OMB Supporting Stmt Part A

U.S. Department of Commerce

U.S. Census Bureau

OMB Information Collection Request

Annual Business Survey

OMB Control Number 0607-1004

Supporting Statement Part A. – Justification

Executive Summary of Changes between 2024 ABS and 2025 ABS

• Reduced sample size from 338,000 employer businesses and nonprofit organizations to 230,000- reducing the size of our sample will reduce respondent burden and additional changes to mailing strategy will result in savings of approximately $1.1 million in mailing costs.

• Sampling method changes- reduces respondent burden by decreasing the chances of respondent being selected into the survey year after year. Further, mail out strategy changes to remove chronic nonresponders increases cost savings.

• Removal of Telephone Follow-Up to reduce the type of contacts we have with respondents and increase cost savings.

• Streamlined content- The survey was reduced from 9 modules to 6 modules. Content removed includes questions on work from home, sexual orientation, gender identity, business collaboration with other entities like universities, and management practices.

• Implementation of our reduced content plan and reduced sample saves approximately $8,656,035 for the cost to respondents compared to the estimated cost to respondents of the 2024 ABS.

1. Necessity of Information Collection

In an effort to improve the measurement of business dynamics in the United States, the Census Bureau is conducting the 2025 Annual Business Survey (ABS), covering reference year 2024. The ABS combines Census Bureau firm-level collections to reduce respondent burden, increase data quality, reduce operational costs, and operate more efficiently. The ABS measures research and development for microbusinesses, new business topics such as innovation and technology, as well as other business characteristics. Further, the ABS provides information on selected economic and demographic characteristics for businesses and business owners by sex, ethnicity, race, and veteran status. The 2025 ABS is co-sponsored by the National Center for Science and Engineering Statistics (NCSES) within the National Science Foundation (NSF) and conducted by the Census Bureau. Title 13, United States Code, Sections 8(b), 131, and 182; Title 42, United States Code, Section 1861-76 (National Science Foundation Act of 1950, as amended); and Section 505 within the America COMPETES Reauthorization Act of 2010 authorize this collection. Sections 224 and 225 of Title 13, United States Code, require a response from sampled firms (see Attachment E).

Estimates from the Research and Development section of the ABS are used as a part of the calculations for investment in quarterly GDP.

The ABS includes all nonfarm employer businesses filing Internal Revenue Service (IRS) tax forms as individual proprietorships, partnerships, or any other type of corporation, with receipts of $1,000 or more. While the 2023 ABS sampled approximately 850,000 employer businesses to produce detailed statistics by owner demographics, last survey year 2024 ABS (reference year 2023), the sample was reduced to approximately 330,000 employer businesses and 8,000 nonprofits to reduce the burden on the respondents. For the 2025 ABS, we further reduced the sample to 222,000 employer businesses and 8,000 nonprofits. The reduced sample size will yield summary-level estimates by owner characteristics at the NAICS (North American Industry Classification System) sector level, U.S., state, metropolitan statistical area (MSA), and county levels. The Census Bureau uses administrative data to estimate the probability that a firm belongs in each owner characteristic category. The universe is then stratified by employment size, owner characteristic probability, and NAICS, with additional minor adjustments made to reduce the chance of respondents being selected into the sample every year thereby reducing respondent burden especially for smaller businesses. The sample is stratified by state, industry, and owner characteristics. The Census Bureau selects some companies with certainty based on volume of sales, payroll, and number of paid employees or NAICS. All certainty cases are sure to be selected and represent only themselves.

The 2025 ABS (reference year 2024) will also sample approximately 8,000 nonprofit organizations to collect their research activities. Of note, nonprofit organizations will only see questions relating to research activities and will not be asked any questions relating to owner demographics.

The ABS is designed to be adaptive. New content each survey year can be incorporated based on topics of relevance. Each year, new questions will be submitted to the Office of Management and Budget (OMB) for approval.

