The 1099 Provision

Congress has voted to repeal a tax-reporting requirement for businesses, designed to raise revenues to finance health reform.

Both Democrats and Republicans largely agree on repealing the provision in the Affordable Care Act (ACA) that requires businesses file Form 1099 with the Internal Revenue Service for all vendor purchases totaling $600 or more annually.

This so-called "1099 provision" was designed to capture tax revenues that may be lost if businesses fail to report income, and was one of the ACA’s revenue-raising provisions. Most lawmakers now agree that the measure would place an undue burden on business, especially small businesses.

The 1099 provision was designed to raise $19 billion in taxes from 2010 through 2020. The Senate voted to repeal the provision in early February, and the House is likely to follow. The Senate bill instructs the Obama administration to cut unspent federal funds to replace the money. The House version is expected to take a somewhat similar tack.

This Health Policy Brief examines how the 1099 provision works and how these funds might be replaced, and was published online on April 7, 2011 in Health Affairs.