[House Report 112-16]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     112-16

======================================================================



 
   COMPREHENSIVE 1099 TAXPAYER PROTECTION AND REPAYMENT OF EXCHANGE 
                    SUBSIDY OVERPAYMENTS ACT OF 2011

                                _______
                                

 February 22, 2011.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

            Mr. Camp, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 705]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 705) to amend the Internal Revenue Code of 1986 to 
repeal the expansion of information reporting requirements to 
payments made to corporations, payments for property and other 
gross proceeds, and rental property expense payments, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................2
 II. Explanation of the Bill..........................................4
          A. Repeal of Expansion of Information Reporting 
              Requirements (sec. 2 of the bill and sec. 6041 of 
              the Code)..........................................     4
          B. Repeal of Information Reporting Requirements with 
              Respect to Real Estate Expenses (sec. 3 of the bill 
              and sec. 6041 of the Code).........................     6
          C. Increase in Amount of Overpayment of Health Care 
              Credit Which is Subject to Recapture (sec. 4 of the 
              bill and sec. 36B of the Code).....................     8
III. Votes of the Committee..........................................13
 IV. Budget Effects of the Bill......................................14
  V. Other Matters To Be Discussed Under the Rules of the House......20
 VI. Changes in Existing Law Made by the Bill, as Reported...........23
VII. Dissenting Views................................................26

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

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

SEC. 2. REPEAL OF EXPANSION OF INFORMATION REPORTING REQUIREMENTS TO 
                    PAYMENTS MADE TO CORPORATIONS AND TO PAYMENTS FOR 
                    PROPERTY AND OTHER GROSS PROCEEDS.

 (a) Application to Corporations.--Section 6041 of the Internal Revenue 
Code of 1986 is amended by striking subsections (i) and (j).
 (b) Payments for Property and Other Gross Proceeds.--Subsection (a) of 
section 6041 of such Code is amended--
         (1) by striking ``amounts in consideration for property,'', 
        and
         (2) by striking ``gross proceeds,'' both places it appears.
 (c) Effective Date.--The amendments made by this section shall apply 
to payments made after December 31, 2011.

SEC. 3. REPEAL OF EXPANSION OF INFORMATION REPORTING REQUIREMENTS FOR 
                    RENTAL PROPERTY EXPENSE PAYMENTS.

 (a) In General.--Section 6041 of the Internal Revenue Code of 1986 is 
amended by striking subsection (h).
 (b) Effective Date.--The amendment made by this section shall apply to 
payments made after December 31, 2010.

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

 (a) In General.--Clause (i) of section 36B(f)(2)(B) of the Internal 
Revenue Code of 1986 is amended to read as follows:
                         ``(i) In general.--In the case of a taxpayer 
                        whose household income is less than 400 percent 
                        of the poverty line for the size of the family 
                        involved for the taxable year, the amount of 
                        the increase under subparagraph (A) shall in no 
                        event exceed the applicable dollar amount 
                        determined in accordance with the following 
                        table (one-half of such amount in the case of a 
                        taxpayer whose tax is determined under section 
                        1(c) for the taxable year):


----------------------------------------------------------------------------------------------------------------
  ``If the household income (expressed as a
         percent of poverty line) is:                           The applicable dollar amount is:
----------------------------------------------------------------------------------------------------------------
Less than 200%...............................  $600
At least 200% but less than 300%.............  $1,500
At least 300% but less than 400%.............  $2,500.''.
----------------------------------------------------------------------------------------------------------------


 (b) Effective Date.--The amendment made by this section shall apply to 
taxable years ending after December 31, 2013.

                       I. Summary and Background


                         A. PURPOSE AND SUMMARY

    The bill, H.R. 705 (the ``Comprehensive 1099 Taxpayer 
Protection and Repayment of Exchange Subsidy Overpayments Act 
of 2011''), as amended, reported by the Committee on Ways and 
Means, provides for the repeal of the expanded information 
reporting requirements, enacted in section 9006 of the Patient 
Protection and Affordable Care Act of 2010 (``PPACA''), Pub. L. 
No. 111-148 (March 23, 2010), the repeal of the information 
reporting requirements with respect to real estate expenses 
enacted in section 2101 of the Small Business Jobs Act of 2010 
(``SBJA''), Pub. L. No. 111-240 (September 27, 2010), and an 
increase in the amount of the required repayment of overpayment 
of health care credits.
    Section 2 of the bill repeals the PPACA changes to section 
6041 that provide rules for payments to corporations, provide 
additional regulatory authority and impose a reporting 
requirement with respect to gross proceeds from property. 
Section 3 repeals the SBJA change to section 6041 that subjects 
recipients of rental income from real estate, who are not 
otherwise considered to be engaged in a trade or business, to 
the same information reporting requirements as taxpayers who 
are considered to be engaged in a trade or business.
    Section 4 increases the amount of the required repayment of 
overpayment of advance payment of the premium assistance 
credits for health insurance purchased through an exchange.