Employer businesses will be asked questions about the sex, ethnicity, race, and veteran status for up to four persons owning the majority of rights, equity, or interest in the business (Section B of the questionnaire). Organizations sampled as nonprofits and respondents with 1-9 employees will be asked about research and development (R&D) activities, R&D costs, and R&D capital expenditures (Sections D and E of the questionnaire). Further, employer businesses sampled will be asked about the following topics: Goods, Services, and Business Processes (Section C of the questionnaire). These sections are also known as modules. The 2025 ABS will not contain any new or variable content. We do plan to add variable content on Management Practices next year to the 2026 ABS (reference year 2025). The ABS questionnaire is included as Attachment C.

The ABS is collected electronically using a web-based questionnaire. Respondents selected for the survey receive an initial letter informing them of their requirement to complete the survey as well as instructions on accessing the survey (see Attachment A). The 2025 ABS initial mailing is scheduled for July 2025. Responses will be due approximately 30 days from initial mailing. Respondents will also receive a due date reminder approximately one week before responses are due. The Census Bureau plans to conduct two follow-up mailings and an optional third follow-up if deemed necessary based on quality of response data at that time. The Census Bureau may also plan to conduct an email follow-up to select nonrespondents reminding them to submit their report in the electronic instrument (see Attachment B). Closeout of mail operations is scheduled for December 2025 but may be extended to allow ample time to receive returned forms if necessary. Response data will be processed as they are received. Upon the close of the collection period, data processing will continue, and records will be edited, reviewed, tabulated, and disseminated.

2. Needs and Uses

Statistics from the ABS will be used by government program officials, industry organization leaders, economic and social analysts, business entrepreneurs, and domestic and foreign researchers in business, government and academia. Estimates produced on R&D and innovation may be used to compare R&D costs across industries, determine where R&D activity is conducted geographically, and identify the types of businesses with R&D; to contribute to the Bureau of Economic Analysis (BEA) system of national accounts; to increase investments in research and development, strengthen education, and encourage entrepreneurship; and to compare business innovation in the United States to other countries. Results of the research activities data collected from nonprofit organizations will be used to report updated, valid, and reliable estimates of U.S. nonprofit R&D in National Patterns of R&D Resources and BEA’s system of national accounts.

The data collected by ABS will also be incorporated into the National Science Board’s biennial report, Science and Engineering Indicators (SEI). The R&D data from the nonprofit module will be reported in periodic publications and for comparisons of R&D efforts. NCSES also anticipates professional associations will use data from the nonprofit module.

Additional examples of data use include:

• The National Women’s Business Council to assess the state of women’s business ownership for policymakers, researchers, and the public at large.

• Consultants and researchers to analyze long-term economic and demographic shifts, and differences in ownership and performance among geographic areas.

• Individual business owners to analyze their operations in comparison to similar firms, compute their market share, and assess their growth and future prospects.

Information quality is an integral part of the predissemination review of information disseminated by the Census Bureau (fully described in the Census Bureau’s Information Quality Guidelines) at http://www.census.gov/about/policies/quality/guidelines.html. Data quality is also integral to information collections conducted by the Census Bureau and is incorporated into the clearance process required by the Paperwork Reduction Act.

3. Use of Information Technology

The ABS is collected electronically via a web-based reporting instrument. Respondents are provided an initial letter with log-in instructions to access the secure electronic reporting system known as the Centurion – Internet Data Collection System. The respondent navigates through the electronic reporting instrument by responding to each screen presented and selecting ‘save and continue.’ Skip patterns are coded throughout the system to ensure respondents only read and respond to questions pertaining to their specific owner and business characteristics. In addition, certain businesses will be pre-identified to skip portions of the survey to decrease respondent burden. Respondents will have access to the questionnaire prior to logging in (see Attachment C). Once a respondent has completed the online survey, a PDF copy of the responses may be printed or saved for business records. The electronic reporting instrument has built-in edits that give respondents the opportunity to verify their responses. The use of built-in edits ensures consistency among data received from respondents. The electronic reporting instrument saves respondents’ progress and allows them to return later to complete the survey. The instrument also generates an error page prior to submission that indicates if a respondent should revisit a page to make a correction.

