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Amendments to Repeal 1099 Provision Set for Vote

The U.S. Senate is set to consider two amendments that would repeal a provision of the healthcare law requiring that 1099 forms be filed with the IRS for all transactions over $600.

A bill by Sen. Mike Johanns (R-Neb.) would repeal the requirement. A separate bill by Sen. Spencer Baucus (D-Mont.) would also repeal it. The Johanns' measure covers the cost by using unspent and unobligated federal money, while the Baucus version adds about $17-19 billion to the federal deficit.

What It Means to Agents: PIA strongly supports repeal of the 1099 provision. The expanded 1099 requirement places an onerous burden on small businesses, erodes competitiveness, and jeopardizes our nation's economic recovery.

Section 9006 of the new healthcare law requires that businesses of all sizes, as well as governments and nonprofits, file a 1099 form with the IRS reporting any purchases they make of goods or services of $600 or more in a tax year from any individual or business.

"This places an unacceptably onerous burden on businesses of all sizes," said PIA National Executive Vice President & CEO Leonard C. Brevik. "If allowed to take effect, this provision will impose a substantial reporting and paperwork burden on governments, nonprofits and businesses—especially small businesses—dramatically increasing costs."

"This will bury small business under a mountain of needless paperwork," Brevik said, adding that the expanded 1099 reporting requirement will distort the marketplace by driving purchases away from small businesses. "Small business is the growth engine of the American economy, and this provision throws sand into that engine."

In a letter to Congressional leaders, PIA noted that "this new, expanded, mandate may have the unintended consequence of encouraging buyers of goods and services to consolidate their purchases with large vendors instead of doing business with smaller firms, in order to avoid the excessive paperwork."

"In addition, this expansive and expensive federal requirement also greatly raises costs for nonprofits, and is an unfunded mandate on financially-pressed state and local governments," the PIA letter states.

Two bills were introduced in the Senate. One would eliminate the 1099 provision completely; another would exempt businesses with fewer than 25 employees, raise the reporting threshold to purchases above $5,000 and exclude those made with a credit card. In the House, Rep. Daniel E. Lungren (R-Calif.) introduced the Small Business Paperwork Mandate Elimination Act (H.R. 5141) to repeal the provision. A Senate companion bill, S.3578, was introduced by Sen. Mike Johanns (R-Neb.).

All of the attempts to repeal or significantly change the 1099 reporting requirement failed.

The Senate voted 46-52 on September 14 to reject an amendment by Johanns that would have repealed the new Form 1099 reporting requirements altogether. On the same day, the Senate also rejected by a 56-42 vote on amendment proposed by Sen. Bill Nelson (D-Fla.) and supported by the Obama administration to limit the 1099 requirement.

PIA supports the Johanns amendment providing for outright repeal.

"Without a change by 2012, agencies and other small businesses will face an overwhelming reporting requirement," said Mike Becker, PIA National Director of Federal Affairs, in comments to BestWire. "A full repeal remains a top PIA priority."

Brevik said there is a "need for speed" in repealing the 1099 provision. "The IRS is already working on procedures to implement this expanded 1099 reporting requirement," he said. "We need to work hard to kill it."

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