Mar 03 2011

Noem Votes to Eliminate Small Business Burdens

Measure Repeals Job-Destroying 1099 Provision



WASHINGTON, DC – U.S. Representative Kristi Noem (R-SD) voted with a bipartisan majority today to eliminate a key reporting burden for small businesses originally enacted as part of the job-destroying health care law.


“This legislation is dedicated to protecting small business, their workers and American taxpayers.  If allowed to continue, this new requirement would impose a huge tax compliance burden on small businesses, forcing them to devote resources to tax filing instead of to business expansion and job creation,” said Noem.


“Repealing this provision is a win for small business.  What they need is certainty to create more jobs, not more regulation and paperwork,” said Noem.


The new health care law expanded tax information reporting rules by requiring businesses to issue a Form 1099 for many new types of payments that exceed $600 per year per payee.  The bill passed by the House repeals this provision. 



The 1099 Provision Is Widely Panned:


Businesses—Crushed by It:  A recent National Federation of Independent Business (NFIB) Small Business Survey determined that tax paperwork, costing $74 an hour, is the most expensive burden placed on small businesses by the federal government.  The NFIB’s tax counsel, Bill Rys, has also highlighted the “direct negative impact on small business” of the 1099 mandate.  In an extensive June 2010 memo submitted to President Obama’s Office of Management and Budget, the Business Roundtable and the Business Council—industry organizations representing the nation’s largest private sector employers— outlined the job-destroying policies of the administration.  Referring specifically to the 1099 provision of ObamaCare, the memo noted: “[T]he cost to modify systems to collect the data and send the additional 1099s will not be insignificant.” 


Further, a September 2010 letter from the U.S. Chamber of Commerce to members of Congress, signed by more than 2,400 member businesses from all industries and regions, stated that the 1099 provision means “40 million entities, including governments, nonprofits, and businesses of all sizes across the nation will be subjected to onerous data collection and IRS information filing burdens.”  The letter continued: “[T]hese entities will have to institute new complex record-keeping, data collection and reporting requirements that track every purchase by vendor and payment method.”  This mandate will “dramatically increase accounting costs, expose businesses to costly and unjustified audits by the IRS, and subject more small businesses to the challenges of electronic filing.”


Accountants—Against It:  The American Institute of Certified Public Accountants (AICPA) advocated against Section 9006 in a July 2010 letter to Senators.  Based on excessive implementation costs and the “limited utility” gained by the government from the “generation and receipt of millions of forms,” the AICPA said the 1099 requirement should be repealed as the “extraordinary burden in this instance far outweighs the potential benefit.”


The IRS—Wary of It:  In July, the Internal Revenue Service’s National Taxpayer Advocate highlighted several problems with the 1099 mandate:

§  “[T]he new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”

§  “[S]mall businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition.”


(Source: House Republican Conference)




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