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PPACA: Health Tax Issue Headed for Senate

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WASHINGTON–The Senate is expected to take up as early as the week of Sept. 13 changes to the to the health care reform law designed to limit a stringent tax-reporting mandate scheduled to go into effect in 2012.

That provision, considered particularly irksome to small businesses, is designed to raise $18 billion in revenue over 10 years.

It mandates that all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue IRS Form 1099 to vendors from which they purchase goods totaling $600 or more during a calendar year beginning in 2012.

An official of the National Association of Insurance and Financial Advisors who is tracking the issue said “NAIFA members welcome modifications to the new 1099 requirements to ease the burden on their small business clients.”

The Independent Insurance Agents and Brokers of America is being particularly vocal on the issue. In a recent letter to congressional leadership, the IIABA said that it and many others in the small business community oppose the tax mandate.

The letter criticizes “the massive amounts of resources that will be poured into new record keeping, accounting and unnecessary compliance procedures,” according to Robert Rusbuldt, IIABA president and CEO. “The mountain of paperwork required to comply with this provision will cost the federal government time and money, divert resources and prevent investment in job growth and business expansion at a delicate point in the American economy.”

Lobbyists claimed that if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual would have to issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.

An amendment to H.R. 5297, the small business lending bill, sponsored by Sen. Mike Johanns, R-Neb., would repeal the provision.

The Johanns amendment replaced the almost $18 billion in revenue that would be lost if the provision were repealed by adjusting the subsidies for individual purchases of health insurance.

Sen. Harry Reid, D-Nev., and Sen. Max Baucus, D-Mont., introduced a Democrat alternative to the Johanns’ amendment that would modify rather than repeal the provision.

The Democratic substitute, sponsored by Sen. Bill Nelson, D-Fla., would exempt credit cards from the information reporting requirement, liftthe threshold for 1099 reporting from $600 to $5,000, and exempt firms employing no more than 25 employees at any time during the taxable year from the reporting requirements.

It also would authorize the Treasury to exempt “non-troublesome” transactions (like meals, airplane tickets, and hotel rooms) from the reporting requirements.

Critics of the alternative, including business groups as well as GOP lawmakers, argue that exempting firms with under 25 employees from the new paperwork requirements will discourage small businesses from hiring new workers to avoid growing large enough to trigger more forms.


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