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Senate Approves 1099 Repeal, Sends Bill to President

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The Senate April 5 passed legislation to repeal both the expanded Form 1099 information-reporting requirements mandated by last year’s health care legislation and also new 1099 reporting requirements imposed on taxpayers who receive rental income. The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (H.R. 4) was approved by the Senate by a vote of 87–12. The House of Representatives passed the bill on March 3, and since the House and Senate have approved the same version it now goes to President Barack Obama for his signature.

The repeal bill was passed in response to two pieces of legislation enacted in 2010 that significantly expanded information-reporting requirements for businesses and for taxpayers who receive rental income. The 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 Both of these provisions are repealed by the bill.

To pay for repeal, the bill will increase the amount of the new Sec. 36B health care premium assistance credit that is subject to recapture. Under this amendment, taxpayers whose household income is over 400% of the poverty line for a particular tax year would have to pay back their advance health care premium assistance credit payments (previously this provision applied to taxpayers whose household income was over 500% of the poverty line). For taxpayers whose household income is less than 400% of the poverty line for a particular tax year, the amount of the increase in tax under Sec. 36B(f)(2)(A) due to excess advance payments of the credit will be limited to the applicable dollar amounts in this table:

If the household income (expressed as a percent of poverty line) is:

The applicable dollar amount is:

Less than 200%

$600

At least 200% but less than 300%

$1,500

At least 300% but less than 400%

$2,500

An amendment proposed by Sen. Robert Menendez, D-N.J., that would have required further study of the effects of this provision was defeated by a vote of 41–58.

The White House has said that it supports repeal of the expanded 1099 reporting provisions, but opposes this method of paying for repeal; however, the president is expected to sign the bill into law.

The AICPA supported repeal of both 1099 provisions. In February 14 letters to the chairmen and ranking members of the Senate Finance Committee and the House Ways and Means Committee, the chair of the AICPA’s Tax Executive Committee, Patricia Thompson, urged the repeal of both provisions and expressed the AICPA’s concerns about the significant compliance burdens that businesses and rental property owners would face if the expanded 1099 reporting provisions were not repealed.