H.R. 5, Regulatory Accountability Act of 2017

Floor Situation

On Wednesday, January 11, 2017, the House will begin consideration of H.R. 5, the Regulatory Accountability Act of 2017, under a structured rule. H.R. 5 was introduced on January 3, 2017, by Rep. Bob Goodlatte (R-VA) and was referred to the Committee on the Judiciary, in addition to the Committee on Oversight and Government Reform and the Committee on Small Business.

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Summary

H.R. 5 combines six previously passed reform minded bills to eliminate overly burdensome red tape and regulation in order to lift unnecessary burdens on hardworking Americans and to promote jobs, innovation, and economic growth.  Major provisions of the legislation include:

Title I: Regulatory Accountability Act

Title I requires agencies to choose the lowest-cost rulemaking alternative that meets statutory objectives and requires greater opportunity for public input and vetting of critical information.

Specifically, Title I modifies certain parts of the Administrative Procedure Act (APA) “to reform the process by which federal agencies analyze and formulate new regulations and guidance documents.”[1]  The bill codifies key rulemaking principles found in a variety of Executive Orders issued by Presidents for more than thirty years, and makes them judicially enforceable.[2]  This requires federal agencies to consider: 1) the legal authority for the rule and other relevant statutory considerations; 2) the nature of the problem and whether it warrants new regulations; 3) whether the problem could be addressed by repealing or modifying existing regulations; 4) potential alternatives to adopting a new regulation; and 5) the potential costs and benefits associated with each alternative.

Title I also requires agencies to identify when new rules have a negative impact on jobs and wages.  Moreover, this legislation requires agencies to submit an Advance Notice of Proposed Rulemaking (ANPR) 90 days before they propose any major or high-impact rule.[3]  Federal agencies are also required to identify, in any Notice of Proposed Rulemaking (NPR), the achievable objectives of the proposed rule and the metrics to be used to identify if they are met, and to certify that the rule meets the objectives the agency identified in the NPR.

The Title improves the process for notice-and-comment rulemaking by promoting more robust public input at each stage of the process.  It also generally requires agencies to issue the least costly alternative rule that achieves relevant statutory objectives.  To adopt a higher-cost alternative, the agency must demonstrate that the alternative’s additional benefits justify its additional costs, based on interests of public health, safety or welfare that fall clearly within the scope of the statutory provision authorizing the rule. It also brings major guidance within the regulatory review process, thereby subjecting it to more intensive pre-issuance scrutiny.[4]  It also reforms the process of issuing interim-final rules—which may currently be promulgated without public input—to prevent abuse of that type of rulemaking. And, it requires “hybrid” rulemaking for high-impact rules (rules imposing $1 billion or more in annual costs), combining hearing-based proceedings previously used in formal rulemaking with informal notice-and-comment procedures to best vet issues raised by these highest-cost rules.

Finally, Title I further authorizes the Office of Information and Regulatory Affairs (OIRA) to issue guidelines for agencies to follow as they assess economic and scientific issues in rulemaking; observe statute-specific rule making regimes in conjunction with the generally applicable procedures of the APA (as amended by this legislation); work to assure better coordination, simplification and .coordination by agencies in rulemaking; and conduct hearings.  Each agency is required to include ‘‘all documents and information considered by the agency during the proceeding’’ in the rule making record.

In the 114th Congress, the House passed similar legislation under a rule (H.R. 185) by a vote of 250-175.

Title II: Separation of Powers Restoration Act

Title II repeals the Chevron and Auer doctrines to end judicial deference to bureaucrats’ statutory and regulatory interpretations.

In the 114th Congress, the House passed similar legislation under a rule (H.R. 4768) by a vote of 240-171.

Title III: Small Business Regulatory Flexibility Improvements Act

Title III requires agencies to account for the direct, indirect, and cumulative impacts of new regulations on small businesses and find flexible ways to reduce them.

