SBA Advocate Backs '1099' Repeal

Small businesses’ watchdog inside the federal government today endorsed repeal of a health care reform provision that would increase the paperwork burden imposed on businesses.

Winslow Sargeant, chief counsel of the Small Business Administration’s Office of Advocacy, said Congress should repeal a provision that requires businesses to file a 1099 form with the Internal Revenue Service any time they spend more than $600 a year with any business for anything, whether it’s good or services. That health care reform provision, scheduled to go into effect in 2012, dramatically expands the current 1099 reporting requirement, which now applies only to unincorporated service providers.

Small businesses have been up in arms about this new requirement ever since health care reform became law, because it would force them to file dozens, if not hundreds, more 1099 forms every year.

“We’ve heard strong opposition from small business about the new 1099 requirement, and the message we heard was repeal,” Sargeant said. “I endorse repeal.”

Sargeant’s endorsement was welcomed by small business groups, but it wasn’t exactly a bold move. President Barack Obama already had conceded the 1099 provision is too burdensome and needs to be addressed. The senator who is responsible for including the provision in the health care reform bill in the first place, Senator Max Baucus, Democrat of Montana, has introduced legislation to repeal it.

Repeal of the 1099 requirement is going to happen, said Senator Mary Landrieu, Democrat of Louisiana, who chairs the Senate Small Business and Entrepreneurship Committee.

“We’ve already skinned that cat,” Landrieu said today as her committee held a hearing on regulatory burdens on small businesses.

Landrieu, however, may be getting a little ahead of herself. While there is bipartisan agreement that the 1099 provision needs to be repealed, there is no agreement yet on how to replace the revenue that would have been raised by this third-party reporting of business income.

Senator James Risch, Republican of Idaho, pointed out the provision could have been repealed in September, when Democrats rejected Republican legislation to do just that. Yesterday, a Republican attempt to repeal the provision by unanimous consent was derailed by objections from Democrats, he said.

Landrieu didn’t appreciate Risch’s remarks, because she said Republicans knew their proposals to offset the revenue that would be lost by 1099 would be unacceptable to Democrats. Republicans wanted to exempt more Americans from health care reform’s mandate to buy insurance, and delay funding of wellness and prevention programs until 2018.

“You did it in a very partisan and obnoxious way,” Landrieu told Risch. “That’s why we didn’t vote for it.”

What’s needed is an offset that both Republicans and Democrats can agree on, she said.

This cat fight over 1099 repeal came at the end of a hearing that featured widespread consensus over the need to protect small businesses from excessive regulation.

“It is my top priority to ensure that small businesses are not unfairly burdened by regulations,” Sargeant told the committee.

Senator Olympia Snowe of Maine, the committee’s ranking Republican, opposed Sargeant’s appointment to head the Office of Advocacy because she and many groups representing small businesses weren’t convinced he would be aggressive enough in opposing the Obama administration’s “regulatory rampage stampeding over small business.”

“I sincerely hope you prove us wrong,” she told Sargeant.

You need to more than a watchdog for small businesses, Snowe said, you need to “be a bulldog.”

“This isn’t a suggestion—it’s a fundamental obligation.”

After the hearing, one advocate for regulatory relief wasn’t convinced that Sargeant will be effective in this role.

“This administration doesn’t care about the work that Winslow does,” said Andrew Langer, president of the Institute for Liberty and former regulatory affairs director for the National Federation of Independent Business.

Obama administration officials don’t believe in reducing the regulatory burden on anybody, he said.

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Kent Hoover is the Washington bureau chief for bizjournals.