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65–195 2011

BURIED IN PAPERWORK: A 1099 UPDATE 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

FEBRUARY 9, 2011 

Small Business Committee Document Number 111–059 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


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HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Directory 


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C O N T E N T S 

Opening Statements: 

Graves, Hon. Sam ............................................................................................. 1 

Vela ́zquez, Hon. Nydia M. ............................................................................... 2 

WITNESSES 

Lungren, Hon. Daniel E., U.S. House of Representatives (CA–03) ..................... 4 

Kivett, Mr. R. Jerol, President, Kivett’s, Inc., Clinton, NC. On behalf of 

the National Federation of Independent Business ............................................ 34 

Eagleton, Mr. John ‘‘Mark’’, Managing Member, Eagleton Ventures, LLC, 

The Egg & I Restaurant, Golden, CO. On behalf of the National Restaurant 

Association ............................................................................................................ 24 

Shipley, Mr. Seth, Owner, Shipley’s Fine Jewelry, Hampstead, MD. On behalf 

of the National Retail Federation ....................................................................... 19 

Kegley, Mr. Mike, President, B.O.L.D. Homes, Inc., Union, KY. On behalf 

of the National Association of Home Builders ................................................... 41 

APPENDIX 

Prepared Statements: 

Lungren, Hon. Daniel E., U.S. House of Representatives (CA–03) .............. 7 

Kivett, Mr. R. Jerol, President, Kivett’s, Inc., Clinton, NC. On behalf 

of the National Federation of Independent Business ................................ 37 

Eagleton, Mr. John ‘‘Mark’’, Managing Member, Eagleton Ventures, LLC, 

The Egg & I Restaurant, Golden, CO. On behalf of the National Restaurant Association ....................................................................................... 26 

Shipley, Mr. Seth, Owner, Shipley’s Fine Jewelry, Hampstead, MD. On 

behalf of the National Retail Federation .................................................... 21 

Kegley, Mr. Mike, President, B.O.L.D. Homes, Inc., Union, KY. On behalf 

of the National Association of Home Builders ............................................ 43 

Statements for the Record: 

Altmire, Hon. Jason ......................................................................................... 64 

Landry, Hon. Jeff .............................................................................................. 67 

Tipton, Hon. Scott ............................................................................................. 65 

West, Hon. Allen ............................................................................................... 66 

Society of American Florists ............................................................................ 107 

United States Chamber of Commerce ............................................................. 95 

National Association of Chain Drugstores ..................................................... 89 

National Association of the Remodeling Industry ......................................... 78 

National Community of Pharmacists .............................................................. 92 

The Computer Technology Industry Association ........................................... 80 

American Association of Orthodontists ........................................................... 75 

Associated Builders and Contractors, INC ..................................................... 71 

Owner-Operator Independent Drivers Association ........................................ 73 

Letter to the Committee on Ways and Means ............................................... 68 


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BURIED IN PAPERWORK: A 1099 UPDATE 

WEDNESDAY, FEBRUARY 9, 2011 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building, Hon. Sam Graves (Chairman 

of the Committee) presiding. 

Present: Representatives Graves, Bartlett, Chabot, King, 

Coffman, Mulvaney, Tipton, Fleischmann, Herrera Beutler, West, 

Ellmers, Walsh, Landry, Vela ́zquez, Schrader, Critz, Altmire, 

Clarke, Chu, Cicilline, Richmond, Peters, Owens and Keating. 

Chairman GRAVES. Good afternoon, and we will call this hearing 

to order. 

Again, I want to welcome all of the new Members as well as returning Members to the 112th Congress and to the Small Business 

Committee. I look forward to working with everybody. I want to 

give a special thanks to Chairman Lungren and all of our small 

business witnesses that are going to be here today. 

We are depending on small firms to reinvigorate our economy, so 

we must provide an environment in which I think that they can 

flourish and do just that. 

We begin with session’s hearings by examining the state of the 

health care reform and the effect on small businesses. Today, we 

focus on the health care law’s provision that expands the business 

1099 reporting requirements. Under the new provision, reports will 

also be required for goods and property as well as services. Additionally, reporting on payments to all corporations that are not taxexempt will be required if they meet the $600 threshold. 

To reiterate, small business owners could be forced to fill out all 

this paperwork over and over again because of hundreds of ordinary business purchases that add up over the course of a year; 

business purchases such as equipment, furniture, office supplies, 

software and fuel. 

Scheduled to take effect in 2012, the expanded 1099 reporting 

provision was added to the health care law to help close the socalled tax gap by generating revenue to pay for the law. However, 

a report by the IRS Taxpayer Advocate Service notes that the new 

reporting burden, particularly as it falls on small businesses, may 

turn out to be disproportionate as compared to any resulting improvement in tax compliance. In other words, the reporting requirements may not accomplish its intended purpose and could be an 

administrative nightmare for small businesses. 


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In addition, the Taxpayer Advocate Service has raised questions 

about the significant administrative challenges that the requirement may pose to the IRS. This new 1099 requirement will cause 

an avalanche of additional 1099 forms to be filed and affect over 

36 million entities. 

At a time when we should be making it easier to create jobs, promote growth and invest in our economy, small firms don’t need yet 

another costly and burdensome mandate. Although attempts were 

made last session to repeal this provision, those efforts were unsuccessful. We must repeal it immediately so small businesses do not 

begin to devote scarce resources to compliance. 

I am pleased that over 260 Members from both sides of the aisle 

have cosponsored Chairman Lungren’s repeal legislation and that 

President Obama called for repeal in the State of the Union address. And last week, the Senate passed an amendment doing just 

that in its repealing of this provision. 

Today we will hear from small business owners who would be affected by this new 1099 requirement and from the House author 

of the legislation to repeal it. And so I want to, again, thank all 

of you for being here and providing your testimony. 

I now yield to Ranking Member Vela ́zquez for her opening statement. 

Ms. VELA ́ ZQUEZ. I thank the gentleman for yielding. 

Today’s hearing will focus on an issue that could impact millions 

of small businesses across the country. While there is often little 

agreement in Congress on many policies, there is bipartisan consensus that the issue of 1099 reporting must be fixed. 

As we examine the problems this requirement could pose, it is 

important to understand the concept’s history. While some might 

like to believe it was created minutes before it was added to the 

health reform bill, it is a proposal that was years in the making. 

Originally proposed by the Bush administration, the reporting 

provision was intended to ensure accurate income reporting. The 

Taxpayer Advocate suggested this type of change won’t reduce the 

so-called tax gap and level the playing field and ensure all businesses pay their taxes. 

Although there may have been a laudable goal behind the 1099 

requirement, the new law will have severe unintended consequences for entrepreneurs with little benefit. Small firms already 

spend 1.8 billion hours on tax compliance, and the new 1099 rules 

will add to that burden. 

It also does little to limit tax avoidance, as estimates have found 

it will improve tax compliance by only a half percent. Clearly, this 

minimal improvement is not worth the significant economic effects. 

At a time when America needs to promote economic activity, the 

1099 requirements could hamper transactions between businesses. 

If Congress does not act, businesses will see additional paperwork 

every time they buy equipment, sell goods, or make capital investments. Our Tax Code should reward growth, not serve as a roadblock to growth. That is why repeal is the only solution. 

It is my hope that we can address this problem immediately. 

Many businesses are already spending money on compliance. If 

Congress acts quickly, small firms will see immediate benefits, 

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tinues improving, small businesses need to focus on what they do 

best: developing innovative new services, bringing additional products to market, and creating jobs. 

This hearing can also serve as a starting point to examine other 

ways to limit burdensome regulations. Today’s discussion offers 

witnesses an opportunity to expose not just the problem with 1099s 

but also highlight other regulatory reforms that may help entrepreneurs. 

Throughout the 112th Congress, I will stand committed to working in a bipartisan way to remove or revise policies that stifle entrepreneurship, innovation and growth. That has been the spirit of 

this committee for the last many years, since Chairman Talent was 

the chairman, and then Steve Chabot was the chairman, and then 

when I came here. We do understand the important role that small 

businesses play. And compared to many other committees, we 

should be proud of the products that we reported out of this committee. 

So, hopefully, fixing 1099 will be the first of the many issues that 

the committee can approach with enthusiastic support from both 

sides of the aisle. I would also hope that our focus today remains 

on the regulatory burdens facing small firms, and we do not get 

bogged down repeating political debates from last Congresses. 

With that, let me welcome Chairman Lungren to the committee 

as well as the small businesses who have taken time from their 

busy schedules to testify before this committee. 

Welcome. 

Thank you, Mr. Chairman. 

Chairman GRAVES. At this time, I would ask if there are any 

other opening statements, please submit them for the record. We 

will have a series of votes shortly, and I want to make sure that 

we get through Chairman Lungren’s testimony. 


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Chairman GRAVES. It is my pleasure to introduce the first witness. He is chairman of the House Administration Committee, Congressman Dan Lungren from California. He has been the leader in 

the 1099 repeal. In fact, he introduced his bill in 2010 shortly after 

the health care law was passed, and he has reintroduced it and 

now has 260 cosponsors. 

Welcome, Chairman Lungren. 

STATEMENT OF THE HON. DANIEL E. LUNGREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. LUNGREN. Thank you, Mr. Chairman. 

And thank you, Madam Ranking Member. 

After those opening statements, I just have one thing to say: 

Amen and thank you. 

First of all, let me thank you for the opportunity to testify regarding this legislative proposal, which has now been given the 

number H.R. 4. And I wish to acknowledge that the Small Business 

Committee is the appropriate place to begin the discussion of the 

bill. 

If I were to summarize the bill, I would say that we are trying 

to get rid of something that shouldn’t have been there in the first 

place. It is a totally ineffective way to solve the so-called tax gap 

problem. And only in Washington, I guess, could searchers for a 

needle in a haystack enlarge the haystack. This is exactly what the 

1099 requirement does. 

If you check U.S. tax compliance, it is among the highest in the 

world; if not the highest in the world, over 86 percent. And this 

provision would affect businesses most likely who are already in 

compliance. So it is misguided. 

