Senate Again Blocks Repeal Of 1099 Tax-Filing Requirement

Filing Requirement Will Be Paperwork Nightmare For Businesses

The Senate last night failed to repeal the 1099 provision buried deep in the health care law H.R.3590. Both Democrats and Republicans agreed it needed to be repealed to prevent businesses from being saddled with undue tax paperwork.

Caught in a dispute over how to eliminate the provision, the Senate twice was unable to reach an agreed-upon threshold of 67 votes to eliminate it. A Democratic plan to overturn it attracted only 44 votes in support with 53 against; a Republican plan that would have paid for the repeal by cutting other expenditures failed by a vote of 61 to 35.

Under the provision, businesses that spend a cumulative $600 or more with a vendor annually, supplier or contractor would have to file a 1099 form with the IRS identifying the recipient of the money. Many Democrats who supported the filing requirement now acknowledge that it would create a paperwork nightmare. Both parties now say that the provision would put a burden on companies and would require an expansion of the IRS to track the added paperwork.

The provision survived because of the complex politics of the Senate. Some lawmakers were reluctant to back repeal on Monday since the rule change would have been added to a popular food-safety law that is nearing approval, potentially jeopardizing its passage.

Senator Mike Johanns, Republican of Nebraska, said his proposal lifted the provision, without adding to the deficit  “If we can’t solve this problem and pay for it, how do we ever solve the multitrillion-dollar deficit that this country is facing?”

Republicans said the fight over the 1099 requirement was just the first to come in their efforts to unravel the health law. “We are going to do it a little bit at a time until we can repeal the whole thing and start all over,” said Senator Kay Bailey Hutchison, Republican of Texas, in urging repeal of the provision. 

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