Senate to Repeal 'Burdensome' Small Biz Law

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When Congress passed the health care reform bill last year, a little-known provision requiring small businesses to notify the Internal Revenue Service of purchases greater than $600 was highlighted by critics as a symbol of the bill’s intrusiveness into the lives of average Americans.

That provision -- which has nothing to do with health care, by the way -- looks like it’s on the road to repeal.

Officially, the “1099” provision would force businesses to provide 1099 tax forms to any business or person from which they made a purchase of $600 or more. The federal government initially defended the requirement, saying it would generate about $17 billion in additional tax revenues over the next 10 years. But businesses small and large have heavily criticized the rule, arguing against the mountains of paperwork it would cause and the expense of keeping track of what can amount to thousands of transactions every year.

Says one website commentator, “Plain and simple, this requirement will create an insurmountable hurdle for a going concern in a vast number of small businesses.”

Now even the White House is changing its tune. "The 1099 provision in the health care bill appears to be too burdensome for small businesses," Obama said during a Nov. 3 White House press conference. “It just involves too much paperwork, too much filing. It's probably counterproductive."

Some powerful business lobbies also joined the call for repeal of the proposed rule. U.S. Small Business Administration director Karen Mills, in a Nov. 22 letter to small-business owners, agreed the rule was “burdensome” and that SBA would support any efforts to “repeal this provision."

And it looks like the Senate might take action. On Nov. 12, Sen. Max Baucus (D-Mont.) filed the Small Business Paperwork Relief Act (S. 3946), which would officially end the 1099 reporting provision included in the Patient Protection and Affordable Care Act.

"Small businesses are the backbone of our economy, especially in Montana where we have more workers employed by small businesses than anywhere else in the country. Montana businesses need to focus their efforts on growing and creating good-paying jobs -- not filing paperwork.

"Montana businesses have made clear these reporting requirements won't work for them, and it's my job to fix that. And that is exactly what I'm going to do," Baucus said in a statement.

While supporters for the senator’s repeal bill are lining up, the hurdle for passage is high. According to Senate rules, the amendment must garner a supermajority (67 votes) before it gets to the president’s desk. Even so, debate on the Baucus bill is under way on the Senate floor.

And now that Baucus, a Democrat, has joined the chorus of Senate Republicans lambasting the 1099 rule, chances of the bill’s passage are good, proponents say.

Congress faces a public relations disaster if the 1099 provision persists and the 24/7 news cycle is filled with reports of flower shop owners having to fill out tax forms to pay their store leases or gas stations having to let the IRS know every time they buy a transmission for a customer.

Politicians' electability is likely to trump revenue considerations. For the controversial health care reform bill’s 1099 rule, it looks like Congress will pull the plug.

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