The idea for H.R. 4 had its genesis in the groundswell of concern 

among the small business community over the unintended consequences of a 170-word Section 9006 of the bill that contained 

over 240,000 words. Essentially this section would require all businesses and nonprofit organizations—oh, and by the way, and congressional offices. Every congressional office would be required to 

file 1099s for every vendor that you would transact business with 

over $600 a year. Perhaps that is the good part of it. We would 

have to follow the same law that small businesses would. 

This new mandate is set to take effect on January 1 of next year. 

Now, regardless of one’s view on the health care bill, the new 1099 

filing requirement could not be more ill-conceived. The focus of this 

committee relates to expanding opportunities for small businesses. 

And, unfortunately, this section of the health care bill takes us in 

precisely the opposite direction. 

I know I have heard from many members of this committee that 

they are looking for ways to free small businesses from undue burdens. We should look for ways to free up the—as they call it—the 

animal spirits in order to encourage entrepreneurship. And rather 

than imposing these obligations for companies, we should seek 

ways to start—restart the engine of job growth. 

The ranking member mentioned that this had its genesis with 

the Bush administration, and that is partially correct. The Bush 

administration Treasury Department talked about requiring corVerDate Mar 15 2010 06:32 Apr 09, 2011 Jkt 065195 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 E:\HR\OC\A195.XXX A195

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porate services—that is corporations providing services—that in 

that regard 1099s ought to be filed. They never, as far as I am concerned, I don’t know where this idea came from, that you would 

have to file 1099s for purchase of goods. That is an entirely new 

concept. And, frankly, I am not sure any hearings were ever held 

on that, any consideration on what that would do, and the tremendous range of application that that would have. 

Look, we don’t have the luxury of thinking that the small business community is this constant variable that can easily absorb additional requirements, additional burdens. Even in normal terms, 

it is challenging enough for new business ventures to succeed. 

In my district, we have an unemployment rate of over 12.5 percent. Small businesses are having a tough time even hanging on. 

We hear from small businesses talking about the difficulty they 

have getting credit just to keep their businesses going. And then, 

on top of that, to face this kind of regulatory array of obligations 

is entirely unnecessary. 

If we really seek to increase investment, hiring and business 

growth, we need to look for an environment that is more friendly 

to entrepreneurship. 

When I first heard of this, actually it was a briefing that Congressman Burgess had to look at the business implications of the 

health care bill after it passed. The NFIB identified this as a problem. When my staff brought it to my attention, we started to examine it. And one of the things we discovered is not only would it be 

a burden on all businesses, but it would be a double-edged sword 

with respect to small business. Because if you want to minimize 

the number of 1099s you file, are you going to go to your local restaurant? Are you going to your local hardware store? Are you going 

to go to your local provider when you will have to keep track of 

every single purchase you make so that, if it reaches that $600 

threshold in a calendar year, you are going to have to file? Or if 

you want to minimize your 1099s, won’t you go to the big box 

store? Won’t you go to the big chains? In other words, this is a tremendous disincentive for the small business entrepreneur in all of 

our districts, and I am not sure anybody really thought about that. 

One of the—someone who has been involved in small business 

before told me this, and he said it is obvious that whoever put this 

in the bill never has laid awake on a Thursday night trying to figure out how to make payroll for their employees on Friday. This 

is just an additional burden. 

There are those who have said, the Tax Advocate for the Internal 

Revenue Service indicated that there is a questionable return on 

investment here, for the cost of the reporting placed on a small 

business could very well outweigh anything that the government 

gets. 

Here is the last thing I would say is this, look, we talk about a 

tax gap, and that is a nice technical term. What we are suggesting 

is that people are cheaters. Now I think most people follow the law. 

And to suggest that virtually the entire business community, especially the small business community, is made up of a bunch of 

cheaters and we should then have a reporting requirement that 

doesn’t go to the person who is filing the report, the 1099, as to 

any obligation they have, but rather as a report on somebody else 


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with whom they have at most an arm’s length transaction, that 

somehow that is to get information on that other person, I just 

think is—I don’t want to overstate it, but almost un-American. It 

is almost like we are asked to be a nation of snitchers. 

When you look at it that way, you have to say: What is the original purpose of 1099? When you file a 1099, it is to, in many cases, 

ensure that you make sure that payroll taxes are paid. It is an obligation on your part. Then we extend a little bit further because we 

say, well, this is an easy way of getting some reporting that we can 

check on. Then we finally extend it to every purchase of every product possible over a 12-month period of time. It really boggles the 

mind to think that we think that this could be effective. 

According to the National Taxpayer Advocacy Service analysis of 

2009 IRS data, about 40 million businesses and other entities will 

be subject to this new requirement, including roughly 26 million 

nonfarm sole proprietorships, 4 million S corporations, 2 million C 

corporations, 3 million partnerships, 2 million farming businesses, 

1 million charities, and other tax-exempt organizations, and more 

than 100,000 government entities, including each and every one of 

your offices. So I hope you are ready to have an accountant take 

care of this to make sure that you do not violate the law. 

I just would say that we are now up to 270 cosponsors, which is 

kind of nice because when I introduced this a little less than a year 

ago, I had one sponsor, myself. And the response has been—it is 

bipartisan. I believe I have 34 Members from the minority that 

have signed onto this now. We have from the most conservative 

Members to my good friend Barney Frank have signed on. So if 

anybody wants to find a bipartisan piece of legislation, it is the 

only thing that I could find in the President’s State of the Union 

address that he specifically mentioned that ought to be passed. So 

I hope that we can do that, and I hope we can do that with dispatch. 

I thank you for your time and consideration. 

[The statement of Mr. Lungren follows:] 


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Chairman GRAVES. Thank you, Mr. Chairman. 

I just have one or two questions just out of curiosity. Can you 

tell me what on earth the IRS is going to do with all of this paperwork if this were to be implemented? 

Mr. LUNGREN. Well, if they are going to do anything with it, they 

are going to have to hire more people and they are going to have 

some new software and new hardware to figure out what they are 

going to do with it. 

Chairman GRAVES. And that is my next question. How many 

would they have to hire? 

Mr. LUNGREN. Lord only knows. This is actually true. When I 

started to consider this bill last year after the health care bill 

passed, we called the IRS and asked them if they could tell us how 

it would apply and in what fashion. And their response to us was, 

we have to wait for guidance from Secretary Sebelius. 

Chairman GRAVES. That is interesting. 

Mr. LUNGREN. That is one of the problems you have when you 

mix up some bills. 

Chairman GRAVES. I will turn to Ranking Member Vela ́zquez for 

questions. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Thank you, Mr. Lungren, for your testimony. 

My question to you is, you have a bill that has bipartisan support. You have a precedent that is on record. You have most of the 

members of this committee supporting the repeal of 1099. Do you 

support the recently passed legislation in the Senate, which has bipartisan support and was revenue neutral? 

Mr. LUNGREN. Well, they added some language in that. It was 

an amendment, and it was an amendment to a bill, FAA bill, and 

it involves tax policy. So there is a question of whether or not a 

provision like that can actually initiate in the Senate or rather it 

has to initiate in the House under the section of the Constitution 

that requires us to initiate tax legislation. So all I can say is that 

I am glad for their support. I am happy they have taken a position, 

and my feeling is that if we can have a freestanding bill, H.R. 4, 

passed, I can’t see how it wouldn’t be passed in the Senate. 

Ms. VELA ́ ZQUEZ. H.R. 4 repeals the 1099 provision, but it does not address the issue of the $22 billion in revenue that would be 

lost. 

Mr. LUNGREN. Correct. 

Ms. VELA ́ ZQUEZ. What is your position on that? 

Mr. LUNGREN. Well, my position on that is that this was largely 

an unknown section of the bill. I do not recall us debating this on 

the floor of the House. I don’t even know whether they debated it 

on the floor of the Senate. We found out after the fact that they 

scored it for somewhere between $19 billion and $22 billion, and 

to suggest that because we are going to repeal a provision that has 

never gone into effect based on a scoring of tax revenue that they 

say they have never received before and that we, therefore, are obligated to substitute other taxes, frankly, I think that is a game 

that the American people ought not to play. 

So I do not have a reflected amount of money, a respective 

amount of money for that. This simply gets rid of a provision of law 

that never existed before. It does not deny any taxes that had been 


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collected before. And under the Rules of the House adopted on the 

opening session, it is not required because it deals with the health 

care bill. 

Ms. VELA ́ ZQUEZ. Mr. Lungren, I understand and I hear what you 

are saying. But conceptually, whether or not you agree with the 

process, would you agree that it would be fiscally irresponsible for 

us not to pay for, not to find—— 

Mr. LUNGREN. No, not at all, because if I accept that proposition, 

I have to accept the argument that a provision that was not debated in the public, not understood by the public, never presented 

to us in the House, that never existed before, gets into law and we 

realize it is a huge mistake, that we are then obligated to introduce 

legislation that increases taxes by a like amount; I frankly just— 

let me just put it this way. I offered that question to my constituents and they overwhelmingly said no. Because you made a mistake last year, don’t then double down on that mistake by saying, 

well, we are going to increase your taxes by a like amount for a 

program that never existed in the first place. So I don’t think it is 

a budgetarily or fiscally irresponsible to pass—— 

Ms. VELA ́ ZQUEZ. It is because it is going to expand on the deficit. 

It is going to broaden the deficit. 

Mr. LUNGREN. Well, see, I understand what you are saying. But 

with all due respect, I will say this, I think that kind of an argument is the kind of argument that upsets our constituents at home 

because the collection of these revenues never existed before; there 

is an argument that it is somewhat fanciful in terms of the number 

they came up with; and third, you have the IRS tax advocate saying that the imposition of this may cause a greater burden dollarwise on the affected small business than it would ever garner for 

the government. 

Ms. VELA ́ ZQUEZ. We don’t agree, but JCT is a bipartisan body. 

Thank you, Mr. Chairman. 

