House Votes to Repeal 1099 Reporting Requirements

The House approved a repeal of the expanded 1099 information reporting requirements by a vote of 314-112 on Thursday.

The bill, H.R. 4, “"The Small Business Paperwork Mandate Elimination Act of 2011,” introduced by Rep. Dan Lungren, R-Calif., would repeal the provisions in last year’s Affordable Care Act and Small Business Jobs Act requiring businesses, including rental property owners, to file a Form 1099-MISC with the Internal Revenue Service reporting any purchases of $600 or more from another business during the calendar year.

Every Republican in the House voted to approve the bill, but 76 Democrats were opposed, according to The Hill’s Floor Action Blog. Democrats objected to an offset in the bill that would pay for the cost of the repeal by requiring people who had received tax credits to pay for health insurance under the health care reform bill to repay the subsidies if they end up earning too much during the year to qualify. They argued that the offset amounted to a tax increase.

“This bill would saddle hundreds of thousands of middle-income taxpayers with a hefty tax increase,” said Rep. Sander Levin, D-Mich., the ranking member on the House Ways and Means Committee. “We all favor repealing 1099, but to do so on the backs of the middle class is irresponsible. With this legislation, Republicans continue their reckless overreach, this time by gouging middle-income taxpayers.”

However, Rep. Dave Camp, R-Mich., who chairs the Ways and Means Committee, said he did not view the provision as a tax increase. “Voluntarily choosing to not enroll in government health care and thus forgoing the associated tax subsidies that one may not be eligible for might result in more government revenue according to the Joint Tax Committee, but it is not a tax increase,” he said.

He hailed the passage of the bill. "Clearly there is strong, bipartisan support to repeal the 1099 provisions so that small businesses can focus on what they do best – creating jobs," Camp said in a statement. "With more than 70 percent of the House, including 76 Democrats, voting for repeal of the 1099 provisions, I urge the Senate to move quickly to take up and pass this legislation so we can send a bipartisan bill to the President.”

The Obama administration has said it would prefer that a different way be used to pay for the repeal, however. Last month, the Senate passed its own repeal of the health care reform bill’s expanded 1099 information reporting requirements within a larger reauthorization bill for the Federal Aviation Administration that would offset the cost of the repeal with unspecified spending cuts, authorizing the Office of Management and Budget to use unobligated funds (see Senate Passes FAA with 1099 Repeal). However, that bill does not include provisions repealing the rental property owner 1099 requirements in the Small Business Jobs Act.

The Obama administration opposes the offsets used in both the House and Senate bills, but has not specified how the cost of the repeal should be paid. It said in a statement Tuesday evening that the House bill "would result in tax increases on certain middle-class families that incure unexpected tax liabilities," while the Senate bill "could cause seious disruption in a wide range of services."