Senate Approves 1099 Repeal Language

February 2, 2011

UPDATEThe U.S. Senate has just voted to approve a measure to repeal the expanded 1099 reporting mandate which was included in the health care law. The vote on the Stabenow amdnement was bipartisan with 81 voting in favor, and 17 voting against the bill. Please see the article below that was published earlier today for background details. More details to follow.

The U.S. Senate is poised to vote today on a measure to repeal the expanded 1099 reporting mandate which was included in the health care law. Initially, a repeal amendment offered by Sen. Mike Johanns (R-Neb.) was being considered for inclusion in the Federal Aviation Administration bill currently being debated. In just the last 24 hours, however, Sen. Debbie Stabenow (D-Mich.) has offered a nearly identical amendment which is now likely to be the vehicle through which repeal will be considered.

As of noon today (Feb. 2), the Senate is expected to vote on the Stabenow amendment around 5:00 tonight. The primary reason for the shift from Johanns’ amendment–which Stabenow had supported–to the Stabenow amendment–which Johanns will support–is due to conflict over the pay-fors.

The Johanns bill was paid for with $39 billion in federal spending rescissions, but excluded any funds from the Department of Defense or Veterans Affairs. Finance Committee Chairman Max Baucus (D-Mont.) has expressed concern over using any unused funds from the Social Security Administration (SSA) given its significant budget issues. As a result, Stabenow last night offered her own amendment which is identical to Johann’s amendment, but adds SSA to the list of agencies from which unused funds will not be used as a pay-for.

At the close of each fiscal year, federal departments and agencies have unobligated and unspent money in their accounts. According to OMB, the projected amount of these funds at the end of fiscal year 2010 (not including those from Defense or Veterans Affairs) was about $684 billion.

NSBA has been an ardent supporter of the Johanns bill and also is supporting the Stabenow amendment. As it stands now, Senate Minority Leader Mitch McConnell (R-Ky.) is urging Republicans to support Stabenow’s bill.

As background, the Stabenow amendment will repeal Section 9006 of the health care law, passed last year, which expands the requirement to submit 1099 tax filing forms for business expenses to include all transactions that total $600 or more per vendor per year. The provision would impact businesses, family farms, churches, charities and local governments.

Over on the House-side, Rep. Dan Lungren’s (R-Calif.) legislation (H.R. 4) which would simply repeal the provision without an offset already has enough cosponsors to pass the House. The Ways and Means Committee intends to move that 1099 repeal legislation through the committee soon, so that it can be sent to the floor and on to the Senate for action.

Additionally, President Obama mentioned repealing the provision during his State of the Union address, saying the requirement that businesses submit to the Internal Revenue Service a report of any transaction adding up to $600 in business in a year would be an “unnecessary bookkeeping burden on small businesses.”

According to NSBA data small businesses currently file 1099 reports for an average of 10 companies. Under the new law, that would skyrocket to 86.