A BILL TO BE ENTITLED
AN ACT to REQUIRE STATE AGENCIES PROPOSING PERMANENT RULES TO CONSIDER THE ADVERSE ECONOMIC IMPACT OF THE PROPOSED RULE ON SMALL BUSINESS; to require STATE agency review of existing rules prior to amendment to determine the impact on small business; TO ESTABLISH THE SMALL BUSINESS REGULATORY COMMITTEE IN THE DEPARTMENT OF COMMERCE; TO PROVIDE FOR SMALL BUSINESS REGULATORY COMMITTEE REVIEW OF PROPOSED PERMANENT RULES THAT MAY HAVE AN ADVERSE IMPACT ON SMALL BUSINESS AND SMALL BUSINESS REGULATORY COMMITTEE RECOMMENDATIONS TO THE AGENCY AND GENERAL ASSEMBLY; TO AUTHORIZE PETITION BY A SMALL BUSINESS OBJECTING TO A PERMANENT RULE ON SPECIFIED GROUNDS;  PROVIDING FOR SMALL BUSINESS REGULATORY COMMITTEE REVIEW OF THE AGENCY'S RESPONSE to the PETITION; AND AUTHORIZING AGENCY WAIVER OF ADMINISTRATIVE FINES OR PENALTIES FOR VIOLATIONS BY SMALL BUSINESS.
Whereas, a vibrant and growing small business sector is critical to creating jobs in a dynamic economy; and
Whereas, small businesses bear a disproportionate share of regulatory costs and burdens; and
Whereas, fundamental changes that are needed in the regulatory and enforcement culture of State agencies to make them more responsive to small business can be made without compromising the statutory mission of the agency; and
Whereas, uniform regulatory and reporting requirements can impose unnecessary and disproportionately burdensome demands including legal, accounting, and consulting costs upon small businesses with limited resources; and
Whereas, unnecessary rules create entry barriers in many industries and discourage potential entrepreneurs from introducing beneficial products and processes; and
Whereas, alternative regulatory approaches that do not conflict with the stated objective of applicable statutes may be available to minimize the significant economic impact of rules on small businesses; Now, therefore,
The General Assembly of North Carolina enacts:
SECTION 1.  Article 2A of Chapter 150B of the General Statutes is amended by adding the following new Part to read:
"Part 2A. Small Business Regulatory Improvement Act.
"§ 150B‑21.7A.  Findings; definitions.
(a)	The General Assembly finds the following:
(1)	A uniform system for administrative rule making and adjudicatory process is necessary to ensure that rules to protect the health, safety, and economic welfare of the State are adopted and enforced in an open, fair, and equitable manner.
(2)	In adopting and enforcing administrative rules, State agencies should seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on employers.
(3)	The failure to recognize differences in the scale and resources of regulated businesses can adversely affect competition in the marketplace, discourage innovation, and restrict improvements in productivity.
(4)	The practice of treating all regulated businesses as equal may lead to inefficient use of regulatory agency resources, enforcement problems, and, in some cases, actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation.
(b)	As used in this Part, the term:
(1)	'Adverse economic impact' means an aggregate financial impact on small businesses affected by the rule of at least two million dollars ($2,000,000) in a 12‑month period.
(2)	'Committee' means the Small Business Regulatory Committee established under G.S. 143B‑472.99.
(3)	'Small business' means a business entity, including its affiliates, that is both independently owned and operated and has not more than 250 employees.
"§ 150B‑21.7B.  Rules affecting small businesses; economic impact statement by agency; judicial review of agency compliance.
(a)	Before an agency publishes in the North Carolina Register the proposed text of a permanent rule that would have an adverse economic impact on small businesses, the agency shall prepare an economic impact statement that includes the following:
(1)	An identification and estimate of the number of small businesses subject to the proposed rule.
(2)	The projected reporting, record keeping, and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record.
(3)	A statement of the probable effect on impacted small businesses.
(4)	A description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed rule.
(b)	A small business that is adversely affected or aggrieved by the adoption of a permanent rule subject to this section may seek judicial review of the agency's compliance with this section. The small business may seek judicial review under this subsection during the period commencing on the date the permanent rule becomes effective and end one year from that date.
"§ 150B‑21.7C.  Agency review of existing rules.
In order to minimize the adverse economic impact on small businesses, prior to amending a permanent rule, the agency shall consider the following:
(1)	The continued need for the rule.
(2)	The nature of complaints or comments received from the public concerning the rule.
(3)	The complexity of the rule.
(4)	The extent to which the rule overlaps, duplicates, or conflicts with other federal or State rules or local government ordinances.
(5)	The length of time since the rule has been evaluated and an estimate on the length of time the rule will continue to be necessary.
(6)	The degree to which technology, economic conditions, or other factors have changed or no longer exist in the area affected by the rule.
