Health reform law's tax reporting provision recharges opponents

Despite several setbacks, some GOP and Democratic members of Congress, business groups and other foes are still working to weaken or rescind the requirement.

By Doug Trapp — Posted Sept. 27, 2010

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Attempts to strip a financial reporting provision from the national health system reform law have failed so far, but some Republicans and Democrats in Congress, business groups and other opponents still are working on proposals to weaken the requirement or remove it from the law.

The new law is paid for in part by a provision to improve tax collections. Businesses will be required to file a 1099 form with the Internal Revenue Service for every vendor where they spend at least $600 annually on goods and services. The requirement, which is scheduled to begin with transactions on Jan. 1, 2012, exempts credit card purchases, according to the U.S. Chamber of Commerce.

The provision is expected to garner at least $17 billion in income taxes over a decade, because businesses are more likely to pay taxes on transactions that have been reported to the government.

Chamber leaders, however, say the provision will create a tremendous administrative burden on businesses, especially small firms. Employers will need to significantly ramp up their recordkeeping and could be discouraged from buying from smaller businesses to decrease their number of 1099 form filings.

"In this economy, there is little defense for supporting oppressive regulations on small businesses that will hamper their ability to put people back to work," said R. Bruce Josten, the chamber's executive vice president for government affairs.

The American Medical Association is watching congressional action on the reporting provision closely, said AMA President Cecil B. Wilson, MD. "We strongly support repeal of the provision from the health reform law ... and hope both sides can come together to find an appropriate way to offset the cost."

Some Democrats in Congress have called for scaling back the 1099 requirement by increasing the dollar value of purchases exempt from the provision. The White House also supports reducing the provision's impact. But others in Congress, especially GOP members, are seeking to repeal the amendment.

However, two Senate amendments that would have ended or limited the reporting requirement failed to attract enough votes on Sept. 14 to be attached to a small-business bill.

The stronger of the two amendments, introduced by Sen. Mike Johanns (R, Neb.), would have repealed the 1099 provision. Seven Democrats joined Republicans in voting for it, but the amendment fell 14 votes short of the 60 needed to end debate and call a final vote.

The Johanns amendment drew opposition from preventive health care advocates because it would have been paid for in part by eliminating $11 billion of a $15 billion preventive care fund in the health reform law. In fiscal 2010, the law provided $500 million to a range of programs, including training of primary care health professionals, said Ripley Forbes, director of government affairs for the Partnership for Prevention, a Washington, D.C.-based group of business, nonprofit and government leaders who want prevention to be a priority in health policy.

Johanns spokesman Steve Wymer said that, despite the amendment, the senator is not determined to end the preventive care funding. Instead, Johanns wants it to be allocated through the regular annual congressional appropriations process, which it is not subject to now. "People on both sides of the aisle would agree that Congress should play a role there."

The other amendment, offered by Sen. Bill Nelson (D, Fla.), would have limited the reporting requirement to transactions of $5,000 or more a year and exempted businesses with 25 or fewer workers. It would have been offset by ending tax breaks for domestic oil companies, but it fell four votes shy of the 60 needed to move to a final vote.

Johanns also has introduced a stand-alone bill to repeal the tax requirement. The bill has 24 co-sponsors, including one Democrat -- Sen. Blanche Lincoln (D, Ark.), Wymer said. It does not specify how to pay for the repeal. Rep. Dan Lungren (R, Calif.) is the sponsor of a measure in the House that would repeal the tax requirement. The U.S. Chamber of Commerce supports the bill.

Senate Finance Committee Chair Max Baucus (D, Mont.), who supported Nelson's amendment, said Democrats have heard small businesses' concerns. "And we intend to work diligently to address and mitigate those concerns."

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