Congressional dispute delays 1099 tax reporting repeal

Washington -- -- The House on March 3 overwhelmingly passed legislation that would roll back a tax reporting provision in the health system reform law that would apply to many physician practices. The Senate passed similar legislation in February by a wide margin as part of an unrelated bill, but the chambers are not in agreement over how to offset the cost of the provision's repeal.

The so-called 1099 tax reporting provision, approved to help raise funding for the reform bill's coverage expansions, would require many small businesses to file forms with the Internal Revenue Service for every vendor on which they spend $600 or more in a year. Because many physician practices would be subject to the requirement as well, the American Medical Association and other physician organizations have come out in opposition to the provision and in favor of bipartisan legislation to overturn the language.

Democratic leaders signaled a willingness to rescind the requirement, and President Obama indicated that he would sign legislation to accomplish it. But the two chambers take significantly different approaches to paying for the estimated $20 billion in lost revenue that would occur by rolling back the tax reporting mandate.

The Senate version of the 1099 repeal would give the White House the latitude to redirect money already appropriated by Congress for certain budget items that the administration no longer deems necessary. The House version would require the recipients of federal insurance subsidies under the health system reform law to pay back more of those subsidies if it were determined that the recipients received higher income for the year than projected.

The White House indicated that Obama does not support the House funding mechanism for the 1099 repeal, although the president stopped short of threatening to repeal the House version. At this article's deadline, the House and Senate had not made any apparent progress toward resolving the stalemate.

If it is not rescinded, the tax reporting provision will take effect for purchases starting on Jan. 1, 2012.