99–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 112–16 

COMPREHENSIVE 1099 TAXPAYER PROTECTION AND REPAYMENT OF EXCHANGE SUBSIDY OVERPAYMENTS ACT 

OF 2011 

FEBRUARY 22, 2011.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 705] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 705) to amend the Internal Revenue Code of 1986 to repeal the expansion of information reporting requirements to payments made to corporations, payments for property and other gross 

proceeds, and rental property expense payments, and for other purposes, having considered the same, report favorably thereon with 

an amendment and recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. Summary and Background ........................................................................... 2 

II. Explanation of the Bill .................................................................................. 4 

A. Repeal of Expansion of Information Reporting Requirements 

(sec. 2 of the bill and sec. 6041 of the Code) ................................ 4 

B. Repeal of Information Reporting Requirements with Respect 

to Real Estate Expenses (sec. 3 of the bill and sec. 6041 of 

the Code) ......................................................................................... 6 

C. Increase in Amount of Overpayment of Health Care Credit 

Which is Subject to Recapture (sec. 4 of the bill and sec. 

36B of the Code) ............................................................................. 8 

III. Votes of the Committee ................................................................................. 13 

IV. Budget Effects of the Bill .............................................................................. 14 

V. Other Matters To Be Discussed Under the Rules of the House ................ 20 

VI. Changes in Existing Law Made by the Bill, as Reported ........................... 23 

VII. Dissenting Views ........................................................................................... 26 


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The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011’’. 

SEC. 2. REPEAL OF EXPANSION OF INFORMATION REPORTING REQUIREMENTS TO PAYMENTS 

MADE TO CORPORATIONS AND TO PAYMENTS FOR PROPERTY AND OTHER GROSS 

PROCEEDS. 

(a) APPLICATION TO CORPORATIONS.—Section 6041 of the Internal Revenue Code of 

1986 is amended by striking subsections (i) and (j). 

(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—Subsection (a) of section 6041 of such Code is amended— 

(1) by striking ‘‘amounts in consideration for property,’’, and 

(2) by striking ‘‘gross proceeds,’’ both places it appears. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011. 

SEC. 3. REPEAL OF EXPANSION OF INFORMATION REPORTING REQUIREMENTS FOR RENTAL 

PROPERTY EXPENSE PAYMENTS. 

(a) IN GENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended 

by striking subsection (h). 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to payments made after December 31, 2010. 

SEC. 4. INCREASE IN AMOUNT OF OVERPAYMENT OF HEALTH CARE CREDIT WHICH IS SUBJECT TO RECAPTURE. 

(a) IN GENERAL.—Clause (i) of section 36B(f)(2)(B) of the Internal Revenue Code 

of 1986 is amended to read as follows: 

‘‘(i) IN GENERAL.—In the case of a taxpayer whose household income 

is less than 400 percent of the poverty line for the size of the family 

involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar amount determined in accordance with the following table (one-half of such 

amount in the case of a taxpayer whose tax is determined under section 

1(c) for the taxable year): 

‘‘If the household income (expressed as a percent of 

poverty line) is: The applicable dollar amount is: 

Less than 200% .......................................................................................... $600 

At least 200% but less than 300% ........................................................... $1,500 

At least 300% but less than 400% ........................................................... $2,500.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable 

years ending after December 31, 2013. 

I. SUMMARY AND BACKGROUND

A. PURPOSE AND SUMMARY

The bill, H.R. 705 (the ‘‘Comprehensive 1099 Taxpayer Protection 

and Repayment of Exchange Subsidy Overpayments Act of 2011’’), 

as amended, reported by the Committee on Ways and Means, provides for the repeal of the expanded information reporting requirements, enacted in section 9006 of the Patient Protection and Affordable Care Act of 2010 (‘‘PPACA’’), Pub. L. No. 111–148 (March 

23, 2010), the repeal of the information reporting requirements 

with respect to real estate expenses enacted in section 2101 of the 

Small Business Jobs Act of 2010 (‘‘SBJA’’), Pub. L. No. 111–240 

(September 27, 2010), and an increase in the amount of the required repayment of overpayment of health care credits. 

Section 2 of the bill repeals the PPACA changes to section 6041 

that provide rules for payments to corporations, provide additional 


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regulatory authority and impose a reporting requirement with respect to gross proceeds from property. Section 3 repeals the SBJA 

change to section 6041 that subjects recipients of rental income 

from real estate, who are not otherwise considered to be engaged 

in a trade or business, to the same information reporting requirements as taxpayers who are considered to be engaged in a trade 

or business. 

Section 4 increases the amount of the required repayment of 

overpayment of advance payment of the premium assistance credits 

for health insurance purchased through an exchange. 

B. BACKGROUND AND NEED FOR LEGISLATION

Originally enacted in 2010 to help finance the cost of PPACA, the 

new provisions requiring expanded tax information reporting by 

businesses have generated considerable concern among taxpayers 

and policymakers alike. It is now widely acknowledged that, if allowed to go into effect, the expansion of these information reporting 

requirements will impose a substantial tax compliance burden on 

small businesses, forcing them to devote scarce resources to tax filing instead of to business expansion and job creation. Similarly, the 

subsequently enacted provision in SBJA that further expands these 

Form 1099 reporting requirements to owners of rental real estate 

has already begun to ensnare millions of American families in a 

complex web of new tax filing requirements. Because the burdens 

on taxpayers resulting from the imposition of these new Form 1099 

reporting requirements outweigh any potential improvement in tax 

compliance, the bill reflects a consensus that these new rules 

should be repealed. 

In addition, given the Federal government’s current fiscal situation, it is imperative that Congress scrutinize the Federal budget 

to identify the potential for waste, fraud, and abuse, and to make 

appropriate changes to Federal programs in order to better protect 

taxpayer dollars. Under PPACA, the design of the new refundable 

tax credits for purchasing health insurance through exchanges 

gives rise to the potential for such waste, fraud, and abuse due to 

the combination of income determination rules that are highly susceptible to error and of strict limits on the recapture of overpayments of these exchange subsidies where income has been underestimated. Accordingly, the bill seeks to reduce waste, fraud, and 

abuse by improving the mechanism by which exchange subsidy 

overpayments are to be repaid. 

C. LEGISLATIVE HISTORY

Background 

H.R. 705 was introduced on February 15, 2011, and was referred 

to the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up the bill on February 17, 2011, and ordered the bill, as amended, favorably reported. 


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1Secs. 6031 through 6060. 

2Sec. 6041(a). Information returns are generally submitted electronically on Forms 1096 and 

Forms 1099, although certain payments to beneficiaries or employees may require use of Forms 

W–3 and W–2, respectively. Treas. Reg. sec. 1.6041–1(a)(2). 3Sec. 6041(a) requires reporting of payments ‘‘other than payments to which section 

6042(a)(1), 6044(a)(1), 6047(c), 6049(a) or 6050N(a) applies and other than payments with respect to which a statement is required under authority of section 6042(a), 6044(a)(2) or 6045[.]’’ 

The payments thus excepted include most interest, royalties, and dividends. 4Treas. Reg. sec. 1.6041–3(p). 

5The Patient Protection and Affordable Care Act, Pub. L. No. 111–148, sec. 9006 (March 23, 

2010). 

Committee hearings 

The Committee on Ways and Means held a full Committee hearing on January 20, 2011, on fundamental tax reform. This hearing 

focused on the economic and administrative burdens imposed by 

the current structure of the Federal income tax, including with respect to the burdens associated with the new Form 1099 reporting 

requirements. 

