Sen. Blanche Lincoln (Ark.) on Thursday became the first Democrat to sign her name to a GOP bill that would repeal a new requirement — included in her party's health reform law — that businesses file IRS forms when they buy goods exceeding $600.
“No piece of legislation is ever perfect and it's important we take steps to make improvements where we can," Lincoln said in a statement announcing her endorsement.
"While the provision in question was intended to improve tax reporting and reduce the number of IRS audits, I have heard from many Arkansans who strongly feel that complying with this new tax reporting requirement would have the unintended consequence of burdening small businesses that lack the resources to maintain this level of detailed recordkeeping," she said.
Under current law, companies buying services exceeding $600 from other businesses must file a 1099 form with the IRS. The Democrats' health reform law extended that requirement to include goods exceeding that amount. The provision is projected to hike federal revenues by roughly $17 billion over the next decade.
The National Taxpayer Advocate (NTA), an independent watchdog operating within the Internal Revenue Service (IRS), recently warned that the new requirement “may present significant administrative challenges to taxpayers and the IRS."
"The Office of the Taxpayer Advocate is concerned that the new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance,” the NTA said in a recent report.
The comments caught the attention of Sen. Mike Johanns (R-Neb.), who last month introduced legislation to repeal the provision outright. Aside from Johanns, 23 Senate Republicans have endorsed the bill.
On Thursday, it got it's first Democrat.
"While I believe that improved bookkeeping and reporting standards to the IRS have merit," Lincoln said, "I also want to ensure that policy changes do not create unnecessary burdens for the small businesses that serve as the backbone of Arkansas’s economy."
The new filing requirement is scheduled to take effect in 2012.