Chairman GRAVES. Thank you. 

Mr. Chairman, real quick, since when does money that the government is not receiving contribute to the deficit? 

Mr. LUNGREN. It is the language in Washington, D.C., where we 

talk about expenditures. Have you ever heard the word ‘‘tax expenditure’’? That is used to say that if we grant you a tax cut or 

don’t increase your taxes, that amount of money you owe us. Philosophically, the only way I can understand that is if you absolutely 

believe that the first dollar that someone earns is the Federal Government’s first and you only get to keep it at their acquiescence. 

Chairman GRAVES. We are going to have to move fast because we 

do have votes any time now. So I will call on Mr. Tipton of Colorado. We will try to get through them. If we don’t, then we will 

then break for votes. 

Mr. TIPTON. Thank you, Mr. Chairman. 

And thank you, Chairman Lungren, for being here at well. 

I am a little curious, you may have covered this, but what is the 

cost, you listed off the millions of businesses that would have to 

comply with this if it stands as is, what would be the cost to those 

businesses? 

Mr. LUNGREN. I haven’t seen an actual number. I am sure maybe 

some of the other witnesses might be able to tell you that. I just 


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will say this, that the tax advocate said that the cost may in fact 

not be worth it in terms of that money that goes to the government. And I would agree with the tax advocate on that one. 

Mr. TIPTON. But would it be a reasonable extension—I am a 

small business owner as well; you know, you scrap for every penny 

you have—that this, actually, if it stood, it would actually be more 

of a job inhibitor at a time when we are trying to create jobs? 

Mr. LUNGREN. Well, you are going to take money to do this that 

you would use to hire somebody to do productive activity, I would 

think. And you have got to make sure that you are not wrong because you are subject to filing penalties if you don’t file it correctly. 

Mr. TIPTON. Thank you. 

Mr. Chairman, I yield the balance of my time. 

Chairman GRAVES. Mr. Critz of Pennsylvania. 

Mr. CRITZ. Thank you, Mr. Chairman, Chairman Graves and 

Chairman Lungren, for appearing here. 

I just have one quick question, something I learned during this 

debate. And by the way, I am one of those 34 cosponsors of the bill. 

Mr. LUNGREN. Thank you very much. Talk to some of your colleagues, please. 

Mr. CRITZ. Well, one of the things that I just learned that I did not know was that $600 threshold was actually set in 1954. And 

the last time I checked, $600 in 2011 does not buy the same 

amount as it did in 1954. And as we debate this reporting, 

shouldn’t we also look at this reporting threshold as a possible way 

to also reduce small business reporting? 

I mean, we all love accountants—who doesn’t—and we would 

love to give them more work like this provision does, but I would 

be curious to have your feedback on that threshold limit. 

Mr. LUNGREN. You are right. We do love our accountants. I am 

not sure I would allow my daughter to date one, but I think you 

are absolutely correct. We ought to do that. I thank the gentleman 

for bringing that to our attention. 

Mr. CRITZ. Thank you, and I yield back. 

Chairman GRAVES. Mr. Fleischmann from Tennessee. 

Mr. FLEISCHMANN. Thank you, Mr. Chairman. 

Chairman Lungren, thank you. I am also a cosponsor of this bill, 

and proud to do so. 

I just returned from my district last week. I met with business 

people, small business people, chambers of commerce, and good 

hardworking people. Their question to me is basically with over 

200 cosponsors of this bill, with the President’s support of this bill, 

you have indicated that the Senate has a bill, perhaps, with some 

language in there that we can’t necessarily live with but could possibly correct; what is the prospect of passage of this bill and how 

swiftly can we get some relief for the small business people in this 

country? 

Mr. LUNGREN. All I can say is I have 270 cosponsors, and I introduced it with H.R. 4 with more than a majority in the House. I 

don’t know when that has ever been done. The Speaker gave us 

H.R. 4. And as you know, the Speaker has the first 10 numbers 

that he designates for important legislation. The President gave us 

a shout out in his State of the Union address. The Senate has 

passed language that is exactly the same but with some additional 


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language. If I were a betting man, I would say the chances are 

pretty good and we ought to do it fairly quickly. 

Mr. FLEISCHMANN. Thank you. 

Mr. Chairman, I yield back. 

Chairman GRAVES. Mr. Keating of Massachusetts. 

Mr. KEATING. Thank you, Mr. Chairman. 

I just had an interesting metaphor from the northeast that I 

think we could all take home with us in terms of the need to pass 

this quickly. It is more of a statement than a question. 

I heard from people in Cape Cod, and I, too, am a cosponsor of 

the bill, but I heard from people from Cape Cod who just impressed 

upon me how many businesses this really—the scope of the businesses that this—you know, people from bed and breakfasts to UHauls to people in the tourism industry. But the one that, the letter I got that would be interesting to share was from a woman who 

told me that every time it snows, and we have had our share of 

snowfall in the northeast, every time it snows, remember that she 

has to fill out a new form because she is in the tree repair business, and every time there is a snowstorm, the trees need repairing. And every time it snows, remember when I am down here, she 

will be filling out another form. So given the climate this year, I 

hope the climate for change is as great. I think you will see great 

bipartisan support for your bill. 

Thank you. 

I yield my time. 

Chairman GRAVES. Mr. Landry of Louisiana. 

Mr. LANDRY. Thank you, Mr. Chairman. 

That is what happens when you are a freshman, you see; I don’t 

where the buttons are—or the bathrooms, I guess. 

I certainly support this. As a former small business owner, I 

know exactly the kind of onerous burden this would place on small 

businesses and the impact it would have. 

I guess my question is the IRS National Taxpayer Advocate report said there was concern that the new 1099 reporting, especially 

for small businesses, may be disproportionate compared with any 

of the other improvements in the tax compliance; do you agree with 

that? 

Mr. LUNGREN. Oh, yes. They went on to say the requirement 

would require widespread administrative burden disproportionate 

to the value of the information to the IRS. They said that precisely 

because this extends itself to all goods purchases. It also went on 

to say the IRS will receive millions of such reports on paper, requiring it, meaning the IRS, to devote significant resources to entering the data into its systems manually, increasing the risk of 

transcription errors and rendering the data less reliable. 

Mr. LANDRY. Thank you. I certainly appreciate your answer. 

I yield back the balance of my time. 

Chairman GRAVES. Mr. Owens of New York. 

Mr. OWENS. I just want to state that I am a cosponsor. I also was 

a sponsor of a piece of legislation last year to accomplish this goal. 

And I certainly support what you are doing. I think we do have 

some dispute as to whether or not there is a necessary pay-for 

here. But I think we are moving in the right direction, and I hope 


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that this gets acted on promptly and we reach a bipartisan compromise on the pay-for issue. Thanks very much. 

Chairman GRAVES. Mrs. Ellmers of North Carolina. 

Mrs. ELLMERS. Thank you. 

I would just like to say as a small business owner, a nurse for 

20 years, I understand how cumbersome this is and how difficult 

it will be for our businesses to adhere to this. My question and the 

question that I have received from my constituents has been one 

thing. Now I know this is IRS legislation and language that has 

existed for quite awhile, but whose brilliant idea was it to put this 

in the health care bill in order to help pay for it? 

Mr. LUNGREN. My understanding is that it came in on the Senate 

side, although I have not found a rush to claim fathership or 

mothership of this particular section. 

Mrs. ELLMERS. That is my understanding, no one seems to be 

coming to the forefront. Thank you. 

Chairman GRAVES. Chairman Lungren, I want to thank you for 

coming in. We have a vote going on right now. We will adjourn for 

approximately 20 or 25 minutes or so. We only have two votes, so 

it won’t be too bad. So we will stand in recess until that time. 

[Recess.] 

Chairman GRAVES. The hearing will come back to order. 

We have the second panel up, and you have 5 minutes. If you 

go for a little bit, I am not going to break your arm or anything, 

but please try to keep it to 5 minutes. 

STATEMENTS OF SETH SHIPLEY, OWNER, SHIPLEY’S FINE 

JEWELRY, HAMPSTEAD, MD, ON BEHALF OF THE NATIONAL 

RETAIL FEDERATION; JOHN ‘‘MARK’’ EAGLETON, MANAGING 

MEMBER, EAGLETON VENTURES, LLC, THE EGG & I RESTAURANT, GOLDEN, CO, ON BEHALF OF THE NATIONAL RESTAURANT ASSOCIATION; R. JEROL KIVETT, PRESIDENT, 

KIVETT’S, INC., CLINTON, NC, ON BEHALF OF THE NATIONAL 

FEDERATION OF INDEPENDENT BUSINESS; AND MIKE 

KEGLEY, PRESIDENT, B.O.L.D. HOMES, INC., UNION, KY, ON 

BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS. 

Chairman GRAVES. And I will recognize Mr. Bartlett to introduce 

our first witness. 

Mr. BARTLETT. Thank you very much. I am very pleased this is 

the second panel. I thought I was going to miss the opportunity to 

introduce the witness from my district. I was off the Hill giving a 

talk, but I got back just in time. 

Of all of the counties I represent, I think probably in many respects the prettiest county is Carroll County. Everybody there 

takes an enormous amount of pride in their county. I have never 

seen such manicured farm fields as you see in Carroll County. And 

if you were to pick a town in Carroll County that kind of typifies 

Carroll County, I think it would be Hampstead. 

My district is a small business district. It is made up of small 

businesses. I was in a former life a small business person, and so 

I am very pleased to have been able to be on this committee for 

16 years now. I am happy to introduce one of my constituents, a 


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small business person who is struggling to stay in business in spite 

of stifling regulation and over-taxation. 

Congratulations, sir, for being a survivor, and welcome to the 

committee. 

Chairman GRAVES. You are recognized for 5 minutes. 

STATEMENT OF SETH SHIPLEY 

Mr. SHIPLEY. Mr. Chairman, Ranking Member Vela ́zquez, and 

honorable members of the committee, I thank you for the opportunity to address your committee this afternoon about a pending 

threat to small businesses that I can best describe as formidable, 

frustrating and frightening. 

