Small Businesses -- 1099 Relief Expected to Fail

Small businesses have been shouting down the phone lines, bending the ears of their congressmen, and holding press conferences, pleading for help from Washington to relieve the massive paperwork burden coming their way as a result of the new health care reform law.  But, Senate sources tell Fox that help is not likely to come any time soon.

On Tuesday, the Senate is expected to take two key votes on measures that either fully or partial repeal a reporting requirement that mandates that all businesses file a 1099 form with the IRS for expenses totaling $600 or more in a year.

Sen. Mike Johanns, R-Neb, has sponsored the full repeal. The alternative amendment, authored by Sen. Bill Nelson, D-FL, would exempt businesses with 25 or fewer employees; all others would have to spend at least $5,000 before a 1099 would need to be filed. Both are amendments to a small business jobs bill.

Two senior Senate leadership aides, one Republican, one Democrat, tell Fox that neither measure is expected to garner the 60 votes necessary for approval.

A full repeal would deprive the federal government of an estimated $17 billion in revenue, with Johanns advocating that the money be removed from prevention and public health programs.  A vast majority of Democrats are, therefore, expected to support the Nelson provision, which pays for itself by an increase in taxes on big oil companies.

Republicans have said the partial repeal is only a half-measure, still requiring that small businesses track expenses, a position with which one powerful small business group agrees.

In  a letter to congressmen, the National Federation of Independent Businesses' Susan Eckerly warned that the group would consider this a "key vote", something that could affect future support for a member, and added, "At a time when our economy needs small businesses to help our country grow out of this recession, saddling them with expensive new requirements and paperwork burdens will only further hamper their ability to aid in our economic recovery. Small businesses need certainty, and the Johanns amendment is the only option to fully eliminate this new burden."

Small business support in this intense midterm election year, in which political oddsmakers predict major gains for Republicans, is considered crucial.   Democrats are expected to pass the small business jobs bill later this week, which creates a $30 billion loan program, a move that many will, no doubt, hope overshadows the 1099 controversy.