From the August 1998 issue of Entrepreneur

It could happen to any small-business owner: forgetting to submit a crucial piece of federal paperwork. Whether it's a form permitting the IRS to automatically withdraw taxes from an employee's checking account, COBRA insurance information or another federal form, an error of omission can mean hefty federal fines.

That could change, though, if the Small Business Paperwork Reduction Act passes. The bill (S.1867) would take small businesses off the hook for first-time federal paperwork violations if they send in the missing paperwork up to six months after they're found out of compliance. The bill, which at press time was headed for the Senate Committee on Governmental Affairs, is sponsored by Sen. Susan Collins (R-ME); the House version (H.R. 3310), sponsored by Rep. David McIntosh (R-IN), passed in March.

To qualify for the six months of breathing room, a company must meet the SBA definition of small, which is generally a company with fewer than 500 employees or less than $5 million in annual revenue. The six-month reprieve would only apply to one violation per company, not one per federal statute. And it wouldn't apply if the violation relates to a tax matter, impedes the detection of criminal activity, or causes or poses a threat of serious harm to the public.

The exemption from first-time civil penalties will undoubtedly be an issue when the Senate takes up the bill. But there are several other noncontroversial provisions. For example, the White House Office of Management and Budget would have to publish an annual list of paperwork rules applicable to small business, and every federal agency would have to establish a liaison to discuss with entrepreneurs that agency's information requirements.

The bill's fate in the Senate may hinge on the contents of the federal agencies' reports, which will be reviewed by the Senate Committee on Small Business. The reports detail "concessionary" fine policies for small businesses that were developed per a provision in the 1996 Small Business Regulatory Enforcement Fairness Act. Some of those policies may touch on leeway for paperwork violations.

Staffers who have seen the reports from the Environmental Protection Agency and the Occupational Safety and Health Administration say they are woefully lacking in detail. What may be worse, according to Committee on Small Business chairman Sen. Christopher S. Bond (R-MO), is that 23 departments and agencies-including the SBA and the IRS-have ignored the requirement to submit reports. Says Bond, "This makes me wonder whether these agencies are also ignoring the plight of small businesses earnestly looking for help in understanding and complying with complex federal regulations."


Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

Heard On The Street

By Debra Phillips

  • Pillow talk: It's hardly a sleepy market for pajamas now that the TV series "Ally McBeal" has showcased its title character wearing-and dancing in-whimsical sheep-and-cloud-patterned PJs. The sleepwear-a product of the New York City-based label NICK & NORA Sleepwear-is rousing mainstream America's interest in nighttime duds. "Sleepwear is a respected category now," says Steven M. Abrams, who co-owns NICK & NORA with Linda Rae Tepper (both pictured at left). "It's nice we're getting some recognition."
  • Big Blue is getting bigger: Microsoft may be grabbing headlines, but IBM isn't exactly resting on its microchips. With an eye toward plugging into a greater share of the database market (and, not incidentally, overtaking current market-share leader Oracle), IBM reports it will increase its team of database-software salespeople by 1,000 within the next two years.
  • Not just kidding around: Children's apparel and accessories retailer Gymboree Corp. is making a play for pre-teens with a new chain of clothing stores. Although details were sketchy at press time-even the name of the chain had yet to be announced-we're interested to see if pre-teens cotton to this newest fashion outlet.