Implementing an electronic collection instrument reduces the cost of mailing this annual survey. Additionally, electronic responses yield higher quality response data by utilizing edits built into the electronic reporting system to decrease manual edits when the data are received and processed, ultimately leading to cost savings and increased data quality.

4. Efforts to Identify Duplication

R&D data are collected on both the ABS and the Business Enterprise Research & Development (BERD) surveys, depending on the number of employees in the business. The R&D module asked on the ABS is only asked of businesses with 1-9 employees. The BERD will continue to collect R&D data from businesses with 10 or more employees.

The Census Bureau consulted with NCSES to remove duplication of innovation questions that existed on the BERD. As a result, BERD no longer includes innovation questions. Innovation questions are asked of all ABS respondents, regardless of the number of employees.

5. Minimizing Burden

The ABS uses the following methods to minimize the burden:

• The survey has been streamlined to meet minimum data requirements while producing necessary and key business data. Potential impacts to quality of the data, particularly at lower geographic and smaller industries can be expected. Some data previously released may no longer be available. Overall, the benefit of reduced burden on respondents outweighs the potential cost.

• This survey is currently researching a broader use of administrative records, direct data from company feeds, and modeling techniques to create results for smaller geographic levels and more detailed industries to further reduce respondent burden.

• Predetermining the likelihood that a business is within certain demographic groups, for example, women-owned for sampling: Several sources of information are used to stratify the universe. Administrative data from the Social Security Administration (SSA), American Community Survey, and Decennial Census are used to identify individual proprietorships that are potentially owned by women or other demographic groups; then this information is used to stratify the universe.

• Predetermining owner characteristics to reduce burden on some respondents: Businesses that were sampled for previous cycles will not be asked questions in Section B: Owner Characteristics for 2025.

• Employment-based form path: Based on the number of employees reported by the respondent in Section A of the questionnaire, businesses with 10 or more employees will not be asked questions on R&D because those businesses’ data will continue to be collected from BERD.

• Nonprofit organizations receiving an abridged version of ABS: The ABS universe is matched to publicly available datasets from the IRS. Nonprofit organizations whose ownership by sex, ethnicity, race, and veteran status cannot be determined do not receive demographic questions. Businesses identified as nonprofit organizations will only report their research activities and therefore will only receive Section E of the questionnaire.

• Nonprofit organizations excluded if in select industries: The nonprofit sample selection will exclude organizations identified as operating in the Public Administration or Education industries. Also excluded are industries that are not expected to have research activities such as Religious Organizations.

6. Consequences of Less Frequent Collection

The ABS improves the measurement of business dynamics in the United States and expands the availability of federal economic statistics in the areas of owner demographics, entrepreneurship, innovation, R&D and technology. A less frequent collection would impact government agencies’ access to information used to monitor investments in R&D for the GDP, as well as business growth and development at state and substate levels. Further, less frequent collections would create a risk in not being able to monitor and analyze the impact of business cycle trends on business ownership. Additionally, as we work to model more data, a less frequent collection may impact the modeling itself as models are built on current data.

7. Special Circumstances

As stated earlier, the ABS collects data on business owner race and ethnicity. The Office of Management and Budget has issued Statistical Policy Directive No. 15 (SPD-15) which provides standards for collecting and presenting federal data on race and ethnicity. We currently collect race and ethnicity data in the ABS in a manner that is not consistent with SPD-15 standards. The ABS has historically made the race and ethnicity questions the same as in the American Community Survey (ACS), which is also not currently in compliance with SPD-15. Part of the reason for this is because we use programs, recodes, and bridging information from the ACS for the ABS. Additionally, we use the ACS as a source of administrative records. To keep imputation methodology consistent we also follow their race and ethnicity coding. Following guidance from OMB, we will be compliant by 2027, which is within the guidelines established by OMB that all Federal information collections that collect data on race and ethnicity be compliant with SPD-15 no later than March 28, 2029. We have been actively preparing to implement SPD-15. We have collected two years’ worth of test data that used the SPD-15 guidelines and we are now reviewing and researching the changes the new categories have on our data. This research will enable to us to be sure that any race and ethnicity changes to our data are real changes, and not changes due to coding changes. This time for research and review is necessary because we must maintain our data quality standards.

