Close Close

Life Health > Health Insurance > Your Practice

1099 Fix: Democrats Pan Subsidy Clawback Change

Your article was successfully shared with the contacts you provided.

Democrats are charging that Ways and Means Committee Republicans are trying to squeeze struggling middle-income families to pay for a Form 1099 reporting provision fix.

Republicans on the committee want to offset the cost of a fix by having the Internal Revenue Service (IRS) be more aggressive about getting excess health insurance tax subsidy payments back from middle-income taxpayers.

“The subsidy recapture provision is not a tax increase in any way, shape or form,” and every current Democratic member of the committee voted for a similar provision in December 2010, to avoid cutting Medicare provider reimbursement rates, Republican committee members say.

Democrats say the Republicans are misrepresenting their approach.

“This Republican tax hike would penalize middle class Americans who sought affordable health insurance for their families, did everything they were supposed to, and had the tenacity to be hired or get a raise,” according to Rep. John Larson, D-Conn. “It unfairly hurts low- and middle-income families who are seeking affordable health insurance and greater opportunity.”


Ways and Means members agreed by a voice vote Thursday to pass a bill, H.R. 4, that would repeal Section 9006 of the Patient Protection and Affordable Care Act (PPACA). If implemented as written, PPACA Section 9006 could require a business to send a Form 1099 to the Internal Revenue Service when the business does more than $600 in business with a vendor in a tax year.

Committee members also voted 21-15 to approve a second bill, H.R 705, that would cancel the expanded 1099 reporting requirements by revising Section 6041 of the Internal Revenue Code. The bill includes a second provision that would cancel new rental property owner expense reporting requirements, and a third provision designed to make up for the $22 billion in revenue that could be lost as a result of the reporting changes.

Members of the Senate voted 87-8 Thursday to approve a third measure – S. 233, an aviation modernization bill that includes a 1099 fix amendment. The 1099 fix amendment in S. 233 would eliminate the expanded Form 1099 reporting requirements by changing Internal Revenue Code Section 6041. That version of the fix would pay for at least part of its effects on tax revenue by drawing on federal agencies’ unspent funds.


The 1099 fix offset in H.R. 705 would pay for the fix by applying tougher income guidelines to people who collect excess health insurance subsidies.

Some in Congress and elsewhere are trying to repeal PPACA, change it or block implementation. If PPACA takes effect as written, the IRS will provide advance tax credits that taxpayers can use to buy health coverage. The subsidies are supposed to start flowing in 2014. Applicants will apply for the subsidy in 2013, using 2012 tax forms, and the tax forms used in later applications will always be somewhat out of date.

To deal with the possibility that some taxpayers might get raises or higher-paying jobs over a 2-year period – or that some taxpayers might lie about their income to get bigger subsidies – PPACA authorizes the IRS to claw back excess subsidy payments.

PPACA would soften clawback pain

by capping the amount that could be clawed back from taxpayers earning up to 500% of the federal poverty level.

H.R. 705 would provide a cap only for taxpayers earning less than 400% of the federal poverty level.

Democrats say that the IRS will usually send the health insurance subsidy tax credits straight to the health insurers, and that families earning 400% to 500% of the federal poverty level may have trouble coming up with thousands of dollars in cash to satisfy IRS clawback demands.

A Democrat on the Ways and Means Committee, Rep. Joe Crowley, D-N.Y., tried to address Democrats’ concerns by introducing an amendment that would have stripped the health subsidy clawback provision out of H.R. 705. Democrats on the committee voted for the Crowley amendment, and Republicans on the committee rejected it.