Senate Fails to Repeal 1099 Requirements

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The Senate was unable to produce enough votes to end debate on two amendments that would have repealed or scaled back the expanded 1099 reporting requirements for businesses in the health care reform bill.

The controversial requirements, which were included in the Patient Protection and Affordable Care Act, would require businesses to report to the IRS any purchase from a vendor of goods or services worth $600 or more during the calendar year. The new requirements would be effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013.

Two separate amendments introduced by Senate Democrats and Republicans to the Small Business Jobs Act were unable to reach the 60-vote threshold needed to cut off debate on Tuesday and be included in the final bill. One amendment, introduced by Sen. Mike Johanns, R-Neb., would have repealed the provision, but would have made more people exempt from having to buy health insurance by lowering the affordability exemption for the individual mandate. The amendment was defeated on a procedural vote of 46-52.

The Democratic alternative, introduced by Sen. Bill Nelson, D-Fla., would have increased the threshold for reporting the purchases on a 1099 from $600 to $5,000, and exempted businesses with 25 or fewer employees from the new reporting requirement. His amendment was defeated on a vote of 56-42, also failing to reach the 60-vote threshold.

The Senate may next try to pass the 1099 repeal as a separate piece of legislation. Earlier efforts to pass the 1099 repeal before lawmakers left for their August recess have also failed to pass in the House (see Small Business Tax Relief Act Fails to Pass in House).

The Obama administration is asking to scale back, but not repeal, the requirements. Treasury Secretary Timothy Geithner and Health and Human Services Secretary Kathleen Sebelius sent a letter Monday to Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ken., urging them to scale back the new 1099 requirements.

“We are committed to reducing the gap between taxes legally owed and taxes paid,” they wrote, according to “However, the administration believes that the burden created on businesses by the new information reporting requirement on purchases of goods that exceed $600, as included in Section 6041 of the Internal Revenue Code as modified by Section 9006 of the Affordable Care Act, is too great.” They said they opposed the Johanns amendment because it would withhold money from a new fund for wellness programs until 2018.

Johanns blamed Democrats for the defeat of his amendment. “Regulations, mandates and government spending simply will not create jobs,” he said in a statement. “Today’s vote signifies that Senate Democrats and the Obama administration would rather protect a section of their more than 2,400-page unpopular health care bill than stand up for small businesses. It is wrong to have paid for the president’s health care plan on the backs of small businesses. My amendment would have truly helped small businesses and I am committed to continuing this fight until this provision is repealed.”

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Tax practice Finance