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The SBA’s Office of Advocacy

By Jim Kuba, CMA
February 1, 2016
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The Small Business Administration’s Office of Advocacy acts to advance the causes of small business within the U.S. federal government.

 

Created by Congress in 1976, the U.S. Small Business Administration’s Office of Advocacy—also referred to as simply “Advocacy”—was chartered as an independent voice for small business within the federal government. The primary job of Advocacy is to advance the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. It also drafts documents on economic research, provides policy analyses, and helps identify issues of concern. Small business outreach is an important part of the process.

 

 

Advocacy is a key player on the federal regulatory front. This role was initially defined by the Regulatory Flexibility Act (RFA), a comprehensive act that tries to balance the social goals of federal regulations with the needs and capabilities of small businesses and other small entities. Since the inception of the RFA 36 years ago, the role of Advocacy has been routinely strengthened in a bipartisan manner. The RFA initially didn’t permit judicial review of agencies’ actions, but subsequent amendments permit limited judicial review. Currently, a small business that is adversely affected by a new regulation or rule could (in some instances) seek judicial review of that determination.

 

RULEMAKING

 

Based on the RFA and subsequent legislation, Advocacy prescribes an analytical process that federal agencies must use when issuing regulations. This is detailed in the “Guide for Government Agencies: How to comply with the Regulatory Flexibility Act” (http://1.usa.gov/1SucvAE). Like most government guides, it’s rather lengthy.

 

Put briefly, for any rule expected to have a significant economic impact on a substantial number of small entities, most federal agencies are required to assess the impact of the proposed rule on small businesses and to consider alternatives that are less burdensome. The rulemaking agency must give every appropriate consideration to comments provided by Advocacy and must respond (in a formally prescribed manner) to those comments. On occasion, failure to comply with the RFA process provides background for subsequent legal action.

 

OUTREACH

 

A large part of Advocacy’s role is outreach to the small business community. This isn’t a one-way interaction, and it isn’t a passive process. Advocacy provides a filter on numerous federal regulations that are published each year in the Federal Register (in 2014: 30,194 documents were detailed in 78,796 pages). Most of these items are innocuous or focused on a narrow business segment.

 

When Advocacy discovers a new regulation that it believes may have a significant economic impact on a substantial number of small businesses, it issues a Regulatory Alert. The Alert includes instructions for public comment. (Regulatory Alerts are routine reading for a few members of the IMA® Small Business Financial and Regulatory Affairs Committee (SBFRC)). In a few cases, Advocacy will conduct roundtables with the small business community.

 

RESEARCH

 

Besides the active role as the regulatory small business watchdog, Advocacy also publishes research reports on small business topics (http://1.usa.gov/1Pe8QGO). It publishes small business profiles annually for each state. These reports are a valuable resource that the SBFRC uses when drafting comment letters.

 

Advocacy also annually provides a comprehensive report to the President of the United States and Congress addressing federal agencies’ compliance with the RFA along with other Advocacy activities and success stories. These reports are available on the Advocacy website
(http://1.usa.gov/1n7Rizb).

 

COMMENT LETTERS

 

During 2015, the IMA SBFRC issued several comment letters in response to Regulatory Alerts from Advocacy. These letters are available on the IMA SBFRC website (http://bit.ly/IMASBFRC). One recent letter concerned the IRS’s $500 de minimis safe harbor limit in accounting requirements, commonly referred to as the “repair regulations.” Thanks to Advocacy’s Regulatory Alert, the IMA SBFRC was able to respond (along with about 150 other commenters) to a little publicized IRS request for comment on the issue. In November 2015, the IRS announced that the threshold for small business was increasing to $2,500.

 

Another notable proposal was the Department of Labor (DOL) rule that amends overtime regulations under in the Fair Labor Standards Act (DOL-OT), particularly the “white collar” exemption from overtime pay for executive, administrative, and professional employees. A key provision would raise the salary threshold for employees to receive overtime from $23,660 to $50,440. This is a 113% increase, but it would seem that some increase is appropriate given that the last major review was conducted in 2004. Within the DOL-OT are a number of other provisions that could have serious economic impacts on small business. Final resolution was originally expected in early 2016. More than 280,000 citizens and groups responded with comment letters. In early October, the House of Representatives Small Business Subcommittee on Oversight, Investigations, and Regulations initiated hearings on DOL-OT. Recent comments from the Department of Labor seem to imply that the decision will be deferred (as reported by Lauren Weber in “New Rule for Overtime Pay Coming Later Than Anticipated,” The Wall Street Journal, http://on.wsj.com/1ZKio14).

 

The DOL-OT is a good example of how seriously the Office of Advocacy takes its role. Advocacy issued an extensive multipoint comment letter basically noting that the RFA requires the DOL “to assess the impact of the proposed rule on small business and to consider less burdensome alternatives” and that, in Advocacy’s opinion, the DOL failed to do this. Advocacy also proposed a number of recommendations that would help with RFA compliance. We’ll have to wait until later this year to see if the DOL will adopt the small business alternatives by Advocacy and the IMA SBFRC.

SF ADVICE

 

This column is published quarterly by the Research and Education Subcommittee of the IMA Small Business Financial and Regulatory Affairs Committee. If you have knowledge of an issue pertaining/of interest to the small business community and/or would be interested in writing about such an issue, please contact Linda Devonish-Mills, IMA director of advocacy, at lmills@imanet.org.

 

Jim Kuba, CMA, is a semi-retired management accountant who works for several entrepreneurial SME companies, including Ross Valve Manufacturing and Metweld International. He is a member of IMA’s Tech Valley Chapter and a member of IMA’s Small Business Financial and Regulatory Affairs Committee. You can contact him at jimkuba@nycap.rr.com.
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