Senate defeats plan to strip filing requirement from health law

The Senate on Tuesday defeated an effort to strip a controversial tax-reporting provision from the sweeping healthcare law Congress passed earlier this year.

In a 46-52 vote, lawmakers killed an amendment sponsored by Sen. Mike Johanns (R-Neb.) that would have saved businesses and nonprofit groups from having to report an array of small and medium-sized purchases to the IRS.

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A handful of Democrats voted for the Johanns proposal, including Sens. Evan Bayh (Ind.), Michael Bennet (Colo.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), Mark Pryor (Ark.), Mark Warner (Va.) and Jim Webb (Va.).

The vote puts the Senate on track to pass small-business assistance legislation this week or early next.

Lawmakers voted 61-37 to cut off debate on the Senate version of the small-business bill. Republicans may require another cloture vote on the underlying legislative vehicle before it can get off the floor.

“I hope Republicans won’t force us to do that,” said a Democratic leadership aide.

The U.S. Chamber of Commerce and other business groups had lobbied furiously in favor of the Johanns amendment. Business groups argue the new requirements impose a heavy cost on small businesses and will harm the economy.

The provision, which is estimated to raise $17 billion over 10 years to pay for a new prevention and public healthcare fund, requires businesses and other groups to file 1099 tax forms to report purchases from a single supplier that total more than $600 in a year.

An alternative to Johanns’s amendment sponsored by Sen. Bill Nelson (D-Fla.) also fell short of passage. Nelson’s proposal would have increased the reporting threshold to $5,000 and eliminated the requirement for businesses with fewer than 25 employees.

Nelson’s amendment failed by a vote of 56-42, four votes short of the 60 needed to cut off debate and move to a final vote.

Republicans expressed concerns over the Nelson alternative because it would have been paid for by repealing a tax break for large oil-and-gas producers.

Senate Republicans said they were not surprised the Johanns amendment did not attract more votes, citing staunch opposition from President Obama.

“The White House does not want to set the precedent of rewriting the healthcare bill,” said a GOP aide. “They don’t want to admit they made any mistakes in the bill before the election.”

Democratic leaders scheduled the vote on the Johanns amendment to secure the support of Sen. George Voinovich (R-Ohio) to advance the small-business bill. Voinovich had demanded consideration of the small-business reporting provision before agreeing to a final vote on the broader bill.

The legislation would provide $12 billion in tax cuts to small businesses and set up a $30 billion Small Business Lending Fund. It would allow businesses to write off up to $500,000 in capital investments and 50 percent of the cost of new equipment. It would also increase to $10,000 the tax deduction for small-business startups.

After lawmakers voted to end debate on the small-business bill, Senate Small Business Chairwoman Mary Landrieu (D-La.) introduced a proposal Tuesday that would raise the IRS reporting requirement for businesses from $600 to $5,000.

She said the controversy over the 1099 reporting requirement should not entangle federal assistance to struggling businesses.

“We have a year and a half to fix 1099,” she said. “We have no more time to help small businesses.”

Landrieu didn’t offer a way to pay for her bill, saying that both parties should sit down and work it out. The 1099 requirement is scheduled to go into effect in 2013.
 
Vicki Needham contributed to this report.

This story was posted at 11:59 a.m. and updated at 12:47 p.m. and at 7:22 p.m.