., opposing including the IRS in the bill. Small businesses depend on IRS interpretations to figure out how to comply with regulations. If IRS staff must spend their time writing detailed analyses of each regulation released, they won't have time to write the other guidance small businesses depend on, claims the NYSBA.

We will see.