The Committee on Ways and Means held a full Committee hearing on January 26, 2011, on the health care law’s impact on jobs, 

employers, and the economy, including the impact of PPACA’s expanded Form 1099 reporting requirements. 

The Committee on Ways and Means held full Committee hearings on February 15, 2011, and February 16, 2011, with Secretary 

of the Treasury Timothy F. Geithner and Secretary of Health and 

Human Services Kathleen Sebelius, respectively, on the President’s 

Fiscal Year 2012 Budget, including the President’s proposal relating to information reporting on payments to corporations and payments for property and the Administration’s plans to implement 

various aspects of PPACA. 

II. EXPLANATION OF THE BILL

A. REPEAL OF EXPANSION OF INFORMATION REPORTING

REQUIREMENTS (SEC. 2 OF THE BILL AND SEC. 6041 OF THE CODE)

Present law 

A variety of information reporting requirements apply under 

present law.1 The primary provision governing information reporting by payors requires an information return by every person engaged in a trade or business who makes payments to any one 

payee aggregating $600 or more in any taxable year in the course 

of that payor’s trade or business.2 Reportable payments include 

compensation for both goods and services, and may include gross 

proceeds. Certain enumerated types of payments that are subject 

to other specific reporting requirements are carved out of reporting 

under this general rule by regulation.3 Another carveout excepts 

payments to corporations from reporting requirements.4

For payments made after December 31, 2011, the class of payments subject to reporting was expanded in two ways.5 First, the 

regulatory carveout for payments to corporations was expressly 

overridden by the addition of section 6041(i). In addition, information reporting requirements were expanded to include gross proceeds paid in consideration for any type of property. The payor is 

required to provide the recipient of the payment with an annual 

statement showing the aggregate payments made and contact inVerDate Mar 15 2010 02:05 Feb 24, 2011 Jkt 099006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR016.XXX HR016

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6Sec. 6041(d). Specifically, the recipient of the payment is required to provide a Form W–9 

to the payor, which enables the payee to provide the recipient of the payment with an annual 

statement showing the aggregate payments made and contact information for the payor. If a 

Form W–9 is not provided, the payor is required to ‘‘backup withhold’’ tax at a rate of 28 percent 

of the gross amount of the payment unless the payee has otherwise established that the income 

is exempt from backup withholding. The backup withholding tax may be credited by the payee 

against regular income tax liability, i.e., it is effectively an advance payment of tax, similar to 

the withholding of tax from wages. 7Sec. 6041(h); Small Business Jobs Act of 2010, Pub. L. No. 111–240, sec. 2101 (Sept. 27, 

2010). 8Treasury has not promulgated regulations defining these ‘‘minimal amounts of rental income’’ or ‘‘hardship’’ cases. 9Secs. 6042 (dividends), 6045 (broker reporting) and 6049 (interest), as well as the Treasury 

regulations thereunder. 10See Treas. Reg. sec. 31.3406(h)–3. 11Sec. 6721. 12Sec. 6722. 13Sec. 6723. 

formation for the payor.6 The regulations generally except from reporting payments to exempt organizations, governmental entities, 

international organizations, or retirement plans. 

Additionally, the requirement that businesses report certain payments is generally not applicable to payments by persons engaged 

in a passive investment activity. However, beginning in 2011, recipients of rental income from real estate generally are subject to 

the same information reporting requirements as taxpayers engaged 

in a trade or business.7 In particular, rental income recipients making payments of $600 or more to a service provider (such as a 

plumber, painter, or accountant) in the course of earning rental income are required to provide an information return (typically Form 

1099–MISC) to the IRS and to the service provider. Exceptions to 

this reporting requirement are made for (i) individuals who rent 

their principal residence on a temporary basis, including members 

of the military or employees of the intelligence community (as defined in section 121(d)(9)), (ii) individuals who receive only minimal 

amounts of rental income, as determined by the Secretary in accordance with regulations, and (iii) individuals for whom the requirements would cause hardship, as determined by the Secretary 

in accordance with regulations.8

Detailed rules are provided for the reporting of various types of 

investment income, including interest, dividends, and gross proceeds from brokered transactions (such as a sale of stock).9 In general, the requirement to file Form 1099 applies with respect to 

amounts paid to U.S. persons and is linked to the backup withholding rules of section 3406. Thus, a payor of interest, dividends 

or gross proceeds generally must request that a U.S. payee (other 

than certain exempt recipients) furnish a Form W–9 providing that 

person’s name and taxpayer identification number.10 That information is then used to complete the Form 1099. 

Failure to comply with the information reporting requirements 

results in penalties, which may include a penalty for failure to file 

the information return,11 a penalty for failure to furnish payee 

statements,12 or failure to comply with other various reporting requirements.13

Reasons for change 

The Committee understands that there is a significant tax gap, 

or difference between the amount of tax owed by taxpayers and the 

amount voluntarily paid to the IRS, that must be addressed. The 


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14Secs. 6031 through 6060. 15Sec. 6041(a). Information returns are generally submitted electronically on Forms 1096 and 

Forms 1099, although certain payments to beneficiaries or employees may require use of Forms 

W–3 and W–2, respectively. Treas. Reg. sec. 1.6041–1(a)(2). 16Sec. 6041(a) requires reporting of payments ‘‘other than payments to which section 

6042(a)(1), 6044(a)(1), 6047(c), 6049(a) or 6050N(a) applies and other than payments with respect to which a statement is required under authority of section 6042(a), 6044(a)(2) or 6045[.]’’ 

The payments thus excepted include most interest, royalties, and dividends. 17Treas. Reg. sec. 1.6041–3(p). 18The Patient Protection and Affordable Care Act, Pub. L. No. 111–148, sec. 9006 (March 23, 

2010). 

Committee also recognizes that information reporting requirements 

generally improve taxpayer compliance. However, the Committee is 

concerned that the expansion of the information reporting requirements imposes a substantial tax compliance burden on small businesses, including costs to acquire new software or pay for additional accounting services. The Committee believes this burden is 

disproportionate as compared with any resulting improvement in 

tax compliance and therefore believes that these requirements 

should be repealed in their entirety. The Committee will continue 

to explore other potential solutions to the tax gap problem. 

Explanation of provision 

Under the provision, the changes to section 6041 enacted under 

section 9006 of the Patient Protection and Affordable Care Act that 

provide rules for payments to corporations, provide additional regulatory authority and impose a reporting requirement with respect 

to gross proceeds from property, are repealed in their entirety. 

Effective date 

This provision is effective for payments made after December 31, 

2011. 

B. REPEAL OF INFORMATION REPORTING REQUIREMENTS WITH RESPECT TO REAL ESTATE EXPENSES (SEC. 3 OF THE BILL AND SEC. 

6041 OF THE CODE)

Present law 

A variety of information reporting requirements apply under 

present law.14 The primary provision governing information reporting by payors requires an information return by every person engaged in a trade or business who makes payments to any one 

payee aggregating $600 or more in any taxable year in the course 

of that payor’s trade or business.15 Reportable payments include 

compensation for both goods and services, and may include gross 

proceeds. Certain enumerated types of payments that are subject 

to other specific reporting requirements are carved out of reporting 

under this general rule by regulation.16 Another carveout excepts 

payments to corporations from reporting requirements.17

For payments made after December 31, 2011, the class of payments subject to reporting was expanded in two ways.18 First, the 

regulatory carveout for payments to corporations was expressly 

overridden by the addition of section 6041(i). In addition, information reporting requirements were expanded to include gross proceeds paid in consideration for any type of property. The payor is 

required to provide the recipient of the payment with an annual 

statement showing the aggregate payments made and contact inVerDate Mar 15 2010 02:05 Feb 24, 2011 Jkt 099006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR016.XXX HR016

