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August 5, 2010

1099 Amendment Gaining Bipartisan Support

Senator Blanche Lincoln Signs-On To Amendment In Support Of Small Businesses

WASHINGTON

Sen. Mike Johanns (R-Neb.) gained the support of Sen. Blanche Lincoln (D-Ark.) for his amendment that would repeal section 9006 of the health care law, striking a provision that would create additional paperwork burdens for small businesses.

Johanns said, “I appreciate the support of Senator Lincoln on this important amendment. We must stand up for the job creators across the country and free them from a needless burden of paperwork. The IRS says this provision will be of little compliance benefit, but small businesses will certainly face more tax paperwork, occupying time and resources that could be devoted to growing and hiring. Senator Lincoln’s support is important and it is my hope that additional Democrats will join us in saying ‘no’ to job-killing paperwork.”

Lincoln said, “No piece of legislation is ever perfect and it's important we take steps to make improvements where we can. That's why I support the Johanns amendment. 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. Senator Johanns' proposal would eliminate the requirement. While I believe that improved bookkeeping and reporting standards to the IRS have merit, 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.”

Section 9006 of the Patient Protection and Affordable Care Act included a provision that requires businesses to submit a 1099 form to each vendor from which the business has purchased more than $600 worth of products. The bill would require the business to include a copy of the 1099 form in their tax return.

Background:

• Repealing section 9006 of the health care law is supported by a broad range of groups including the U.S. Chamber of Commerce, the National Federation of Independent Businesses, the American Farm Bureau Federation, and the Nebraska Farm Bureau.

• The provision of the health care law, Section 9006, would impact as many as 40 million American businesses, of which 26 million are sole proprietorships, not counting farms. [National Taxpayer Advocate (a division of the IRS), Report to Congress]

• "The IRS will face challenges making productive use of this new volume of information … In our view, it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort." [National Taxpayer Advocate, Report to Congress, pp.24-25]

• "The cost of that paper trail could swamp the small companies, sole proprietors freelancers forced to generate it. Pennsylvania business networking organization SMC Business Councils surveyed its members and found that they currently average 10 filings a year of 1099 forms. The new rules would push that average to more than 200 filings per year for a typical small business, the industry group estimates." [CNNMoney.com, "IRS Starts Mopping Up Congress's Tax-Reporting Mess," 7/9/10]

• Small businesses have created more than 64% of new jobs nationally in the past 15 years. [Small Business Administration]

• If it is not repealed, the 1099 provision would take effect in 2012.

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