Revenue Offsets Will Be Key To Repealing Reform Law’s 1099 Tax Provision

Bipartisan efforts to eliminate new tax-reporting requirements from the federal health reform law are dependent on whether the parties can agree on offsets for lost revenue, CQ Today reports (Ethridge, CQ Today, 9/17).

Background

The reporting mandate -- scheduled to 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 or services from another business in a given year.

The Obama administration endorsed a Democratic-led amendment to raise the reporting threshold to $5,000 and exclude companies with fewer than 25 employees, and rejected a Republican-sponsored amendment that would have completely eliminated the mandate.

The Senate last week voted down both amendments, in part because of disagreements on how to replace the $17 billion in revenue over 10 years that the provision is expected to generate (California Healthline, 9/15).

Four Proposals Under Consideration

According to CQ Today, at least four new proposals to repeal the provisions, with differing plans to recoup the lost revenue, are being circulated in the House and Senate.

• House Proposal No. 1: Democrats have proposed a plan with two potential revenue-raising devices. One would generate about $5.3 billion by revising the annuity trust inheritance rules, while a second would raise taxes on carried interest, which is a type of compensation for private equity managers and venture capitalists. Both plans were included in a bill that the House rejected in July. The provisions are expected to face opposition from most Republicans and some moderate Democrats, according to CQ Today.
• House Proposal No. 2: Rep. Dan Lungren (R-Calif.) on Sept. 15 filed a discharge petition to force a floor vote on a bill (HR 5141) that would repeal the tax-reporting requirement without replacing the lost revenue. Within two days of the petition's release, 93 lawmakers had signed on in support. The bill requires 218 signatures for a floor vote to be scheduled.
• Senate Proposal No. 1: Sens. Mark Begich (D-Alaska) and Ben Nelson (D-Neb.) last week introduced a proposal to repeal the provision and replace the revenue with surplus funds from the 2009 federal economic stimulus package. Democratic leaders have opposed the proposal.
• Senate Proposal No. 2: Sen. Mary Landrieu (D-La.) introduced a proposal that would repeal the provision, but she has not indicated how the lost revenue would be offset (CQ Today, 9/17).