House Passes 1099 Repeal, Offsets an Issue

March 8, 2011

On March 3, the House passed Small Business Paperwork Mandate Elimination Act of 2011 (H.R. 4) by a vote of 314-112 (238 Republicans and 76 Democrats) to repeal the Form 1099 information reporting requirement.

The House bill, which would relieve businesses of the requirement to file a Form 1099 information report whenever their payments to a single provider of a good or services reaches $600 in a single year, is expected to move to the Senate floor by March 11. The bill would also repeal a new requirement for landlords to report all payments of $600 or more for goods or services provided for rental property.

The debate on the House floor focused almost exclusively on the $25 billion adjustment to the premium assistance tax credits from the 2010 health care law that the Republican majority included in H.R. 4 to pay for the 1099 repeal. Republicans have said the change would simply recapture overpayments from individuals and families who received more of the credit than they were eligible for while Democrats called it a tax on middle-income families.

The main question now facing Senate Democrats on the measure is whether to accept the House’s proposal to offset the cost by reclaiming overpayments of advance tax credits to help low-income families buy health insurance. If the Senate accepts the bill as is, it would go to the President for his signature and mark the most significant change yet to the landmark health care law.

Meanwhile, the Senate voted to repeal the 1099 reporting requirement in an amendment to the reauthorization (S. 223) of the Federal Aviation Administration, which the Senate passed on Feb. 17. The amendment, sponsored by Sen. Debbie Stabenow (D-Mich.), offset the costs of the repeal by rescinding unobligated discretionary funds—unspent agency funds. The repeal passed by voice vote after senators voted, 81-17, to waive a budgetary point of order against it.

Differences are already lining up in the Senate, as Senate Finance Committee Chairman Max Baucus (D-Mont.) has said he intends to amend the House-passed bill (H.R. 4) to repeal the 1099 requirement and pay for it with a combination of both the House offset and the Senate amendment offset. How he intends to accomplish this is yet to be revealed.

On the other hand, Senate Majority Leader Harry Reid (D-Nev.) has endorsed the House approach to repealing the reporting requirement, saying that he personally likes the House pay-for better than theirs in the Senate.

President Barack Obama supports repealing the compliance requirement and has called it a flaw. However, the administration has raised concerns about both offset proposals.

Please take a few moments today to urge your Senators to support H.R.4.