Support the H.R. 974: Small Business Regulatory Reduction Act

• PART I: CHALLENGE

  • Legislative Context

    • The Small Business Regulatory Reduction Act was introduced on February 4, 2025, by Rep. Beth Van Duyne (R-TX-24), with initial cosponsors including Reps. Daniel Meuser (R-PA), Aaron Bean (R-FL), and Derek Schmidt (R-KS). It was referred to the House Committee on Small Business and had a committee meeting noted around April 1, 2025, but as of the latest available information, it remains at the "Introduced" stage with no further floor action.

    • The bill's core purpose is to reduce regulatory burdens on small businesses, particularly from the Small Business Administration (SBA) itself, while increasing transparency on broader federal regulatory impacts.

    • It requires the SBA Administrator to ensure that the "small business regulatory budget" for each small business concern is not greater than zero starting in fiscal year 2026 and thereafter.

    • This "budget" is defined as the net cost to a small business from SBA rulemakings (new rules, modifications, or repeals of existing rules). In practice, it aims for a net-zero or cost-reducing approach to SBA regulations—meaning any new compliance costs imposed by SBA rules would need to be offset by cost reductions elsewhere (e.g., through deregulation or streamlining).

    • It directs the SBA Administrator to submit an annual report to Congress (within 60 days after the end of each fiscal year, starting after FY2025) on rules issued by other federal agencies that impact small businesses. The report must list the rules and be broken down by issuing agency.

    • No additional funds are authorized for implementation.

  • Constitutional Context

    • Non-Delegation Doctrine

      • The bill operates within the framework of Congress delegating rulemaking power to the SBA (and other agencies) under the Administrative Procedure Act and specific statutes. By imposing a net-zero regulatory cost cap on the SBA, Congress is attempting to reclaim some control over the volume and direction of regulation.

      • Critics of broad delegation might view such bills as a partial corrective to excessive delegation, while opponents argue that micromanaging agency “budgets” for regulatory costs could raise separation-of-powers questions if it unduly interferes with executive discretion. However, courts have historically been deferential to congressional conditions on delegated power.

    • Major Questions Doctrine (Post-West Virginia v. EPA, 2022)

      • The bill reflects congressional skepticism toward agencies making economically significant policy decisions (here, the cumulative cost of rules on small businesses) without clear statutory authorization. By explicitly directing the SBA on regulatory costs, Congress seeks to provide the kind of clear statement that the Supreme Court has increasingly required for “major” regulatory actions.

    • Congressional Oversight and the Power of the Purse

      • Requiring annual reports on regulatory impacts from all agencies is a classic exercise of Congress’s oversight authority. Congress can demand information from the executive branch and structure agencies to promote transparency and accountability. The “no additional funds authorized” provision reinforces that this is an internal management directive rather than a new spending program.

    • Regulatory Flexibility Act 9RFA) Tradition

      • H.R. 974 builds on decades of statutes like the 1980 Regulatory Flexibility Act and the 1996 Small Business Regulatory Enforcement Fairness Act (SBREFA). These laws require agencies to analyze and mitigate impacts on small businesses and have been upheld as valid exercises of congressional authority to guide agency procedure. The “regulatory budget” concept is a more aggressive version of the same idea: shifting from analysis to a hard net-zero constraint on SBA-issued rules.

    • Constitutional Objections

      • Separation of Powers: Opponents could argue that a strict “regulatory budget” of zero intrudes too far into executive functions by limiting the SBA Administrator’s ability to fulfill other statutory mandates (e.g., consumer protection, lending oversight, or emergency rules). However, because the constraint applies only to the SBA’s own rulemakings and is imposed by statute, it is more likely viewed as a valid condition on delegated authority than an unconstitutional encroachment.

      • Vagueness or Implementation Issues: Defining and calculating the precise “net cost” of rules across thousands of small businesses could be technically challenging, but this is an administrative rather than core constitutional problem.

      • Equal Protection / Due Process: The bill does not raise serious equal protection concerns, as it applies neutrally to small businesses as a class defined by statute (15 U.S.C. § 632).