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19Sec. 6041(d). Specifically, the recipient of the payment is required to provide a Form W– 

9 to the payor, which enables the payee to provide the recipient of the payment with an annual 

statement showing the aggregate payments made and contact information for the payor. If a 

Form W–9 is not provided, the payor is required to ‘‘backup withhold’’ tax at a rate of 28 percent 

of the gross amount of the payment unless the payee has otherwise established that the income 

is exempt from backup withholding. The backup withholding tax may be credited by the payee 

against regular income tax liability, i.e., it is effectively an advance payment of tax, similar to 

the withholding of tax from wages. 20Sec. 6041(h); Small Business Jobs Act of 2010, Pub. L. No. 111–240, sec. 2101 (Sept. 27, 

2010). 21Treasury has not promulgated regulations defining these ‘‘minimal amounts of rental income’’ or ‘‘hardship’’ cases. 22Secs. 6042 (dividends), 6045 (broker reporting) and 6049 (interest), as well as the Treasury 

regulations thereunder. 23See Treas. Reg. sec. 31.3406(h)–3. 24Sec. 6721. 25Sec. 6722. 26Sec. 6723. 

formation for the payor.19 The regulations generally except from reporting payments to exempt organizations, governmental entities, 

international organizations, or retirement plans. 

Additionally, the requirement that businesses report certain payments is generally not applicable to payments by persons engaged 

in a passive investment activity. However, beginning in 2011, recipients of rental income from real estate generally are subject to 

the same information reporting requirements as taxpayers engaged 

in a trade or business.20 In particular, rental income recipients making payments of $600 or more to a service provider (such as a 

plumber, painter, or accountant) in the course of earning rental income are required to provide an information return (typically Form 

1099–MISC) to the IRS and to the service provider. Exceptions to 

this reporting requirement are made for (i) individuals who rent 

their principal residence on a temporary basis, including members 

of the military or employees of the intelligence community (as defined in section 121(d)(9)), (ii) individuals who receive only minimal 

amounts of rental income, as determined by the Secretary in accordance with regulations, and (iii) individuals for whom the requirements would cause hardship, as determined by the Secretary 

in accordance with regulations.21

Detailed rules are provided for the reporting of various types of 

investment income, including interest, dividends, and gross proceeds from brokered transactions (such as a sale of stock).22 In general, the requirement to file Form 1099 applies with respect to 

amounts paid to U.S. persons and is linked to the backup withholding rules of section 3406. Thus, a payor of interest, dividends 

or gross proceeds generally must request that a U.S. payee (other 

than certain exempt recipients) furnish a Form W–9 providing that 

person’s name and taxpayer identification number.23 That information is then used to complete the Form 1099. 

Failure to comply with the information reporting requirements 

results in penalties, which may include a penalty for failure to file 

the information return,24 and a penalty for failure to furnish payee 

statements 25 or failure to comply with other various reporting requirements.26

Reasons for change 

The Committee understands that there is a significant tax gap, 

or difference between the amount of tax owed by taxpayers and the 

amount voluntarily paid to the IRS, that must be addressed. The 


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27 Individuals enrolled in multistate plans, pursuant to section 1334 of the Patient Protection 

and Affordable Care Act, Pub. L. No. 111–148, are also eligible for the credit. 28Sec. 1412 of the Patient Protection and Affordable Care Act, Pub. L. No. 111–148, describes 

the program for advance payment of the premium assistance credit. 29 Although the credit is generally payable in advance directly to the insurer, individuals may 

choose to purchase health insurance out-of-pocket and claim the credit at the end of the taxable 

Committee also recognizes that information reporting requirements 

generally improve taxpayer compliance. However, the Committee is 

concerned that the expansion of the information reporting requirements to owners of rental real estate imposes a significant tax compliance burden on taxpayers who are not otherwise engaged in 

business activity. The Committee believes this burden is disproportionate as compared with any resulting improvement in tax compliance and therefore believes that these requirements should be repealed in their entirety. The Committee will continue to explore 

other potential solutions to the tax gap problem. 

Explanation of provision 

Under the provision, recipients of rental income from real estate 

who are not otherwise considered to be engaged in a trade or business of renting property are not subject to the same information reporting requirements as taxpayers who are considered to be engaged in a trade or business. As a result, rental income recipients 

making payments of $600 or more to a service provider (such as a 

plumber, painter, or accountant) in the course of earning rental income are not required to provide an information return (typically 

Form 1099–MISC) to the IRS and to the service provider. 

Effective date 

The provision is effective for payments made after December 31, 

2010. 

C. INCREASE IN AMOUNT OF OVERPAYMENT OF HEALTH CARE CREDIT

WHICH IS SUBJECT TO RECAPTURE (SEC. 4 OF THE BILL AND SEC. 

36B OF THE CODE)

Present law 

Premium assistance credit 

For taxable years ending after December 31, 2013, section 36B 

provides a refundable tax credit (the ‘‘premium assistance credit’’) 

for eligible individuals and families who purchase health insurance 

through an exchange.27 The premium assistance credit, which is refundable and payable in advance directly to the insurer, subsidizes 

the purchase of certain health insurance plans through an exchange. 

To become entitled to an advance premium assistance credit 

under section 36B, an eligible individual enrolls in a plan offered 

through an exchange and reports his or her income to the exchange.28 Based on the information provided to the exchange, the 

individual receives an advance premium assistance credit based on 

income and the Treasury pays the premium assistance credit 

amount directly to the insurance plan in which the individual is 

enrolled. The individual then pays to the plan in which he or she 

is enrolled the dollar difference between the premium assistance 

credit amount and the total premium charged for the plan.29 IndiVerDate Mar 15 2010 02:05 Feb 24, 2011 Jkt 099006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR016.XXX HR016

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year. The amount of the reduction in premium as a result of the assistance credit is required 

to be included with each bill sent to the individual. 30 Individuals who are lawfully present in the United States but are not eligible for Medicaid 

because of their immigration status are treated as having a household income equal to 100 percent of FPL (and thus eligible for the premium assistance credit) as long as their household income does not actually exceed 100 percent of FPL. 31 As described in section 1402 of the Patient Protection and Affordable Care Act, Pub. L. No. 

111–148. 

viduals who fail to pay all or part of the remaining premium 

amount are given a mandatory three-month grace period prior to 

an involuntary termination of their participation in the plan. Eligibility for the advance premium assistance credit is generally based 

on the individual’s income for the taxable year ending two years 

prior to the enrollment period. 

The premium assistance credit is available for individuals (single 

or joint filers) with household incomes between 100 and 400 percent of the Federal poverty level (‘‘FPL’’) for the family size involved who do not receive health insurance through an employer or 

a spouse’s employer.30 Household income is defined as the sum of: 

(1) the taxpayer’s modified adjusted gross income, plus (2) the aggregate modified adjusted gross incomes of all other individuals 

taken into account in determining that taxpayer’s family size (but 

only if such individuals are required to file a tax return for the taxable year). Modified adjusted gross income is defined as adjusted 

gross income increased by: (1) the amount (if any) normally excluded by section 911 (the exclusion from gross income for citizens 

or residents living abroad), plus (2) any tax-exempt interest received or accrued during the tax year. To be eligible for the premium assistance credit, taxpayers who are married (within the 

meaning of section 7703) must file a joint return. Individuals who 

are listed as dependents on a return are ineligible for the premium 

assistance credit. 