                 B. BACKGROUND AND NEED FOR LEGISLATION

    Originally enacted in 2010 to help finance the cost of 
PPACA, the new provisions requiring expanded tax information 
reporting by businesses have generated considerable concern 
among taxpayers and policymakers alike. It is now widely 
acknowledged that, if allowed to go into effect, the expansion 
of these information reporting requirements will impose a 
substantial tax compliance burden on small businesses, forcing 
them to devote scarce resources to tax filing instead of to 
business expansion and job creation. Similarly, the 
subsequently enacted provision in SBJA that further expands 
these Form 1099 reporting requirements to owners of rental real 
estate has already begun to ensnare millions of American 
families in a complex web of new tax filing requirements. 
Because the burdens on taxpayers resulting from the imposition 
of these new Form 1099 reporting requirements outweigh any 
potential improvement in tax compliance, the bill reflects a 
consensus that these new rules should be repealed.
    In addition, given the Federal government's current fiscal 
situation, it is imperative that Congress scrutinize the 
Federal budget to identify the potential for waste, fraud, and 
abuse, and to make appropriate changes to Federal programs in 
order to better protect taxpayer dollars. Under PPACA, the 
design of the new refundable tax credits for purchasing health 
insurance through exchanges gives rise to the potential for 
such waste, fraud, and abuse due to the combination of income 
determination rules that are highly susceptible to error and of 
strict limits on the recapture of overpayments of these 
exchange subsidies where income has been underestimated. 
Accordingly, the bill seeks to reduce waste, fraud, and abuse 
by improving the mechanism by which exchange subsidy 
overpayments are to be repaid.

                         C. LEGISLATIVE HISTORY

Background

    H.R. 705 was introduced on February 15, 2011, and was 
referred to the Committee on Ways and Means.

Committee action

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

Committee hearings

    The Committee on Ways and Means held a full Committee 
hearing on January 20, 2011, on fundamental tax reform. This 
hearing focused on the economic and administrative burdens 
imposed by the current structure of the Federal income tax, 
including with respect to the burdens associated with the new 
Form 1099 reporting requirements.
    The Committee on Ways and Means held a full Committee 
hearing on January 26, 2011, on the health care law's impact on 
jobs, employers, and the economy, including the impact of 
PPACA's expanded Form 1099 reporting requirements.
    The Committee on Ways and Means held full Committee 
hearings on February 15, 2011, and February 16, 2011, with 
Secretary of the Treasury Timothy F. Geithner and Secretary of 
Health and Human Services Kathleen Sebelius, respectively, on 
the President's Fiscal Year 2012 Budget, including the 
President's proposal relating to information reporting on 
payments to corporations and payments for property and the 
Administration's plans to implement various aspects of PPACA.

                      II. Explanation of the Bill


A. REPEAL OF EXPANSION OF INFORMATION REPORTING REQUIREMENTS (SEC. 2 OF 
                  THE BILL AND SEC. 6041 OF THE CODE)

Present law

    A variety of information reporting requirements apply under 
present law.\1\ The primary provision governing information 
reporting by payors requires an information return by every 
person engaged in a trade or business who makes payments to any 
one payee aggregating $600 or more in any taxable year in the 
course of that payor's trade or business.\2\ Reportable 
payments include compensation for both goods and services, and 
may include gross proceeds. Certain enumerated types of 
payments that are subject to other specific reporting 
requirements are carved out of reporting under this general 
rule by regulation.\3\ Another carveout excepts payments to 
corporations from reporting requirements.\4\
---------------------------------------------------------------------------
    \1\Secs. 6031 through 6060.
    \2\Sec. 6041(a). Information returns are generally submitted 
electronically on Forms 1096 and Forms 1099, although certain payments 
to beneficiaries or employees may require use of Forms W-3 and W-2, 
respectively. Treas. Reg. sec. 1.6041-1(a)(2).
    \3\Sec. 6041(a) requires reporting of payments ``other than 
payments to which section 6042(a)(1), 6044(a)(1), 6047(c), 6049(a) or 
6050N(a) applies and other than payments with respect to which a 
statement is required under authority of section 6042(a), 6044(a)(2) or 
6045[.]'' The payments thus excepted include most interest, royalties, 
