NPGA has joined with the U.S. Chamber of Commerce in calling for Congress to repeal Section 9006 of the recently enacted health care reform law before it goes into effect in 2012. Unless this section, referred colloquially to as the 1099 reporting mandate, is repealed, 40 million entities, including governments, nonprofits, and businesses of all sizes will be subjected to onerous data collection and IRS information filing burdens on virtually all non-credit card purchases totaling $600 or more with any vendor in a tax year. This includes office supplies, shipping costs, and telephone and internet services.
The 1099 reporting mandate will impose substantial paperwork and reporting burdens on the backs of businesses —especially small businesses. In order to comply, these entities will have to institute new record-keeping and data reporting requirements to track every purchase by vendor and payment method. This will increase accounting costs and potentially expose businesses to IRS audits. Moreover, the 1099 mandate will alter behavior in the marketplace, with negative consequences for smaller merchants by driving purchases away from small vendors and startups. Businesses may find it advantageous to consolidate their purchases with several large vendors instead of a number of smaller ones.
NPGA and the U.S. Chamber supported an amendment sponsored by Senator Mike Johanns (R-NE) to move Senate small business legislation to repeal the 1099 mandate. Despite bipartisan support, the ammendment failed by a vote of 46-52. Over in the House of Representatives, Congressman Dan Lungren (R-CA) introduced H.R. 5141 (The ‘‘Small Business Paperwork Mandate Elimination Act”). This legislation would also completely repeal the new 1099 requirement.
An alternative legislative approach proposed by Senator Bill Nelson (D-FL) partially offsets the 1099 requirement by raising the spending amount from $600 to $5,000 annually, exempting organizations with 25 or fewer employees, and eliminating all payments made by credit card from reporting. NPGA does not support the Nelson approach because it still requires expanded paperwork. Even with the exemption and higher monetary threshold, many small propane businesses would still spend critical time and energy tracking vendor purchases, obtaining taxpayer identification numbers, and distributing 1099 forms.
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