April 14 (Bloomberg) -- President Barack Obama signed a bill repealing a tax-compliance mandate in last year’s health-care law, giving a victory to business groups that led a campaign against the requirement.
The repealed provision, under which companies would have had to report more transactions to the Internal Revenue Service, was included in the law as a revenue-raising measure. It was to have taken effect in 2012.
“Small business owners are the engine of our economy and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork,” Obama said today in a statement released by the White House.
To cover the cost of the forgone revenue from the repeal, the legislation Obama signed today includes provisions that will curtail health-insurance tax credits in the health-care law. The president signed the bill despite his objections to those changes.
“I look forward to continuing to work with Congress to improve the tax credit policy in this legislation and I am eager to work with anyone with ideas about how we can make health care better or more affordable,” he said in the statement.
The tax reporting requirement, dubbed 1099 for the tax form it would have required, drew widespread criticism after Congress passed it last year.
Under the provision, businesses would have had to report transactions totaling at least $600 in a year paid to all businesses for goods and services. The repeal law returns such information reporting to its previous state, in which businesses must report only payments to unincorporated businesses for services.
Congress wrote the 1099 provision to combat tax evasion by businesses that underreport income. Business groups argued that the law created a paperwork burden for minimal benefit, and they lobbied for repeal.
Lawmakers in both parties agreed, and Obama endorsed changes to the 1099 provision in his State of the Union speech.
The biggest problem they encountered was covering the cost of the $21.9 billion the provision was estimated to raise. The Senate voted 81-17 on Feb. 2 to repeal the 1099 provision and offset it with spending cuts.
The House took a different approach, voting 314-112 on March 3 to pass the version of the bill that became law today. The Senate passed the House version, 87-12, on April 5.
Health Tax Credits
The new law changes the portion of the health-care law that deals with the health insurance tax credits that low- and middle-income Americans will get.
Eligibility for the tax credits, which are paid directly to health insurers, is determined each year by examining income from a prior year. At the end of each year, there is a reconciliation through which the government can seek repayment of credits from people whose incomes rose.
The new law changes the calculation and will require more people to return overpayments. Democrats maintained that this portion of the legislation represented a tax increase for people who happened to receive a year-end bonus.
The bill Obama signed also repeals a separate tax reporting requirement that was passed in another law last year. That rule, which took effect Jan. 1, required landlords to report more information about their business expenses.
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