A national insurance agents’ association is calling for the repeal of one provisions in the federal health reform because it will create a “paperwork burden.”

Leonard Brevik

The National Association of Professional Insurance Agents (PIA) wants Section 9006 deleted from the Patient Protection and Affordable Care Act before it takes effect in 2012.

Section 9006 of the new health care law, passed by Congress and President Barack Obama in March, requires that businesses of all sizes, as well as governments and nonprofits, file a 1099 form with the Internal Revenue Service reporting any purchases they make of goods or services of $600 or more in a tax year from any individual or business, including corporations. Currently, businesses only need to file 1099s when they buy services and only when the vendor is an unincorporated person or business.

“This places an unacceptably onerous burden on businesses of all sizes,” said PIA National Executive Vice President and CEO Leonard C. Brevik in a statement. “If allowed to take effect, this provision will impose a substantial reporting and paperwork burden on governments, nonprofits and businesses – especially small businesses – dramatically increasing costs.”

He added that the provision will “bury small business under a mountain of needless paperwork.”

Expanded 1099 reporting requirement will distort the marketplace by driving purchases away from small businesses, Brevik said. “Small business is the growth engine of the American economy, and this provision throws sand into that engine,” he added.

In a Sept. 7 letter to congressional leaders, the PIA noted that “this new, expanded mandate may have the unintended consequence of encouraging buyers of goods and services to consolidate their purchases with large vendors instead of doing business with smaller firms, in order to avoid this excessive paperwork.”

“In addition, this expansive and expensive federal requirement also greatly raises costs for nonprofits, and is an unfunded mandate on financially-pressed state and local governments,” the PIA letter states.

The U.S. Senate is expected to take up at least two amendments to an unrelated bill next week: One would eliminate the 1099 provision; another would exempt businesses with fewer than 25 employees, raise the reporting threshold to purchases above $5,000 and exclude those made with a credit card.

In the U.S. House, Rep. Daniel E. Lungren (R-Calif.) has introduced the Small Business Paperwork Mandate Elimination Act (H.R. 5141) to repeal the provision. The Senate companion bill, S.3578, was introduced by Sen. Mike Johanns (R-Neb.).

“The IRS is already working on procedures to implement this expanded 1099 reporting requirement,” Brevik said. “We need to work hard to kill it.”