Reid says Democrats will offer alternative 1099 language

Generally, Baucus and congressional lawmakers across both parties backed the repeal language included in the Senate-passed Federal Aviation Administration authorization bill that pays for the bill with unused, previously appropriated federal funds as determined by the Office of Management and Budget. 

Although the small business measure is under consideration on the Senate floor, lawmakers aren’t likely to make much headway before clearing the latest short-term continuing resolution (CR) to fund the government through April 8 before leaving for a weeklong recess.

On Monday, Sen. Mike Johanns (R-Neb.) said he would offer the House-passed standalone version as an amendment to legislation to fund the Small Business Administration (SBA) for 2011, which Democrats say will create jobs. 

Republicans argue it’s the same offset offered by Democrats last year to pay for the “doc fix.”

The 1099 provision requires businesses to file paperwork to every vendor with which they purchase at least $600 in goods and services and is estimated to bring in an additional $22 billion in revenue. 

The White House and House and Senate lawmakers across both parties back the elimination of the 1099 provision but have been at odds for nearly a year over how to make up for the lost revenue. 

Johanns said he was confident he had enough votes to tack for his version of the repeal although it may be two weeks now before the amendment gets a vote unless the Senate decides to consider amendments this week. 

On March 3, the House passed a 1099 repeal measure that requires taxpayers who receive federal health insurance subsidies to reimburse the IRS if they earn more than 400 percent of the poverty line and are deemed ineligible. Taxpayers would be required to pay back only the amount of the subsidy and won’t levied with penalties above that amount, according to House Ways and Means Republican staff. 

Some taxpayers could receive a subsidy even though they didn’t qualify because they are self-reporting on data that is based on a two-year window and their eligibility could change significantly during that time. Under current law, those receiving the subsidy are required to report going over the level that makes them ineligible for premium assistance, according to Republican staff. 

Some House Democrats say the bill’s offset creates a $25 billion tax hike on the middle class because it could ensnare taxpayers who straddle the 400 percent income line and that a mere year-end bonus could push taxpayers “over the cliff” and force them to repay the money. 

Meanwhile, House Republicans have argued that those taxpayers who exceed the income levels shouldn’t receive the subsidy and should pay it back.