and dividends.
    \4\Treas. Reg. sec. 1.6041-3(p).
---------------------------------------------------------------------------
    For payments made after December 31, 2011, the class of 
payments subject to reporting was expanded in two ways.\5\ 
First, the regulatory carveout for payments to corporations was 
expressly overridden by the addition of section 6041(i). In 
addition, information reporting requirements were expanded to 
include gross proceeds paid in consideration for any type of 
property. The payor is required to provide the recipient of the 
payment with an annual statement showing the aggregate payments 
made and contact information for the payor.\6\ The regulations 
generally except from reporting payments to exempt 
organizations, governmental entities, international 
organizations, or retirement plans.
---------------------------------------------------------------------------
    \5\The Patient Protection and Affordable Care Act, Pub. L. No. 111-
148, sec. 9006 (March 23, 2010).
    \6\Sec. 6041(d). Specifically, the recipient of the payment is 
required to provide a Form W-9 to the payor, which enables the payee to 
provide the recipient of the payment with an annual statement showing 
the aggregate payments made and contact information for the payor. If a 
Form W-9 is not provided, the payor is required to ``backup withhold'' 
tax at a rate of 28 percent of the gross amount of the payment unless 
the payee has otherwise established that the income is exempt from 
backup withholding. The backup withholding tax may be credited by the 
payee against regular income tax liability, i.e., it is effectively an 
advance payment of tax, similar to the withholding of tax from wages.
---------------------------------------------------------------------------
    Additionally, the requirement that businesses report 
certain payments is generally not applicable to payments by 
persons engaged in a passive investment activity. However, 
beginning in 2011, recipients of rental income from real estate 
generally are subject to the same information reporting 
requirements as taxpayers engaged in a trade or business.\7\ In 
particular, rental income recipients making payments of $600 or 
more to a service provider (such as a plumber, painter, or 
accountant) in the course of earning rental income are required 
to provide an information return (typically Form 1099-MISC) to 
the IRS and to the service provider. Exceptions to this 
reporting requirement are made for (i) individuals who rent 
their principal residence on a temporary basis, including 
members of the military or employees of the intelligence 
community (as defined in section 121(d)(9)), (ii) individuals 
who receive only minimal amounts of rental income, as 
determined by the Secretary in accordance with regulations, and 
(iii) individuals for whom the requirements would cause 
hardship, as determined by the Secretary in accordance with 
regulations.\8\
---------------------------------------------------------------------------
    \7\Sec. 6041(h); Small Business Jobs Act of 2010, Pub. L. No. 111-
240, sec. 2101 (Sept. 27, 2010).
    \8\Treasury has not promulgated regulations defining these 
``minimal amounts of rental income'' or ``hardship'' cases.
---------------------------------------------------------------------------
    Detailed rules are provided for the reporting of various 
types of investment income, including interest, dividends, and 
gross proceeds from brokered transactions (such as a sale of 
stock).\9\ In general, the requirement to file Form 1099 
applies with respect to amounts paid to U.S. persons and is 
linked to the backup withholding rules of section 3406. Thus, a 
payor of interest, dividends or gross proceeds generally must 
request that a U.S. payee (other than certain exempt 
recipients) furnish a Form W-9 providing that person's name and 
taxpayer identification number.\10\ That information is then 
used to complete the Form 1099.
---------------------------------------------------------------------------
    \9\Secs. 6042 (dividends), 6045 (broker reporting) and 6049 
(interest), as well as the Treasury regulations thereunder.
    \10\See Treas. Reg. sec. 31.3406(h)-3.
---------------------------------------------------------------------------
    Failure to comply with the information reporting 
requirements results in penalties, which may include a penalty 
for failure to file the information return,\11\ a penalty for 
failure to furnish payee statements,\12\ or failure to comply 
with other various reporting requirements.\13\
---------------------------------------------------------------------------
    \11\Sec. 6721.
    \12\Sec. 6722.
    \13\Sec. 6723.
---------------------------------------------------------------------------

