S-495-119
Committee on Small Business and Entrepreneurship. Hearings held.
Sponsored by Joni Ernst (R-IA)
What it does
This bill would expand requirements for federal agencies when writing rules that affect small businesses, small nonprofits, and small local governments. It would require agencies to include indirect costs — not just direct costs — in their analyses of how proposed rules affect small entities. It would also create a new petition process allowing small entities to challenge an agency's decision to skip a full economic impact analysis, and would require agencies to publish and accept public comments on guidance documents related to rules with significant small-entity impacts. If an agency fails to participate in the petition review process, the finalized rule would not apply to small entities.
Who benefits
Small businesses across all industries that are subject to federal regulation, particularly those in heavily regulated sectors such as agriculture, manufacturing, healthcare, and financial services. Small nonprofits and small local governments that must comply with federal rules. The SBA's Office of Advocacy, which would gain new authority and a formal role in reviewing agency certifications. Law firms and consultants specializing in regulatory compliance and administrative law, who may see increased demand for petition-related services.
Who is hurt
Federal agencies, which would face increased procedural burdens, longer rulemaking timelines, and the risk that finalized rules become unenforceable against small entities if they fail to participate in the petition review process. Larger businesses that compete with small businesses and could face a competitive disadvantage if small entities are exempted from rules that large ones must follow. Workers and communities that benefit from the substantive protections of federal rules (e.g., environmental, labor, or safety standards) that may be delayed, weakened, or rendered inapplicable to small entities. Taxpayers who fund the additional administrative capacity required at agencies and the SBA Office of Advocacy.
Supporters argue
Supporters argue that the existing Regulatory Flexibility Act has long been undermined by agencies that certify away their obligation to conduct full economic analyses, often without accounting for indirect costs that can be just as burdensome as direct ones. They contend that small businesses — which employ roughly half of the U.S. private-sector workforce — lack the legal and compliance resources of large corporations and are disproportionately harmed by regulatory burdens they had no meaningful opportunity to challenge. The petition mechanism and the consequence of non-applicability for non-participating agencies, they argue, create real accountability where none currently exists.
Opponents argue
Opponents argue that adding mandatory indirect-cost analyses and a new petition-and-review layer will significantly slow the rulemaking process, delaying rules that protect workers, consumers, and the environment. They contend that the non-applicability penalty — under which a rule simply does not apply to small entities if an agency fails to engage — could be weaponized to create broad regulatory exemptions, undermining the uniform enforcement that many health, safety, and environmental standards depend on. Critics also argue that "indirect costs" is a vague standard that could be stretched to require agencies to analyze virtually any downstream economic effect, making it nearly impossible to finalize rules efficiently.
Constitutional context
The bill operates within Congress's authority to structure and constrain executive agency rulemaking under the Necessary and Proper Clause (Art. I, §8, cl. 18) and the Vesting Clause (Art. I, §1). Post-Loper Bright v. Raimondo (2024), courts now independently review whether agency actions comply with statutory requirements, meaning the new procedural mandates in this bill would be subject to rigorous judicial scrutiny without deference to agency interpretations of their own obligations.
Checks and balances
The executive branch (federal agencies) would lose procedural flexibility in rulemaking, while the SBA's Office of Advocacy — an independent voice within the executive branch — gains new review authority; courts serve as the ultimate check by independently reviewing agency compliance with the bill's requirements under post-Loper Bright standards.
Historical precedent
The Regulatory Flexibility Act of 1980 and its 1996 expansion via the Small Business Regulatory Enforcement Fairness Act (SBREFA) established the existing framework this bill would modify, and both were challenged and interpreted in federal courts over the scope of agency obligations to small entities.