Report Questions GOP Plan To Repeal Reform Law’s Tax Filing Rules

Repealing a new tax filing requirement included in the federal health reform law would allow businesses to avoid paying taxes and cut billions of dollars in funding for preventive care initiatives, according to a Center on Budget and Policy Priorities report issued on Monday, The Hill's "Healthwatch" reports (Lillis, "Healthwatch," The Hill, 8/16).

Background on Tax Filling Provision

The reporting mandate, which will take effect in 2012, requires businesses, not-for-profit groups and government offices to file 1099 forms with the Internal Revenue Service when they purchase $600 or more in goods from another business in a given year.

The law previously required 1099 forms only for services above that amount (California Healthline, 7/27).

Opposition to Requirement

Businesses have argued that the new requirements will impose significant bureaucratic burdens for companies during bleak economic times when money could be better spent elsewhere. GOP lawmakers have echoed businesses' concerns.

Sen. Mike Johanns (R-Neb.) introduced legislation (S 3578) to repeal the provision entirely, calling the requirement "nothing more than a government-imposed obstacle to economic growth and job creation" and a "slush fund" for things "that aren't specifically related to healthy outcomes."

Report Questions Johanns' Proposal

However, the report stated that repealing the provision "would leave in place a clearly inadequate reporting regime that has failed to prevent widespread tax avoidance." Furthermore, the report found that funding from the provision would:

• Encourage innovation in preventive care;
• Strengthen state efforts to track infectious diseases;
• Bolster community-based obesity prevention programs;
• Reduce tobacco use; and
• Promote active lifestyles.

Democrats' Alternative Represents 'Balanced Approach,' Report States

Democrats have offered an alternative proposal.

Supported by Sen. Bill Nelson (D-Fla.), the amendment would eliminate the filing requirement for businesses with fewer than 25 employees and increase the filing threshold from $600 to $5,000 for larger companies.

According to the CBPP, Nelson's proposal offers "a balanced approach that responds to concerns over paperwork burdens while still strengthening tax compliance."

A procedural vote for the Johanns amendment is scheduled for Sept. 14. The Senate is expected to consider the Nelson amendment soon after ("Healthwatch," The Hill, 8/16).