Democrat vows to repeal 1099 filing rule from healthcare law

A leading Senate Democrat vowed Friday to introduce legislation killing a part of the new healthcare reform law that imposes new tax-filing requirements on small businesses.

Sen. Max Baucus (D-Mont.), chairman of the Finance Committee and a leading architect of the reform law, said a provision requiring businesses to report more purchases to the IRS will impose undue paperwork burdens on companies amid an economic downturn when they can least afford it. 

Baucus, who had pushed legislation scaling back the requirement earlier in the year, now wants it repealed in full. 

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“I have heard small businesses loud and clear and I am responding to their concerns," Baucus said in a statement. "Small businesses are the backbone of our economy in my home state of Montana and across the country, and they need to focus their efforts on creating good-paying jobs — not filing paperwork."

Since the midterm election, Democrats have signaled a willingness to change the provision.

House Speaker Nancy Pelosi (D-Calif.) said Friday that the 1099 requirement is one of the rare provisions of the healthcare law where the two parties agree that a change is needed.

"That's probably the first place we could go together," she told NPR's "Morning Edition."

Last week, President Obama also conceded that the filing provision threatens to put too much strain on businesses. 

"The 1099 provision in the healthcare bill appears to be too burdensome for small businesses," Obama said at a White House news conference the day after Democrats were trounced in midterm elections. "It just involves too much paperwork, too much filing. It's probably counterproductive."

Beginning in 2012, the Democrats’ new healthcare reform bill requires businesses to file 1099 forms with the IRS when goods purchased from another business, even corporations, exceed $600 in a year. That's more burdensome than previous law, under which the reporting requirement related only to services from non-incorporated businesses in excess of $600.

The provision is not a new tax, but is designed to force businesses to comply with existing tax laws. The Congressional Budget Office estimates the change will generate roughly $17 billion over 10 years.

Behind the U.S. Chamber of Commerce and the National Federation of Independent Business, the nation's businesses have slammed the provision as a job-killer. 

In September, the Senate shot down two separate bills addressing the requirement. The first, sponsored by Sen. Mike Johanns (R-Neb.), would have repealed the provision altogether, paying the tab by eliminating billions of dollars in preventive healthcare funds included in the reform law.

The second, sponsored by Sen. Bill Nelson (D-Fla.), would have scaled back the requirement by repealing the new filing requirement for all businesses with fewer than 25 employees, and hiking the reporting threshold for large businesses. 

The Democrats’ bill, offset by killing a tax break for the nation's oil giants, was also shot down.

Baucus’s office did not immediately respond to requests for comment about the forthcoming legislation.