The House Thursday voted overwhelmingly to repeal a new Internal Revenue Service reporting requirement included in the health care reform law that both parties and President Obama have determined would be a hindrance to small businesses. The bill passed 314-112, with 76 Democrats and every Republican voting for the measure, but it may still be months before it is officially repealed as lawmakers wrangle over how to pay for it.
The legislation would eliminate language in the new health care law requiring businesses to report purchases of $600 or more by filing 1099 forms to the IRS. The provision, which would take effect in 2012, was intended to raise $19 billion to help fund the health care reform law by capturing uncollected tax revenue. But both parties soon realized it would become burdensome and perhaps crippling for small businesses because of the additional paperwork associated with the filing requirements. Churches, charities state and local governments are also swept into the new reporting law.
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Republicans celebrated the Thursday’s vote as a step in undoing the entire health care law, a top priority on their agenda.
“The 1099 mandate has been a major source of uncertainty for small businesses trying to grapple with the costs and consequences of the government takeover of health care,” House Speaker John Boehner, R-Ohio, said.
Despite nearly universal bipartisan agreement on elimination of the 1099 requirement, there is wide disagreement on how to make up for the revenue lost from its repeal.
The Senate in February passed a measure to repeal the 1099 reporting requirement by attaching it to a bill that would reauthorize the Federal Aviation Administration. The Senate repeal amendment, which passed 81-17, makes up for the lost revenue by tapping into “unobligated” money left over in the federal budget.
The House bill, which is a standalone measure, would recoup the lost funds much differently, requiring more people to repay subsidies they receive under the health care law if their income increases. This would raise the income threshold for health care subsidies, which begin in 2014, and bring nearly $25 billion into the treasury.
Democrats are labeling it a tax increase.
“In unmistakable terms, the pay-for is an increase on middle-income families,” said Rep. Sander Levin, D-Mich., the ranking member on the House Ways and Means Committee. “It increases how much they will have to pay to the IRS if their income increases over what was projected when they would have obtained health insurance.”
The Obama administration said it “strongly opposes” the House bill for this reason and it also opposes the Senate provision because of the funding mechanism.
The Senate has not indicated when, or if, it would consider the House bill.
Congress has yet to address a new 1099 reporting requirement for rental property owners who pay $600 or more for a service such as plumbing, landscaping or painting. The provision became law in January and requires property owners to issue 1099 forms to the IRS and whoever provided the work.
