The "Prove It Act of 2025" enhances regulatory analysis and transparency to better account for the impact of regulations on small businesses, ensuring agencies consider indirect costs, publish clear guidance, and face consequences for failing to review rules.
Joni Ernst
Senator
IA
The "Prove It Act of 2025" amends Title 5 of the United States Code to require agencies to consider potential indirect costs a proposed rule may impose on small businesses, and allows small businesses to petition the Small Business Administration's Chief Counsel for Advocacy to review an agency's certification that a proposed rule won't significantly impact a substantial number of small entities. Additionally, agency heads must publish guidance and relevant documents on regulations.gov or a similar website for any rule likely to significantly impact a substantial number of small entities, including updated guidance that interprets the rule and agencies must consider indirect costs during the 10-year review period. No additional funds will be allocated to implement this Act or its changes.
Prove It Act of 2025: New Rules for Rule-Making Could Shift Regulatory Landscape for Small Businesses
The "Prove It Act of 2025" aims to reshape how federal agencies create regulations that affect small businesses. This bill introduces several key changes to the regulatory process, focusing on indirect costs, Small Business Administration (SBA) oversight, and mandatory rule reviews.
Digging Deeper into the Changes
The core of the Prove It Act is about forcing agencies to think beyond the obvious. When making new rules, agencies will now have to consider indirect costs to small businesses. This includes impacts on businesses that aren't directly regulated but might still feel the effects – think a small farm that sells to a larger, regulated food processor, or a local IT firm that services businesses now facing new compliance rules. (SEC. 2)
Beyond just thinking about it, the bill gives small businesses a new tool: the power to petition the SBA's Chief Counsel for Advocacy. If a business believes an agency is downplaying a rule's impact, they can ask the Chief Counsel to step in and review the agency's assessment. The petition needs to lay out the specific problems, backed by data, and suggest solutions (SEC. 2). If the Chief Counsel agrees there's a problem, the agency might have to go back and do a more thorough analysis of the rule's impact on small businesses.
Transparency and Review
Another key element is increased transparency. Agencies will be required to publish guidance on any rule that significantly affects small businesses on regulations.gov (or a similar site) and allow for public comments (SEC. 3). This is meant to give small businesses a clearer understanding of new regulations and a chance to provide feedback.
The bill also strengthens the existing requirement for agencies to review their rules every 10 years. Now, those reviews must include an assessment of indirect costs, just like the initial rule-making process (SEC. 4). And if an agency misses the 10-year deadline? The rule could become ineffective, forcing the agency to go through a reinstatement process, including public comment, to get it back on the books.
Challenges and the Bigger Picture
While the bill aims to protect small businesses, there are some potential hitches. The legislation explicitly states that no new money will be allocated to implement these changes (SEC. 5). This could strain existing resources at agencies and the SBA, potentially slowing down the rule-making process.
It’s also worth noting how the 'Prove It Act' fits in with existing laws. It amends Title 5 of the United States Code, which deals with government organization and employees, specifically sections related to regulatory flexibility analysis. The changes could lead to more challenges for agencies and potentially more delays in getting new regulations finalized. The requirement to consider a broad range of indirect costs, coupled with the petition process, could make agencies more cautious, but also potentially create more red tape.
Ultimately, the Prove It Act of 2025 represents a significant shift in how regulations are developed and reviewed, with potentially far-reaching consequences for small businesses and the agencies that regulate them. The practical impact will depend on how agencies interpret "indirect costs," how actively small businesses use the petition process, and how the SBA handles its expanded oversight role.