Reasons for change

    The Committee understands that there is a significant tax 
gap, or difference between the amount of tax owed by taxpayers 
and the amount voluntarily paid to the IRS, that must be 
addressed. The Committee also recognizes that information 
reporting requirements generally improve taxpayer compliance. 
However, the Committee is concerned that the expansion of the 
information reporting requirements imposes a substantial tax 
compliance burden on small businesses, including costs to 
acquire new software or pay for additional accounting services. 
The Committee believes this burden is disproportionate as 
compared with any resulting improvement in tax compliance and 
therefore believes that these requirements should be repealed 
in their entirety. The Committee will continue to explore other 
potential solutions to the tax gap problem.

Explanation of provision

    Under the provision, the changes to section 6041 enacted 
under section 9006 of the Patient Protection and Affordable 
Care Act that provide rules for payments to corporations, 
provide additional regulatory authority and impose a reporting 
requirement with respect to gross proceeds from property, are 
repealed in their entirety.

Effective date

    This provision is effective for payments made after 
December 31, 2011.

 B. REPEAL OF INFORMATION REPORTING REQUIREMENTS WITH RESPECT TO REAL 
     ESTATE EXPENSES (SEC. 3 OF THE BILL AND SEC. 6041 OF THE CODE)

Present law

    A variety of information reporting requirements apply under 
present law.\14\ The primary provision governing information 
reporting by payors requires an information return by every 
person engaged in a trade or business who makes payments to any 
one payee aggregating $600 or more in any taxable year in the 
course of that payor's trade or business.\15\ Reportable 
payments include compensation for both goods and services, and 
may include gross proceeds. Certain enumerated types of 
payments that are subject to other specific reporting 
requirements are carved out of reporting under this general 
rule by regulation.\16\ Another carveout excepts payments to 
corporations from reporting requirements.\17\
---------------------------------------------------------------------------
    \14\Secs. 6031 through 6060.
    \15\Sec. 6041(a). Information returns are generally submitted 
electronically on Forms 1096 and Forms 1099, although certain payments 
to beneficiaries or employees may require use of Forms W-3 and W-2, 
respectively. Treas. Reg. sec. 1.6041-1(a)(2).
    \16\Sec. 6041(a) requires reporting of payments ``other than 
payments to which section 6042(a)(1), 6044(a)(1), 6047(c), 6049(a) or 
6050N(a) applies and other than payments with respect to which a 
statement is required under authority of section 6042(a), 6044(a)(2) or 
6045[.]'' The payments thus excepted include most interest, royalties, 
and dividends.
    \17\Treas. Reg. sec. 1.6041-3(p).
---------------------------------------------------------------------------
    For payments made after December 31, 2011, the class of 
payments subject to reporting was expanded in two ways.\18\ 
First, the regulatory carveout for payments to corporations was 
expressly overridden by the addition of section 6041(i). In 
addition, information reporting requirements were expanded to 
include gross proceeds paid in consideration for any type of 
property. The payor is required to provide the recipient of the 
payment with an annual statement showing the aggregate payments 
made and contact information for the payor.\19\ The regulations 
generally except from reporting payments to exempt 
organizations, governmental entities, international 
organizations, or retirement plans.
---------------------------------------------------------------------------
    \18\The Patient Protection and Affordable Care Act, Pub. L. No. 
111-148, sec. 9006 (March 23, 2010).
    \19\Sec. 6041(d). Specifically, the recipient of the payment is 
required to provide a Form W-9 to the payor, which enables the payee to 
provide the recipient of the payment with an annual statement showing 
the aggregate payments made and contact information for the payor. If a 
Form W-9 is not provided, the payor is required to ``backup withhold'' 
tax at a rate of 28 percent of the gross amount of the payment unless 
the payee has otherwise established that the income is exempt from 
backup withholding. The backup withholding tax may be credited by the 
payee against regular income tax liability, i.e., it is effectively an 
advance payment of tax, similar to the withholding of tax from wages.
---------------------------------------------------------------------------
    Additionally, the requirement that businesses report 
certain payments is generally not applicable to payments by 
persons engaged in a passive investment activity. However, 
beginning in 2011, recipients of rental income from real estate 
generally are subject to the same information reporting 
requirements as taxpayers engaged in a trade or business.\20\ 
In particular, rental income recipients making payments of $600 
or more to a service provider (such as a plumber, painter, or 
accountant) in the course of earning rental income are required 
to provide an information return (typically Form 1099-MISC) to 
the IRS and to the service provider. Exceptions to this 
reporting requirement are made for (i) individuals who rent 
their principal residence on a temporary basis, including 
members of the military or employees of the intelligence 
community (as defined in section 121(d)(9)), (ii) individuals 
who receive only minimal amounts of rental income, as 
determined by the Secretary in accordance with regulations, and 
(iii) individuals for whom the requirements would cause 
hardship, as determined by the Secretary in accordance with 
regulations.\21\
---------------------------------------------------------------------------
    \20\Sec. 6041(h); Small Business Jobs Act of 2010, Pub. L. No. 111-
240, sec. 2101 (Sept. 27, 2010).
    \21\Treasury has not promulgated regulations defining these 
``minimal amounts of rental income'' or ``hardship'' cases.
---------------------------------------------------------------------------
    Detailed rules are provided for the reporting of various 
types of investment income, including interest, dividends, and 
gross proceeds from brokered transactions (such as a sale of 
stock).\22\ In general, the requirement to file Form 1099 
applies with respect to amounts paid to U.S. persons and is 
linked to the backup withholding rules of section 3406. Thus, a 
payor of interest, dividends or gross proceeds generally must 
request that a U.S. payee (other than certain exempt 
recipients) furnish a Form W-9 providing that person's name and 
taxpayer identification number.\23\ That information is then 
used to complete the Form 1099.
---------------------------------------------------------------------------
    \22\Secs. 6042 (dividends), 6045 (broker reporting) and 6049 
(interest), as well as the Treasury regulations thereunder.
    \23\See Treas. Reg. sec. 31.3406(h)-3.
---------------------------------------------------------------------------
    Failure to comply with the information reporting 
requirements results in penalties, which may include a penalty 
for failure to file the information return,\24\ and a penalty 
for failure to furnish payee statements\25\ or failure to 
comply with other various reporting requirements.\26\
---------------------------------------------------------------------------
    \24\Sec. 6721.
    \25\Sec. 6722.
    \26\Sec. 6723.
---------------------------------------------------------------------------

Reasons for change

    The Committee understands that there is a significant tax 
gap, or difference between the amount of tax owed by taxpayers 
and the amount voluntarily paid to the IRS, that must be 
addressed. The Committee also recognizes that information 
reporting requirements generally improve taxpayer compliance. 
However, the Committee is concerned that the expansion of the 
information reporting requirements to owners of rental real 
estate imposes a significant tax compliance burden on taxpayers 
who are not otherwise engaged in business activity. The 
Committee believes this burden is disproportionate as compared 
with any resulting improvement in tax compliance and therefore 
believes that these requirements should be repealed in their 
entirety. The Committee will continue to explore other 
potential solutions to the tax gap problem.

Explanation of provision

    Under the provision, recipients of rental income from real 
estate who are not otherwise considered to be engaged in a 
trade or business of renting property are not subject to the 
same information reporting requirements as taxpayers who are 
considered to be engaged in a trade or business. As a result, 
rental income recipients making payments of $600 or more to a 
service provider (such as a plumber, painter, or accountant) in 
the course of earning rental income are not required to provide 
an information return (typically Form 1099-MISC) to the IRS and 
to the service provider.

Effective date

    The provision is effective for payments made after December 
31, 2010.

  C. INCREASE IN AMOUNT OF OVERPAYMENT OF HEALTH CARE CREDIT WHICH IS 
   SUBJECT TO RECAPTURE (SEC. 4 OF THE BILL AND SEC. 36B OF THE CODE)