As described in Table 1 below, premium assistance credits are 

available on a sliding scale basis for individuals and families with 

household incomes between 100 and 400 percent of FPL to help offset the cost of private health insurance premiums. The premium 

assistance credit amount is determined based on the percentage of 

income the cost of premiums represents, rising from two percent of 

income for those at 100 percent of FPL for the family size involved 

to 9.5 percent of income for those at 400 percent of FPL for the 

family size involved. Beginning in 2014, the percentages of income 

are indexed to the excess of premium growth over income growth 

for the preceding calendar year. Beginning in 2018, if the aggregate 

amount of premium assistance credits and cost-sharing reductions 31 exceeds 0.504 percent of the gross domestic product for that 

year, the percentage of income is also adjusted to reflect the excess 

(if any) of premium growth over the rate of growth in the consumer 

price index for the preceding calendar year. For purposes of calculating family size, individuals who are in the country illegally are 

not included. 

Premium assistance credits, or any amounts that are attributable to them, cannot be used to pay for abortions for which federal funding is prohibited. Premium assistance credits are not 

available for months in which an individual has a free choice 

voucher under section 139D. 


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32 As defined in section 1302(b) of the Patient Protection and Affordable Care Act, Pub. L. No. 

111–148. 33 A similar rule applies to additional benefits that are offered in multi-State plans, under section 1334 of the Patient Protection and Affordable Care Act, Pub. L. No. 111–148. 34Those eligible to purchase catastrophic plans either must have not reached the age of 30 

before the beginning of the plan year, or have certification of an affordability or hardship exemption from the individual responsibility payment, as described in sections 5000A(e)(1) and 

5000A(e)(5), respectively. 35 As defined in section 5000A(f). 36The 9.5 percent amount is indexed for calendar years beginning after 2014. 

The low income premium credit phase-out 

The premium assistance credit increases, on a sliding scale in a 

linear manner, as shown in Table 1 below. 

TABLE 1 

Household Income (expressed as a percent of FPL) Initial Premium 

(percentage) 

Final Premium 

(percentage) 

100% up to 133% .......................................................................................................... 2.0 2.0 

133% up to 150% .......................................................................................................... 3.0 4.0 

150% up to 200% .......................................................................................................... 4.0 6.3 

200% up to 250% .......................................................................................................... 6.3 8.05 

250% up to 300% .......................................................................................................... 8.05 9.5 

300% up to 400% .......................................................................................................... 9.5 9.5 

The premium assistance credit amount is tied to the cost of the 

second lowest-cost silver plan (adjusted for age) which: (1) is in the 

rating area where the individual resides, (2) is offered through an 

exchange in the area in which the individual resides, and (3) provides self-only coverage in the case of an individual who purchases 

self-only coverage, or family coverage in the case of any other individual. If the plan in which the individual enrolls offers benefits in 

addition to essential health benefits,32 even if the State in which 

the individual resides requires such additional benefits, the portion 

of the premium that is allocable to those additional benefits is disregarded in determining the premium assistance credit amount.33

Premium assistance credits may be used for any plan purchased 

through an exchange, including bronze, silver, gold and platinum 

level plans and, for those eligible,34 catastrophic plans. 

Minimum essential coverage and employer offer of health insurance coverage 

Generally, if an employee is offered minimum essential coverage 35 in the group market, including employer-provided health insurance coverage, the individual is ineligible for the premium assistance credit for health insurance purchased through a State exchange. 

If an employee is offered unaffordable coverage by his or her employer or the plan’s share of total allowed cost of provided benefits 

is less than 60 percent of such costs, the employee can be eligible 

for the premium assistance credit, but only if the employee declines 

to enroll in the coverage and satisfies the conditions for receiving 

a tax credit through an exchange. Unaffordable is defined as coverage with a premium required to be paid by the employee that is 

more than 9.5 percent of the employee’s household income, based 

on self-only coverage.36 The percentage of income that is considered 

unaffordable is indexed in the same manner as the percentage of 

income is indexed for purposes of determining eligibility for the 


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37Medicare and Medicaid Extenders Act of 2010, Pub. L. No. 111–309, sec. 208. Prior to the 

Medicare and Medicaid Extenders Act of 2010, for persons whose household income was below 

400 percent of the FPL, the amount of the increase in tax was limited to $400 ($250 for unmarried individuals who are not surviving spouses or filing as heads of households). 

credit (as discussed above). The Secretary of the Treasury is informed of the name and employer identification number of every 

employer that has one or more employees receiving a premium assistance credit. 

Procedures for determining eligibility 

In order to receive an advance payment of the premium assistance credit, during the open enrollment period for coverage during 

the next calendar year, exchange participants must provide to the 

exchange certain information from their tax return from two years 

prior. For example, if during the 2013 open enrollment period an 

individual applies for a premium assistance credit for 2014, the individual must provide his or her tax return from 2012. The IRS is 

authorized to disclose to the Department of Health and Human 

Services limited tax return information to verify a taxpayer’s income based on the most recent return information available to establish eligibility for advance payments of the premium assistance 

credit. Existing privacy and safeguard requirements apply. Individuals who do not qualify for advance payments of the premium assistance credit on the basis of their prior year income may apply 

for the premium assistance credit based on specified changes in circumstances. For individuals and families who did not file a tax return in the prior tax year, the Secretary of Health and Human 

Services is directed to establish alternative income documentation 

that may be provided to determine income eligibility for advance 

payments of the premium assistance credit. 

Reconciliation 

If the premium assistance credit received through advance payment exceeds the amount of premium assistance credit to which 

the taxpayer is entitled for the taxable year, the liability for the excess advance payment must be reflected on the taxpayer’s income 

tax return for the taxable year subject to a limitation on the 

amount of such liability. For persons with household income below 

500 percent of FPL, the liability for the excess payment for a taxable year is limited to a specific dollar amount (the ‘‘applicable dollar amount’’) as shown in Table 2 below (one half of the applicable 

dollar amount shown in Table 2 for unmarried individuals who are 

not surviving spouses or filing as heads of households).37

TABLE 2 

Household Income 

(expressed as a percent of FPL) 

Applicable Dollar 

Amount 

Less than 200% ............................................................................................................................................... $600 

At least 200% but less than 250% ................................................................................................................ 1,000 

At least 250% but less than 300% ................................................................................................................ 1,500 

At least 300% but less than 350% ................................................................................................................ 2,000 

At least 350% but less than 400% ................................................................................................................ 2,500 

At least 400% but less than 450% ................................................................................................................ 3,000 

At least 450% but less than 500% ................................................................................................................ 3,500 


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If the premium assistance credit for a taxable year received 

through advance payment is less than the amount of the credit to 

which the taxpayer is entitled for the year, the shortfall in the 

credit is also reflected on the taxpayer’s tax return for the year. 

The eligibility for and amount of the advance premium assistance credit is generally determined in advance of the coverage 

year, on the basis of household income and family size shown on 

the taxpayer’s return for the taxable year from two years prior, and 

the monthly premiums for qualified health plans in the individual 

market in which the taxpayer, spouse and any dependent enroll in 

an exchange. Any advance premium assistance credit is paid during the year for which coverage is provided by the exchange. In the 

subsequent year, the amount of advance premium assistance credit 

is required to be reconciled with the allowable refundable premium 

assistance credit for the year of coverage. Generally, this reconciliation is to be accomplished on the tax return filed for the year of 

coverage, based on that year’s actual household income, family size, 

and premiums. 