My name is Seth Shipley, owner of Shipley’s Diamonds and Fine 

Jewelry in Hampstead, Maryland. I appear before you on behalf of 

both the National Retail Federation and the Maryland Retailers 

Association. 

From a small business perspective, the health care reform law 

enacted last year is at best a mixed bag and looks to me like it will 

hurt far more than it will help. Retailers recognize that repeal of 

the entire health care reform law is difficult given the current 

makeup of the Senate as well as President Obama’s veto power. 

Therefore, we also support specific changes to The Patient Protection and Affordable Care Act, such as the repeal of the expanded 

Form 1099 reporting requirements. 

Section 9006 of the PPACA will impact small business owners 

like me in ways we are sure of and in other ways we only imagine. 

There will be nothing positive or economically stimulating about it; 

really quite the opposite. 

Requiring reporting for all noncredit card transactions over $600 

in a year will create a blizzard of reports that needlessly bog down 

commerce while also swamping the IRS. This provision has no relevance to our health care system and should promptly be repealed. 

I strongly support H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011, introduced by Congressman Lungren. 

The National Retail Federation also strongly supports this bill. 

This necessary change to the PPACA rightly enjoys broad bipartisan support and received an overwhelming Senate vote of 81–17 

February 2, 2011, on a dispositive procedural motion. We look forward to its prompt approval in the House as well. 

My small store in rural Carroll County, Maryland, serves about 

6,000 customers a year. According to the government Web site, it 

only takes 18 minutes for me to fill out a 1099 form. Even so, that 

means many, many more hours of work that will have to be devoted to filling out these forms. I conduct transactions with over 

200 jewelry suppliers each year and will invest more than $600 

with each of them. That means additional hours of work to fill out 

those forms. 

What I find extremely frustrating, however, is that there is nothing in the 18-minute government estimate that considers the time 

I will need to invest tracking each of my transactions throughout 

the year. In addition to all of the 1099 forms, I am told by my accountant that each 1099 form should have a completed W–9 form. 

This is a request for taxpayer identification and certification. 


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Ultimately, the bookkeeping requirements mandated by this new 

law will require hours and hours of additional work. My conservative estimate is that I will have to expend more than $35,000 each 

year to comply with this new law. That is a significant blow to my 

net business income. At the moment, I do not know how I will be 

able to financially comply with this mandate. 

I began my business in 1991 in my parents’ basement. I have 

struggled and sacrificed to make my business what it is today. I 

have received no government loans or subsidies. I believe I have 

made a positive contribution to the economy in my town, my State, 

and ultimately my Nation. I have worked hard and been blessed 

with a small part of the American dream. If this law takes effect 

next year, I believe that dream will vanish for me and tens of thousands of small business owners across our great Nation. 

I urge your immediate action to repeal this onerous legislation. 

I appreciate the chance to appear before you today on behalf of The 

National Retail Federation and the Maryland Retailers Association. 

Retailers look forward to working with you to repeal this burdensome reporting mandate and to help promote the enactment of a 

more positive health care reform. Thank you. 

[The statement of Mr. Shipley follows:] 


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Chairman GRAVES. Thank you, Mr. Shipley. 

I now yield to Mr. Coffman to introduce his constituent witness. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

It is a pleasure to welcome a fellow Coloradoan and constituent, 

Mark Eagleton, to the committee. 

Mr. Eagleton is a managing member of the Egg & I Restaurant 

in Arvada, Colorado. In addition, he serves on the State Board of 

the Colorado Restaurant Association. Outside of his business, Mr. 

Eagleton serves as a volunteer Jefferson County reserve deputy 

sheriff. He and his wife, Sandy, have been foster parents to a total 

of 38 children. 

Welcome to the committee, Mr. Eagleton. I look forward to hearing your testimony. 

STATEMENT OF JOHN ‘‘MARK’’ EAGLETON 

Mr. EAGLETON. Chairman Graves, ranking member Vela ́zquez, 

Colorado Congressman Scott Tipton, and my Colorado Representative, Mike Coffman, and members of the House Small Business 

Committee. Thank you for the opportunity to testify before you 

today on behalf of the National Restaurant Association and the 

Colorado Restaurant Association on the impact of the expanded 

1099 reporting requirements on small business. 

My name is Dr. John ‘‘Mark’’ Eagleton. I am a franchisee and 

owner of the Egg & I® Restaurant in Arvada, Colorado. I began in 

the restaurant industry when I was 14 years old working as a busboy at the International House of Pancakes® to help pay my high 

school tuition. After that, I was with Arby’s® restaurants for 21 

years, eventually serving as the general manager and COO of Colorado’s largest Arby’s® franchisee, The Bailey Company, LLLP. 

When I left there 6 years ago, my wife, Sandy, and I decided to 

take a chance. We leveraged everything we had to open our own 

restaurant. I cashed out my 401(k). I emptied my savings accounts. 

I sold my investments. I took out a second mortgage on my home. 

I just did everything I could to find every dime I could find. I even 

had my best friend chip in a small loan, and we opened our restaurant. And with the help of the Small Business Administration, 

I obtained a 7(a) loan and began business in April of 2004. I cannot 

emphasize enough that we invested every dime we had in our business, and I am proud of what we built. 

We are a 133-seat restaurant open for breakfast and lunch from 

6 a.m. to 2 p.m. every day. I have 26 employees, including my wife, 

two sons, and my adopted daughter. I love what I do, but every day 

I fight to succeed. I, and my team of 22, know that if the restaurant succeeds, we all succeed. And if the restaurant fails, my 

family and I face financial ruin and 22 families lose their source 

of income and their livelihoods. Any variable can tip the balance 

from being a going concern to just another failed business. The 

added 1099 reporting requirements may sound simple to comply 

with, but mandating that I track all vendors from whom I purchase 

at least $600 in products and services each year and issue 1099s 

will be significant in both time and money. 

I work with 200 to 300 vendors a year. Generally, I pay in cash 

or check. For instance, every single day I go across the street to 

the grocery store and buy a fresh head of lettuce to put in my salad 


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mix because if I buy it in bulk, it goes old before I can use it all. 

That lettuce costs $1.79. And if I do that 363 days a year, for every 

day I am open, that exceeds the $600 total. So, I now have to issue 

a 1099 for buying a head of lettuce every day. That is just ludicrous. 

The expanded 1099 requirement will force me to monitor all purchases like this one. In addition, I will need to buy new software, 

track down each vendor’s tax ID number, their address, key in that 

information, compile the data into 1099s, print and mail forms to 

the vendors and to the IRS. And still the process is unclear to me 

because I worry about the accuracy. What if my books don’t agree 

with a vendor’s records? How will we reconcile disagreements? Will 

I face fines if there is some sort of confusion? 

So, to me, next comes a choice: I can either do the work myself 

or pay someone else to do it. I don’t have the money to pay someone else to do it, so that means it falls on my shoulders. The past 

few years have been extremely challenging. For 2 years in a row, 

I have seen sales decline. The choice I make is, can I raise prices 

to cover the costs of doing all this? I don’t think I can because I 

compete in a marketplace where my customers can easily go to my 

competitor. 

I am also concerned about my guests. Almost every week a busi- ness networking group spends $80 for a meal at my restaurant. 

Once a month, a department from a local business comes in for a 

business lunch and spends $60 while they discuss workplace 

issues. They often pay in cash or by check. Will they continue to 

patronize my restaurant if they need to worry about 1099 requirements. 

In addition to the 1099 provision, I urge Congress to address the 

fundamental changes within the entire health care law. My written 

testimony details the deep and growing concerns of my industry. 

Please consider who is affected if a restaurant like mine shuts its 

doors. One server who has been with me since I opened, Danielle, 

put herself through nursing school with our company’s help. One 

of my cooks, Jeff, has a wife and two kids, and she is a schoolteacher. 

I employ college students who work with me on the weekends. 

Their age group faces the highest unemployment rate in decades. 

I worry what they will do if increased government regulations tip 

the scales and force me to close. 

I hope this committee will convey our concerns and Congress will 

repeal the 1099 provision as soon as possible. The National Restaurant Association and the Colorado Restaurant Association look 

forward to working with you to revise health care laws generally. 

Thank you again. I would be happy to take your questions at the 

appropriate time. 

[The statement of Mr. Eagleton follows:] 


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Chairman GRAVES. Thank you, Mr. Eagleton. 

I will next recognize representative Mrs. Ellmers to introduce her 

constituent witness. 

Mrs. ELLMERS. Thank you, Mr. Chairman. 

It is my distinct pleasure to introduce to you my friend Mr. R. 

Jerol Kivett. He is president of Kivett’s, Inc., located in the district 

that I represent in Clinton, North Carolina. 

The Kivetts started their family business years ago in 1958. 

Along with his father, they pooled their money together to start 

their business and continue it on. The Kivetts are the largest family-owned-and-operated pew manufacturer and refinisher in the 

United States for churches across the United States. Mr. Kivett 

has been at the helm since 1972. He is testifying today on behalf 

of The National Federation of Independent Businesses founded in 

1943. The NFIB is the leading small business association representing small and independent businesses. 

Welcome, Mr. Kivett. We are anxiously awaiting your testimony 

for 5 minutes. Thank you. 

STATEMENT OF R. JEROL KIVETT 

Mr. KIVETT. Thank you, congresswoman. 

Good afternoon, Chairman Graves, Ranking Member Vela ́zquez, 

and members of the committee. My name is Jerol Kivett, and I am 

the owner of Kivett’s, Inc. I am pleased to be here as a small business owner and a member of the National Federation of Independent Businesses, the Nation’s leading small business advocacy 

organization, to discuss the negative impact expanding the 1099 reporting provision will have on my business and small businesses in 

again. 

I would also like to thank Congresswoman Ellmers for working 

with me to participate in this important hearing. 