Specifically, the title amends the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBREFA) to ensure agencies adequately analyze proposed rules for their potential impacts on small businesses.  The bill “updates the RFA and SBREFA to close loopholes and more effectively reduce the disproportionate burden that over-regulation places on small entities.”[5] The title requires agencies to perform a regulatory flexibility analysis when a proposed rule’s effects are significant but beneficial.  Under current law, agencies conduct a regulatory flexibility analysis only when a proposed rule has significant costs to small entities.[6]  This legislation expands those requirements in order to encourage agencies to pick the most beneficial alternative.[7]   The bill also requires agencies to look not only at direct effects of new rules, but also indirect effects, which frequently are substantial.

Under SBREFA, the IRS is required to comply with the RFA when an interpretative rule imposes a collection-of-information requirement on a small entity.[8]  However, the IRS misinterprets this statute to apply only when the taxpayer is required to complete a brand new, never-used form.[9]  This legislation requires the IRS to comply fully with the RFA when issuing an interpretative rule outside of the notice-and-comment-process and conduct a full regulatory flexibility analysis. Furthermore, the title expands the terms of the biannual regulatory agenda report to include regulations that may have significant impacts on a substantial number of small entities.[10]  In turn, the title requires the agendas to describe the North American Industrial Classification System sectors that would be affected by the rules.[11]

Title I also requires agencies, when issuing an initial regulatory flexibility analysis, to submit a detailed statement that includes an estimate of the cumulative economic impact of the proposed rule on small entities and a description of any disproportionate economic impact on small entities.  This legislation also requires agencies, when developing a final regulatory flexibility analysis, to provide a quantifiable or numerical description of the effects of a proposed or final rule (and alternatives to such rule); or a more general descriptive statement and a detailed statement explaining why quantification is not practicable or reliable.  Moreover, this legislation repeals provisions that previously allowed a waiver or delay of the completion of an initial regulatory flexibility analysis, and requires the Chief Counsel for Advocacy of the Small Business Administration (SBA) to issue rules governing federal agency compliance with the RFA.  This provision was redundant, as agencies can use a “good cause” exemption under the Administrative Procedure Act to dispense with notice and comment rulemaking in an emergency situation, and hence waive RFA compliance. Further, the title directs agencies, prior to the publication of any proposed rule, to: 1) provide the Chief Counsel for Advocacy of the SBA with all materials prepared or utilized in making the proposed rule; 2) provide information on the potential adverse and beneficial economic impacts of the proposed rule on small entities; and 3) gather information about potential rules for proposal from small entities representatives through the Small Business Advocacy Review panel process (currently, only the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Consumer Financial Protection Bureau need convene such panels).

The title also clarifies how agencies conduct their periodic regulatory reviews, including: 1) requiring agencies to develop new periodic review plans within 180 days and publish them online; 2) clarifying that agencies must review all rules with a significant economic impact on a substantial number of small entities; 3) requiring agencies to report the results of their reviews and publish them in the Federal Register; 4) requiring agencies to conduct significant outreach to small businesses owned by women, veterans, and socially and economically disadvantaged individuals; and 5) allowing small entities to provide input on the rules an agency plans to review.  In addition, the title makes judicial review available when an agency publishes a final rule, ensuring that small entities have prompt access to judicial review without procedural delays from agency-imposed exhaustion requirements. 

Finally, the title makes judicial review available when an agency publishes a final rule, ensuring that small entities have prompt access to judicial review without procedural delays from agency-imposed exhaustion requirements.  Moreover, it provides the U.S. Courts of Appeals exclusive jurisdiction to review all final rules promulgated by the SBA Chief Counsel for Advocacy governing agency compliance with the RFA. The title makes judicial review available when an agency publishes a final rule, ensuring that small entities have prompt access to judicial review without procedural delays from agency-imposed exhaustion requirements. 

In the 114th Congress, the House passed similar legislation under a rule (H.R. 527) by a vote of 260-163.

Title IV: REVIEW Act

Title IV prohibits new billion-dollar rules from taking effect until courts can resolve timely-filed litigation challenging their promulgation.

