Congress helps small business dig out before the IRS digs in
Tuesday, April 19, 2011
Just over a year ago when President Obama, then-U.S. House Speaker Nancy Pelosi, D-Calif., and Majority Leader Sen. Harry Reid, D-Nev., rammed Obamacare through Congress, no one really knew what was in the 2,700 pages of the Patient Protection and Affordable Care Act of 2010 (PPACA). But small business soon learned that it wasn’t so.
For example, the law includes a provision that requires all businesses to file a 1099 form to the Internal Revenue Service for purchases or payments of $600 or more in a calendar year. Currently, businesses must file a 1099 for such payments made to independent contractors or firms that aren’t partnerships or corporations. But PPACA requires that businesses file 1099s for virtually all such payments.
Buy a truck for your business? Send a 1099 to the Ford dealership. Spend more than $600 on printing? Send a 1099 to UPS Store. Run a small dairy? Send 1099s to your hay supplier, the feed store, the corner gas station and every company that sold you equipment or supplies.
The goal of the new requirement was to capture what supporters theorized was $17 billion in fines and lost tax revenue from unreported transactions. Once collected, it would be used to help finance the health reform law. But the provision created a nightmare for the owners of hundreds of thousands of small businesses across America who faced an avalanche of costly paperwork.
The public reaction was so strong that a bill to repeal the requirement sailed through the House on March 3 by a 314-112 vote and breezed unchanged through the U.S. Senate by 87-12 on April 5. Among Washington’s delegation, only Sen. Patty Murray and Congressmen Jim McDermott (Seattle) and Norm Dicks (Bremerton), all Democrats, voted against it.
To recoup the $17 billion in revenue, House Republicans rewrote the way the government pays for subsidies under the health exchanges created by the new law. Originally, consumers were allowed to keep much of the money when the government overpaid them. Now, the government will recover those overpayments.
President Obama is expected to sign the repeal into law.
The 1099 repeal is the first change to Obamacare. Is it the last? Probably not. However, as foolish as the 1099 reporting provision was, it was difficult to repeal. For example, even as compelling as the case for repeal was, Sen. Robert Menendez, D-N.J., barely lost a poison-pill amendment meant to delay the bill’s passage.
Are there other problems in the law for small businesses? Yes. For example, a tax credit that was supposed to help small employers afford health insurance turned out to be so limited that virtually no one qualifies for it. Lawmakers must reconfigure the tax credit to make it work or find another way to help small employers provide coverage.
Are there other provisions of the new law that will cause problems? Without a doubt.
In fact, just a few portions of the law have taken effect, yet the Obama administration has granted temporary waivers to 1,168 businesses, insurers, unions and others who argued that those provisions would force them to drop their existing insurance coverage or suffer irreparable harm. More waivers are anticipated.
So, if small businesses are jeopardized by the provisions of the health-care law, they can get waivers as well, right? Perhaps not. Critics charge that the waiver process favors large corporations and unions because they can afford to go through the process, while small employers don’t have the money or time to apply for a waiver.
Before the law was passed, Pelosi said, “We have to pass the bill so you can find out what is in it.” More than a year after it became law, we are still finding out what’s in it—and which elements need to be fixed or repealed.
Hopefully, fixing the problems will be a little easier and more timely than what has happened with the 1099 repeal.
Don Brunell is the president of the Association of Washington Business. It serves as both the state’s chamber of commerce and the manufacturing and technology association. While its membership includes major employers like Boeing, Microsoft and Weyerhaeuser, 90 percent of AWB members employ fewer than 100 people. More than half of AWB’s members employ fewer than 10. For more about AWB, visit www.awb.org.