House votes to rescind IRS reporting measure

WASHINGTON Thu Mar 3, 2011 3:24pm EST

WASHINGTON (Reuters) - The House of Representatives voted on Thursday to rescind an unpopular business tax reporting requirement in the year-old healthcare law, but the measure could be delayed by a dispute with Senate Democrats over how to pay for it.

The House vote was 314-112, with 76 Democrats joining the majority Republicans despite concerns the method used to cover the cost of repealing the reporting requirements would weaken President Barack Obama's healthcare overhaul.

Small business groups have been howling over the new reporting requirements for purchases, saying it will bury entrepreneurs in paperwork. They have convinced lawmakers of both parties to remove it.

The reporting provision was meant to improve tax compliance and help pay for the sweeping healthcare law, but small firms and the self-employed are up in arms about the paperwork. Starting next year, they must file 1099 forms to the Internal Revenue Service on purchases of goods and services totaling more than $600.

The House-passed bill repeals that provision and a similar measure enacted in separate legislation last year extending the 1099 reporting requirement to landlords.

"This expansion treats the recipient of rental income from real estate as engaging in the trade or business of renting property," said Ways and Means Committee Chairman Dave Camp.

"Unless repealed, families and individuals will be forced to fill out paperwork if they do something as basic as replace a refrigerator in the apartment they rent out," Camp said.

DEMOCRATS SAY HOUSE BILL WILL RAISE TAXES

Democrats say they want to repeal the onerous reporting requirements, but object to how the House bill covers the $22 billion cost to the federal treasury.

The House bill would pay for the repeal by adjusting the health insurance tax subsidies provided to middle-income people under the new law. People whose financial situation improved after receiving subsidies to buy insurance would repay a greater portion than under current law.

The White House and many Democrats say the provision would result in fewer people with medical coverage and undermine the healthcare law. They also say it could mean a hefty tax increase for some middle-income workers.

"If this bill would become law, it would mean a tax increase for hundreds of thousands of middle-income taxpayers," said Representative Sander Levin, the top Democrat on the House Ways and Means Committee.

The Senate has passed a similar measure, but used other savings to cover the cost. Senate Finance Committee Chairman Max Baucus said the way the House-passed measure covers the cost of repealing the 1099 provision would have a difficult time passing the Senate.

The Senate measure paid for the repeal costs by directing the administration to cut unspent funds for some government programs.

In January a Florida judge struck down the healthcare law as unconstitutional, but he ruled on Thursday the law could continue to be implemented while the ruling is appealed. Other courts have upheld the law and the issue is expected to be eventually decided by the Supreme Court.

(Editing by John Whitesides)

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