Kivett’s, Inc., is located in Clinton, North Carolina, and is the 

largest family-owned-and-operated church furniture manufacturer 

and pew refinisher in the United States. In addition, our company 

manufactures and refurbishes other church furniture and fixtures, 

such as steeples and stained-glass windows. We also build and refurbish furniture for courtrooms. Kivett’s provides a full range of 

services. We build new furniture, refurbish existing furniture, and 

provide both delivery and installation. 

Our business was started by my father in 1958, and I took over 

in the early 1970s. At that time, we had fewer than 10 employees. 

But with hard work, we grew the business, and at our peak, we 

employed around 160 workers. When business was at its best, we 

were completing about one church per day. For the last few years, 

business has been down by 50 percent. The church furniture industry is small and competitive. With the recession, many of our customers saw donations drop, meaning they had less to spend on renovations and expansions. As a result, our current work force has 

dropped to about 55 employees. 

In the face of the economic challenges facing small businesses 

like ours, we are confronting daunting new policy challenges as 

well. Working through a recession is tough, but adding to the burden with confusing new laws and regulations makes the recovery 


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twice as hard. The uncertainty being created by Washington is stifling a small business recovery. 

The new health care law and uncertainty it is creating for small 

business owners makes it harder for us to determine what our cost 

will be. The expanded 1099 reporting requirement included in the 

health care law is a good example of the kind of misguided policy 

that works against the interest of small businesses. 

Filing our annual tax return is never a task we look forward to, 

but making filing more burdensome only drains resources from 

small businesses like ours. In fact, in a recent NFIB Small Business Problems and Priorities Survey, tax complexity was ranked as 

the fifth biggest problem for small business owners. 

Small business owners spend on average $74 per hour for paperwork associated with tax compliance, the highest paperwork compliance imposed on small businesses by the Federal Government. 

The expanded 1099 reporting requirement in the health care law 

adds to this already heavy burden and increases our operating 

costs. Previously, businesses were required to file a form 1099 for 

services received from an unincorporated business of over $600. 

The health care law expands the requirement in two ways: First, 

businesses must file for services received of over $600 from both incorporated and unincorporated businesses; and second, for property 

or material purchased in excess of $600. 

Over the last 3 years, we filed approximately 25 form 1099s annually. And at our business peak, we filed 50 per year. With the 

new health care law, we will average about 300 filings based on today’s business activity. If we reach our peak again, we will file 

about 600 forms annually. I will have to dedicate additional time 

and money to ensure that I comply with this new requirement. 

This diverts resources away from the core functions of my business. 

The burden can’t simply be measured in the number of forms but 

also in the information that we will have to track to complete the 

forms. We will have to follow the amounts of our purchases from 

each vendor to determine when or if we meet the $600 filing 

threshold. In addition, we will have to request the taxpayer identification numbers of our vendors, as well as correct addresses to 

send the final forms. 

The expanded reporting requirement also applies to my customers, meaning that we will receive requests for information and 

more 1099s for the work and property we supply. Our customers, 

mostly churches, compose a unique problem for us: Churches are 

not sophisticated taxpayers. This places the burden upon my company to ensure that their forms are completed properly. This 

means more resources being dedicated to filling out forms and less 

dedicated to serving our clients and growing our business. 

This new reporting burden falls especially hard on small businesses. Unlike large firms, most of the small businesses lack an inhouse accounting department to handle tax filings. For the smallest 

businesses, increased paperwork is often handled by the owner. 

The new 1099 requirement would also place small businesses at 

a competitive disadvantage. Some businesses may look to move to 

larger vendors to consolidate their purchases and reduce the number of forms they file, or they can handle the reporting burden for 


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them, meaning fewer customers and opportunities for small businesses. 

The expanded 1099 reporting requirement places an unnecessary 

and onerous burden on small business owners. It is time for Congress to repeal the provision before it goes into effect next year. 

Thank you for the opportunity to appear before the committee. 

I look forward to any questions at the proper time. 

[The statement of Mr. Kivett follows:] 


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Chairman GRAVES. Thank you, Mr. Kivett. 

At this time, I recognize Ranking Member Vela ́zquez for her witness. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

It is my privilege to introduce Mr. Mike Kegley. He is the president of the B.O.L.D. Homes located in Union, Kentucky. B.O.L.D. 

provides residential construction, commercial construction, remodeling, land development and real estate services. Mr. Kegley is testifying on behalf of the National Association of Home Builders. The 

association was founded in 1942 and has more than 160,000 members. Welcome. 

STATEMENT OF MIKE KEGLEY 

Mr. KEGLEY. Thank you, Chairman Graves, Ranking Member 

Vela ́zquez, on behalf of the 160,000 members of the National Association of Home Builders, I thank you for the opportunity to testify 

today before the House Small Business Committee. 

My name is Mike Kegley, and I am a builder in Union, Kentucky, and the 2011 president of the Home Builders Association of 

Kentucky. 

In 1986, my two brothers-in-law, my wife Janet and I started our 

home building business in northern Kentucky; 6 years ago, our son 

joined the family business. 

Few industries have struggled more during this recession than 

the home building industry, and it has been no different for us. 

Our production has dropped from 16 homes built with 17 employees in 2007 to 6 homes last year built with 7 employees. We started 

performing remodeling work to make ends meet, and my wife had 

to leave the company and return to her field of speech therapy. 

In this economic environment, any additional administrative 

costs imposed upon me will greatly affect the future of my company 

and the jobs of my employees. 

Mr. KEGLEY. So I am pleased the committee is focusing today on 

the impact of the new 1099 information reporting requirements on 

small businesses. 

The new requirement will substantially increase the reporting requirements on small homebuilders. In January, the NEHB conducted a survey of builders to determine how many additional form 

1099s would be issued under the new law. The medium result was 

40 additional 1099s, but 38 percent of the responders indicated 

they would issue 50 or more additional 1099s, and 17 percent 

would issue 100 or more additional forms. 

For my company, if the new law had been in effect, I would have 

issued approximately 144 additional 1099s in 2008, 122 additional 

forms in 2009, and 173 additional 1099s last year. A major reason 

for the increase in 1099s is not just the removal of the corporate 

exemption but imposing reporting requirements on a host of new 

transactions, such as goods, utility payments, and freight. 

In the homebuilding industry, our employees can be spread 

across multiple building sites. For example, the simple task of 

tracking fuel purchases from multiple gas stations in possibly multiple States is daunting. It is not just as simple as collecting receipts; we would need to determine the taxpayer identification 


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numbers for each gas station as they are likely owned by different 

franchise owners. 

We further estimated that it would cost my company an addi- tional $6,400 in administrative costs for the first year the new law 

takes effect to obtain and catalog the additional W–9 forms. Succeeding years would run about $1,900 annually to keep up with the 

new W–9s and make sure they are correct. 

In addition, we estimate the added cost of creating the additional 1099s had the law been in effect would have been nearly $2,200 in 

2008, over $1,800 in 2009, and $2,600 last year. These numbers do 

not include the software upgrades I would have to purchase. 

I have also checked with three different accounting services in Kentucky. Their average cost for preparing a form 1099 was $50 

for the first form and $25 for each additional form, with some volume discounts for over 100. Of course, even that does not include 

the cost of obtaining and updating the W–9 forms or other administrative costs. 

To conclude, I am convinced that the additional compliance outweighs any of the estimated tax revenue. I also believe that these 

reporting requirements will make small businesses less competitive 

relative to larger corporate businesses. 

There is a solution, and I urge Congress to move swiftly to repeal 

these new information reporting requirements. Thank you for allowing me to testify, and I look forward to your questions. 

[The statement of Mr. Kegley follows:] 


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Chairman GRAVES. Thank you, Mr. Kegley. 

Mr. Kivett, you have pointed out how many 1099s you are going 

to have to fill out with this, but I would be curious as to what the 

rest of you think it is going to do in terms of how many of these 

you are going to have to fill out. Obviously we have a variety of 

businesses here. We have a service business. We have a retail 

store, which has inventory, and I am assuming everything you buy 

is going to be over $600 easily, but I would be very curious where 

you think this is going. How many are you going to have to file? 

And how much time is this going to take specifically? 

I will start with you, Mr. Kegley. 

Mr. KEGLEY. Altogether, we are probably averaging about 30 

1099s now. And over the last 4 years would have been an average 

of 150 additional ones for a total of 180 to 200 total forms. That 

breaks down to about 41 in general overhead expenses, and then 

approximately about 64 different ones for each and every home 

that we might build. 

Chairman GRAVES. Mr. Shipley. 

Mr. SHIPLEY. We have estimated approximately 200, based on 

how many vendors we currently use; let alone we also buy scrap 

gold. Anybody that we buy scrap gold from, it creates a personal 

issue for them; they have to give us their Social Security number, 

and we run the risk of losing that business. 

Chairman GRAVES. Mr. Eagleton. 

Mr. Eagleton. My best estimate is between 60 and 100. Not 

knowing how many businesses buy meals from me regularly and 

how many of my customers is kind of an unknown, but for vendors 

that I buy from for goods and services that I don’t pay by check, 

61 is my best estimate. 

Chairman GRAVES. And we heard from you, Mr. Kivett. 

Now just a real quick yes or no question: Does it aggravate you 

to know that you may have to do this requirement knowing full 

well that the IRS may not know what they are going to do with 

this information in the end? 

Mr. EAGLETON. Absolutely. 

Mr. SHIPLEY. Without a doubt. 

Chairman GRAVES. Ranking Member Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. Kegley, as you noted in your testimony, new reporting rules 

apply for landlords that are in effect now. Do you think that it is 

likely that many property owners will end up exposed to potential 

penalties because they are unaware of the new rules? 

Mr. KEGLEY. Yes. You are talking about the Small Business Jobs 

Act of 2010 exempted what we call independent landlords, and that 

would be people like yourself or me that are just renting one or two 

homes. And that requirement starts this year and was only published about 3 months before the end of last year. We feel like 

there has been very little advertising about this requirement, that 

most landowners are not even aware of it. There is a very high fine 

for not reporting properly as well. 

Ms. VELA ́ ZQUEZ. Can you tell me if the Treasury Department has 

given any guidance? 

