Nelson (FL) Side-by-Side Amendment (#4595) on Small Business Reporting

• The amendment modifies—but would not repeal—Section 9006 of the health care law.
• The Section 9006 information reporting provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year—which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc.
• The amendment would exempt credit card transactions from the new 1099 information reporting requirements.  However, the Internal Revenue Service (IRS) is already working to implement these changes administratively.
• The amendment raises the reporting threshold from $600 in aggregate transactions with an entity per year to $5,000.
• The amendment also specifies that the new reporting provisions “shall not apply in the case of any person employing not more than 25 employees at any time during the taxable year.”
• The amendment directs the IRS and the Treasury to “request and consider comments and suggestions from the public concerning implementation and administration” of the Section 9006 information reporting requirements.
• To offset projected revenue loss from the above provisions, the amendment denies Section 199 deductions to “major integrated oil companies,” beginning in 2011.

• Exempting only firms with under 25 employees from the new paperwork reporting regime would encourage small businesses not to grow large enough to trigger more bureaucratic requirements.
• At a time when unemployment remains near record highs, the federal government should be enacting policies that encourage businesses to hire—and the Nelson amendment would discourage small businesses from hiring new workers, by subjecting them to new paperwork requirements when they do.
• Repeal of the burdensome “paperwork tax” imposed by Section 9006 of the health care law should not be paid for by yet another tax increase—one that could affect small businesses just as hard, by raising fuel prices during a recession.
• According to a recent report issued by the National Small Business Association, small businesses estimate that the new 1099 reporting requirements will increase the number of 1099s filed from 10 to 86.  This nearly 800% increase in paperwork requirements as a result of one provision in the health care law begs for the provision’s repeal, not its modification.
• The National Small Business Association survey also found that only 30 percent of small business’ purchases subject to 1099 reporting were made by credit card.  Thus the credit card exemption—which the IRS is already implementing administratively—is insufficient to solve the problem.
• While increasing the 1099 filing threshold from $600 to $5,000 may reduce the number of 1099s filed, it will not appreciably reduce the paperwork burdens on businesses, who will still have to track all their annual purchases with vendors to determine whether or when they will hit the $5,000 threshold triggering the new reporting requirements.
• In a report earlier this year, the National Taxpayer Advocate noted that “the IRS will face challenges making productive use of this new volume of information reports” required by the health care law, because “the amounts on the information reports and the tax returns” will not match for a variety of technical reasons.  The Nelson amendment would preserve a reporting regime that will place onerous new burdens on small businesses, yet won’t give the IRS useful information to combat tax evasion.
• Eliminating Sec. 199 altogether for only the oil and gas industry will have the harmful effect of hurting American energy workers and their contributions to our economic recovery. By taxing American energy, it will make domestic production even more expensive than it already is, and it will increase foreign oil and refined products imports.

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