With our economy stuck in neutral, much of the talk in Washington rightfully is about the need for job creation and economic growth. While this Administration is trumpeting a plan to rid the books of outdated federal regulations, Nebraska business owners find themselves bracing for a new one with the potential to cause a tsunami of unproductive paperwork: the 1099 tax mandate. My effort to repeal this looming problem last year earned endorsements from the Chamber of Commerce and nearly 3,000 businesses nationwide; support from President Obama and several members of his Cabinet; and 61 votes in the Senate (but not enough to pass it last year). I've picked up in 2011 where we left off and am pleased to reintroduce it this week.
Found in Section 9006 of the massive new health care law, this provision expands the requirement to submit 1099 tax filing forms for business expenses to include all transactions that total $600 or more per vendor per year. It will apply not only to businesses but every family farm, charity, church and local government body throughout the country.
Proponents of the mandate originally claimed it would crack down on tax evasion. However, the Taxpayer Advocate with the Internal Revenue Service (IRS) took all the air out of that argument in a report last June. It concludes that the IRS would "face challenges making productive use of this new volume of information," and likely would "improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort."
The report also noted one negative consequence of the provision would be "leaving the economy with more large national vendors and less local competition." Our state's farmers, ranchers, and small business owners already know the struggle with the big box stores, and the last thing we need is for the government to create the same challenge for small vendors. “Less local competition” means Nebraska’s business owners lose.
You don't need to take my word for it; our fellow Nebraska business owners are already accounting and bracing for its impact. Dale Black of Grand Island owns several KFC restaurants in the state and already embodies the forewarnings of the IRS. Black professes he "wants to be a good corporate citizen in the communities I have restaurants, but the 1099 [provision] forces me not to hire local vendors and tradesmen in my community, instead giving work to a single regional contractor."
Jeff Scherer of Smeal Fire Apparatus in Snyder, has already estimated that compliance will cost their business $23,000 annually, on top of a host of software upgrades and diverted work hours. "This is a clear example of legislation written for business owners that was conceived by people with very little business experience," Scherer said. He is one of millions of business owners nationwide hoping Congress will correct this mistake.
This is why I've made repeal of the 1099 mandate a top priority this year. Nebraska is always ahead of the curve in terms of job creation and economic growth, and I will continue working to see that our businesses, farms, and other contributors to their communities are not unnecessarily harmed by this costly mandate.