On March 3, the House of Representatives passed the Small Business Paperwork Mandate Elimination Act of 2011 (H.R. 4) by a 314–112 vote. The bill would repeal the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation. It would also repeal the new 1099 reporting requirements imposed on taxpayers who receive rental income.
Section 9006 of last year’s Patient Protection and Affordable Care Act (P.L. 111-148) expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The Small Business Jobs Act (P.L. 111-240) enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more made during 2011 and for payments made for property and to corporations beginning in 2012. Both of these provisions would be repealed by the bill.
The House Ways and Means Committee report on an earlier version of the bill says that the committee believes the burden imposed by the expanded reporting requirement “is disproportionate as compared with any resulting improvement in tax compliance and therefore [the committee] believes that these requirements should be repealed in their entirety” (Committee on Ways and Means, Report No. 112-15 to Accompany H.R. 4, p. 4 (Feb. 22, 2011)).
To pay for repeal, H.R. 4 would increase the amount of the new Sec. 36B health care credit that is subject to recapture. In a statement of administration policy, the White House announced that, while it supports repeal of the expanded 1099 requirements affecting business, it “strongly opposes” the way H.R. 4 would pay for repeal.
H.R. 4 will now go to the Senate for consideration. That chamber has already passed its own version of 1099 repeal as part of the FAA Air Transportation Modernization and Safety Improvement Act (S. 223). However, the Senate’s version of repeal only addressed the health care law’s 1099 requirement and not the rental property 1099 requirements. The Senate bill would pay for the repeal by rescinding $44 billion of discretionary government spending.
The House and the Senate will have to reach agreement on a revenue offset before a bill can be sent to the president. White House opposition to the revenue offsets contained in both bills makes the road to final passage unclear. Until the president agrees to sign this proposal, Benson Goldstein, senior technical manager at the AICPA, cautions practitioners that “clients with rental properties should continue to keep the necessary records so that they will have the records that would be needed to file 1099s in 2012.”
The AICPA supports repeal of both 1099 provisions. In a February 14 letter to the chairman of the Senate Finance Committee, Max Baucus, D-Mont., and its ranking member, Orrin Hatch, R-Utah, the chair of the AICPA’s Tax Executive Committee, Patricia Thompson, urged the repeal of the provisions and expressed the AICPA’s concerns about the significant compliance burdens that businesses and rental property owners will face if the expanded 1099 reporting provisions are not repealed.