Sen. James DeMint, R-S.C., has promised to introduce an amendment to the Senate’s proposed regulatory reform bill that would exempt non-accelerated filers from compliance with Section 404(b) of the Sarbanes-Oxley Act.

A Section 404(b) exemption for non-accelerated filers was notably absent from the reform bill unveiled by Christopher Dodd, chairman of the Senate Banking Committee, on Monday. Such an exemption does exist in the regulatory reform bill passed by the House in December, but unless similar language gets shoe-horned into the Senate bill, non-accelerated filers will indeed face compliance with Section 404(b) starting June 15.

Dodd plans to start debate on the bill at a hearing early next week; proposed amendments must be submitted by the end of Friday. Precisely what language DeMint will include in his bill is unclear, but he has promised that it will be at least as vigorous as the language in the House bill—which exempts public companies with market capitalizations below $75 million from Section 404(b), the part of SOX that requires companies to get an external auditor’s attestation to the strength of their internal control over financial reporting.

DeMint’s exact words were “I think we can make it broader,” which is intriguing. Several anti-SOX lawmakers on the House Financial Services Committee originally proposed exempting companies with market caps as large as $700 million, an actual rollback of SOX compliance since those larger filers had already been complying with Section 404(b) for several years. The good governance crowd raised hell over that, which led to the $75 million threshold, since non-accelerated filers haven’t yet begun compliance anyway.

Several questions here. Conspiracy theorists believe the House exemption came as part of a larger bargain: the Obama Administration threw its support behind the Section 404(b) exemption, in exchange for support of another provision to give shareholders access to the proxy statement. The Senate bill also has language allowing proxy access—so is the DeMint amendment part of a similar deal?

In previous years, I’d have guessed yes: Each side introduces amendments the other dislikes, and a bill gets passed that both parties somewhat like; that’s politics. But Senate Republicans have shown a clear pattern since the Obama Administration took office: They demand all sorts of amendments to whatever major legislation is on the floor; Democrats include those amendments in the bill; and then Republicans vote against the larger bill anyway. We saw that with the tax cuts they demanded for the stimulus bill passed in 2009, and we’re seeing it with various reforms to the healthcare bill now.

Politically, that strategy makes good sense for Republicans. They look good to their constituents, they water down the bill in question so much that the Democrats’ constituents hate it, and that clears the path for the Republicans to say, “Everyone hates this bill, so why don’t we start over from scratch?” That is exactly how the Republicans stymied healthcare legislation.

So are Dodd and the Obama Administration going to fall for the same sucker punch again? Dodd did just get sand-bagged by another Republican senator, Robert Corker, who promised support and then bailed out at the last minute; I’m sure he’s annoyed at that. But if the healthcare bill somehow unravels in the next week or two, Democrats will be desperate to show that yes, they can actually get things done.

It’s a mess. But then, that’s Congress.

The other day I pondered whether the improbable ascendancy of Sen. Scott Brown, R-Mass., might delay or otherwise thwart Democrats’ plans to overhaul financial regulation. Let’s not forget one other niche of corporate compliance where Brown’s arrival as the 41st Republican senator might have serious consequences.

He might allow the dreaded Section 404(b) of Sarbanes-Oxley to take effect on small filers, at long last.

Think about it: Last fall the Securities and Exchange Commission gave non-accelerated filers a final warning that compliance with Section 404(b), which requires public companies to get an outside auditor’s review of internal controls, must start with annual reports filed for fiscal years ending on or after June 15, 2010, period. The House of Representatives then passed its massive regulatory overhaul bill in December, specifically exempting non-accelerated filers from Section 404(b) permanently. For that exemption to become law, however, it must be included in regulatory overhaul legislation approved by the Senate—and Brown’s arrival has just made passage of Senate legislation much less likely.

The Senate’s reform legislation nominally exists as a draft bill circulated by Christopher Dodd, chairman of the Senate Banking Committee. That bill doesn’t even include a Section 404(b) exemption, and it’s been pretty much dead since Dodd unveiled it in November anyway. All indicators are that the Senate will spend its time bickering over curbs to the power of the Federal Reserve and whether to include creation of a Consumer Financial Protection Agency in the bill, not a Section 404(b) exemption. With Brown giving the Republicans the power to filibuster any final bill, and Dodd able to stand his ground since he’s not seeking re-election, we can all expect that bickering to take lots of time.

Like, say, beyond the June 15 compliance deadline set by the SEC that’s still tick-tocking away. At the Securities Regulation Institute annual conference I’ve been attending this week, several speakers guessed that reform legislation might not happen this year at all.