Mr. KEGLEY. Not that I am aware of, no. 


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Ms. VELA ́ ZQUEZ. Mr. Shipley, the IRS has attempted to reduce 

the paperwork burden on small businesses by exempting credit 

card payments from 1099 reporting. Unfortunately, many small 

firms do not accept credit card or debit card payments. Is there a 

potential small firms may be put at a competitive disadvantage because of the exemption for credit card payments? 

Mr. SHIPLEY. I am sorry, could you repeat the question? 

Ms. VELA ́ ZQUEZ. The IRS has attempted to reduce paper by exempting credit card payments, but there are some small businesses 

who do not accept credit cards. My question is, will those small 

businesses who do not accept credit card or debit card payments be 

put at a disadvantage? 

Mr. SHIPLEY. I think so without a doubt. 

I also think a lot of the small businesses that don’t accept credit 

cards right now are on the fringe of going out of business because 

of that. 

Ms. VELA ́ ZQUEZ. And I would like for each one of the members 

of the panel to answer this question: After health care reform, the 

IRS mailed small businesses more than 4 million postcards to inform them of the small business health tax credit. So I would like 

to ask you, do you feel the IRS is adequately working with the 

business community to answer entrepreneurs’ questions on the new 

1099 rules? 

Mr. Kegley. 

Mr. KEGLEY. I think they are not doing so. And really the 

issuance of a postcard, frankly, I don’t really even see all the mail 

and don’t recall ever getting that. 

Ms. VELA ́ ZQUEZ. But they did it for small businesses to inform 

them that as a result of the health care reform bill, there were tax 

credits. So, on the 1099, have you seen anything coming out of the 

IRS? 

Mr. KEGLEY. Not at all. And if it wasn’t for my involvement in 

the National Association of Home Builders, I wouldn’t be aware of 

it. 

Mr. SHIPLEY. Not at all. 

Mr. EAGLETON. I haven’t seen anything. 

Mr. KIVETT. Not at all for me. 

Ms. VELA ́ ZQUEZ. Okay. And of course, it is your position that they 

should do more or better in terms of educating the small business 

sector as to the new rules regarding 1099. 

Thank you, Mr. Chairman. 

Chairman GRAVES. Mr. King of Iowa. 

Mr. KING. Thank you, Mr. Chairman. 

I want to thank the witnesses for your testimony and for making 

the trip here today to help illuminate this subject matter. 

I spent my life in the construction business—we are now in the 

35th or 36th year. And it started out with a little, one-man operation. My biggest fear was government regulators. And of those 

regulators, my biggest fear was the IRS. And now a generation and 

a half, almost two generations have gone by since then, and I 

would start with Mr. Kivett and say, is there any agency that you 

have more trepidation about than the IRS? 

Mr. KIVETT. If there is one, I am not aware of it. 

Mr. KING. If we can go on down the line. 


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Mr. Eagleton. 

Mr. EAGLETON. Well, certainly in our industry, we worry about 

Homeland Security, and we also worry about the Department of 

Labor, but the IRS is number one. 

Mr. KING. Thank you. 

Mr. Shipley. 

Mr. SHIPLEY. Without a doubt, the same. 

Mr. KING. And Mr. Kegley. 

Mr. KEGLEY. The IRS and the Environmental Protection Agency. 

Mr. KING. Ah. I am glad you got that plug in there. I have certainly lived through these things myself. 

I am one who has also made a point, and I just make a point 

of reservation here for the panel and the witnesses and people in 

the room that we have a larger elephant in the room here—I actually don’t think he falls under the species of elephant—and that is 

the ObamaCare legislation that is the father of this 1099 rule that 

is before us here today. 

It has been real clear where I stand, and I think two-thirds of 

the American people seek to abolish and repeal ObamaCare in all 

of its aspects. And I have taken the position that we need to go 

after the whole thing, and that if we take small parts of it out, that 

it diminishes some of our resistance. 

I would just ask, as I go down the line again, starting with Mr. 

Kivett—not that we disagree here because I am going to support 

this legislation, but have you concerned yourself with the idea that 

if we pull out the most egregious aspects of ObamaCare, we may 

be stuck with the broader components of it? 

Mr. KIVETT. That is a concern. And of course, I think the health 

care law is the biggest burden on small business today. It is the 

biggest burden I have seen in the 30-some years that I have run 

my business has come across. I am not sure how we are going to 

handle this. Small business will survive, but we are not going to 

be able to create jobs that are required for the 65 percent that we 

are supposed to generate. I don’t see how we can with this burden 

on our shoulders. 

Mr. KING. And Mr. Eagleton. 

Mr. EAGLETON. Thank you. 

I really worry about the health care legislation and its impact on 

my business. Last year, I did about $940,000 in sales as a restaurant. My net income after debt service was minus $500. So any government 

mandate on my business will force me to close, and 22 employees 

and my family and I will be ruined. 

The health care legislation that is mandated, currently I employ 

or have insurance on four employees. That cost has gone up from 

$11,000 in 2004 to over $30,000 in 2011. I don’t know, if I have to 

pay for health insurance for my employees, how I am going to survive. I will shut my doors. I don’t know how I am going to make 

it through this. 

Mr. KING. And Mr. Eagleton, as I hear this, I think you said $944,000 in gross receipts, $500 in net. 

Mr. EAGLETON. Negative $500. 

Mr. KING. Negative $500. Sorry, I missed that. I have lived a little of that myself. 


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There seems to be an attitude on the part of the administration 

that even small business is making large margins. And I think 

they don’t understand how much of this is—it is a life that we live 

because we want to have the freedom to be able to raise our families and do those things that you get from being self-employed. I 

would just offer that same question to Mr. Shipley and see if he 

cares to respond. 

Mr. SHIPLEY. I agree 100 percent with how you stand on this. It 

is very difficult. It is something that if, as you all know, being selfemployed, there are nights when you lie awake and you wonder, 

what is going to happen tomorrow. Am I going to be here not only 

for my salary, but for the people I employ? How am I going to pay 

them? How am I going to keep this going? 

I heard a story, I don’t know if this is the best analogy, somebody 

said if you lifted a stone out in the desert and there was a rattlesnake under it with a bunch of baby rattlesnakes, would you just 

take care of the big rattlesnake or would you take care of them all? 

So, as a small business owner and the people I represent, we would 

agree, the whole thing is scary for us as a small business owner. 

Mr. KING. Thank you, Mr. Shipley. 

I am watching my clock tick down. I will turn to a little bit different question to Mr. Kegley. And that is that as I listen to the 

testimony of the witnesses here and their responses, the IRS and 

the regulations and the burden of these 1099—squeal forms we always called them and I think we still do—what does it do—you are 

in business. What does it do to the people who are thinking about 

starting a business when they are staring in the eye the 1099 

squeal forms and the weight of the IRS and the other regulations— 

the EPA that you brought up, Mr. Kegley—what would be the response to whether we will have more or less entrepreneurs in 

America? 

Mr. KEGLEY. I think there will be less because any time government puts up these artificial barriers for new businesses, then it 

is that much more difficult to start a new business, and there will 

be less and less of that. 

Mr. KING. Thank you. Thank you, Mr. Chairman. 

I yield back my negative balance of time. 

Chairman GRAVES. Thank you. 

Mr. Cicilline. Cicilline, that is Italian? 

Mr. CICILLINE. Yes, it is. 

Thank you, Chairman Graves. I want to thank you and our ranking member for convening this hearing. 

I just want to follow up on that question that was just asked to 

Mr. Kegley. We are all working hard to build this kind of new innovation economy of entrepreneurship. The President just launched a 

new initiative, ‘‘Innovation America,’’ really focused on that. And I 

take it everyone would agree with Mr. Kegley that this kind of requirement is likely to inhibit innovation and entrepreneurship by 

creating this kind of a burden early on in the startup of a business. 

Is that a fair statement? 

Mr. KEGLEY. Yes. 

Mr. SHIPLEY. Yes. 

Mr. EAGLETON. Absolutely. I met last week with a prospective 

franchisee for The Egg and I, and they were just trying to pick my 


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brain and see what it is like to be in business. I told them that I 

don’t know that I would start my business again with the imposing 

health care burden that is forthcoming. 

Mr. CICILLINE. I am actually talking about the 1099 question. 

Mr. EAGLETON. Okay, excuse me. 

Mr. CICILLINE. But is it the same as the 1099, that that is an 

additional burden? 

Mr. EAGLETON. Absolutely. 

Mr. CICILLINE. And I come from a State that has been very hard 

hit by this recession, Rhode Island, we have the fifth highest unemployment rate in the country. I just was home this past week and 

convened a group of Business Leaders on Jobs and the Economy, 

an advisory group, and this is one of the issues they raised, the 

1099. I was proud to tell them I am a cosponsor of the legislation 

to repeal this provision. I think it is very important to small businesses, which are the backbone of our economy in Rhode Island 

and I think in this country. 

But I do think we owe it to you as business leaders and to the 

American people to be honest about this. The reality is this was a 

provision which was projected to produce in the last budget year 

$22 billion in revenue. My guess is that by stripping away this, it 

will allow small businesses to grow and we will make that up tenfold; I mean, that is the hope. But we need to be honest about it. 

We cannot engage in this sort of mental gymnastics to say there 

is no cost to the repeal. 

So I think we should do it. I am a cosponsor of it. But I think 

we need to be honest with the American people because there is 

a projection when you build a budget of certain expenses and certain revenues. And the projection by the independent Joint Tax 

Committee is that it would generate between $19 billion and $22 

billion in revenue. That is the reality. And so stripping it away, 

which is the right thing to do, we need to acknowledge that that 

is a responsibility we have in balancing all of the equities within 

a budget and making tough decisions. 

But this notion that we can repeal it and magically that $22 billion is erased from the budget, but we don’t have to do anything 

about it is mental gymnastics, and I think we owe it to the American people and we ought to honor your work as great business 

leaders and entrepreneurs to be honest about that. I am prepared 

to say it is worth spending that money—we have got to figure out 

how to do it—but I am not going to just magically say it evaporates. And I think that is what we heard earlier in the hearing 

today. I think it does a disservice to the American people. 