Present law

            Premium assistance credit
    For taxable years ending after December 31, 2013, section 
36B provides a refundable tax credit (the ``premium assistance 
credit'') for eligible individuals and families who purchase 
health insurance through an exchange.\27\ The premium 
assistance credit, which is refundable and payable in advance 
directly to the insurer, subsidizes the purchase of certain 
health insurance plans through an exchange.
---------------------------------------------------------------------------
    \27\Individuals enrolled in multistate plans, pursuant to section 
1334 of the Patient Protection and Affordable Care Act, Pub. L. No. 
111-148, are also eligible for the credit.
---------------------------------------------------------------------------
    To become entitled to an advance premium assistance credit 
under section 36B, an eligible individual enrolls in a plan 
offered through an exchange and reports his or her income to 
the exchange.\28\ Based on the information provided to the 
exchange, the individual receives an advance premium assistance 
credit based on income and the Treasury pays the premium 
assistance credit amount directly to the insurance plan in 
which the individual is enrolled. The individual then pays to 
the plan in which he or she is enrolled the dollar difference 
between the premium assistance credit amount and the total 
premium charged for the plan.\29\ Individuals who fail to pay 
all or part of the remaining premium amount are given a 
mandatory three-month grace period prior to an involuntary 
termination of their participation in the plan. Eligibility for 
the advance premium assistance credit is generally based on the 
individual's income for the taxable year ending two years prior 
to the enrollment period.
---------------------------------------------------------------------------
    \28\Sec. 1412 of the Patient Protection and Affordable Care Act, 
Pub. L. No. 111-148, describes the program for advance payment of the 
premium assistance credit.
    \29\Although the credit is generally payable in advance directly to 
the insurer, individuals may choose to purchase health insurance out-
of-pocket and claim the credit at the end of the taxable year. The 
amount of the reduction in premium as a result of the assistance credit 
is required to be included with each bill sent to the individual.
---------------------------------------------------------------------------
    The premium assistance credit is available for individuals 
(single or joint filers) with household incomes between 100 and 
400 percent of the Federal poverty level (``FPL'') for the 
family size involved who do not receive health insurance 
through an employer or a spouse's employer.\30\ Household 
income is defined as the sum of: (1) the taxpayer's modified 
adjusted gross income, plus (2) the aggregate modified adjusted 
gross incomes of all other individuals taken into account in 
determining that taxpayer's family size (but only if such 
individuals are required to file a tax return for the taxable 
year). Modified adjusted gross income is defined as adjusted 
gross income increased by: (1) the amount (if any) normally 
excluded by section 911 (the exclusion from gross income for 
citizens or residents living abroad), plus (2) any tax-exempt 
interest received or accrued during the tax year. To be 
eligible for the premium assistance credit, taxpayers who are 
married (within the meaning of section 7703) must file a joint 
return. Individuals who are listed as dependents on a return 
are ineligible for the premium assistance credit.
---------------------------------------------------------------------------
    \30\Individuals who are lawfully present in the United States but 
are not eligible for Medicaid because of their immigration status are 
treated as having a household income equal to 100 percent of FPL (and 
thus eligible for the premium assistance credit) as long as their 
household income does not actually exceed 100 percent of FPL.
---------------------------------------------------------------------------
    As described in Table 1 below, premium assistance credits 
are available on a sliding scale basis for individuals and 
families with household incomes between 100 and 400 percent of 
FPL to help offset the cost of private health insurance 
premiums. The premium assistance credit amount is determined 
based on the percentage of income the cost of premiums 
represents, rising from two percent of income for those at 100 
percent of FPL for the family size involved to 9.5 percent of 
income for those at 400 percent of FPL for the family size 
involved. Beginning in 2014, the percentages of income are 
indexed to the excess of premium growth over income growth for 
the preceding calendar year. Beginning in 2018, if the 
aggregate amount of premium assistance credits and cost-sharing 
reductions\31\ exceeds 0.504 percent of the gross domestic 
product for that year, the percentage of income is also 
adjusted to reflect the excess (if any) of premium growth over 
the rate of growth in the consumer price index for the 
preceding calendar year. For purposes of calculating family 
size, individuals who are in the country illegally are not 
included.
---------------------------------------------------------------------------
    \31\As described in section 1402 of the Patient Protection and 
Affordable Care Act, Pub. L. No. 111-148.
---------------------------------------------------------------------------
    Premium assistance credits, or any amounts that are 
attributable to them, cannot be used to pay for abortions for 
which federal funding is prohibited. Premium assistance credits 
are not available for months in which an individual has a free 
choice voucher under section 139D.
            The low income premium credit phase-out
    The premium assistance credit increases, on a sliding scale 
in a linear manner, as shown in Table 1 below.

                                 TABLE 1
------------------------------------------------------------------------
 Household Income  (expressed as a   Initial Premium     Final Premium
          percent of FPL)              (percentage)       (percentage)
------------------------------------------------------------------------
100% up to 133%...................               2.0                2.0
133% up to 150%...................               3.0                4.0
150% up to 200%...................               4.0                6.3
200% up to 250%...................               6.3               8.05
250% up to 300%...................              8.05                9.5
300% up to 400%...................               9.5                9.5
------------------------------------------------------------------------