Separately, the provision requires that the exchange, or any person with whom it contracts to administer the insurance program, 

must report to the Secretary with respect to any taxpayer’s participation in the health plan offered by the Exchange. The information 

to be reported is information necessary to determine whether a person has received excess advance payments, identifying information 

about the taxpayer (such as name, taxpayer identification number, 

months of coverage) and any other person covered by that policy; 

the level of coverage purchased by the taxpayer; the total premium 

charged for the coverage, as well as the aggregate advance payments credited to that taxpayer; and information provided to the 

exchange for the purpose of establishing eligibility for the program, 

including changes of circumstances of the taxpayer since first purchasing the coverage. Finally, the party submitting the report must 

provide a copy to the taxpayer whose information is the subject of 

the report. 

Reasons for change 

The Committee believes that taxpayers with household income of 

at least 200 percent of FPL but less than 400 percent of FPL 

should be required to repay a portion of the overpayment of the 

premium assistance credit received. The Committee believes that it 

is equitable to increase the current repayment rates for these individuals. Furthermore, Congress never intended for a taxpayer with 

a household income that is 400 percent of FPL or above to be eligible for premium assistance credits. Thus, for any taxpayer with 

household income that is 400 percent of FPL or above, the Committee believes the taxpayer should be required to repay the full 

amount of any overpayment of the advance premium assistance 

credit. 

Explanation of provision 

Under the provision, the applicable dollar amount with respect 

to any excess advance payment of a taxpayer’s allowable premium 

assistance credit for a taxable year is revised as shown in Table 3 

below (one half of the applicable dollar amount shown in Table 3 


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for unmarried individuals who are not surviving spouses or filing 

as heads of households). 

TABLE 3 

Household Income (expressed as a percent of poverty line) Applicable Dollar Amount 

Less than 200% ............................................................................................................................................... $600 

At least 200% but less than 300% ................................................................................................................ 1,500 

At least 300% but less than 400% ................................................................................................................ 2,500 

Persons with household incomes of 400 percent of FPL and above 

must repay the full amount of the premium assistance credit received through an advance payment. 

Effective date 

The provision applies to taxable years ending after December 31, 

2013. 

III. VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statements are made concerning the votes of the Committee on Ways and Means in its consideration of H.R. 705, ‘‘Comprehensive 1099 Taxpayer Protection 

and Repayment of Exchange Subsidy Overpayments Act of 2011.’’ 

MOTION TO REPORT RECOMMENDATIONS

The bill H.R. 705 was ordered favorably reported, as amended, 

by a roll call vote of 21 yeas to 15 nays (with a quorum being 

present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Herger ............................. X ........... ............. Mr. Rangel ........................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Stark .............................. ........... X .............

Mr. Brady .............................. X ........... ............. Mr. McDermott ..................... ........... X .............

Mr. Ryan ............................... X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. Davis .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Boustany ......................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Heller .............................. X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Kind ............................... ........... X .............

Mr. Gerlach ........................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Price ............................... X ........... ............. Ms. Berkley ........................... ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Smith .............................. X ........... .............

Mr. Schock ............................ X ........... .............

Ms. Jenkins ........................... X ........... .............

Mr. Paulsen ........................... X ........... .............

Mr. Berg ................................ X ........... .............

Ms. Black .............................. X ........... .............

VOTES ON AMENDMENTS

The Crowley Amendment to the Chairman’s Amendment in the 

Nature of a Substitute to H.R. 705 failed to pass by a roll call vote 


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of 15 yeas to 21 nays (with a quorum being present). The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. ........... X ............. Mr. Levin .............................. X ........... .............

Mr. Herger ............................. ........... X ............. Mr. Rangel ........................... X ........... .............

Mr. Johnson ........................... ........... X ............. Mr. Stark .............................. X ........... .............

Mr. Brady .............................. ........... X ............. Mr. McDermott ..................... X ........... .............

Mr. Ryan ............................... ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Becerra .......................... X ........... .............

Mr. Davis .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Boustany ......................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Heller .............................. ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Kind ............................... X ........... .............

Mr. Gerlach ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Price ............................... ........... X ............. Ms. Berkley ........................... X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Smith .............................. ........... X .............

Mr. Schock ............................ ........... X .............

Ms. Jenkins ........................... ........... X .............

Mr. Paulsen ........................... ........... X .............

Mr. Berg ................................ ........... X .............

Ms. Black .............................. ........... X .............

IV. BUDGET EFFECTS OF THE BILL

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the 

bill, H.R. 705 as reported. 

The bill, as reported, is estimated to have the following effects 

on budget receipts for fiscal years 2011–2021: 


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B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, February 18, 2011. 

Hon. DAVE CAMP, Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 705, the Comprehensive 

1099 Taxpayer Protection and Repayment of Exchange Subsidy 

Overpayments Act of 2011. 

If you wish further details on the estimate, we will be pleased 

to provide them. The staff contacts are Kalyani Parthasarathy 

(CBO) and Pamela Moomau (JCT). 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

H.R. 705—Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 

Summary: H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 

2011, would repeal certain scheduled expansions in information reporting requirements, and modify repayment requirements for the 

advance premium assistance credits available to certain individuals 

starting in 2014 for the purchase of health insurance through 

health insurance exchanges. The staff of the Joint Committee on 

Taxation (JCT) estimates that enacting H.R. 705 would reduce revenues over the 2011–2021 period by $19.7 billion, and reduce outlays by $19.9 billion. JCT therefore estimates that enacting the legislation would reduce federal budget deficits by $166 million over 

the 2011–2021 period. 

Pay-as-you-go procedures apply because enacting the legislation 

would affect direct spending and revenues. JCT has determined 

that the tax provisions of the bill contain no intergovernmental 

mandates and one private-sector mandate as defined in the Unfunded Mandates Reform Act (UMRA). Based on information provided by JCT, the cost of the bill’s private-sector mandate would 

exceed the annual threshold established in UMRA for private-sector mandates ($142 million in 2011, adjusted annually for inflation) 

in each of the first five years the mandate is in effect. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 705 is shown in the following table. 


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By fiscal year, in millions of dollars— 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011–2016 2011–2021 

CHANGES IN REVENUES 

Repeal Information Reporting on Rental Property Expense 

Payments ............................................................................... * ¥227 ¥239 ¥251 ¥261 ¥275 ¥285 ¥299 ¥314 ¥325 ¥335 ¥1,253 ¥2,811 

Repeal 1099 Information Reporting Requirements for Certain 

Other Payments ..................................................................... 0 ¥263 ¥2,785 ¥1,995 ¥2,064 ¥2,135 ¥2,309 ¥2,413 ¥2,523 ¥2,636 ¥2,782 ¥9,242 ¥21,905 

Modify Repayment of Certain Tax Credits ................................ 0 0 0 107 287 435 601 782 870 915 995 829 4,990 

Total Estimated Changes in Revenues ..................................... 0 ¥490 ¥3,024 ¥2,139 ¥2,038 ¥1,975 ¥1,993 ¥1,930 ¥1,967 ¥2,046 ¥2,122 ¥9,666 ¥19,726 

On-budget ......................................................................... 0 ¥490 ¥3,024 ¥2,050 ¥1,827 ¥1,604 ¥1,555 ¥1,462 ¥1,484 ¥1,545 ¥1,601 ¥8,995 ¥16,644 

Off-budget ........................................................................ 0 0 0 ¥89 ¥211 ¥371 ¥438 ¥468 ¥483 ¥501 ¥521 ¥671 ¥3,082 

CHANGES IN DIRECT SPENDING 

Modify Repayment of Certain Tax Credits: 

Estimated Budget Authority ............................................. 0 0 0 ¥566 ¥1,314 ¥2,198 ¥2,661 ¥3,048 ¥3,207 ¥3,350 ¥3,547 ¥4,078 ¥19,892 

Estimated Outlays ............................................................ 0 0 0 ¥566 ¥1,314 ¥2,198 ¥2,661 ¥3,048 ¥3,207 ¥3,350 ¥3,547 ¥4,078 ¥19,892 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT FROM CHANGES IN REVENUES AND DIRECT SPENDING 

Estimated Deficit Impact a ........................................................ 0 490 3,024 1,573 724 ¥223 ¥668 ¥1,118 ¥1,240 ¥1,304 ¥1,425 5,588 ¥166 

On-budget ......................................................................... 0 490 3,024 1,484 513 ¥594 ¥1,106 ¥1,586 ¥1,723 ¥1,805 ¥1,946 4,917 ¥3,248 

Off-budget ........................................................................ 0 0 0 89 211 371 438 468 483 501 521 671 3,082 

Source: Staff of the Joint Committee on Taxation. Note: * = change in revenue between ¥$500,000 and $500,000. a Negative numbers indicate a reduction in the deficit; positive numbers indicate the opposite. 


