Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation describes efforts to repeal the so-called 1099 provision in the Affordable Care Act. That provision was designed to help finance the expansion of health insurance coverage by making certain that businesses reported and paid tax on certain income.
The provision has drawn the ire of the business community, which views the new requirement as an excessive paperwork burden. President Obama has called for repealing it; the Senate has voted to do so; and the House is likely to do so in coming weeks.
The new Health Policy Brief explains the following:
- What’s in the law. Section 9006 of the Affordable Care Act would require businesses--from 2012 on--to file 1099 federal tax forms for all suppliers to whom they had paid $600 or more for goods obtained during a calendar year. The purpose is to detect whether any vendors are underreporting their income and not paying taxes due the federal government. (Businesses are already required to report payments of $600 or more worth of services, such as consulting services or accountants’ fees.) Over 10 years (from 2010 to 2020), this new provision was expected to raise approximately $19 billion.
- Reaction to the provision. In June 2010, three months after the Affordable Care Act became law, Nina Olson, the Internal Revenue Service’s (IRS’s) taxpayer advocate, issued a report saying that the provision could impose significant compliance burdens on millions of businesses and swamp the IRS with requests for taxpayer identification numbers and with 1099 forms. Major business organizations and Republican lawmakers called for eliminating the provision and, by the end of the year, many Democrats added their voices to the chorus.
- Repeal – but how to replace? The Senate voted on February 2 to repeal the provision, accepting an amendment introduced by Sen. Debbie Stabenow (D-MI). The amendment requires the Office of Management and Budget to identify unspent federal funds that could offset the cost of repeal. At this time it appears likely that the House will soon pass a 1099 repeal bill that is similar to the Senate bill and will also require offsetting budget savings. It is all but certain that President Obama will sign the final version.
Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org.
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