"§ 150B‑21.7D.  Periodic agency review of rules.
(a)	Within four years of the enactment of this act, each agency shall review all agency rules existing at the time of enactment to determine whether the rules should be continued without change, or should be amended or repealed, consistent with the stated objectives of the underlying statutes, to minimize economic impact of the rules on small businesses in a manner consistent with the stated objectives of applicable statutes. If the head of the agency determines that completion of the review of existing rules is not feasible by the established date, the agency shall publish a statement certifying that determination. The agency may extend the completion date by one year at a time for a total of not more than five years.
(b)	Rules adopted after the enactment of this act shall be reviewed within five years of the publication of the final rule and every five years thereafter to ensure that they minimize economic impact on small businesses in a manner consistent with the stated objectives of the underlying statutes.
(c)	In reviewing rules to minimize economic impact on small businesses, the agency shall consider all of  the following factors:
(1)	The continued need for the rule.
(2)	The nature of complaints or comments received concerning the rule from members of the public.
(3)	The complexity of the rule.
(4)	The extent to which the rule overlaps, duplicates, or conflicts with other federal, State, or local government rules.
(5)	The length of time since the rule has been evaluated or the degree to which economic conditions or other factors have changed or no longer exist  in the area affected by the rule.
"§ 150B‑21.7E.  Proposed permanent rules; agency determination of impact on small business; notice to Small Business Regulatory Committee.
If the economic impact statement prepared as required under G.S. 150B‑21.7B indicates the proposed permanent rule may have an adverse economic impact on small business, the agency proposing the permanent rule shall provide a copy of the rule and the impact statement to the Small Business Regulatory Committee established under G.S. 143B‑472.99 for its timely review, comment, and recommendations. If the Committee determines that the proposed permanent rule may have an adverse economic impact on small business, the Committee shall request that the agency consider the following:
(1)	The availability and practicability of less restrictive alternatives that could be implemented; and
(2)	Creative, innovative, or flexible methods of compliance by small business.
"§ 150B‑21.7F.  Permanent rules; petition objecting to adverse economic impact on small business.
(a)	If a permanent rule has an adverse economic impact on a small business, that small business may file a written petition with the State agency that adopted the rule objecting to all or part of the rule on any of the following grounds:
(1)	The actual effect on small business significantly exceeded or was not reflected in the small business impact statement formulated by the agency in accordance with this Part.
(2)	The actual or estimated adverse economic impact was either not considered in public hearings on the rule, or there were no public hearings conducted on the rule.
(3)	The technology, economic conditions, or other relevant factors underlying the purpose of the rule have changed or no longer exist.
(b)	Upon receipt of the petition, the agency shall forward a copy of the petition to the Small Business Regulatory Committee as notification of a petition filed under this Part. The agency shall promptly consider the petition and may seek advice and counsel regarding the petition. Within 60 days after the receipt of the petition, the agency shall determine whether the impact statement or the public hearing addressed the actual and significant impact of the rule on small business, or if conditions underlying the purpose of the rule have changed or no longer exist. The agency shall provide a copy of its determination to the Committee.
(c)	If the agency determines that the petition merits amendment to or repeal of a rule, it may initiate proceedings in accordance with the applicable requirements of this Chapter. If the agency determines that the petition does not merit the amendment or repeal of a rule, any small business adversely affected by the agency's determination may seek review of the agency's determination by the Committee.  Upon request for review, the Committee shall convene a meeting for the purpose of determining whether to recommend that the agency initiate proceedings to amend or repeal a rule. The Committee's review shall not be de novo but shall be based on the actual record presented to the agency. The Committee may base its recommendation on any of the following:
(1)	The actual effect on small business significantly exceeded or was not reflected in the small business impact statement formulated by the agency pursuant to G.S. 150B‑21.7B.
(2)	The actual economic impact was not previously considered by the agency.
(3)	The technology, economic conditions, or other relevant factors underlying the purpose for the rule have changed or no longer exist.
(d)	If the Committee recommends that the agency initiate proceedings for any reason stated in subsection (c) of this section, then the Committee shall submit to the Joint Administrative Procedure Oversight Committee ("Oversight Committee") an evaluation report and the agency's determination of the petition's merits.  The Oversight Committee shall review the Committee's report and agency determination and shall make recommendations to the General Assembly for legislative action, if necessary.
"§ 150B‑21.7G.  Waiver of administrative penalties.
(a)	Notwithstanding any other law to the contrary, a State agency that is authorized to assess administrative fines or penalties upon a business may waive or reduce the administrative fine or penalty for a violation of a statute or rule by a small business only under the following conditions:
(1)	The small business corrects the violation within 30 days after receipt of notice of the violation.
(2)	The violation was the result of an excusable misunderstanding of the agency's interpretation of the rule.
