Tuesday, November 30, 2010

Senate Again Fails to Repeal 1099 Requirements

Washington, D.C. (November 29, 2010)
By Michael Cohn

The Senate voted Monday evening on a competing pair of amendments to repeal the expanded 1099 information reporting requirements that were included in the health care reform bill, but failed for the second time this fall to roll back the controversial requirements.

The provision, which was included in the health care reform bill, would require companies to report on any purchases of goods or services of over $600 from a single vendor during the calendar year to the Internal Revenue Service on a Form 1099-MISC. The dueling amendments, from Senate Finance Committee Chairman Max Baucus, D-Mont., and Sen. Mike Johanns, R-Neb., mainly differed in how they would be paid. They were attached to a larger food safety bill, which overcame a procedural hurdle to move forward by a vote of 69-26, shortly before the vote on the amendments.

“There are two big differences between our two amendments,” said Baucus. “First, my alternative is especially friendly to small businesses. It takes extra measures to permit the IRS to waive certain duplicative reporting requirements for small businesses that use credit cards to pay their bills. Second, our two versions differ about paying for the change. The alternative offered by my colleague from Nebraska would give the unelected director of OMB [the Office of Management and Budget] unprecedented authority to slash spending, all on his own. The Johanns alternative would thus abdicate Congress’s responsibility over the budget. For these reasons, I urge my colleagues to oppose the Johanns amendment and support my alternative.”

Johanns contended that the Baucus amendment would add $19 billion to the federal deficit and drive up the overall cost of the health care bill.

He noted that his own amendment would direct the Office of Management and Budget to identify $39 billion in unspent and unobligated accounts to replace the revenue that might have been generated by the 1099 paperwork mandate, representing only about 5 percent of the total funds in unspent and unobligated accounts and giving the administration discretion to ensure the funds do not affect ongoing and necessary programs.

“Every small business out there is asking the question, ‘Why is the cost of this health care bill falling on my back?’” said Johanns. “You can’t go anyplace in this country without people asking, ‘What is this about the 1099 requirement?’ They are concerned they are going to spend on accountants for compliance with this requirement. They are asking, ‘Why are you picking on us?’ Why would you add $19 billion to the federal deficit, and that’s what the Baucus amendment does. You simply won’t find better offsets than the ones mine has. My phone is ringing off the hook, and we can’t go along with these offsets. The Baucus amendment simply does not pay for these offsets. In the end, it hampers the next generation. It adds to the national debt.”

Sen. Tom Harkin, D-Iowa, one of the lead sponsors of the food safety bill, the FDA Food Safety and Modernization Act, recommended that neither amendment should be approved.

“If the Baucus or Johanns amendment is adopted, it will kill the bill,” he said. “There’s no doubt about it. Revenue measures have to originate in the House. I hope this body will reject any extraneous amendments.”

The Johanns amendment received 61 votes in support and 35 votes in opposition, but failed to reach the two-thirds margin needed. The Baucus amendment received 44 votes in support and 53 in opposition and thus did not pass either.

The Senate failed to pass a repeal of the 1099 reporting requirements in September after Democrats and Republicans introduced competing amendments to the Small Business Jobs Act (see Senate Fails to Repeal 1099 Requirements).

After his amendment was defeated, Baucus vowed to continue fighting to repeal the expanded 1099 requirements. Although the requirements had not yet gone into effect, he noted, many small business owners expressed concerns the requirements would create an onerous paperwork burden.

“Small business owners voiced legitimate concerns that these requirements would be burdensome, and the Senate should act in response to those concerns," Baucus said in a statement. "I am disappointed that we weren’t able to repeal these requirements today, but I intend to keep working until we do. Our bill will allow small business owners to direct their focus onto job creation and growth rather than on paperwork. We will keep up our fight on behalf of small businesses so they can continue their critical work to create jobs and help the economy recover.”