    The premium assistance credit amount is tied to the cost of 
the second lowest-cost silver plan (adjusted for age) which: 
(1) is in the rating area where the individual resides, (2) is 
offered through an exchange in the area in which the individual 
resides, and (3) provides self-only coverage in the case of an 
individual who purchases self-only coverage, or family coverage 
in the case of any other individual. If the plan in which the 
individual enrolls offers benefits in addition to essential 
health benefits,\32\ even if the State in which the individual 
resides requires such additional benefits, the portion of the 
premium that is allocable to those additional benefits is 
disregarded in determining the premium assistance credit 
amount.\33\ Premium assistance credits may be used for any plan 
purchased through an exchange, including bronze, silver, gold 
and platinum level plans and, for those eligible,\34\ 
catastrophic plans.
---------------------------------------------------------------------------
    \32\As defined in section 1302(b) of the Patient Protection and 
Affordable Care Act, Pub. L. No. 111-148.
    \33\A similar rule applies to additional benefits that are offered 
in multi-State plans, under section 1334 of the Patient Protection and 
Affordable Care Act, Pub. L. No. 111-148.
    \34\Those eligible to purchase catastrophic plans either must have 
not reached the age of 30 before the beginning of the plan year, or 
have certification of an affordability or hardship exemption from the 
individual responsibility payment, as described in sections 5000A(e)(1) 
and 5000A(e)(5), respectively.
---------------------------------------------------------------------------
            Minimum essential coverage and employer offer of health 
                    insurance coverage
    Generally, if an employee is offered minimum essential 
coverage\35\ in the group market, including employer-provided 
health insurance coverage, the individual is ineligible for the 
premium assistance credit for health insurance purchased 
through a State exchange.
---------------------------------------------------------------------------
    \35\As defined in section 5000A(f).
---------------------------------------------------------------------------
    If an employee is offered unaffordable coverage by his or 
her employer or the plan's share of total allowed cost of 
provided benefits is less than 60 percent of such costs, the 
employee can be eligible for the premium assistance credit, but 
only if the employee declines to enroll in the coverage and 
satisfies the conditions for receiving a tax credit through an 
exchange. Unaffordable is defined as coverage with a premium 
required to be paid by the employee that is more than 9.5 
percent of the employee's household income, based on self-only 
coverage.\36\ The percentage of income that is considered 
unaffordable is indexed in the same manner as the percentage of 
income is indexed for purposes of determining eligibility for 
the credit (as discussed above). The Secretary of the Treasury 
is informed of the name and employer identification number of 
every employer that has one or more employees receiving a 
premium assistance credit.
---------------------------------------------------------------------------
    \36\The 9.5 percent amount is indexed for calendar years beginning 
after 2014.
---------------------------------------------------------------------------
            Procedures for determining eligibility
    In order to receive an advance payment of the premium 
assistance credit, during the open enrollment period for 
coverage during the next calendar year, exchange participants 
must provide to the exchange certain information from their tax 
return from two years prior. For example, if during the 2013 
open enrollment period an individual applies for a premium 
assistance credit for 2014, the individual must provide his or 
her tax return from 2012. The IRS is authorized to disclose to 
the Department of Health and Human Services limited tax return 
information to verify a taxpayer's income based on the most 
recent return information available to establish eligibility 
for advance payments of the premium assistance credit. Existing 
privacy and safeguard requirements apply. Individuals who do 
not qualify for advance payments of the premium assistance 
credit on the basis of their prior year income may apply for 
the premium assistance credit based on specified changes in 
circumstances. For individuals and families who did not file a 
tax return in the prior tax year, the Secretary of Health and 
Human Services is directed to establish alternative income 
documentation that may be provided to determine income 
eligibility for advance payments of the premium assistance 
credit.
            Reconciliation
    If the premium assistance credit received through advance 
payment exceeds the amount of premium assistance credit to 
which the taxpayer is entitled for the taxable year, the 
liability for the excess advance payment must be reflected on 
the taxpayer's income tax return for the taxable year subject 
to a limitation on the amount of such liability. For persons 
with household income below 500 percent of FPL, the liability 
for the excess payment for a taxable year is limited to a 
specific dollar amount (the ``applicable dollar amount'') as 
shown in Table 2 below (one half of the applicable dollar 
amount shown in Table 2 for unmarried individuals who are not 
surviving spouses or filing as heads of households).\37\
---------------------------------------------------------------------------
    \37\Medicare and Medicaid Extenders Act of 2010, Pub. L. No. 111-
309, sec. 208. Prior to the Medicare and Medicaid Extenders Act of 
2010, for persons whose household income was below 400 percent of the 
FPL, the amount of the increase in tax was limited to $400 ($250 for 
unmarried individuals who are not surviving spouses or filing as heads 
of households).

                                 TABLE 2
------------------------------------------------------------------------
                                                       Applicable Dollar
  Household Income  (expressed as a percent of FPL)          Amount
------------------------------------------------------------------------
Less than 200%.......................................              $600
At least 200% but less than 250%.....................             1,000
At least 250% but less than 300%.....................             1,500
At least 300% but less than 350%.....................             2,000
At least 350% but less than 400%.....................             2,500
At least 400% but less than 450%.....................             3,000
At least 450% but less than 500%.....................             3,500
------------------------------------------------------------------------

    If the premium assistance credit for a taxable year 
received through advance payment is less than the amount of the 
credit to which the taxpayer is entitled for the year, the 
shortfall in the credit is also reflected on the taxpayer's tax 
return for the year.
    The eligibility for and amount of the advance premium 
assistance credit is generally determined in advance of the 
coverage year, on the basis of household income and family size 
shown on the taxpayer's return for the taxable year from two 
years prior, and the monthly premiums for qualified health 
plans in the individual market in which the taxpayer, spouse 
and any dependent enroll in an exchange. Any advance premium 
assistance credit is paid during the year for which coverage is 
provided by the exchange. In the subsequent year, the amount of 
advance premium assistance credit is required to be reconciled 
with the allowable refundable premium assistance credit for the 
year of coverage. Generally, this reconciliation is to be 
accomplished on the tax return filed for the year of coverage, 
based on that year's actual household income, family size, and 
premiums.
    Separately, the provision requires that the exchange, or 
any person with whom it contracts to administer the insurance 
program, must report to the Secretary with respect to any 
taxpayer's participation in the health plan offered by the 
Exchange. The information to be reported is information 
necessary to determine whether a person has received excess 
advance payments, identifying information about the taxpayer 
(such as name, taxpayer identification number, months of 
coverage) and any other person covered by that policy; the 
level of coverage purchased by the taxpayer; the total premium 
charged for the coverage, as well as the aggregate advance 
payments credited to that taxpayer; and information provided to 
the exchange for the purpose of establishing eligibility for 
the program, including changes of circumstances of the taxpayer 
since first purchasing the coverage. Finally, the party 
submitting the report must provide a copy to the taxpayer whose 
information is the subject of the report.