8. Consultations Outside the Agency

The NCSES and Census has had extensive consultation outside of the agency in preparation for the various sections/modules included on the ABS and its predecessor surveys, including meetings with researchers, academia, data users, expert panels, cognitive interviews and debriefings. Additionally, many people and organizations have been consulted to develop the research activities at nonprofit organizations content including the National Academies of Science, Engineering, and Medicine Committee on National Statistics, experts in survey methodology and nonprofit R&D, and dozens of nonprofit organizations representatives.

NCSES and the Census Bureau consulted the following officials and agencies regarding content for the ABS:

Steve Landefeld, Director (retired)

Bureau of Economic Analysis

4600 Silver Hill Rd

Hillcrest Heights, MD 20746

Stephen Ezell, Vice President

Global Innovation Policy

Information Technology and Innovation Foundation

700 K St NW

Washington, DC 20001

Nico Thomas, Performance Analyst

National Institute of Standards and Technology

100 Bureau Drive

Gaithersburg, MD 20899

Steve Campbell, Economist

Manufacturing Research and Program Evaluation

National Institute of Standards and Technology

100 Bureau Drive

Gaithersburg, MD 20899

Kenneth Poole, Executive Director

Council for Community and Economic Research

1700 N. Moore Street

Suite 2225

Arlington, VA 22209

Brian Headd, Economist

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Patrick Delehanty, Director of Economic Research

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Ester Morales, Executive Director

National Women’s Business Council

409 Third Street, SW, 5^th Floor

Washington, DC 20416

Tene Dolphin, Executive Director

National Women’s Business Council

409 Third Street, SW, 5^th Floor

Washington, DC 20416

Brent Hedlund Meyer, Assistant Vice President and Economist

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.

Atlanta, Georgia 30309

Jonathan Willis, Vice President and Senior Economist

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.

Atlanta, Georgia 30309

Mark Edward Schweitzer, Senior Vice President

Federal Reserve Bank of Cleveland

1455 E 6th St

Cleveland, OH 44114

Veronika Penciakova, Research Economist and Assistant Adviser

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.

Atlanta, Georgia 30309

Christopher McLaren, Director of Research and Evaluation

Department of Labor

Office of Disability Employment Policy

200 Constitution Ave, NW

Washington, DC 20210

The ABS consists of a core set of questions that do not change, and a variable set of questions of topical relevance which change annually. The core questions, due to their stable nature, are cleared every three years along with 60- and 30-day notices published in the Federal Register. The core questions were last cleared in 2024. The variable topical questions are submitted to the Office of Management and Budget each year along with a 30-day notice.

The Census Bureau published a 60-day notice in the Federal Register on September 22, 2023, pp. 65363-65364, announcing its plan to conduct the 2024, 2025 and 2026 ABS. No comments were received in response to that notice.

9. Paying Respondents

The Census Bureau will not pay or offer gifts to respondents of the ABS.

10. Assurance of Confidentiality

The information collected in this survey is confidential under Title 13, United States Code, Section 9. Sections 224 and 225 of Title 13 require businesses to report. Respondents are informed in the initial letter that responses are confidential, and their responses are mandatory. This information is also available from the electronic reporting instrument as shown in Attachment D.

11. Justification for Sensitive Questions

The ABS asks questions on the sex, ethnicity, race, and veteran status of the owners. The business owner characteristics are important to understanding conditions of business success and failure, showing changes in business performance, and other indicators of the current business environment. ABS uses the race and ethnicity categories and definitions mandated by the OMB. These standards were developed by the Executive Branch and Congress. Although the ABS asks these demographic questions on the survey, the Census Bureau does not consider questions on sex, ethnicity, race or veteran status to be sensitive. Data tabulations may produce estimates on non-minority/minority-owned businesses, veteran/nonveteran- owned businesses, and male/female-owned businesses, or by other owner characteristics.