  • The Issue

    • The main issue addressed by H.R. 974, the Small Business Regulatory Reduction Act (119th Congress), is the cumulative regulatory burden and compliance costs that federal regulations—particularly those issued by the Small Business Administration (SBA) itself—impose on small businesses.

    • Small businesses (typically defined as those with fewer than 500 employees, or much smaller in many contexts) face disproportionately high per-employee compliance costs compared to larger firms. Studies cited by supporters show small businesses with 50 or fewer employees can pay about 20% more per employee in regulatory costs.

    • Opponents argue that the bill could "chill" legitimate regulatory activity at the SBA (e.g., rules related to lending standards, disaster assistance, contracting, or consumer protections). They argue it creates an unrealistic requirement that might force agencies to weaken important safeguards just to meet the zero-cost threshold, without adequately balancing public health, safety, or fairness concerns.

    • The bill has an 8% chance of passing to become law.

• PART II: OUR STRATEGY

  • General Approach: Our approach is rooted in providing a holistic overview and specialized guidance for each issue that needs to be solved. We utilize an inclusive, data-driven process designed to help institutional leaders navigate complex legislative and regulatory environments. 

  • Our Position on this Issue: We argue that years of rulemaking (especially during the prior administration) added trillions in overall regulatory costs, diverting time, money, and resources away from job creation, hiring, investment, and growth. Small businesses often lack dedicated compliance staff, making even modest new rules burdensome.

    • We believe that overregulation stifles Main Street, raises prices, and hurts competitiveness. A hard cap on net costs forces agencies to prioritize and eliminate outdated or inefficient rules, freeing up small businesses to focus on actual work rather than paperwork.

    • The bill addresses that any new compliance costs imposed by the SBA must be fully offset by cost reductions from repealing or streamlining existing rules. This creates a net-zero (or net-reduction) approach specifically for SBA-issued regulations.

    • The bill also requires the SBA to submit an annual report to Congress detailing the regulatory costs imposed on small businesses by other federal agencies (not just the SBA).

  • Our Plan for this Issue: We develop a comprehensive policy proposal examining how the passage of H.R. 974 would deliver significant ROI for small businesses–how it will prevent the burdensome federal regulations from driving up costs for small businesses, allowing them to reinvest savings into hiring and operational expansion. We plan on meeting Reps. Daniel Meuser (R-PA), Aaron Bean (R-FL), Derek Schmidt (R-KS), and Beth Van Duyne (R-TX) to show them the strategy to increase the probability of passing the bill.

• PART III: OUR RESULTS

  • Primary Intended Effects

    • Net-zero regulatory cost cap on the SBA: Starting in FY 2026, the SBA Administrator would be required to ensure that the net compliance costs imposed on small businesses from the agency's own rulemakings (new rules, amendments, or repeals) do not exceed zero. This would force the SBA to offset any new regulatory costs by eliminating or streamlining existing rules, creating a form of regulatory pay-as-you-go or "one-in, one-out" (or stronger) mechanism specifically for SBA actions.

    • Increased Transparency: The SBA would have to submit an annual report to Congress detailing the regulatory costs that other federal agencies impose on small businesses. This would give lawmakers and the public better data on the cumulative burden across the entire federal government.

    • Relief for Small Business: The bill  would reduce paperwork, compliance expenses, and time burdens on small firms (which often face higher per-employee regulatory costs than large companies). Freed-up resources could lead to more hiring, investment, expansion, and innovation. Small business advocacy groups (e.g., NFIB, SBE Council, National Taxpayers Union) generally view such measures as pro-growth.

  • Economic Outcomes

    • Lower compliance costs for businesses that interact with SBA programs (lending, disaster assistance, government contracting, size standards, etc.).

    • Behavioral shift at the SBA: The agency would likely become much more cautious about issuing costly new rules and more aggressive about reviewing/repealing outdated ones.

    • Longer-term durability of deregulation: By codifying a net-zero requirement in statute, it could make it harder for future administrations to rapidly reimpose rules without offsets.

    • Better congressional oversight: The annual cross-agency report could highlight particularly burdensome rules from EPA, DOL, HHS, etc., potentially spurring broader deregulatory legislation or CRA (Congressional Review Act) actions.