And I thank you for your really powerful testimony about the 

kind of burden this imposes. I couldn’t agree with you more. I 

heard it firsthand from Rhode Island businesses. I think it is a bad 

provision. I think it will inhibit small business growth and job 

growth. And I think at least my sole function of coming to Congress 

is to get people back to work, to get my State back on the right 

track and get this country on the right track. 

But I think one of the reasons that I came to Congress and 

saw—confronted some of these great financial challenges that we 

face is because we haven’t been honest about some of the budget 

implications of what we are doing. I think we have to be honest in 


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this context to say that is the loss of revenue that will happen and 

acknowledge it and be able to deal with it like adults. So I hope 

we can do that on both sides of the aisle. 

I thank you and yield back the balance of my time. 

Chairman GRAVES. Thank you very much. 

We will go to Mrs. Ellmers. 

Mrs. ELLMERS. Thank you, Mr. Chairman. 

I have a question for all of our panel, and again thank all of you 

for coming and participating today. I know it is not easy to talk 

about what is happening in our small businesses today because it 

is not very positive. 

As a small business owner and with the issues that we face in 

the economy, my question to you is, with the bleak forecast that 

you have had to weather now and into the future, what effect has 

that had—I have two questions for you. One, how have you survived this? Have you had to dip into your own personal savings, retirement, things like that, to keep your doors open and to keep the 

bills paid? 

And also, Ms. Vela ́zquez, Chairwoman Vela ́zquez, had mentioned 

receiving a postcard in the mail with the health care issue, pointing out the advantages to small businesses. Did you get that postcard? And do you see and can you take advantage of that? Because 

it is my understanding that very few small businesses can actually 

take advantage of any of those provisions that have been put in 

place. And thank you. 

Mr. KEGLEY. Probably one of the toughest dinners I have ever 

had at home was about 3 years ago when I had to tell my wife, 

who started the company with me, that we didn’t have a place for 

her in the family business anymore and she had to go find a job 

somewhere else. 

As far as the health insurance credit, of our seven current employees, five have left the coverage that our company was able to 

offer to go with a spouse, which was considerably less expensive. 

So with the two of us that are left, the credit would not be of any 

benefit at all. 

Mrs. ELLMERS. Thank you. 

Mr. SHIPLEY. The credit wouldn’t benefit us as well. To make 

ends meet, to answer that question, my wife started back to work 

again at a local college, and we had to refinance our building and 

some things like that to keep our payroll paid and taxes. 

Mrs. ELLMERS. Thank you. 

Mr. EAGLETON. I am not sure how well I am surviving this. I 

have had 2 years of sales declines, and we have simply not be been 

able to take a lot of money out of the business to live on. So it has 

been very tough on us. Even the 1099 reporting could force us to 

close. 

I don’t recall getting the postcard in the mail, so if I did receive 

it, I didn’t recognize it for what it was and paid no attention to it. 

Mrs. ELLMERS. Thank you. 

Mr. KIVETT. Well, my company has been in business for 53 years 

and you kind of plan ahead, hoping that you don’t run into these 

rainy days, but we do. We went through one in 1974. We went 

through one in the early 1980s, in 1986, and then things went well 

for a while. And then, of course, we have been in a long decline. 


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And we have been chipping away at money that we had set aside 

and hoped to keep and use for expansion, equipment, and we have 

used that money. 

Then we got down to a point that I cut my salary in half. That 

was 3 years ago, and I don’t see a chance for me putting my salary 

back up. I am hoping to just meet payroll. It is very difficult, and 

I have been in business for 53 years. 

So this is the worst time I have ever seen. And it seems like everything is stacked up against small business. But we will survive. 

But what is going to happen, we are not going to be able to generate the jobs that you want us to generate because we are going 

to have to shrink down. We will survive, but we are not going to 

generate jobs for you. And no, the incentives are not going to help; 

they have no bearing at all in my business. 

Mrs. ELLMERS. Thank you all for your honest and compelling testimony. 

Chairman GRAVES. Ms. Chu from California. 

Ms. CHU. Yes, I would like to follow up on the issue that Ranking Member Vela ́zquez raised about the credit cards. 

One of the difficulties for implementing these 1099 rules is the 

fact that the IRS is exempting credit card reporting, but sometimes 

businesses pay vendors using credit cards and a check or cash, so 

if you have this combination, there is a potential for confusion. 

So I would like to ask you, Mr. Shipley, and any of the others, 

are there times when you make purchases or sales that involve a 

combination of credit cards and other payment methods? And what 

kind of challenges would this reporting requirement pose for you? 

Mr. SHIPLEY. In the past, I had done more with credit card payments. I have actually gotten away from that because of the stress 

of worrying about then how to pay the credit card off. I found that 

was more of a struggle, so I just got to the point where I would 

only pay with checks. 

Ms. CHU. I would like to have any of the others respond to this. 

Mr. KEGLEY. We have suppliers that we both pay with check and 

credit card. A lot of times might be when we first move into a new 

neighborhood to build a home, we might pay with a credit card on 

the first few purchases, but then once this person becomes a trusted supplier, we would go ahead and set up an account and pay by 

check. 

Ms. CHU. And would this pose some challenges for you, having 

this exemption for one aspect of the payment versus the other? 

Mr. KEGLEY. I am thinking it might. I don’t know how to keep 

it straight at this point. When we print off a job cost, I wouldn’t 

know how I would know which ones were paid by credit card and 

which ones were paid with a check. It would take some sort of 

entry that we are not doing at this current time. 

Mr. EAGLETON. Currently, about 90 percent of my transactions 

when I buy a good or a service is by check. Probably 1 percent is 

credit card, and the rest is cash. We keep track of all the purchases 

in our bookkeeping system, but sorting that and categorizing that 

would just take a lot of additional time and a lot of additional effort. 


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Mr. KIVETT. We use very little credit cards in my industry. There 

are no churches that use credit cards, so it would have no effect 

on me. 

Ms. CHU. Well, there is another aspect of this recordkeeping that 

could be problematic, and that is that the 1099 rules are in compliance with the calendar year system, but we know that some small 

firms do not use a calendar year bookkeeping method. And they 

will have to reconcile their accounting system to these new rules. 

How will this affect you in terms of your business? 

Mr. Kegley, let’s start with you. 

Mr. KEGLEY. We operate all of our small companies on a calendar 

basis, so it really wouldn’t be an issue with us. 

Mr. SHIPLEY. As well, we do a calendar basis. 

Mr. EAGLETON. Of The Egg and I franchisees, I am the only 

franchisee that is on a calendar. The rest use a 4–4–5 method because we try and compare similar days and similar weeks to a 

prior year to predict business trends. It will create quite a bit of 

work for them to convert that back to a calendar accounting system 

if they have to. 

Mr. KIVETT. And we would have no effect. We use a calendar 

year. 

Ms. CHU. Okay. Thank you. 

And I yield back. 

Chairman GRAVES. Mr. Coffman of Colorado. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

Thank you all so much for coming today. I spent 17 years as a 

small business owner, a majority shareholder in a property management firm, and I remember what the stresses were like and 

what the hours were like and what the challenges were like. I 

think I learned how to make payroll and run an organization efficiently enough to make a profit and balance a budget. That is 

something that Congress could learn. 

But I would like all of you to talk about, outside of the 1099 

issue, because I think we have had a lot of great testimony on that 

and there is no question that that is incredibly egregious, but I 

think from having been in Congress now going on my third year, 

as a former small business owner, let me tell you, I don’t see a lot 

of, shall I say, knowledge about small business, having come out 

of the Congress certainly in the last 2 years. I wonder if you could 

talk about just at any level of the government, what have been 

your challenges outside the 1099 in terms of whether it is State, 

local or the Federal Government? What do you need relief from in 

order to produce jobs? 

Why don’t we start with you, Mr. Kivett, and we will work our 

way over. 

Mr. KIVETT. Well, of course, the first thing is health care, which 

we talked about. I am talking the entire bill; that is the biggest 

burden on us. 

The other thing is energy. Our energy costs are just skyrocketing, and it affects all of us. It affects all my suppliers. Anything that is coming in, of course, it is not just gasoline. For example, the theory of cap-and-trade scares us to death. We are already 

hit hard with energy costs. But the fuel/gas issue, energy issue 

would be a concern for us. 


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Mr. COFFMAN. Mr. Eagleton. 

Mr. EAGLETON. I would say a couple. One is we need access to 

capital to grow, and right now lenders still aren’t lending. That 

would be number one. 

Number two would be, we are just seeing huge increases in all 

of our costs of doing business, from oil and gas to commodity prices 

to feed prices to raw material goods prices. And we can’t pass these 

along. And any regulation that makes that more complex and 

makes that more expensive hurts us. So those would be my comments. 

Mr. COFFMAN. Mr. Shipley. 

Mr. SHIPLEY. As Mr. Kivett said, health insurance is obviously 

a big issue. I feel overwhelmingly taxed all the time, from a small 

business owner. I feel like every time I turn around, I am getting 

hit with a new tax or a new fee. I was at a tri-State board meeting 

last night for local jewelers in our area, and they want to raise the 

fee on our license for precious metals from $75 to $300. It is these 

things that all the time we get hit with that add up, and that is 

the tough part as a small business owner. 

Mr. COFFMAN. Mr. Kegley. 

Mr. KEGLEY. One of the biggest problems our members are having across the country is finding the credit they need to not only 

keep their businesses running, but to expand those as well. The 

banks are really valuing our assets at just a few cents on the dollar, and therefore, collateral that was adequate 3 or 4 years ago is 

not adequate for the loans we have now. 

And beyond that is the regulatory burden that we see in construction now from the EPA and OSHA. And all of us builders are 

outdoorsmen. We are all environmentalists, and we most all want 

to protect the environment, but the regulations that we are seeing 

are just about running a lot of people out of business and making 

it much more difficult to continue our business. 

