Learn About the Regulatory Flexibility Act

On this page:

• Introduction
• The Small Business Regulatory Enforcement Fairness Act (SBREFA)
• Small Entity Definitions

Introduction

The Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 601 et seq, was signed into law on September 19, 1980. The RFA imposes both analytical and procedural requirements on EPA and on other federal agencies. The analytical requirements call for EPA to carefully consider the economic impacts rules will have on small entities. The procedural requirements are intended to ensure that small entities have a voice when EPA makes policy determinations in shaping its rules. These analytical and procedural requirements do not require EPA to reach any particular result regarding small entities.

The Small Business Regulatory Enforcement Fairness Act (SBREFA)

The Small Business Regulatory Enforcement Fairness Act (SBREFA), Pub Law No. 104-121, was signed into law on March 29, 1996. SBREFA enacted a variety of provisions, including several amendments to the RFA. In short, SBREFA amended the RFA to require EPA to convene a small business advocacy review panel prior to proposing any rule that will have a significant economic impact on a substantial number of small entities. It also added a provision that allows small entities adversely affected by a final rule to challenge the agency's compliance with the RFA's requirements in court.

• Access the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (5 USC §§ 601-612) from www.govinfo.gov
• Read EPA's Action Development Process: Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (pdf) (1006.27 KB, November 2006)

Small Entity Definitions

Under the RFA, the term "small entity" includes small businesses, small governments, and small organizations.

Small Business – The RFA references the definition of "small business" found in the Small Business Act. The Small Business Act further authorizes the Small Business Administration (SBA) to define "small business" by regulation, which it does for each of the business categories listed in the North American Industry Classification System (NAICS).

Up-to-date size standards are provided at SBA's website. For each NAICS code, SBA size standards are generally set by the number of employees or average annual receipts. For example, the recent SBA size standards table (3/17/2023) indicates "small" paper mills are identified by NAICS code 322120 and are defined by those with 1,250 or fewer employees; whereas, potato farming is identified by NAICS code 111211 and is defined by annual receipts of $4.25 million or less. Note: SBA definitions of small businesses apply to a firm's parent company and all affiliates as a single entity. The SBA's small business definitions are codified in the Code of Federal Regulations at 13 CFR 121.201.

The RFA also authorizes an agency to adopt and apply alternative definitions, "which are appropriate to the activities of the agency" for each category of small entity (i.e., small business, small organization, and small governmental jurisdiction). To adopt an alternative definition, agencies must provide an opportunity for public comment and publish the alternative definition in the Federal Register. To adopt an alternative definition of "small business," agencies must also consult with the SBA's Chief Counsel for Advocacy.

Small Government – The RFA defines "small governmental jurisdiction" as the government of a city, county, town, school district or special district with a population of less than 50,000. The RFA also authorizes agencies to establish alternative definitions of small government after opportunity for public comment. Any alternative definition must be "appropriate to the activity of the agency" and "based on such factors as location in rural or sparsely populated areas or limited revenues due to the population of such jurisdiction." Any alternative definition must be published in the Federal Register. States and tribal governments are not considered small governments under the RFA.

Small Organization – The RFA defines "small organization" as any "not-for-profit enterprise which is independently owned and operated and is not dominant in its field." The RFA also authorizes an agency to adopt and apply alternative definitions, "which are appropriate to the activities of the agency" for each category of small entity (i.e., small business, small organization and small governmental jurisdiction). To adopt an alternative definition, agencies must provide an opportunity for public comment and publish the alternative definition in the Federal Register.