Senate Finance Committee Chairman Max Baucus (D-MT) has announced that he will introduce legislation to repeal the 1099 reporting requirement in the Affordable Care Act. The provision, which requires small businesses to report any purchases over $600, was intended to increase the tax compliance of sole proprietors, but has been condemned as overly burdensome by a bipartisan group of lawmakers — including President Obama, House Speaker Nancy Pelosi — and small business advocacy organizations like the National Federation of Independent Businesses (NFIB). The Congressional Budget Office (CBO) estimates that the requirement would generate $17 billion in revenue over 10 years.
“The proposal was originally written to keep taxes low by giving the IRS more tools to ensure all owed taxes were paid,” Baucus’ press release reads. “However, following passage of the law, some business owners expressed concern that when the provision does go into effect, the forms would place too large of a paperwork burden on businesses struggling in a still-recovering economy.” In response to those concerns, Baucus said he would “repeal the new reporting requirements and look for other ways to improve tax compliance and keep taxes low.”
Two previous efforts to repeal the measure failed in the Senate. Sen. Mike Johanns’ (R-NE) proposal would have repealed the tax reporting requirement for small businesses, but made up for the $17 billion revenue shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. Sen. Bill Nelson’s (D-FL) alternative proposal would have required only larger businesses to report their transactions with vendors. Baucus’ office did not specify how the Senator would pay for the repeal or return requests for comment.
NFIB President Dan Danner praised Baucus’ announcement just minutes after it became public. “We are pleased Senator Baucus has announced his support for full repeal of the 1099 provision and are eager for him to formally introduce his bill when Congress returns,” Danner said in a statement. “The sooner Congress repeals this burdensome provision, the better.” Asked about the organization’s quick response, NFIB spokesperson Stephanie Cathcart told me the group has worked closely lawmakers on both sides of the aisle to build momentum to repeal the provision. She said NFIB did not help craft the Baucus’ particular repeal provision.
For repeal to succeed, Senators would have to waive the pay-go rules or find $17 billion in savings — a tall order given today’s partisan environment. Democratic have previously proposed paying for repeal with unspent stimulus funds (a bad idea), changing the inheritance tax (which is likely to get some GOP support) or levying a tax on carried interest.