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Basis of estimate: JCT estimated all of the effects of H.R. 705 on 

revenues and outlays. 

H.R. 705 would repeal expansions in two 1099 information reporting requirements currently scheduled to take effect in 2011 and 

2012. Under current law, businesses that pay more than $600 during a calendar year to an individual or unincorporated business for 

services rendered, or for certain investment income, are required to 

report that information to the recipients and the Internal Revenue 

Service on form 1099. Beginning in 2011, most landlords also became subject to those reporting requirements under current law. 

H.R. 705 would repeal that requirement, reducing revenues by an 

estimated $2.8 billion over the 2011–2021 period. In addition, 

under current law, beginning in 2012, certain additional payments 

will become subject to those reporting requirements, including payments made to corporations and payments made for a broader 

range of expenses. H.R. 705 would also repeal that expansion, reducing revenues by an estimated $21.9 billion over the 2011–2021 

period. 

Starting in 2014, qualifying taxpayers will become eligible to receive refundable health care premium assistance credits based on 

income estimated from tax returns for prior years. Taxpayers may 

later be required to repay some or all of the credit, subject to certain limits based on income, if their actual income proves to be 

higher than estimated. H.R. 705 would generally raise those limits, 

subjecting more taxpayers to the repayment requirement. JCT estimates that the provision will raise revenues by $5.0 billion and reduce outlays by $19.9 billion over the 2011–2021 period. The estimated effect on revenues includes a reduction of $3.1 billion in offbudget (Social Security) receipts over the 2011–2021 period. 

Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget reporting and enforcement procedures 

for legislation affecting direct spending or revenues. JCT estimates 

that enacting H.R. 705 would decrease both direct spending and 

revenues, and would result in a net increase in the deficit over the 

2011–2016 period, but would reduce the cumulative deficits over 

the 2011–2021 period. The pay-as-you-go procedures apply only to 

on-budget effects. 

The net changes in outlays and revenues that are subject to payas-you-go procedures are shown in the following table. 


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CBO ESTIMATE OF PAY-AS-YOU-GO ACT EFFECTS FOR H.R. 705, THE COMPREHENSIVE 1099 TAXPAYER PROTECTION AND REPAYMENT OF EXCHANGE SUBSIDY 

OVERPAYMENTS ACT OF 2011, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 17, 2011 

By fiscal year, in millions of dollars— 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011–2016 2011–2021 

NET ON-BUDGET INCREASE OR DECREASE (¥) IN THE DEFICIT 

Statutory Pay-As-You-Go Impact ........................................................................... 0 490 3,024 1,484 513 ¥594 ¥1,106 ¥1,586 ¥1,723 ¥1,805 ¥1,946 4,917 ¥3,248 

Memorandum: 

Changes in Outlays ...................................................................................... 0 0 0 ¥566 ¥1,314 ¥2,198 ¥2,661 ¥3,048 ¥3,207 ¥3,350 ¥3,547 ¥4,078 ¥19,892 

Changes in Revenues ................................................................................... 0 ¥490 ¥3,024 ¥2,050 ¥1,827 ¥1,604 ¥1,555 ¥1,462 ¥1,484 ¥1,545 ¥1,601 ¥8,995 ¥16,644 


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Intergovernmental and private-sector impact: JCT has determined that the bill contains no intergovernmental mandates and 

one private-sector mandate as defined in UMRA. That mandate 

would change limits on the amounts taxpayers would be required 

to repay for advance premium assistance tax credits associated 

with health insurance exchanges, in the event of an overpayment. 

Based on information provided by JCT, the cost of the mandate 

would exceed the annual threshold established in UMRA for private-sector mandates ($142 million in 2011, adjusted annually for 

inflation) in each of the first five years the mandate is in effect. 

Estimate prepared by: Kalyani Parthasarathy and Joshua 

Shakin. 

Estimate approved by: Frank Sammartino, Assistant Director for 

Tax Analysis. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: The effects of the 

bill on economic activity are so small as to be incalculable within 

the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF

THE HOUSE

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was a result of the Committee’s oversight review concerning the tax compliance burden on taxpayers and the 

potential for waste, fraud, and abuse with respect to exchange subsidies that the Committee concluded that it is appropriate to report 

the bill, as amended, favorably to the House of Representatives 

with the recommendation that the bill do pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (P.L. 104–4). 

The Committee has determined that the bill contains one private 

sector mandate: changes limitations on amounts required for repayment on reconciliation of advance premium assistance tax credits associated with health insurance exchange. 

The Committee has determined that the bill does not impose a 

Federal intergovernmental mandate on State, local, or tribal governments. 


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D. APPLICABILITY OF HOUSE RULE XXI 5(B)

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998 (the ‘‘IRS Reform Act’’) requires the staff 

of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a 

tax complexity analysis. The complexity analysis is required for all 

legislation reported by the Senate Committee on Finance, the 

House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. The staff of the Joint 

Committee on Taxation has identified only one such provision, 

which is discussed below. Pursuant to clause 3(h)(1) of rule XIII of 

the Rules of the House of Representatives, a summary description 

of that provision is provided, along with an estimate of the number 

and type of affected taxpayers, and a discussion regarding the relevant complexity and administrative issues. 

Following the analysis of the staff of the Joint Committee on 

Taxation are the comments of the IRS and Treasury. 

REPEAL OF EXPANDED INFORMATION REPORTING FOR PAYMENTS WITH

RESPECT TO PROPERTY OR PAYMENTS MADE TO CORPORATIONS

Summary description of provision 

Under the provision, section 6041 is amended to delete references 

to gross proceeds from property, a requirement that payments to 

corporations be reported, and a grant of additional regulatory authority. Accordingly, the changes to section 6041 enacted under section 9006 of the Patient Protection and Affordable Care Act are repealed in their entirety. 

As a result of the repeal, taxpayers are not required to file an information return for all payments aggregating $600 or more in 

a calendar year to any single corporation payee (except a tax-exempt corporation). Second, the payments to be reported do not include gross proceeds paid in consideration for property. 

Number of affected taxpayers 

It is estimated that the provision will affect more than 10 percent of individual or small business tax returns. 

Discussion 

According to the Government Accountability Office, only eight 

percent of approximately 50 million small businesses with less 

than $10 million in assets filed miscellaneous information return 


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38Government Accountability Office, IRS Could Do More to Promote Compliance by Third 

Parties with Miscellaneous Income Reporting Requirements, GAO–09–238 (January 2009). 39See e.g., ‘‘Tax Year 2001 Individual Income Tax Underreporting Gap,’’ <http://www.irs.gov/ 

pub/irs-utl/taxlgaplupdatel070212.pdf> at 2, finding that information reporting is the primary differentiator in compliance rates. See also, Joseph Bankman, ‘‘Eight Truths About Collecting Taxes from the Cash Economy,’’ 117 Tax Notes 506, 511 (2007). 40See, Senate Finance Committee, ‘‘America’s Healthy Future Act of 2009,’’ S. Rep 111–89, 

October 19, 2009) pp. 365–366. 41See e.g., Government Accountability Office, Costs and Uses of Third-Party Information Returns, November 2007, GAO–08–266, available at <http://www/gao.gov/new.items/d08266.pdf>, 

wherein the GAO, based on its case studies, found the compliance costs associated with filing 

information returns to be ‘‘relatively low.’’ 

