Schock, Ways & Means Committee, Repeal Anti-Business Health Care Provision
First step taken to permanently repeal 1099 tax reporting provision in Health Care Law
Feb 17, 2011 -
In the House Ways & Means Committee Congressman Aaron Schock (R-IL) debated, marked-up legislation, and voted today to permanently remove the burdensome 1099 tax reporting provision. This provision, which was inserted into the Health care law last year, is designed to raise additional money to pay for the reform law. Schock, an early critic of this provision, was glad to see to the Ways and Means committee vote to repeal the measure.
“This was an easy vote,” said Schock. “Almost as soon as the Health Care Reform law was passed last year, the 1099 provision has been on everyone’s radar to repeal.”
This was the first mark-up for the Ways and Means committee this year, so choosing to repeal the 1099 provision was an important step for those who promised to begin removing harmful provisions of the health care law. Removing the 1099 provision has received wide spread support from both Republicans and Democrats; even President Obama signaled he was willing to see this provision removed from his own signature health care law. During his most recent State of the Union address, President Obama stated that “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”
Many people might remember then-speaker Nancy Pelosi’s famous line during the health care debate stating, “We have to pass the bill so that you can find out what is in it, away from the fog of the controversy.” Blame continues to fall on the poor management of the legislation and a direct result of passing the health care legislation without allowing members enough time to read it.
At the center of the controversy was a provision that expanded tax information reporting requirements to require businesses to issue a 1099 Form for any payments to corporations and for any payments for property that exceeds $600 per year per payee. This new requirement currently imposes a huge tax compliance burden on small businesses, forcing them to devote resources to tax filing instead of to business expansion and job creation. If not repealed, this provision is set to become effective in 2012.
According to the National Federation of Independent Business (NFIB) this provision will have a “direct negative impact on small businesses.”
The Internal Revenue Service’s own National Taxpayer Advocate highlighted significant problems with this requirement. In a report, they expressed “concern that the new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
“Today is a victory for small business owners all over Illinois,” said Schock. “While it’s just one step in the right direction, repealing this burdensome provision will begin to add a little more certainty to the business community at a time when it’s badly needed, and it will keep a little more money in the hands of business owners, instead of the IRS. We need our American entrepreneur’s focused on growing their businesses and creating jobs, not spending countless hours filing additional paperwork.”
Also repealed during the committee meeting today was an additional 1099 reporting requirement placed on owners of certain rental properties. To help cover the cost of a subsequent small business lending law enacted in September 2010, these reporting requirements were expanded to treat recipients of rental income from real estate as engaging in the trade or business of renting property, resulting in the imposition of these 1099 requirements on owners’ rental property expense payments. Individuals and families that rent real property – a vacation home, a condo, or even a spare bedroom – for even just a few weeks or months out of the year, must now comply with complex new filing requirements for everyone to whom they pay more than $600 in a year –including plumber, lawn services, and pool cleaners.
Since the 1099 provision will be used as a mechanism to pay for portions of the Health Care law, House Republicans vowed to offset the cost, so the repeal of the 1099 provision doesn’t add to the deficit. The Ways and Means committee approved legislation to offset the repeal by reducing improper overpayments of Exchange subsidies established under the new health care law. By reducing improper payments, the legislation put an end to the waste, fraud and abuse that is currently taking place and costing millions in taxpayer dollars.
The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011, H.R. 705, as the new legislation is now known will reduce the deficit by $166 million over the 2011-2021 period, according to the Joint Committee on Taxation.
The next step in the repeal process is a vote by the House of Representatives.