Specifically, Title IV amends the Administrative Procedure Act to require federal agencies to postpone the implementation of any rule imposing an annual cost on the economy of more than $1 billion (classified as a “high-impact” rule) if a petition seeking judicial review of that regulation is filed within the statutorily provided time for challenging the rule’s issuance (or a default period of 60 days). Under the bill, implementation would be postponed until any judicial review is resolved.

In the 114th Congress, the House passed similar legislation under a rule (H.R. 3438) by a vote of 244-180

Title V: ALERT Act

Title V forces agencies to publish online, timely information about regulations in development and their expected nature, costs, and timing.

Specifically, the Title requires federal agencies to submit monthly regulatory updates to the Office of Information and Regulatory Affairs (OIRA) for all rules expected to be proposed or released in the upcoming year. The bill requires that most regulations must be published in such reports at least six months before becoming effective.

In the 114th Congress, the House passed similar legislation (H.R. 1759), included in a larger bill (H.R. 712) by a vote of 244-173.

Title VI: Providing Accountability Through Transparency Act

Title VI requires agencies to publish plan-language, online summaries of new proposed rules, so the public can understand what agencies actually propose to do.

Specifically, the Title requires agencies to post on the regulations.gov website an abbreviated summary of proposed rules. Summaries would be required to be no more than 100 words in length.

In the 114th Congress, the House passed similar legislation (H.R. 690), included in a larger bill (H.R. 712), by a vote of 244-173.

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Background

The annual cost of federal regulation adds up to approximately $1.86 trillion, or $15,000 in regulatory costs per family each year.[12]  This burden, coupled with uncertainty over what additional federal regulation may be imposed in the near term, have been cited as key factors continuing to hold back economic recovery and the creation of new jobs.  The current regulatory burden is largely the fruit of inadequate administrative law.  Most important, the APA, known as the ‘constitution’ of agency rulemaking, imposes only a few light-handed constraints on the vast majority of agency rulemaking proceedings.  Nowhere in the APA, for example, is an agency required to consider the costs of a proposed regulation and weigh them against potential benefits.[13]  Since its enactment in 1946, the APA has never been updated by Congress to account for modern rulemaking.[14]  A patchwork of executive orders has provided additional rulemaking guidance, but has been implemented inconsistently, depending on the Administration in place at the time.[15]

The Chevron and Auer doctrines are fundamental elements of modern regulatory jurisprudence. These two elements often form the rubric for regulatory cases in our modern court system. The Chevron doctrine comes from a landmark Supreme Court Case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). Under the Chevron doctrine, a court must determine if a statute speaks clearly to the question the agency has addressed. If so, the court must follow the expressed intent of Congress. If the statute does not reflect a clear congressional content (“Silent or Ambiguous” on the question), the doctrine indicates the court is to defer to the agency’s interpretation, provided that it is within the “permissible” range of statutory interpretations.[16]

Ambiguity surrounding the implementation of the Chevron doctrine has abounded in the Court system, Congress, and legal academia. Many Supreme Court and appeals court decisions have tried to evolve and clarify the doctrine, but this has in turn evolved into a complex area of case law and an evolving set of legal doctrines for review of agencies’ statutory interpretations. This complex series of case law decisions has increased the power of the Federal administrative agencies, giving them power as they seek “permissible” interpretations of statutory provisions. In this ambiguity, the federal agencies have increasingly expanded their powers, as they are not restricted by clear, bright lines. Chevron gave a large amount of deference to agencies, but the Court has had difficulty establishing exactly when deference to a federal agency is appropriate and when it is not.[17]

Judicial deference in interpretation also extends to agencies’ interpretations of ambiguities in their own regulations. This legal principle of self-interpretation was affirmed in Auer v. Robbins, 519 U.S. 452 (1997). In Auer, the Court stated that, because regulations are a creature of the agency’s own writing, the agency’s interpretation of a regulation “is….controlling unless ‘plainly erroneous or inconsistent with regulation.’” Furthermore, the agency is not bound to write its regulations narrowly, as it is free to write regulations as broadly as it wishes, subject only to the limits imposed by the statute, in the interpretation of which the agency may obtain Chevron deference. [18]

