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Lawmakers consider ‘regulatory sandbox’ for businesses

by Cameron Gerber | March 9, 2022 at 4:00 a.m.

With innovation and technology coming to the forefront of the market, emerging businesses find themselves struggling against laws and regulations -- though legislation working its way through the Missouri Senate seeks to provide temporary exceptions.

The Regulatory Sandbox Act would create a Regulatory Relief Office with the Department of Economic Development tasked with identifying state laws and regulations that could be waived for certain businesses for a two-year period. Businesses could apply with the office for a series of waivers they would like to benefit from, which would be approved or denied by the office.

The office would be advised and could be countered by an advisory committee made up of executive and legislative appointees, lawmakers, and the heads of the Commerce and Insurance and Economic Development departments.

Waived rules would create an open "sandbox" for businesses to operate in without typical regulatory burdens to see how they might fare.

Sandboxes are becoming more and more commonplace. Thus far, nearly a dozen states have established sandboxes.

Kentucky, the only neighboring state to have one on the books, extends the opportunity to insurance companies alone.

If the bill were to pass with the current proposal intact, Missouri would become the second state to create an all-encompassing sandbox program after Utah, which enacted one last year.

The bill, sponsored by Sen. Denny Hoskins, R-Warrensburg, was before the Senate Small Business and Industry Committee on Tuesday morning.

"Approved applicants spend about 24 months in the regulatory sandbox with the ability to create and distribute products and services for residents," Hoskins said. "This will help Missouri welcome innovation and protect consumers. No law or regulation could be waived if it would prevent a consumer from seeking restitution if they are harmed by a product or service."

Several witnesses backed the proposal before the committee, including witnesses on behalf of advocacy group Cicero Action, the Greater Kansas City Chamber of Commerce and the Missouri Chamber of Commerce and Industry.

"We support removing barriers to market entry for businesses, especially as this bill would help small businesses and entrepreneurs," Kara Corches, vice president of governmental affairs for the Missouri Chamber, told lawmakers. "Further, we know that Missouri is an emerging tech and innovation hub, so we think this bill uniquely positions Missouri to be a real hub for innovation in the Midwest."

Michael Berg, political director for the Missouri Chapter of the Sierra Club, was the sole witness to speak in opposition, pointing to several potential issues with the bill. Berg said the language could create an unfair advantage for businesses whose applications were approved, eliminate transparency and public involvement for the new agency and potentially allow businesses to avoid regulations designed to preserve the environment.

"We are definitely sympathetic with the goal of encouraging innovation, but we believe this could undermine important environmental protections and could encourage environmentally damaging projects," Berg said. "This is setting up a new agency which gives license to individual businesses to not have to obey laws that other businesses do, which could undermine impartial and equal application of the law."

Berg implored lawmakers to remain cautious when approving these exemptions.

Sen. Doug Beck, D-St. Louis, questioned a portion of the bill that included fishing, hunting and trapping in its definition of "production."

"That's a pretty wide thing that would range all across the regulatory laws that we have now," Beck said. "I don't know that this goes to the intent of the bill."

A parallel effort in the House made it through the committee process earlier this month and has been approved to go to the floor by a rules committee.

The committee considered a handful of other business-related bills Tuesday, including one that would prohibit local governments from banning home-based business and business- related residential structural alterations, in addition to limitations on businesses conducted out of residential homes. This would not extend to regulations from homeowners associations in its current form.

The bill also included a provision that would remove requirements for children under the age of 18 to obtain work certificates in order to gain employment, instead making permits a permissive option that can be requested by a parent or employer.

The bill, sponsored by Sen. Andrew Koenig, R-Manchester, received support from the Opportunity Solutions Project via lobbyist James Harris.

Harris said the elimination of certification requirements would allow younger Missourians to help fill vacant positions growing throughout the state, while the pandemic led to a rise in home-based business in addition to remote office work.

He said Jefferson City allows businesses in 25 percent of the home or 400 square feet, whichever is less, can be used for a home-based business. He said local ordinances allowed daycare, teaching and tutoring businesses to take clients in the home, while other businesses were not authorized to.

"COVID changed a lot of things," Harris said. "I think as we see commerce changing, so must state laws to help address this change."

The committee did not take executive action on either bill Tuesday.

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