The Regulatory Freedom Act of 2026 (RFA) enhances notice requirements for proposed rules, creates a new fiscal impact statement framework, and raises the approval threshold for rules with significant cost consequences – requiring full Tennessee General Assembly approval – rather than just committee sign-off. The new law will give Tennessee's industries, businesses, and even licensed professionals earlier notice as well as a more direct role in the creation of any expensive new regulations. However, the RFA also raises unresolved procedural questions, particularly around how the General Assembly will structure its approval of high-cost rules and how emergency rules interact with the legislature's session calendar. Entities should prepare to capitalize on this new leverage point.
Key Provisions
Application
The RFA's provisions apply only to rules that must be approved by the Tennessee General Assembly. As a result, they exclude rules adopted due to federal regulation, rules related to changes in professional or occupational licensure fees, and temporary rules adopted in response to a new or amended state law while the agency develops a permanent rule.
Expanded Notice and Public Participation
Under prior law, state agencies were only required to take whatever steps they "deemed necessary" to inform interested parties of a proposed rule. The RFA significantly raises that bar. Agencies must now publish the text of any proposed rule on the agency's homepage during the 45 days preceding a public hearing. In addition, agencies must make a "good faith effort" to notify trade associations and organizations known to the state that may be impacted by the rule. Notification must be given by electronic mail at least 45 days before the hearing – and must include a copy of the proposed rule along with an invitation to provide comments for incorporation into the agency's fiscal impact statement.
Fiscal Impact Statements
The Act creates an entirely new framework requiring agencies to prepare a fiscal impact statement, which is defined as an estimate of the actual cost of compliance a proposed or amended rule will impose on the businesses and industries. The statement must include proof that the agency reached out to potentially impacted entities: specifically, a record of the name of each individual, association, or organization invited to provide feedback. In the case of emergency rules, if an agency doesn't file a fiscal impact statement with the Secretary of State within 45 days of emergency rules going into effect, the emergency rules expire. Finally, each agency must also compile an annual report aggregating fiscal impact statements for all rules affecting industries, businesses, and licensed professionals to illustrate the cumulative fiscal burden of the agency's rulemaking activity.
A Heightened Approval for High-Cost Rules
Under existing law, rules requiring General Assembly approval are reviewed by the government operations committee, and the proposed rule is effective upon committee approval. The RFA adds a critical new layer: if an agency's fiscal impact statement indicates a negative impact exceeding $1 million over a five-year period (or over one year for an emergency rule), the rule only becomes effective after approval by a majority of both the full House of Representatives and the full Senate.
Two Unresolved Questions
Legislative Approval Mechanics. While the RFA represents a desire for transparency and industry engagement, it raises at least two procedural questions. The Act requires full General Assembly approval for rules exceeding $1 million over five years, but it is unclear how that approval must be structured. Specifically, there is an open question as to whether each qualifying rule requires its own standalone bill or whether multiple rules can be bundled as individual amendments within an omnibus measure. This distinction carries practical significance: if each rule demands a separate bill, it could strain the General Assembly's member bill limits and create logistical bottlenecks for agencies seeking timely approval. Ultimately, we expect that the Clerks will provide guidance to legislative members and committee staff.
Emergency Rules and Special Sessions. Under the RFA, an emergency rule that is expected to have a negative fiscal impact of more than $1 million in a year may be short-lived unless it receives legislative approval. Specifically, if an emergency rule is approved in committee and the General Assembly convenes for a special legislative session and adjourns the special session before approving the rule, the emergency rule could expire upon adjournment of that special session unless both chambers vote to preserve it.
This creates a practical timing concern. A special session may be called for reasons entirely unrelated to the emergency rule. If the General Assembly adjourns the special session without taking action on the rule, it could automatically expire. The result could be a regulatory vacuum created by accident shortly after an emergency rule had been deemed necessary by the committee
For now, industries, businesses, and licensed professionals should be aware that these questions exist and may affect how the RFA operates in practice once it takes effect on January 1, 2027.
What Business Entities Should Do?
The RFA does not take effect until January 1, 2027, but the RFA's notice-and-comment framework rewards early engagement. Entities that are known to the state and positioned to respond to active agency outreach will have the greatest influence over fiscal impact statements and, by extension, the level of legislative scrutiny a proposed rule receives.
Consider the following:
- Build internal capacity to identify and respond to agency outreach and provide fiscal impact data within the 45 day comment window.
- Monitor agency homepages and the administrative register for proposed rules affecting your industry.
- Engage government affairs and public policy professionals who can help navigate the rulemaking process, coordinate during comment periods, and advocate at the legislative level when high-impact rules require full approval by the Tennessee General Assembly.
The RFA creates new leverage points for industries, businesses, and licensed professionals at every stage of the rulemaking process. Entities that invest in the monitoring infrastructure to engage early and substantively will be best positioned to shape outcomes.
If you have any questions or need any additional information about the Regulatory Freedom Act of 2026, please contact Jacob D. Baggett.