On February 14, House Ways and Means Committee Chair Dave Camp (R-MI) announced that on February 17, the Ways and Means Committee will mark up two competing bills to eliminate or reduce the onerous 1099 reporting requirements—H.R.4, Small Business Paperwork Mandate Elimination Act of 2011, and the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidiary Overpayments Act of 2011.
Effective for payments made after 2011, Sec. 9006 of the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148) adds payments of amounts in consideration for property and gross proceeds—i.e., it adds payments for goods—to the list of payments subject to reporting. It further provides that starting in 2012, payments to corporations (that are not tax-exempt)—which had previously been exempt from the reporting requirement—will be subject to information reporting. (Code Sec. 6041(i))
Effective for payments made after 2010, the Small Business Jobs Act of 2010 provides that subject to limited exceptions, a person receiving rental income from real estate is treated as engaged in the trade or business of renting property for information reporting purposes. (Code Sec. 6041(h)) In particular, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income must provide an information return to the service provider and IRS.
The Small Business Paperwork Mandate Elimination Act of 2011 would simply repeal Sec. 9006 of PPACA and apply the Code as if Sec. 9006 had never been enacted. No offset would be provided for the nearly $22 billion revenue loss over 2011–2021 estimated by the Joint Committee on Taxation (JCT).
Observation: The Small Business Paperwork Mandate Elimination Act of 2011 doesn't address the expanded reporting requirements for rental income recipients.
The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidiary Overpayments Act of 2011 would similarly repeal the provisions in Sec. 9006 that provide rules for payments to corporations and impose a reporting requirement with respect to gross proceeds from property. However, it would also repeal Code Sec. 6041(h) 's application of information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property, and it would also provide an offset for the lost revenue from repealing the new information reporting provisions. The bill would increase the amount of excess advance payments of the premium assistance credit (enacted as part of the 2010 health care reform legislation to help lower-income individuals acquire affordable health insurance coverage) that a taxpayer must repay under Code Sec. 36B(f)(2) for tax years ending after Dec. 31, 2013. According to the JCT, the net effect of these changes over the 2011–2021 period would be a positive $166 million.
If the premium assistance credit received through advance payment exceeds the amount of premium assistance credit to which the taxpayer is entitled for the taxable year, the liability for the excess advance payment must be reflected on the taxpayer's income tax return for the taxable year subject to a limitation on the amount of such liability. For persons with household income below 500 percent of FPL, the liability for the excess payment for a taxable year is limited to a specific dollar amount.
Observation: This bill reflects an ongoing effort by Congressional Republicans to modify, if not repeal, the health care legislation that was enacted last year.