A Voice for Entrepreneurs Inside the Government

Small businesses were spared nearly $12 billion in regulatory compliance costs thanks to the Small Business Administration’s Office of Advocacy’s role in the rule-making process last year.

That’s according to the office’s annual report on what it does to make sure that federal agencies consider how their regulations affect small businesses. The office’s job is to enforce the Regulatory Flexibility Act (RFA), which requires agencies to analyze the effects of their rules on small businesses and consider less-burdensome alternatives.

That job became easier when Winslow Sargeant was finally confirmed as the office’s chief counsel in November, after serving in that role for more than a year.

“We have a much stronger voice at the table,” Sargeant said, because his confirmation shows that Congress, as well as President Barack Obama, fully supports his work.

Last year, the office reviewed hundreds of regulations, submitted more than 50 formal comment letters to agencies, hosted 18 roundtables where small businesses could provide feedback on specific proposals, and trained nearly 200 agency employees on RFA compliance.

But a lot of the office’s work is done behind the scenes, making sure that the concerns of small businesses and entrepreneurs are heard by agencies when issues come up.

For example, the office played a role in the Internal Revenue Service’s decision last week to drop plans to impose yet-another paperwork burden on businesses. Legislation enacted in 2008 requires third-party payment entities to report how much every merchant is paid each year from credit cards, debit cards or services like PayPal. For the 2012 tax year, the IRS planned to require businesses to reconcile their records with these third-party reports when they file their tax returns.

That would have posed a huge burden on businesses, because the amount recorded on credit card or debit card purchases often doesn’t equal the revenue a business receives from the transaction. For example, customers often get cash back on debit card purchases or receive cash when they return merchandise purchased with credit cards.

IRS listened to small businesses in this case, and decided this reconciliation requirement was too burdensome.

Sargeant thinks government agencies are becoming more conscientious about considering the impact of their rules on entrepreneurship.

"As a former entrepreneur, I can attest that small firms are in a better position to grow, innovate and create jobs when regulations are less burdensome," Sargeant said. "Federal agencies that work with Advocacy to use the RFA effectively write rules that are better for small entities and the economy while still meeting the statutory goals the regulations were designed to carry out."

Sargeant co-founded Aanetcom, a semiconductor integrated circuit design company in Allentown, Pa., and was managing director of a venture capital firm, Venture Investors in Madison, Wis., before joining the Office of Advocacy.

“I come from the startup community,” he said.

So Sargeant is particularly concerned about the impediments that ill-considered regulation pose on entrepreneurs.

His office will conduct research this year on ways to help early-stage companies get the capital they need to continue growing. It held a conference in September on the debt and equity capital needs of entrepreneurs, and has held forums on crowdfunding -- allowing startups to use the Internet to solicit small equity investments from large numbers of people.

The House has passed legislation to make it easier for businesses to raise capital this way, and the Securities and Exchange Commission is considering changing its regulations to make it easier for startups to raise money.

“We’re pleased that the SEC is starting to look at ways that we can fill the capital gap,” Sargeant said.

The Office of Advocacy will help the SEC craft rules that address potential problems -- fraud, in the case of crowdfunding -- without posing excessive burdens on businesses.

“We just want to make sure it works well,” Sargeant said.

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Kent Hoover is the Washington bureau chief for bizjournals.