Johanns Amendment (#4596) on 1099 Reporting
Senator Johanns has offered an amendment (#4596) to the small business bill (H.R. 5297) regarding new corporate reporting requirements included in the health care law. A cloture vote on the amendment is scheduled for Tuesday at 11 AM. Background information on the Johanns 1099 amendment and the Nelson side-by-side can be found in two articles on the issue, one by the New York Times and another in this week’s National Journal.
Summary and Background:
- The amendment repeals Section 9006 of the health care law. This Section 9006 information reporting provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year—which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc.
- The amendment is paid for through 1) an expansion of the affordability exception to the individual mandate; 2) postponement of the mandatory appropriations to the Prevention and Public Health Fund created under Section 4002 of the health care law until Fiscal Year 2018; and 3) a corporate tax timing shift.
- The amendment lowers the affordability exemption in the health care law’s individual mandate from 8 percent of income to 5 percent. The affordability exemption creates a threshold so that people who do not have access to affordable health insurance (that costs less than the threshold) do not have to pay the individual mandate penalty. In the underlying bill this threshold is 8 percent of income; lowering the threshold to 5 percent of income saves money because fewer people will take health care subsidies. This provision was accepted by members on both sides during the Senate Finance Committee mark-up.
- The amendment would strike $11 billion in mandatory appropriations from the Prevention and Public Health Fund created in Section 4002 of the health care law by striking all appropriations to the Fund prior to Fiscal Year 2018. During the HELP Committee markup of the health care bill last summer, some Senators raised concerns that the Fund could spend federal taxpayer dollars supporting jungle gyms, grocery stores, and other similar projects.
Arguments in Favor:
- According to a report issued by the National Taxpayer Advocate, the new 1099 reporting requirements will affect 40 million businesses—ten times the number of firms the Administration asserts will benefit from small business tax credits.
- The Taxpayer Advocate has also called the reporting requirement “disproportionate” and “burdensome” for small business. For instance, the Taxpayer Advocate noted that small businesses “may lose customers” to larger chains more easily able to comply with the new requirements, and that “it is highly likely that the IRS will improperly assess penalties” for not filing forms.
- The Taxpayer Advocate has also noted that “the IRS will face challenges making productive use of this new volume of information reports” required by the health care law, because “the amounts on the information reports and the tax returns” will not match for a variety of technical reasons.
- The amendment fully repeals the 1099 reporting requirements, and does so by reducing federal spending, rather than by raising taxes at a time of near-record high unemployment.