The Auer doctrine has come under increasing scrutiny, as it gives agencies perverse incentives to increase their regulatory power through vague and ambiguous regulations at the potential expense of clear and productive policy. Articulating this sentiment, Justice Thomas in the case of Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 525 (1994), stated: “It is perfectly understandable, of course, for an agency to issue vague regulations, because to do so maximizes agency power and allows the agency greater latitude to make law through adjudication rather than the more cumbersome rulemaking process.”[19]

Between Chevron and Auer, the power of the administrative agencies has increased dramatically as the agencies, Courts, and legal community have sought to navigate the ambiguities in statutory and regulatory law.

The Administrative Procedure Act (APA) provides for a strong presumption of judicial review regarding agency rules. Judicial recourse is available for any party aggrieved by a final agency action unless a statute precludes judicial review, or if a decision is left to agency discretion by law. Under the APA, a court may compel any agency action that is unreasonably delayed or unlawfully withheld. Furthermore, a court may vacate an agency rule if the agency acted (1) arbitrarily or capriciously; (2) in excess of statutory authority; (3) contrary to a constitutional right; or (4) without following proper procedures.[20]

After a number of Congressional hearings held in the late 1970s highlighted the impact of federal regulation on small business, Congress enacted the Regulatory Flexibility Act (RFA) as a means of better-controlling agency decision-making.[21]  The RFA requires federal agencies to prepare a regulatory flexibility analysis when developing a rule, which describes the rule’s impact on small entities.[22]  These requirements are not triggered, however, if the head of the issuing agency certifies that the rule would not have a “significant economic impact on a substantial number of small entities.”[23]  This term, however, lacks a uniform definition across federal agencies.  Furthermore, courts have held that indirect impacts on small entities, which are often significant, are irrelevant under the RFA.[24]  Additionally, the RFA requires federal agencies to publish a “regulatory flexibility agenda” biannually in the Federal Register, overseen and monitored by the Small Business Administration’s (SBA) Chief Counsel for Advocacy; and requires agencies to conduct decennial rule reviews to identify whether the impacts of rules on small entities can be mitigated further.[25] 

From the time of the RFA’s enactment until 1996, agency compliance was at best sporadic, “since judicial review of regulatory flexibility analyses was very limited, and an agency’s certification decision could not be challenged in court.”[26]  As a result, agencies only complied when it would benefit their rulemakings.  In response to agencies’ noncompliance with the RFA, Congress enacted the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).[27]  The SBREFA added several features to the RFA, including: compliance guidelines, advocacy review panels; judicial review; publishing requirements for compliance guides; and input requirements for rules that have a significant economic impact on a substantial number of small entities.  However, compliance with RFA and SBREFA requirements remained unclear.  As a result, President Bush issued Executive Order 13272, which required agencies to: adopt standards for complying with the RFA; make those standards known to the public; and provide the SBA an opportunity to comment on proposed rules prior to publication in the Federal Register.[28]  The executive order, however, was not judicially enforceable and did not address the RFA’s loopholes, and subsequent judicial proceedings have not given agency compliance with the RFA the same scrutiny that they have given to compliance with the National Environmental Policy Act (NEPA).[29]

The Regulatory Flexibility Act and Executive Order 12866 require a semi-annual Unified Agenda of Regulatory and Deregulatory Actions report and an annual, agency-specific Regulatory Plan report to detail government-wide regulation plans. According to the Judiciary Committee, in recent years, “the Unified Agenda has not provided significant detail about planned regulations, such as precise information on how much planned regulations are expected to cost the economy. [And the Administration] has consistently sought to restrict the amount of information provided in the Unified Agenda.”[30] The bill seeks to increase transparency in the regulatory process by requiring monthly, online reporting on and more useful information about the timing and costs of planned regulatory action.

