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Small Business Impact Statement Overview and Guidelines

Overview

Pursuant to M.G.L. c. 30A, §§ 2 & 3, as amended by Chapter 240 of the Acts of 2010, prior to the adoption, amendment, or repeal of any regulation, an agency must file with the secretary of state’s office a public notice of the proposed action and include a small business impact statement.  In the statement, the agency must consider the impact the proposed action will or will not have on small businesses in Massachusetts.  The statement must include, but not be limited to, the following:
(1) an estimate of the number of small businesses subject to the proposed regulation;
(2) projected reporting, recordkeeping and other administrative costs required for compliance with the proposed regulation;
(3) the appropriateness of performance standards versus design standards;
(4) an identification of regulations of the promulgating agency, or of another agency or department of the Commonwealth, which may duplicate or conflict with the proposed regulation; and
(5) an analysis of whether the proposed regulation is likely to deter or encourage the formation of new businesses in the Commonwealth.

After the agency has afforded the public an opportunity to present data, views, or arguments related to the small business impact statement, and prior to adopting the proposed regulation, M.G.L. c. 30A, § 5 requires the agency to file an amended small business impact statement with the secretary of state’s office.  In the amended statement, the agency must consider whether any of the following methods of reducing the impact of the proposed regulation would hinder achievement of the purpose of the proposed regulation:
(1) establishing less stringent compliance or reporting requirements for small businesses;
(2) establishing less stringent schedules or deadlines for compliance or reporting requirements for small businesses;
(3) consolidating or simplifying compliance or reporting requirements for small businesses;
(4) establishing performance standards for small businesses to replace design or operational standards required in the proposed regulation;
(5) an analysis of whether the proposed regulation is likely to deter or encourage the formation of new businesses in the Commonwealth; and
(6) minimizing adverse impacts on small businesses by using alternative regulatory methods.
A “small business” is defined by M.G.L. c. 30A, § 1 as a business entity or agriculture operation, including its affiliates that: (i) is independently owned and operated; (ii) has a principal place of business in the Commonwealth; and (iii) would be defined as a “small business” under applicable federal law, as established in the United States Code and promulgated from time to time by the United States Small Business Administration.
A Snapshot of Small Businesses in Massachusetts
Small businesses in Massachusetts account for a significant share of the state’s economic production and hiring.  According to the Small Business Administration, as of 2008 there were 594,487 small businesses in Massachusetts.  Of these, 138,846 were employers, accounting for 47.8% of private-sector jobs in the state.   Given the important role small businesses play in the Massachusetts economy, it is critical that the effects a regulation has on small businesses be justified and mitigated to the greatest extent possible.

Guidance for Determining How Many Small Businesses will be Impacted by the Proposed Regulation

The U.S. Small Business Administration (SBA) defines small businesses according to size standards which are matched to the North American Industry Classification Systems (NAICS).  The SBA table of small business size standards can be found at the following URL:  http://www.sba.gov/content/table-small-business-size-standards. The SBA defines a small business differently depending on the industrial classification using either employee number or annual revenue. Because staff will most likely not have access to annual revenue data, small businesses should be considered to have an employee size of NO MORE THAN:

  • 100 for Wholesale Trade (Sector 42);
  • 200 for Retail Trade (Sector 44-45); and
  • 500 for all other sectors
     

Step 1:  Identify Business Sectors to be Impacted:  Staff developing the regulation should generate a list of the business sectors (using the 6-digit NAICS codes) which their program thinks will be impacted by the regulation.  
       For the most current list of NAICS codes with definitions:  http://www.census.gov/eos/www/naics/2007NAICS/2007_Definition_File.pdf

Step 2:  Determine the Number of Small Businesses in Each Sector:  Once there is a list of 6-digit NAICS codes that are expected to be impacted by the regulation, determine the number of small businesses in Massachusetts with those NAICS codes by going to the SBA’s online searchable database of self-certified small businesses: http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm\

Once at the SBA “Dynamic Small Business Search” page:
        i) In the first section (“Location of Firm”), scroll down to highlight Massachusetts. (Leave all other selections [congressional district, county, etc.] blank.)
        ii) Leave the “Government Certifications” selections as “Not Required” (this should be the default setting).
        iii) Leave the “Ownership and Self-Certifications” selections blank.
        iv) In “Specific Nature of Business,” enter the 6-digit NAICS code(s) from step one above.
        v) Leave the next four sections blank (General Nature of Business; Profile Last Updated; Maximum Acceptable Bonding Levels; and Quality Assurance Standards).
        vi) In the “Size” section, select “No More Than” and enter 500 employees (leave “Annual Revenue” blank).
        vii) Do not make any entries under “Capabilities” or “Searching for a Specific Profile.”
        viii) Under “Search Results Display Options” select the number of results you want to be shown (e.g. 500), and leave the columns to be displayed and tabular format at the default setting.
        ix) At the bottom of the screen, click on “Search Using These Criteria.”
        x) The number of firms displayed in your results table is the number of small businesses to be impacted by this regulation for the NAICS codes selected.

Note:  In some cases, staff will already have a list of businesses in MA that are projected to be impacted because the industry is currently regulated by an existing regulatory program and the information is collected in an existing database. Staff should determine whether this method will yield a more accurate list of small businesses to be impacted as opposed to searching the SBA database by NAICS code.