Mr. COFFMAN. Could you all answer one quick question really 

quick because I am running out of time, and that is simply whether 

or not you plan on adding employees in 2011, starting with you, 

Mr. Kivett? 

Mr. KIVETT. I am adding no employees. I will cut employees—I 

have to. 

Mr. COFFMAN. Mr. Eagleton. 

Mr. EAGLETON. I have a building of 5,000 square feet, and 3,800 

square feet of it is my restaurant. I have 1,200 feet next door that 

I am paying for to be empty. I would love to start another small 

business in that space that I already pay rent on. If I could find 

the capital to operate another business and hire more employees, 

I would do it tomorrow. 

Mr. COFFMAN. Mr. Shipley. 

Mr. SHIPLEY. No, sir. 

Mr. KEGLEY. We sent layoff notices to three more employees on 

Monday. 

Mr. COFFMAN. Well, I want to thank you all so much for coming. 

I know how tough it is being out there, and the fact that you have 

all taken time to come here and testify, not only on behalf of your 

businesses but on behalf of small businesses across America. I really want to thank you. 


emcdonald on DSK2BSOYB1PROD with HEARING
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I yield back my time, Mr. Chairman. 

Chairman GRAVES. Ms. Clarke of New York. 

Ms. CLARKE. Thank you very much, Mr. Chairman. 

And thank you, Ranking Member Vela ́zquez. 

I am a supporter of making it easier for small businesses to compete and grow as we continue to turn around the economy. The 

central Brooklyn district that I represent is filled with commercial 

corridors of locally owned mom-and-pop small businesses that are 

a huge part of each neighborhood’s unique character. I can appreciate that the President in his State of the Union speech addressed 

the issue. And while I differ on certain particulars, I do support the 

policies that keep our small businesses competitive. 

So my question to each of you gentlemen is, acknowledging that 

expanded reporting adversely affects small businesses, what suggestions would you make with regards to the intent of the expanded reporting, which is to enhance the ability to monitor large 

transactions, without the undue burden that comes with the implementation of this policy? Is there an alternative that you could 

think of that would meet the same ends but not through the same 

means, or have you given it any consideration at all? 

Mr. KEGLEY. The only consideration that we have thought about is if you raise the threshold beyond the $600. When it was first enacted in 1954, that was a lot of money, but our economists figure 

that if you allow for inflation, that would be closer to $5,000 today. 

Ms. CLARKE. Anyone else given any thought to it? Not really? 

You just think dispensing with it is just ultimately the best thing 

to do? 

Mr. EAGLETON. Correct. 

Mr. KIVETT. Exactly. 

Ms. CLARKE. And you haven’t thought about what we would do 

around the transaction issue. 

Ms. EAGLETON. My only comment would be is, we log every 

transaction now in our bookkeeping systems. We report all income 

and expenses already. I don’t know why it is up to us as small 

businessmen to track that for the government so they can tax it or 

make sure they have gotten their tax on it. I don’t think that is 

our responsibility. 

Ms. CLARKE. Okay. What about people who don’t pay their taxes? 

Ms. EAGLETON. Should that be a small business person? 

Ms. CLARKE. I am just asking. 

Ms. EAGLETON. I don’t know that it should be. 

Mr. KIVETT. I agree. I don’t think it is our responsibility. We do 

our part. And of course 86 or 87 percent compliance is pretty good. 

It is the highest in the world. 

Ms. CLARKE. I agree. Thank you very much, gentlemen. 

I yield back the balance of my time. 

Chairman GRAVES. Ms. West. 

Ms. WEST. Thank you, Mr. Chairman, and also Ranking Member 

Vela ́zquez. 

I guess one of the key things, we probably have already discussed 

it, but for myself, coming out of south Florida in Congressional District 22 where unemployment in Broward County is close to 11 percent unemployment; Palm Beach County is very close to 12 percent. So we are looking at our small businesses, our economic enVerDate Mar 15 2010 22:23 Apr 08, 2011 Jkt 065195 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 E:\HR\OC\A195.XXX A195

emcdonald on DSK2BSOYB1PROD with HEARING
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gine there. What would you say are the top two things that we 

could alleviate off of your backs that will help you to expand and 

to grow your business and get back to hiring Americans. 

Subject to your questions, I will yield back to the chairman. 

Mr. KIVETT. My opinion of course is the health care law; that is 

the number one thing, and of course, any other regulations that are 

put on us with the EPA, as Mr. Kegley mentioned. The EPA is on 

us. OSHA, the same thing. Not that we don’t need regulations, but 

adding more and more every year is just hard to understand and 

comprehend why it is necessary. That is my answer. 

Ms. EAGLETON. My answer would be, one is access to capital to 

expand and grow and provide jobs. Two would be to reduce taxes 

so that I have more money to hire more people and build my business. 

Ms. SHIPLEY. As I mentioned earlier, if there was a way we could 

reduce taxes, that would help us as a small business owner. 

Mr. KEGLEY. I agree with everyone else, with the added comment 

that if government would just get out of the way, I think we would 

take care of the problem. 

Ms. WEST. But I guess, just codify getting out of the way, because that could go from one extreme to the other. What specifics? 

Mr. KEGLEY. I think primarily some of the restrictions that have 

been put on the banking, as far as limiting the loans that they are 

able to make to our businesses; the regulations, by the EPA in particular in our industry as well. Some of the mandates about construction techniques and products that are used, and just the lack 

of—government seems to have the opinion that people can’t make 

up their own mind and can’t do what they think is best for themselves. They are wanting to do too much thinking for those folks, 

and people should be able to act upon their own. 

Ms. WEST. Thank you very much, gentlemen. 

Mr. Chairman. 

Chairman GRAVES. Ms. Mulvaney. 

Ms. MULVANEY. Thank you, Mr. Chairman. 

And very briefly, I apologize for having to come and go. So many 

of us have other meetings at the same time, so I appreciate your 

patience. 

I also appreciate your perspective. I am a restaurant owner, have 

been a homebuilder. I have never built any church pews, but my 

next door neighbor makes pipe organs, if you can believe that. And 

as for jewelry, that is another story entirely. 

A quick question for Mr. Kegley, because one of the things we 

are seeing obviously in our market, we are a northern South Carolina suburb of the Charlotte market, and we have a tremendous inventory of housing on the ground, built housing, empty. Traditionally what we would see in this marketplace in a similar type of 

downturn would be that these would be snapped up oftentimes by 

individual investors. There was a great article in the Wall Street 

Journal I think about how this is starting to happen in the Miami 

market—we are not starting to see it yet—where individual investors are starting to snap up properties, undervalued properties, for 

the purpose of putting it back into the marketplace as rental property. Tell me a little bit about how you think this bill—excuse me, 

this provision, if we don’t repeal it, would impact our ability to get 


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people, essentially small business people, entrepreneurs back into 

that rental property market. 

Mr. KEGLEY. I think there are two ways. Number one, as they 

rehab those rental properties, they are going to have to meet that 

1099 reporting requirement. So you are talking about a lot of times 

a small father-and-son type operation that maybe doesn’t have a 

full-time bookkeeper, so they are going to have to keep better track 

and report these items. That is going to mean hiring some additional help. It is going to be nonproductive for their business just 

to keep up with the reporting requirements. 

Then with the landlord provisions, they are also going to have to 

continue those reporting requirements as long as they own that 

property for any additional repairs or upkeep they have to do. So 

I think it is going to discourage a little bit of that. 

Ms. MULVANEY. And especially at that very small level, at that 

micro level. If you have one house or two houses, there is only one 

place you can go to to make up that shortfall, which is raising your 

rents, which sort of defeats the whole purpose of trying to get the 

thing back into the marketplace as well. 

I agree with you. I am glad to see that we are getting rid of this 

bill. I am especially glad, by the way, that the President said he 

supported getting rid of it this year. I remember that he said specifically last year that he would oppose repealing this, and I am 

glad that he has seen the light. 

So thank you, gentlemen, for coming out today. 

Chairman GRAVES. I yield to the Ranking Member. Do you have 

any comments? 

Ms. VELA ́ ZQUEZ. No. I just want to take this opportunity to thank 

all of you. Especially on this committee, we work in a bipartisan 

way. When we talk about small businesses, there is no Republican 

or Democratic approach to it. And I am happy to see that there is 

bipartisan support to repeal 1099. 

In the last Congress, in the 111th Congress, Chairman Lungren 

introduced a—he filed a discharge petition that if he gets 218 signatures, Members to sign into that discharge petition, that will 

allow for the bill to come to the floor. And so given the fact that 

the leadership, the President, all of us are supporting repeal of 

1099, and given the fact that you are making statements to the fact 

that this will stifle job creation in America, I don’t see any reason 

as to why we cannot bring this bill to the floor, either this week 

or next week. And if we don’t, then we should file a discharge petition. He has 269 cosponsors, and I would be one of the first to sign 

onto that discharge petition. 

Thank you, Mr. Chairman. 

Chairman GRAVES. Thank you, Ms. Vela ́zquez. 

And I apologize that my mike is not working, but I do want to 

thank all of the witnesses for coming today. There is bipartisan 

support to eliminate this 1099 provision. 

There is a little bit of controversy over cost, which is frustrating 

to me in that this has been estimated to generate somewhere between $17 billion and $22 billion worth of revenue, but the fact 

that this revenue is not being received as of yet because this hasn’t 

been implemented, the notion that that would be a cost to government is very frustrating to me, because I don’t understand when 


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something that the government is not receiving becomes a cost, 

which kind of brings us to the real issue. And that is that the deficits, whether it is a Republican majority or a Democrat majority, 

are a result of spending; not as a result of revenue. It is not a revenue problem; it is a spending problem. 

With that, I am going to compile all of the information we got 

today, and I will be sending a letter to the Chairman of the Ways 

and Means Committee summarizing everything that took place in 

the hearing. 

With that, I would ask unanimous consent that Members have 

5 legislative days to submit statements and supporting material for 

the record. 

[Supporting material for the Record follows:] 


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