February 7, 2011
Nation's Building News

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Politics and Government
Senate Repeals IRS Form 1099 Reporting Requirements

While considering the Federal Aviation Administration reauthorization bill, the Senate on Feb. 2 approved an amendment offered by Sen. Debbie Stabenow (D-Mich.) to strike a provision in the health care reform law requiring all businesses to submit reports to the IRS (generally on IRS Form 1099) on every company from which they make annual purchases totaling more than $600 in goods and services.

Under the health care overhaul approved last year, starting in 2012 businesses will have to issue millions of new tax documents annually as a result of this provision.

NAHB has opposed this rule as a costly and unfair administrative burden — particularly for small businesses — that will be ineffective in raising government revenue.

On Feb. 9, Mike Kegley, president of the Home Builders Association of Kentucky, will testify on behalf of NAHB before the House Small Business Committee on the need to repeal the 1099 provision because of its administrative burdens and its negative impact on job creation, economic growth and business investment.

There is widespread agreement in Congress on the need to repeal these requirements, but lawmakers have clashed over how to offset the $19 billion in revenue that will be lost.

The Stabenow amendment, which passed with broad bipartisan support in an 81-to-17 vote, would offset the cost of fully repealing the 1099 reporting requirements by directing the Office of Management and Budget to rescind $44 billion in unspent and unobligated federal dollars. Her measure exempts the Departments of Defense, Veterans’ Affairs and the Social Security Administration from the cuts.

It is similar to legislation introduced by Sens. Mike Johanns (R-Neb.) and Joe Manchin (D-W. Va.), which has garnered 61 Senate cosponsors.

"Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS," Stabenow said following the Senate vote. "Since last year, I have worked with my colleagues on both sides of the aisle to address this problem. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2000%."

Johanns also lauded passage of the amendment. "I'm thrilled that after multiple attempts to repeal this burdensome mandate, the Senate has finally done the right thing in voting to repeal it," Johanns said. "The small business owners and organizations who stepped forward in opposition to this 1099 overreach were instrumental in sustaining the momentum that has resulted in wide bipartisan support."

Once the Senate approves the broader FAA reauthorization bill (S. 223) — which includes the amendment to repeal the 1099 tax-reporting requirements — the legislation will move to the House for consideration.

In another sign of congressional opposition to this burdensome recordkeeping requirement for small businesses, a stand-alone bill (H.R. 4) recently introduced in the House by Rep. Dan Lungren (R-Calif.) already has enough co-sponsors to pass the chamber.

Meanwhile, during his State of the Union address, President Obama also reiterated his support for repealing this business tax. Commenting on how to improve the health care law, Obama said: “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”

For more information, e-mail J.P. Delmore at NAHB, or call him at 800-368-5242 x8412.

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