According to the bill’s sponsor, “If we want to see better and faster growth within our economy, reforming our regulatory system must be at the center of our nation’s focus. The runaway regulatory state is creating hidden costs on hardworking Americans and small business owners alike. As these costs grow and continue to burden our economy, we are losing jobs and wages to thousands of regulations. The Regulatory Accountability Act is a major step to reverse the negative effects regulations are having on our economy. The bill promotes making the regulatory process more transparent for the American people; increases the power of the people’s elected representatives and the courts to stop overreaching new rulemaking; and lets the public have the full say they deserve in the rulemaking process. The barriers regulations have built halt economic growth but those burdens can be lifted, and Congress has the opportunity to make our economy work for hardworking Americans again.”[31]

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Amendments

1. Rep. Goodlatte (R-VA) – This amendment revises section 2 of title II of the bill to restrain unwarranted interpretation of ambiguous statutes to find implied delegations of legislative rulemaking authority, and of ambiguous statutes and regulations to expansively extend agency authority.
2. Rep. Chaffetz (R-UT) – This amendment establishes a timeline by which the Office of Information and Regulatory Affairs must issue guidelines under title I of the bill.
3. Rep. Chabot (R-OH) – This amendment requires an agency to include an economic assessment or a summary of it when an agency certifies that a proposed rule will not have a “significant economic impact on a substantial number of small entities” under the Regulatory Flexibility Act. This will ensure an agency’s decision to certify a rule and not conduct a full (10 minutes) regulatory flexibility analysis is supported by data.
4. Rep. Velázquez (D-NY) – This amendment Strikes Title III of the bill and replaces it with alternative language that reforms the Regulatory Flexibility Act to reduce the burden of regulations on small business.
5. Rep. Peterson (D-MN) – This amendment prohibits agencies from impartially communicating with the public in order to generate support or opposition to a proposed rule.
6. Rep. Graves (R-LA) – This amendment provides agency accountability of major rules by requiring retrospective review and report.
7. Rep. Young (R-IA) – This amendment allows for sufficient time (at least 90 days) for affected entities to take steps to comply with issued guidance.
8. Rep. Castor (D-FL) – This amendment ensures that any rule intended to protect public health and welfare is exempted from the requirements of this act.
9. Rep. Cicilline (D-RI) – This amendment provides for the prevention of the transmission of foodborne illness or to meet preventive-control requirements for food safety.
10. Rep. Johnson (D-GA) – This amendment exempts rules that significantly improve the employment, retention, and wages of workforce participants, especially those with significant barriers to employment, such as persons with disabilities or limited English proficiency.
11. Rep. Ruiz (D-CA) – This amendment exempts rules pertaining to the safety of children's products or toys.
12. Rep. Scott (D-VA) – This amendment exempts from this bill a rule which pertains to workplace health and safety and that is necessary to prevent or reduce the incidence of traumatic injury, cancer or irreversible lung disease at mining facilities which are subject to the Federal Mine Safety and Health Act of 1977 (30 USC 801, et seq) or workplaces which are subject to the Occupational Safety and Health Act (29 USC 651 et seq).
13. Rep. Tonko (D-NY) – This amendment ensures that any rules made under the “Frank R. Lautenberg Chemical Safety for the 21st Century Act,” are exempted from this act.
14. Rep. Grijalva (D-AZ) – This amendment strikes language that would require the Forest Service and the Bureau of Land Management to perform regulatory flexibility analyses for forest and land management plans.
15. Rep. Nadler (D-NY) – This amendment requires analyses conducted under Title III of the bill to include direct and indirect benefits as well as direct and indirect costs.
16. Rep. Posey (R-FL) – This amendment requires federal agencies to report on influential scientific information and associated peer reviews disseminated or to be disseminated in a rulemaking proceeding.

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Cost

A Congressional Budget Office (CBO) estimate is currently unavailable. However, previous CBO scores of House-passed legislation included in this bill are below.

Title II (H.R. 4768) estimate; Title III (H.R. 527) estimate; Title IV (H.R. 3438) estimate; Title V (H.R. 1759) estimate; and Title VI (H.R. 690) estimate.

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Staff Contact

For questions or further information please contact Jake Vreeburg with the House Republican Policy Committee by email or at 2-1374.