Form 1099–MISC.38 If greater reporting from small businesses 

were available, it is possible that the IRS could more readily identify areas of underreported income of the payees. In general, the 

more payments to which information reporting and/or withholding 

applies, the greater the improvement in compliance.39 However, 

since the reporting requirements were expanded, numerous critics 

have pointed to disproportionate additional administrative burden 

on those required to comply with the reporting obligations. Thus, 

requiring information reporting for all payments aggregating $600 

or more in a calendar year to a corporation and for payments for 

property may outweigh the enhanced taxpayer compliance. 

At the time the expanded provisions were under consideration, a 

complexity analysis 40 suggested that the widespread use of computer technology to process and store business information should 

minimize the burden associated with generating and transmitting 

the information necessary to comply with the provision, regardless 

of the extent to which the taxpayer is currently subject to information reporting. Although the additional burden of expanded reporting would have depended on the extent to which taxpayers subject 

to the provision already had adequate procedures and systems in 

place to comply with existing information reporting requirements,41

uncertainty about the scope of the expansion, and the lack of administrative guidance to date has made it difficult for taxpayers to 

determine what steps would be necessary to comply with the expanded reporting. Repeal of the additional information reporting 

requirements avoids the need for small businesses to develop new 

bookkeeping systems necessary in time for implementation of the 

expanded reporting in 2012. In addition, it relieves the IRS of the 

need to develop new forms and outreach programs to educate the 

public about the changes in reporting obligations. 

Comments from IRS and Treasury 

No guidance would be required. 

The relevant forms and instructions would not need to be modified (Forms 1099, 1098, 3921, 3922, 5498, and W–2G), and the instructions for certain other information returns and publications 

would not need to be revised to reflect the elimination of the exception for payments to corporations and the exception for payments 

other than for services. 

The IRS would not need to modify existing tax systems to reflect 

this provision. 


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F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED

TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter A—Determination of Tax Liability 

* * * * * * * 

PART IV—CREDITS AGAINST TAX 

* * * * * * * 

Subpart C—Refundable Credits 

* * * * * * * 

SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED 

HEALTH PLAN. 

(a) * * * 

* * * * * * * 

(f) RECONCILIATION OF CREDIT AND ADVANCE CREDIT.— 

(1) * * * 

(2) EXCESS ADVANCE PAYMENTS.— 

(A) * * * 

(B) LIMITATION ON INCREASE.— 

ø(i) IN GENERAL.—In the case of a taxpayer whose 

household income is less than 500 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar amount determined in accordance with the following table (one-half of such amount in the case of a 


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taxpayer whose tax is determined under section 1(c) 

for the taxable year): 

øIf the household income (expressed as a percent of poverty line) is: The applicable dollar amount is: 

Less than 200% $600 

At least 200% but less than 250% $1,000 

At least 250% but less than 300% $1,500 

At least 300% but less than 350% $2,000 

At least 350% but less than 400% $2,500 

At least 400% but less than 450% $3,000 

At least 450% but less than 500% $3,500¿ 

(i) IN GENERAL.—In the case of a taxpayer whose 

household income is less than 400 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar 

amount determined in accordance with the following 

table (one-half of such amount in the case of a taxpayer 

whose tax is determined under section 1(c) for the taxable year): 

If the household income (expressed as 

a percent of poverty line) is: The applicable dollar amount is: 

Less than 200% ..................................................... $600

At least 200% but less than 300% ....................... $1,500

At least 300% but less than 400% ....................... $2,500. 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter A—Returns and Records 

* * * * * * * 

PART III—INFORMATION RETURNS 

* * * * * * * 

Subpart B—Information Concerning Transactions With 

Other Persons 

SEC. 6041. INFORMATION AT SOURCE. 

(a) PAYMENTS OF $600 OR MORE.—All persons engaged in a 

trade or business and making payment in the course of such trade 

or business to another person, of rent, salaries, wages, øamounts 


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25 

in consideration for property,¿ premiums, annuities, compensations, remunerations, emoluments, or other øgross proceeds,¿ fixed 

or determinable gains, profits, and income (other than payments to 

which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) 

applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 

6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the 

case of such payments made by the United States, the officers or 

employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate 

return to the Secretary, under such regulations and in such form 

and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such øgross proceeds,¿ gains, 

profits, and income, and the name and address of the recipient of 

such payment. 

* * * * * * * 

ø(h) TREATMENT OF RENTAL PROPERTY EXPENSE PAYMENTS.— 

ø(1) IN GENERAL.—Solely for purposes of subsection (a) and 

except as provided in paragraph (2), a person receiving rental 

income from real estate shall be considered to be engaged in 

a trade or business of renting property. 

ø(2) EXCEPTIONS.—Paragraph (1) shall not apply to— 

ø(A) any individual, including any individual who is 

an active member of the uniformed services or an employee of the intelligence community (as defined in section 

121(d)(9)(C)(iv)), if substantially all rental income is derived from renting the principal residence (within the 

meaning of section 121) of such individual on a temporary 

basis, 

ø(B) any individual who receives rental income of not 

more than the minimal amount, as determined under regulations prescribed by the Secretary, and 

ø(C) any other individual for whom the requirements 

of this section would cause hardship, as determined under 

regulations prescribed by the Secretary. 

ø(i) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘‘person’’ includes any corporation that is not an organization exempt 

from tax under section 501(a). 

ø(j) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to 

carry out the purposes of this section, including rules to prevent 

duplicative reporting of transactions¿ 

* * * * * * * 


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VII. DISSENTING VIEWS ON H.R. 705, THE COMPREHENSIVE 1099 

TAXPAYER PROTECTION AND REPAYMENT OF EXCHANGE SUBSIDY

OVERPAYMENTS ACT OF 2011 

We want the record to show clearly that the 15 minority members of the Ways and Means Committee voted in support of H.R. 

4, legislation to repeal the 1099 tax reporting requirement enacted 

as part of health reform. However, we were unified in opposition 

to the second bill, H.R. 705, the Comprehensive 1099 Taxpayer 

Protection and Repayment of Exchange Subsidy Overpayments Act 

of 2011. We opposed H.R. 705 because it would raise taxes on the 

middle class. 

According to the Joint Committee on Taxation, repealing the 

1099 provision has a cost of $24.9 billion over 10 years. Democrats 

are clearly on record supporting repeal of 1099 and paying for it 

as well. 

In the 111th Congress, all but one House Democrat supported 

passage of H.R. 5982, a bill to repeal the 1099 provision that was 

offset by closing a number of foreign tax credit loopholes to ship 

jobs overseas and other loopholes that promote tax avoidance. That 

bill failed under suspension of the rules in which two-thirds of the 

House must support the legislation. It failed because of almost uniform opposition by House Republicans—even though the bill was 

endorsed by and subject to a key vote by the National Federation 

of Independent Businesses. Only two Republicans supported the 

legislation—one of whom is no longer in Congress. 