Reasons for change

    The Committee believes that taxpayers with household income 
of at least 200 percent of FPL but less than 400 percent of FPL 
should be required to repay a portion of the overpayment of the 
premium assistance credit received. The Committee believes that 
it is equitable to increase the current repayment rates for 
these individuals. Furthermore, Congress never intended for a 
taxpayer with a household income that is 400 percent of FPL or 
above to be eligible for premium assistance credits. Thus, for 
any taxpayer with household income that is 400 percent of FPL 
or above, the Committee believes the taxpayer should be 
required to repay the full amount of any overpayment of the 
advance premium assistance credit.

Explanation of provision

    Under the provision, the applicable dollar amount with 
respect to any excess advance payment of a taxpayer's allowable 
premium assistance credit for a taxable year is revised as 
shown in Table 3 below (one half of the applicable dollar 
amount shown in Table 3 for unmarried individuals who are not 
surviving spouses or filing as heads of households).

                                 TABLE 3
------------------------------------------------------------------------
 Household Income  (expressed as a percent of poverty  Applicable Dollar
                        line)                                Amount
------------------------------------------------------------------------
Less than 200%.......................................              $600
At least 200% but less than 300%.....................             1,500
At least 300% but less than 400%.....................             2,500
------------------------------------------------------------------------

    Persons with household incomes of 400 percent of FPL and 
above must repay the full amount of the premium assistance 
credit received through an advance payment.

Effective date

    The provision applies to taxable years ending after 
December 31, 2013.

                      III. Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 705, ``Comprehensive 1099 Taxpayer 
Protection and Repayment of Exchange Subsidy Overpayments Act 
of 2011.''

                    MOTION TO REPORT RECOMMENDATIONS

    The bill H.R. 705 was ordered favorably reported, as 
amended, by a roll call vote of 21 yeas to 15 nays (with a 
quorum being present). The vote was as follows:


----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Herger.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Ryan.......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Davis......................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Heller.....................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Kind.........  ........        X   .........
Mr. Gerlach....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Price......................        X   ........  .........  Ms. Berkley......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Smith......................        X   ........  .........
Mr. Schock.....................        X   ........  .........
Ms. Jenkins....................        X   ........  .........
Mr. Paulsen....................        X   ........  .........
Mr. Berg.......................        X   ........  .........
Ms. Black......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                          VOTES ON AMENDMENTS

    The Crowley Amendment to the Chairman's Amendment in the 
Nature of a Substitute to H.R. 705 failed to pass by a roll 
call vote of 15 yeas to 21 nays (with a quorum being present). 
The vote was as follows:


----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................  ........        X   .........  Mr. Levin........        X   ........  .........
Mr. Herger.....................  ........        X   .........  Mr. Rangel.......        X   ........  .........
Mr. Johnson....................  ........        X   .........  Mr. Stark........        X   ........  .........
Mr. Brady......................  ........        X   .........  Mr. McDermott....        X   ........  .........
Mr. Ryan.......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Becerra......        X   ........  .........
Mr. Davis......................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Boustany...................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Heller.....................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Kind.........        X   ........  .........
Mr. Gerlach....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Price......................  ........        X   .........  Ms. Berkley......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Smith......................  ........        X   .........
Mr. Schock.....................  ........        X   .........
Ms. Jenkins....................  ........        X   .........
Mr. Paulsen....................  ........        X   .........
Mr. Berg.......................  ........        X   .........
Ms. Black......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

                     IV. Budget Effects of the Bill


               A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 705 as reported.
    The bill, as reported, is estimated to have the following 
effects on budget receipts for fiscal years 2011-2021:


B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET 
                               AUTHORITY

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority.

      C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 18, 2011.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman:  The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 705, the 
Comprehensive 1099 Taxpayer Protection and Repayment of 
Exchange Subsidy Overpayments Act of 2011.
    If you wish further details on the estimate, we will be 
pleased to provide them. The staff contacts are Kalyani 
Parthasarathy (CBO) and Pamela Moomau (JCT).
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

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

    Summary: H.R. 705, the Comprehensive 1099 Taxpayer 
Protection and Repayment of Exchange Subsidy Overpayments Act 
of 2011, would repeal certain scheduled expansions in 
information reporting requirements, and modify repayment 
requirements for the advance premium assistance credits 
available to certain individuals starting in 2014 for the 
purchase of health insurance through health insurance 
exchanges. The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting H.R. 705 would reduce revenues over the 
2011-2021 period by $19.7 billion, and reduce outlays by $19.9 
billion. JCT therefore estimates that enacting the legislation 
would reduce federal budget deficits by $166 million over the 
2011-2021 period.
    Pay-as-you-go procedures apply because enacting the 
legislation would affect direct spending and revenues. JCT has 
determined that the tax provisions of the bill contain no 
intergovernmental mandates and one private-sector mandate as 
defined in the Unfunded Mandates Reform Act (UMRA). Based on 
information provided by JCT, the cost of the bill's private-
sector mandate would exceed the annual threshold established in 
UMRA for private-sector mandates ($142 million in 2011, 
adjusted annually for inflation) in each of the first five 
years the mandate is in effect.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 705 is shown in the following table.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            By fiscal year, in millions of dollars--
                                                              ----------------------------------------------------------------------------------------------------------------------------------
                                                                2011    2012      2013      2014      2015      2016      2017      2018      2019      2020      2021     2011-2016   2011-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                       CHANGES IN REVENUES