(b)	An agency may not waive an administrative fine or penalty when:
(1)	A small business has been notified of the violation and has been given a prior opportunity to correct the violation on a prior occasion.
(2)	A small business fails to exercise good faith in complying with the statute or rule.
(3)	The violation involves willful or criminal misconduct by the small business or its agents or employees.
(4)	The violation results in or poses the threat of serious health, safety, or environmental impact.
(5)	The penalty or fine is assessed pursuant to a federal law or regulation and for which no waiver or reduction is authorized by the federal law or regulation.
(c)	An agency may adopt rules providing for the waiver of administrative fines or penalties in accordance with this section."
SECTION 2.  Article 10 of Chapter 143B of the General Statutes is amended by adding the following new Part to read:
"Part 20. Small Business Regulatory Review Committee.
"§ 143B‑472.99.  Small Business Regulatory Review Committee established; members; chairman; selection; removal; compensation; quorum; services.
(a)	There is established the Small Business Regulatory Committee ("Committee").  The Committee shall be located in the Department of Commerce for budgetary purposes only. The Committee shall consist of 15 members, 10 of whom shall be appointed by the Governor. In making appointments, the Governor shall ensure that members represent the geographic regions of the State and are employed by or own a small business, as defined in G.S. 150B‑21.7B.
(b)	The Governor shall designate one member of the Committee to serve as Chairman at the pleasure of the Governor.
(c)	Members shall be appointed for a term of four years, except that one-third of the initial members appointed by the Governor shall be appointed to serve for a term of two years. Members shall serve until their successors are appointed and qualify. Any appointment to fill a vacancy on the Committee created by the resignation, dismissal, death, or disability of a member shall be for the balance of the unexpired term. A member shall not be appointed for more than two consecutive terms.
(d)	The Governor shall have the power to remove any member of the Committee from office in accordance with the provisions of G.S. 143B‑16 of the Executive Organization Act of 1973.
(e)	Members of the Committee shall receive per diem and necessary travel and subsistence expenses in accordance with the provisions of G.S. 138‑5.
(f)	A majority of the Committee shall constitute a quorum for the transaction of business.
(g)	The Secretary of Commerce shall provide clerical and other services required for the Committee to carry out its duties.
(h)	The Committee shall meet at least semiannually, or more often if necessary as determined by the Chair.
"§ 143B‑472.100.  Duties of the Small Business Regulatory Committee.
The duties of the Small Business Regulatory Committee are as follows:
(1)	Provide State agencies with input regarding proposed permanent rules which may have an adverse economic impact, as defined in G.S. 150B‑21.7B, upon small business and for which notice has been published in the North Carolina Register in accordance with G.S. 150B‑21.2. The Committee shall provide its comment and recommendations to the State agency within 30 days of receipt of the proposed permanent rule and impact statement from the State agency pursuant to G.S. 150B‑21.7E.
(2)	Review any permanent rule proposed by a State agency for which the agency has notified the Committee that the proposed rule has an adverse economic impact upon small business and make recommendations to the agency and the General Assembly regarding the need for further agency or legislative action."
SECTION 3.  G.S. 150B‑21.9 reads as rewritten:
"§ 150B‑21.9.  Standards and timetable for review by Commission.
(a)	Standards. – The Commission must determine whether a rule meets all of the following criteria:
(1)	It is within the authority delegated to the agency by the General Assembly.
(2)	It is clear and unambiguous.
(3)	It is reasonably necessary to fulfill a duty delegated to the agency by the General Assembly, when considered in light of the cumulative effect of all rules adopted by the agency related to the specific purpose for which the rule is proposed and the legislative intent of the General Assembly in delegating the duty.
The Commission may determine if a rule submitted to it was adopted in accordance with Part 2 and Part 2A of this Article. The Commission may ask the Office of State Budget and Management to determine if a rule has a substantial economic impact and is therefore required to have a fiscal note. The Commission must ask the Office of State Budget and Management to make this determination if a fiscal note was not prepared for a rule and the Commission receives a written request for a determination of whether the rule has a substantial economic impact.
The Commission must notify the agency that adopted the rule if it determines that a rule was not adopted in accordance with Part 2 or Part 2A of this Article and must return the rule to the agency. Entry of a rule in the North Carolina Administrative Code after review by the Commission is conclusive evidence that the rule was adopted in accordance with Part 2 and Part 2A of this Article.
 (b)	Timetable. – The Commission must review a rule submitted to it on or before the twentieth of a month by the last day of the next month. The Commission must review a rule submitted to it after the twentieth of a month by the last day of the second subsequent month."
SECTION 3.  The Department of Commerce shall use funds appropriated to it for the support of the Small Business Regulatory Committee established under this act.
SECTION 4.  This act becomes effective October 1, 2005, and applies to proposed permanent rules the text of which is published in the North Carolina Register on and after that date.