The Census Bureau collaborated with the Office of Disability Employment Policy, Department of Labor to include a question on owner disability. Data on owner disability is needed to understand the prevalence of disability among business owners across industries, firm size, and geographies. These data are important to examining key motivations for people with disabilities to become business owners. Additionally, this information will allow users to identify industries where people with disabilities may be more likely to become leaders in their organizations. Results of this information can be used to target policy development, technical assistance, and stakeholder engagement towards specific industries or organizations.

By law (Title 13 of the United States Code), all responses to the survey, including sensitive questions, are completely confidential and may be seen only by persons sworn to uphold the confidentiality of Census Bureau information. The data are used only for statistical purposes and the responses are summarized so that the confidentiality of individual respondents and their business activities is fully protected.

12. Estimate of Hour Burden

The 2025 ABS will be mailed in fiscal year 2025 to approximately 230,000 respondents. For businesses, the sample will yield summary-level estimates for businesses by owner characteristics at the NAICS sector level, U.S., state, metropolitan statistical area (MSA), and county levels. Response times will vary for selected respondents. For the 2024 ABS, the estimated average time for the 338,000 employer and nonprofit businesses to complete the survey was 105 minutes. The streamlining of content has reduced the estimated average time to complete the survey to 30 minutes.

According to the May 2023 Occupational Employment Statistics from the Bureau of Labor Statistics (BLS) website, the mean hourly wage for accountants (13-2011 Accountants & Auditors) was $43.65. The total annual cost to respondents for their time to respond for fiscal year 2025 is estimated to be $4,904,805.

Implementation of our reduced content plan and reduced sample saves approximately $8,656,035 for the cost to respondents compared to the estimated cost to respondents of the 2024 ABS.

The sample size has been revised since the 60-day notice published in the Federal Register on September 22, 2023. The notice estimated a total sample size of 308,000 organizations and businesses. Later the package was amended to 338,000 employer businesses and nonprofit organizations. We now request to reduce our sample to 230,000 to reduce burden on companies.

13. Estimate of Cost Burden

We do not expect respondents to incur any costs other than that of their time to respond. The information requested is of the type and scope normally known by respondents or carried in company records and no special hardware or accounting software or system is necessary to provide answers to this information collection. Therefore, respondents are not expected to incur any capital and start-up costs or system maintenance costs in responding. Further, purchasing of outside accounting or information collection services, if performed by the respondent, is part of usual and customary business practices and not specifically required for this information collection.

14. Cost to Federal Government

The ABS is funded jointly by the Census Bureau and NCSES within the NSF. The estimated cost to the Federal Government to conduct this survey for one reference year is $7.1 million. The Census Bureau has planned and allocated resources for the effective and efficient management of this information collection.

15. Reason for Change in Burden
    
    The burden has decreased due to fewer employer businesses sampled to reduce burden on respondents and provide summary-level statistics by demographics. Burden is also reduced due to streamlined content on survey.
    
    

16. Project Milestones

    Milestone	2025 ABS Planned Completion Date
    Content Final/Centurion Requirements Final	November 2024
    Approval Request Submitted to OMB	February 2025
    Initial Mail	July 2025
    1st Follow-up	September 2025
    2nd Follow-up/Email reminder	October 2025
    [Possible] 3rd Follow-Up	November 2025
    Closeout	December 2025
    Micro Data Review Complete	February 2026
    Production Processing	April 2026
    Macro Data Review Complete	July 2026
    Dissemination Processing	August 2026
    Data Tables Published	September 2026

17. Request Not to Display Expiration Date

The assigned expiration date will be included on the collection instrument.

18. Exceptions to the Certification

There are no exceptions to the certification.

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