Business lobby urges Senate to repeal 1099 tax-filing requirement

The nation's largest business lobby on Thursday urged Senate lawmakers to back the full repeal of a controversial provision of the new healthcare reform law designed to ensure that businesses (and others) pay all the taxes they owe.

The provision, the U.S. Chamber of Commerce wrote in a letter to senators, "will dramatically increase accounting costs and expose businesses to costly and unjustified audits by the IRS." 

"When America is counting on the small business community to generate jobs and grow the economy, lawmakers should not force companies to divert their precious time and resources to collect volumes of information and fill out mounds of new paperwork for the government," the group wrote.

The Chamber is urging a full repeal of the filing requirement, as proposed by Sen. Mike Johanns (R-Neb.), and not just a scaling back, as offered by Sen. Bill Nelson (D-Fla.). 

The Nelson amendment — which eliminates the new filing requirement for businesses with fewer than 25 employees — "would likely discourage job creation because the full cost of compliance must be accounted for when exceeding this threshold," the Chamber says. 

The group is also slamming the Democratic alternative for its offset: a $15 billion tax on oil companies that "would likely be passed along to consumers," the Chamber writes.

"The Chamber will consider including votes on, or in relation to, these amendments in our annual How They Voted scorecard," the group warns.

Under the healthcare reform law, businesses, nonprofits and other entities will be required to report purchases of goods from individual suppliers, even corporations, when costs exceed $600. Under previous law, the Form 1099 filing requirement pertained only to services through unincorporated entities. 

The provision is not a new tax, but merely attempts to close the tax gap by making it harder for businesses to avoid the taxes they owe. The provision, which takes effect in 2012, is estimated to generate more than $17 billion over the next decade.

A cloture vote on the Johanns bill is scheduled for next Tuesday, with action on the Nelson bill expected to follow.