House Fails to Repeal Form 1099 Reporting Rules

A majority of House members last week agreed that new Form 1099 reporting requirements were onerous for small businesses and tax-exempt organizations, but could not agree on how best to pay for repealing them.

Enacted as part of the landmark Patient Protection and Affordable Care Act passed by Congress in March, the Form 1099 requirements force all businesses and tax-exempt organizations to issue a Form 1099 to vendors from whom they buy goods totaling $600 or more annually. The new requirement, scheduled to take effect beginning in 2012, would impose a massive paperwork burden on an estimated 40 million businesses, charities and associations, according to the National Taxpayer Advocate. ASAE has joined the U.S. Chamber of Commerce, the National Federation of Independent Business (NFIB) and other business organizations in support of legislation repealing this requirement.

House Democrats and Republicans held a heated debate on the Small Business Tax Relief Act (H.R. 5982) last Friday before leaving town for the August recess, and while the House voted 241-154 in favor of the Democrats’ bill the vote fell short of the two-thirds majority needed to pass under suspension of the rules.

House Ways and Means Committee Chairman Sander Levin (D-MI) blamed Republicans for standing in the way of repeal because they opposed some foreign tax credit changes Levin inserted to pay for the legislative fix. “Despite all of their rhetoric about the need to eliminate this reporting requirement, Republicans walked away from small businesses when it mattered most,” Levin said.

Rep. Dave Camp (R-MI) said House Republicans had offered an alternative proposal that would have “better protected taxpayers from erroneously paying too much in health insurance subsidies” but the Democrats cancelled a vote on Republicans’ motion to recommit and pulled the bill.

“Frankly, this is a missed opportunity,” Camp said on Friday. “It is a missed opportunity to fix a fundamental flaw in the health care law and a missed opportunity to truly help American employers and the jobs they provide…I urge my colleagues to stand up for job-providers by demanding a full repeal of the 1099 requirement that does not impose other job-killing tax increases.”