On Wednesday, March 2, 2011, the House is scheduled consider H.Res. 129, the rule providing for consideration of H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011. Under the rule, the text of the underlying bill will be substituted with the text of H.R. 705. The rule would provide for two hours and 30 minutes of debate equally divided and controlled by the chair and ranking minority member of the Committee on Ways and Means. Complete consideration of H.R. 4 is expected on Thursday, March 3, 2011. The bill was introduced by Rep. Dan Lungren (R-CA) on January 12, 2011, and referred to the Committee on Ways and Means. On February 17, 2011, a mark-up was held and the bill was reported by voice vote.
The legislation would repeal an expansion currently scheduled to take effect in 2012 of information that businesses must report to the Internal Revenue Service on Form 1099.
This legislation would amend the Internal Revenue Code to repeal the expanded 1099 information reporting requirements on payments made to corporations, rental property expense payments, and payments for property and other gross proceeds. The legislation would strike portions of section 6041 of the Internal Revenue Code which were added by the Patient Protection and Affordable Care Act of 2010 (ObamaCare). ObamaCare expanded tax information reporting requirements to require businesses to issue a Form 1099 for any payments to corporations (rather than just to individuals) and for any payments for property (rather than just for services or investment income) that exceed $600 per year per payee. H.R. 4 would strike language requiring “amounts in consideration for property” and “gross proceeds” to be subject to 1099 reporting requirements under section 6041 of IRS Code in order to eliminate the expanded reporting requirements. The bill would also repeal expanded information reporting requirements on rental property expense payments that are currently in effect. According to the Joint Committee on Taxation, repealing these expanded 1099 information reporting requirements for rental property expense payments as well as certain payments of more than $600 will reduce taxes by approximately $24.7 billion over ten years.
In addition, H.R. 4 would increase the maximum amount of subsidy overpayments that could be recaptured by the government under ObamaCare. Under ObamaCare, when health insurance subsidy payments start in January 2014, they will be based on income statements from the 2012 tax year, thus subsidy eligibility will be based on financial information that is two years old. H.R. 4 would expand the maximum amount of subsidy overpayments that can recaptured, thus discouraging waste and abuse and allowing excessive spending to be reclaimed. According to the Committee on Ways & Means, increasing the subsidy amounts subject to recapture as a result of error or fraud was endorsed by HHS Secretary Sebelius as “fairer for recipients and all taxpayers.” According to the Joint Committee on Taxation, this provision will reduce government spending by $24.8 billion over ten years.
Section 6041 of the Internal Revenue Code outlines reporting requirements and generally requires information returns to be made by every person (payor) engaged in a trade or business that makes payments aggregating $600 or more in any taxable year to another person (payee) in the course of the payor’s trade or business. The information returns must be filed with the Internal Revenue Service and corresponding statements must be sent to each payee. Beginning in 2012, certain payments not previously subject to 1099 reporting requirements, including those made to corporations and those made for property, will become subject to the reporting requirements under ObamaCare. ObamaCare and subsequent legislation expanded information reporting requirements of businesses for payments of $600 or more to any vendor and on rental property expense payments. These new requirements will impose a huge tax compliance burden on small businesses, forcing them to devote resources to tax filing instead of to business expansion and job creation.
According to the Joint Committee on Taxation, the legislation would cut taxes by $24.7 billion over the FY 2011-FY 2021 period. In addition, reducing improper exchange subsidy overpayments will reduce excessive government spending by $24.8 billion over ten years. Thus, according to the Joint Committee on Taxation, the net impact of H.R. 4 will be a deficit reduction of $166 million.