Now, in the 112th Congress, our Republican colleagues on Ways 

and Means have chosen to pursue a financing mechanism for 1099 

repeal that forces the middle class to shoulder the expense of this 

provision for small businesses. It does this by eliminating a protection for individuals and families who obtain tax credits for health 

insurance, a protection that prevents substantial tax increases that 

result from unexpected changes in income or family status. As the 

consumer advocacy organization Families USA puts it, ‘‘House Republicans have introduced a proposal that would undermine protections in the Affordable Care Act for middle-class families and put 

the financial security of these families at risk.’’ 

Starting in 2014, the health reform law ensures health care is affordable for working families by making tax credits available for 

the purchase of health insurance for families with incomes below 

400 percent of poverty. The amount of the tax credit for which people are eligible is based on annual income for the year the credits 

are received. But, because people will need help paying their insurance premiums throughout the course of the year, the law provides 

for advance payments of the credits. These tax credits never go to 

the families—they are paid directly to health insurers to offset the 

cost of people’s health insurance premiums. In order to make advanced tax credit payments, the law bases the premiums on the 


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taxpayer’s most recent tax filing. At the time when taxpayers file 

their annual return, the advance payments are reconciled with 

their actual year income. If the advance payments are greater than 

the final tax credit, the taxpayer must pay the difference in the 

form of higher taxes. This process is often called a ‘‘true up.’’ Republicans charge that the true-up policy captures overpayments 

that are due to fraud. This is not true—the true-up policy in fact 

relies on taxpayers truthfully reporting their actual income for the 

year. If taxpayers do not report extra income on their return for 

the year, then the true-up policy would not apply. Section 1411(h) 

of the Affordable Care Act contains protections that guard against 

fraudulent overpayments and permits recoupment of such overpayments. This provision of the law permits the assessment of a penalty of up to $250,000 in the case of the submission of false or 

fraudulent information in order to obtain health tax credits. 

This true-up process will not be infrequent. The incomes of hourly-wage workers often fluctuate from week to week and are difficult 

to predict. Dependents may leave or return home at any point in 

the year. People may change jobs midyear, get an end-of-year 

bonus, or go from part-time employment to employment on a fulltime basis. Any of these changes would affect their eligibility for 

premium tax credits. 

However, the law also recognizes that this true up process can 

put families in a difficult financial situation. At these income levels, it is unlikely that people have the resources to pay what could 

be thousands of dollars of unanticipated taxes. So, the law protects 

them by capping tax increases. 

In the original law, the cap was a flat $250 for an individual and 

$600 for a family below 400% of the federal poverty level. This policy created a large cliff for people whose incomes increase to 400 

percent of poverty because they would suddenly be liable for 100 

percent of any tax credits received. 

Last December, in a bipartisan vote of 409–2, the Congress voted 

to alter the true-up policy. The President signed this policy into 

law. It converted the flat cap to a graduated income approach that 

protects those with lower incomes, but also mitigated the cliff that 

people faced at 400 percent of poverty by phasing the caps out up 

to 500 percent of poverty ($110,000 for a family of four). That was 

a trade-off Democrats were willing to make. The policy under current law (as modified by the December legislation) is as follows: 

Percent of Income Repayment for an individual 

Repayment for a 

family 

< 200% FPL ................................................................................................................. $300 $600 

200% – < 250% .......................................................................................................... 500 750 

250% – < 300% .......................................................................................................... 750 1,500 

300% – < 350% .......................................................................................................... 1,000 2,000

350% – < 400% .......................................................................................................... 1,250 2,500

400% – < 450% .......................................................................................................... 1,500 3,000

450% – < 500% .......................................................................................................... 1,750 3,500

In H.R. 705, the Ways and Means Republicans are reversing the 

December policy and reinstating the original cliff to generate more 

taxes from middle-class families. They are collapsing the income 

categories so that many people under 400 percent of poverty will 

owe $500 in higher taxes, and they are reinstating the cliff at 400 


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percent of poverty. In other words, H.R. 705 eliminates the protections for families with incomes between 400 and 500 percent of 

poverty ($88,000 to $110,000 for a family of four). If a family’s actual income was even one dollar above 400 percent of poverty, they 

could have to pay the IRS the entire value of their health insurance premium tax credit—which could be as high as nearly $12,000 

in 2014. 

Middle-income Americans will be forced to pay higher taxes 

under this proposal. The financial security of these families could 

be put in jeopardy when they are forced to pay the IRS the full 

value of their health premium tax credits simply because they accepted a better job, picked up extra shifts, received a holiday 

bonus, or saw a reduction in household size, such as a drop due to 

a death in the family or a child reaching adulthood. 

We would also like to note that each of our colleagues on the 

other side of the aisle signed the Americans for Tax Reform’s ‘‘Taxpayer Protection Pledge’’ committing to oppose any and all tax increases. Their party-line vote in support of this middle-income tax 

increase violates that pledge. 

According to the Joint Committee on Taxation, this Republican 

proposal will increase the number of uninsured by 266,000. Over 

a quarter of a million individuals will no longer receive health insurance out of fear that they will be forced to pay substantial 

amounts to the IRS at tax-time. 

The Republican proposal will also disproportionally affect families who live in parts of the country with higher health insurance 

premiums due to circumstances in the local market. While families 

in both high and low-cost insurance areas will be protected from 

having to pay more than 9.5 percent of their income for health coverage, families in high-cost insurance areas will receive tax credits 

in higher dollar amounts than families in low-cost areas because 

their coverage is more expensive, and these higher dollar amounts 

are what would be required to be fully repaid. 

If our Republican colleagues wonder why we refuse to return to 

the flawed true-up policy, the answer is simple: There are 25 billion reasons. With a score from the Joint Committee on Taxation 

of $25 billion, this bill gouges mostly middle-income American families by adding $25 billion in new taxes simply because they were 

doing the right thing and providing health insurance for their families. 

Another aspect of this bill that should be the topic of discussion 

on both sides of the aisle is the growing tax gap. In January of this 

year, the Committee received testimony from Taxpayer Advocate 

Nina Olson that, 

‘‘Noncompliance cheats honest taxpayers, who must pay more 

to make up the difference. According to the IRS’s most recent 

comprehensive estimate, the net tax gap stood at $290 billion 

in 2001, when 132 million tax returns were filed. This means 

that each taxpayer was effectively paying a ‘surtax’ of some 

$2,200 to subsidize noncompliance by others.’’ 

While we remain concerned about the burdens that may result 

from the 1099 reporting requirements that would go into effect in 

2012, it is important to note that the revenues that would have 


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come in to the Treasury as a result of those provisions were not 

additional taxes, as many have attempted to characterize them. 

This is increased revenue associated with encouraging greater compliance with our tax laws. While efforts to collect these dollars 

should not present burdensome new requirements on job-driving 

businesses, the Committee must work in a bipartisan fashion in 

order to ensure that the tax gap does not transfer tax liabilities to 

honest taxpayers in order to subsidize noncompliance to others. 

In closing, we reiterate our longstanding support for repealing 

the 1099 provision. However we refuse to do so on the backs of 

working Americans. We urge our colleagues on the other side of the 

aisle to seek a new financing mechanism for the 1099 repeal. We 

will gladly work with them to find an acceptable revenue source. 

This one is unacceptable. 

SANDER M. LEVIN. 

CHARLES B. RANGEL. 

PETE STARK. 

JIM MCDERMOTT. 

JOHN LEWIS. 

RICHARD NEAL. 

XAVIER BECERRA. 

MIKE THOMPSON. 

JOHN LARSON. 

EARL BLUMENAUER. 

RON KIND. 

BILL PASCRELL. 

SHELLEY BERKLEY. 

JOE CROWLEY. 

Æ 


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