Here's one part of health care law sure to be repealed

McClatchy NewspapersFebruary 1, 2011 

WASHINGTON — Joe Olivo and his family own a small printing company in Moorestown, N.J., and Washington's new demand for more paperwork is about to drive them crazy.

They're upset about a part of last year's health care law that has nothing to do with health care. Intended to boost tax compliance, the provision means that Olivo will have to keep tabs starting next year on how much his drivers spend for gasoline, his business lunches and even his expenses when he takes the train to Washington to urge repeal.

Olivo, like other business owners, will have to comply with the new requirement that businesses report purchases of goods or services of more than $600 from single vendors during a calendar year.

The good news for Olivo — and for all the Washington lawmakers who are eager but struggling to promote bipartisanship — is that virtually everyone in power, regardless of party or ideology, agrees that the requirement has to go.

President Barack Obama mentioned it in last week's State of the Union address, calling it "a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses."

The Senate voted 81-17 on Wednesday to repeal it. A similar measure, sponsored by Republican U.S. Rep. Dan Lungren of California in the House of Representatives, has a majority pledging support and is expected to pass.

But there's one sobering problem with repealing it.

The provision, known informally as the 1099 law after the Internal Revenue Service form, was adopted because it's supposed to raise money. Estimates are that businesses would report more income to the IRS to avoid penalties, so the government would gain about $19.3 billion over 10 years.

However, the bills to repeal it provide no offsets for the foregone revenue.

Lungren argues that the bill would erase the equivalent of a tax increase, so it would pay for itself by helping small businesses produce more revenue. Jon Summers, a spokesman for Senate Majority Leader Harry Reid, D-Nev., said efforts to work with the GOP to find offsets had proven fruitless, so "having heard from small businesses that this provision will impose undue burdens on them, Democrats decided that the most important thing is to address their concerns."

The National Federation of Independent Business, the powerful small business lobby, is pushing hard for repeal. "We're pretty confident about this," said Bill Rys, the federation's tax counsel.

That's because the effort is fueled by a constituency with deep roots in every congressional district.

In Raleigh, N.C., United Restaurant Equipment Co. Inc., buys from about 600 vendors a year, meaning it faces a potential explosion of paperwork to comply with the 1099 law.

"That's going to take time away from the business," sales manager Eric Margulies said. "We want to comply with the law, but what's the cost-benefit of doing this?"

In Denver, the Denver Bookbinding Co.'s president, Gail Lindley, figures she'll have to hire a part-timer to comply. Fourteen people now work at the 82-year-old company, and Lindley said, "If I have to hire a part-timer, I don't want them filling out government forms, I want them to be binding books."

She envisions all kinds of frightening scenarios. For instance, she just spent $800 at Home Depot to upgrade a classroom (the firm teaches bookbinding).

"Are they (Home Depot) going to have to give me a 1099 form?" she wondered.

In Montana, Riley Johnson, the state director of the National Federation of Independent Business, sounded an alarm in an opinion essay in local newspapers: "Who knew four little numbers in the health care law would unleash such a fury from small business owners?"

The tale of Olivo, the co-owner of Perfect Printing, appears typical. His parents started the company 32 years ago, and he now owns it with his wife, mother and two brothers. Forty-five people work there, down from a pre-recession high of 54.

He has drivers and salespeople who use gasoline, and they probably top $600 filling up from a single vendor during a year.

"I now have to track down who the gas station owners are, get the proper information and submit to them a form of how much we spent with each business," Olivo said.

He got a taste of the 1099 craziness himself last week when he came to Washington, at his own expense, to testify before congressional committees on repeal.

Olivo took the train from Philadelphia to Washington. If he racks up more than $600 in identical fares next year, he has to report it. He stayed at a Marriott hotel, and next year he'd have to learn the identity of its owner; if he spends more than $600 in hotels owned by the same entity, the government has to know.

If he spends more than $600 eating at places owned by the same company in 2012, he needs to report it.

"This is a nightmare," Olivo said.

Lawmakers understand.

"1099 is one of those areas that we know we need to address," Reid said. "There are a number of proposals out there; some are paid for, some aren't paid for."

One way or another, he vowed, "It's something we're going to get accomplished."

ON THE WEB

Rep. Lungren's legislation

Sen. Johanns' legislation

Sens. Reid and Baucus' legislation

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For more McClatchy politics coverage visit Planet Washington

McClatchy Newspapers 2010

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