After all, even if a Section 404(b) exemption gets inserted into the bill, and Republicans settle their differences with Dodd, and the Senate reconciles its bill with the House bill, and the 404(b) exemption survives that process, and both chambers then vote in favor of the full bill, and the president signs it into law—all this assumes Washington doesn’t have other demands on its time, like starting over with healthcare legislation, or cutting the deficit, or running for re-election.

This makes me wonder whether the SEC might end up granting another extension on compliance after all. Yes, that would be a huge turnaround from its previous statements; Chairman Mary Schapiro clearly wants to extend Section 404(b) to all filers and move on with life, as do her two fellow Democratic appointees to the Commission. But consider a world where non-accelerated filers must cough up auditors’ attestations about internal controls for some reporting periods (which they’ll flunk anyway, since none of them have been preparing for it), and then that requirement goes away after Congress finally does pass an exemption. How do investors determine that disclosed weaknesses in internal controls were ever resolved?

Let’s take it one step further. What if a permanent exemption arrives on Oct. 1, say, and some filers have made 404(b) disclosures but others dodged the bullet? Could that latter group ever compare itself to companies in the former, since they now have different standards of scrutiny over their internal controls? What if there’s a restatement, and the lawsuits start flying? I’d welcome any guesses from securities lawyers out there who think about these things.

Of course, this might all be much ado about nothing, if the Senate moves forward on reform promptly. But as Republicans have been gleefully noting these last two days, now that Scott Brown is with them, they can stop anything from moving forward at all.

From the I’d-rather-watch-paint-dry department: That conservative outfit still arguing that the Sarbanes-Oxley Act is unconstitutional has, yet again, lost a court dispute and vowed to appeal. 

Earlier this week, the U.S. Court of Appeals for Washington, D.C., voted 5-4 not to review the case, which argues that the structure of the Public Company Accounting Oversight Board violates the appointments clause of the U.S. Constitution. And because SOX lacks a severability clause, if that section of the law establishing the PCAOB ever were ruled unconstitutional, the whole of Sarbanes-Oxley would go out the window.

This is the third consecutive legal defeat for the plaintiffs, the Washington D.C.-based Free Enterprise Fund and Las Vegas accounting firm Beckstead & Watts. They lost in federal court last year and lost an appeal to a three-judge panel of the D.C. Circuit in August. Now they’ve lost again, and (naturally) they have vowed to appeal to the U.S. Supreme court. Beckstead & Watts, by the way, was once previously discplined by—you guessed it—the PCAOB.

Here’s the painful truth, folks: As much as you may detest the Sarbanes-Oxley Act, it’s here to stay. Congress does not want to revisit this can of worms. The judiciary doesn’t want to revisit this can of worms. Even if the plaintiffs do appeal to the Supreme Court, and by some miracle the court decides to hear the case, arguments won’t happen at least until late 2009, and by then we’ll probably have at least one new justice anyway pulling the court back from its rightward tilt.

This case is going nowhere. One wonders what the Free Enterprise Fund’s stance is about frivolous litigation …

One bit of political flotsam flushed away in last night’s blue deluge: U.S. Rep. Tom Feeney of Florida. 

Feeney, a three-term Republican from central Florida, has been an outspoken critic of Sarbanes-Oxley and specifically of applying its notorious Section 404 provisions to small companies. Well, he lost last night. Democrat Suzanne Kosmas drubbed him out of town by a 57-41 margin. 

Feeney co-sponsored legislation in 2007 to delay Section 404 for non-accelerated filers until the end of 2008. That bill went nowhere, and ultimately the SEC decided to extend the deadline—for Section 404(b), the requirement for an auditor’s attestation on internal controls—until the end of 2009 anyway. But Feeney had been a reliable voice against Section 404 for six years. Notably, he also opposed the Wall Street bailout legislation. Anyway, he’s unemployed.

On the bright side for Section 404 opponents, Scott Garrett did hold onto his House seat in northern New Jersey. He was the other co-sponsor in that Section 404 legislation, and presumably will remain on the House Financial Services Committee, where he waged his anti-SOX battles. 

One last bit of political errata this morning: One of the many rumors around Washington and here in Boston is that Sen. John Kerry might take a position in Barack Obama’s cabinet, possibly as secretary of state. Kerry is chairman of the Senate Small Business Committee and a reliable opponent of extending Section 404 to small companies—so if he leaves the Senate, someone else will need to pick up that mantle. But there’s more: When it seemed that Kerry might win the White House in 2004, Massachusetts changed its law so that a vacant Senate seat is filled by a special election within 120 days. At the time, one rumored candidate for replacement was U.S. Rep. Barney Frank, now chairman of the House Financial Services Committee. 

I don’t believe Kerry will be offered a position in the Obama Administration. And if he does receive an offer, and he accepts, I don’t believe Frank will give up what is now one of the most important committee chairmanships in Washington. But stranger things have happened.