Groups cheer U.S. House’s vote to repeal 1099 tax reporting rule

Insurance industry trade groups praised the U.S. House of Representatives for passing a bill to repeal the 1099 provision of the health care reform.

H.R. 4, the bill to repeal the 1099 provision, passed 314-112, in a decision favored by the National Association of Professional Insurance Agents (PIA) and the Independent Insurance Agents & Brokers of America (Big I).

The 1099 provision, set to take effect in 2012, is part of the Patient Protection and Affordable Care Act. The provision would require businesses to file 1099 forms with the Internal Revenue Service any time they spend more than $600 per year with any other business.

President Barack Obama called for the bill’s repeal in his State of the Union Address in January.

That requirement is a significant expansion of the current 1099 reporting requirement, which applies only to payments to unincorporated service providers, the PIA said.

“The overwhelming repeal vote in the House is a victory for all American businesses, especially small businesses which would face an overwhelming, onerous reporting and paperwork burden,” said Mike Becker, PIA’s national director of federal affairs, in a statement. “This 1099 provision was ill-conceived from the start, because it would bury small business under a mountain of needless paperwork and act as an impediment to economic recovery.”

Repeal of the 1099 provision had bipartisan support in both the House and Senate, although the “point of contention” has been how to offset the lost revenue, according to the Big I.

To pay for the $21.9 billion increase in the deficit by repealing the 1099 provision, the Senate calls for giving the Office of Management and Budget the ability to take away nearly $44 billion of discretionary budget authority, except from the Departments of Defense, Veterans Affairs and Social Security, according to the Hill.

The House calls for making consumers repay all of their insurance subsidies under the health care law once their income rises beyond 400% of the federal poverty line, the Democratic Caucus reported.

The House Democrats said the House idea would result in an additional $25 billion in taxes for the middle class.

“The administration strongly opposes the House’s offset to pay for this repeal, which would undo an improvement enacted with nearly unanimous support in the Medicare and Medicaid Extenders Act that eliminated an egregious ‘cliff’ in the tax system affecting middle income taxpayers,” according to a statement of administration policy.