Commerce Committee

Government Administration and Elections Committee


SUMMARY: This act expands the types of information that agencies must include in the regulatory flexibility analyses they prepare before adopting regulations that directly affect small businesses. Agencies include these analyses in the fiscal note they prepare for a proposed regulation. Under prior law, in preparing these analyses, agencies had to consider using specific regulatory methods to minimize adverse effects on small businesses.

The act also specifies that agencies must prepare the regulatory flexibility analysis before, or concurrently with, posting notice of their intended action on the eRegulations system. This notice must be posted at least 30 days before adopting regulations. Prior law required agencies to prepare the fiscal note, which includes the flexibility analysis, at least 30 days before adopting the regulations but did not tie the deadline to posting the notice.

Additionally, the act increases, from 75 to 250, the maximum number of employees a business may have to be considered a small business for the purpose of regulatory flexibility analyses. By law, a small business is an entity that (1) is independently owned and operated and (2) has fewer than the maximum number of employees or gross annual sales of less than $5 million.

Lastly, the act makes a technical change to the definition of small business for the purposes of individual development accounts.

EFFECTIVE DATE: October 1, 2016


The act expands the types of information that must be included in a regulatory flexibility analysis, some of which the law already requires agencies to include in the regulations' fiscal note or notice of intended action. The act requires each regulatory flexibility analysis to include the following:

1. the proposed regulation's scope and objectives (existing law requires agencies to include the regulations' purpose in its notice of intended action);

2. the types of businesses potentially affected by the proposed regulation;

3. the total number of small businesses potentially subject to the proposed regulation (existing law requires this to be included in the regulation's fiscal note); and

4. whether, and to what extent, the agency communicated with small businesses or small business organizations in developing the proposed regulation and flexibility analysis.

Under the act, the analysis must also state whether small businesses, in order to comply with the proposed regulation, may be required to do any of the following specific actions:

1. create, file, or issue additional reports;

2. implement additional recordkeeping procedures;

3. provide additional administrative oversight;

4. hire additional employees;

5. hire or contract with additional professionals, including lawyers, accountants, engineers, auditors, or inspectors;

6. purchase any product or make any capital investment;

7. conduct additional training, audits, or inspections; or

8. pay additional taxes and fees.

Prior law required agencies, in their analyses, to use specific strategies to accomplish statutory objectives while minimizing the regulation's impact on small businesses. The act instead requires agencies to state whether, and to what extent, the regulations provide alternative compliance methods for small businesses, which may include any of the strategies specified in law (e. g. , establishing less stringent reporting requirements for small businesses).

Existing law, unchanged by the act, requires an agency, before adopting any regulations that may adversely affect small businesses, to notify the Department of Economic and Community Development (DECD) and the Commerce Committee of its intent to adopt the proposed regulations. DECD and the committee must advise and assist an agency in preparing its regulatory flexibility analysis.

By law, these requirements do not apply to emergency regulations, small business set-aside program regulations, or regulations that do not directly impact small businesses, including regulations (1) for the administration of federal programs or (2) concerning costs and standards for service businesses (e. g. , nursing homes, day care facilities, and nonprofit agencies).

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