Repeal Information Reporting on Rental Property Expense            *      -227      -239      -251      -261      -275      -285      -299      -314      -325      -335      -1,253      -2,811
 Payments....................................................
Repeal 1099 Information Reporting Requirements for Certain         0      -263    -2,785    -1,995    -2,064    -2,135    -2,309    -2,413    -2,523    -2,636    -2,782      -9,242     -21,905
 Other Payments..............................................
Modify Repayment of Certain Tax Credits......................      0         0         0       107       287       435       601       782       870       915       995         829       4,990
                                                              ----------------------------------------------------------------------------------------------------------------------------------
Total Estimated Changes in Revenues..........................      0      -490    -3,024    -2,139    -2,038    -1,975    -1,993    -1,930    -1,967    -2,046    -2,122      -9,666     -19,726
    On-budget................................................      0      -490    -3,024    -2,050    -1,827    -1,604    -1,555    -1,462    -1,484    -1,545    -1,601      -8,995     -16,644
    Off-budget...............................................      0         0         0       -89      -211      -371      -438      -468      -483      -501      -521        -671      -3,082

                                                                                   CHANGES IN DIRECT SPENDING

Modify Repayment of Certain Tax Credits:
    Estimated Budget Authority...............................      0         0         0      -566    -1,314    -2,198    -2,661    -3,048    -3,207    -3,350    -3,547      -4,078     -19,892
    Estimated Outlays........................................      0         0         0      -566    -1,314    -2,198    -2,661    -3,048    -3,207    -3,350    -3,547      -4,078     -19,892

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

Estimated Deficit Impact\a\..................................      0       490     3,024     1,573       724      -223      -668    -1,118    -1,240    -1,304    -1,425       5,588        -166
    On-budget................................................      0       490     3,024     1,484       513      -594    -1,106    -1,586    -1,723    -1,805    -1,946       4,917      -3,248
    Off-budget...............................................      0         0         0        89       211       371       438       468       483       501       521         671      3,082
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: * = change in revenue between -$500,000 and $500,000.
\a\Negative numbers indicate a reduction in the deficit; positive numbers indicate the opposite.

    Basis of estimate: JCT estimated all of the effects of H.R. 
705 on revenues and outlays.
    H.R. 705 would repeal expansions in two 1099 information 
reporting requirements currently scheduled to take effect in 
2011 and 2012. Under current law, businesses that pay more than 
$600 during a calendar year to an individual or unincorporated 
business for services rendered, or for certain investment 
income, are required to report that information to the 
recipients and the Internal Revenue Service on form 1099. 
Beginning in 2011, most landlords also became subject to those 
reporting requirements under current law. H.R. 705 would repeal 
that requirement, reducing revenues by an estimated $2.8 
billion over the 2011-2021 period. In addition, under current 
law, beginning in 2012, certain additional payments will become 
subject to those reporting requirements, including payments 
made to corporations and payments made for a broader range of 
expenses. H.R. 705 would also repeal that expansion, reducing 
revenues by an estimated $21.9 billion over the 2011-2021 
period.
    Starting in 2014, qualifying taxpayers will become eligible 
to receive refundable health care premium assistance credits 
based on income estimated from tax returns for prior years. 
Taxpayers may later be required to repay some or all of the 
credit, subject to certain limits based on income, if their 
actual income proves to be higher than estimated. H.R. 705 
would generally raise those limits, subjecting more taxpayers 
to the repayment requirement. JCT estimates that the provision 
will raise revenues by $5.0 billion and reduce outlays by $19.9 
billion over the 2011-2021 period. The estimated effect on 
revenues includes a reduction of $3.1 billion in off-budget 
(Social Security) receipts over the 2011-2021 period.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. JCT estimates that enacting H.R. 705 would decrease 
both direct spending and revenues, and would result in a net 
increase in the deficit over the 2011-2016 period, but would 
reduce the cumulative deficits over the 2011-2021 period. The 
pay-as-you-go procedures apply only to on-budget effects.
    The net changes in outlays and revenues that are subject to 
pay-as-you-go procedures are shown in the following table.

 CBO ESTIMATE OF PAY-AS-YOU-GO ACT EFFECTS FOR H.R. 705, THE COMPREHENSIVE 1099 TAXPAYER PROTECTION AND REPAYMENT OF EXCHANGE SUBSIDY OVERPAYMENTS ACT OF 2011, AS ORDERED REPORTED BY THE HOUSE
                                                                        COMMITTEE ON WAYS AND MEANS ON FEBRUARY 17, 2011
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             By fiscal year, in millions of dollars--
                                                                --------------------------------------------------------------------------------------------------------------------------------
                                                                  2011    2012      2013      2014      2015      2016      2017      2018      2019      2020      2021    2011-2016  2011-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Statutory Pay-As-You-Go Impact.................................      0       490     3,024     1,484       513      -594    -1,106    -1,586    -1,723    -1,805    -1,946      4,917     -3,248
Memorandum:
    Changes in Outlays.........................................      0         0         0      -566    -1,314    -2,198    -2,661    -3,048    -3,207    -3,350    -3,547     -4,078    -19,892
    Changes in Revenues........................................      0      -490    -3,024    -2,050    -1,827    -1,604    -1,555    -1,462    -1,484    -1,545    -1,601     -8,995    -16,644
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT has 
determined that the bill contains no intergovernmental mandates 
and one private-sector mandate as defined in UMRA. That mandate 
would change limits on the amounts taxpayers would be required 
to repay for advance premium assistance tax credits associated 
with health insurance exchanges, in the event of an 
overpayment.
    Based on information provided by JCT, the cost of the 
mandate would exceed the annual threshold established in UMRA 
for private-sector mandates ($142 million in 2011, adjusted 
annually for inflation) in each of the first five years the 
mandate is in effect.
    Estimate prepared by: Kalyani Parthasarathy and Joshua 
Shakin.
    Estimate approved by: Frank Sammartino, Assistant Director 
for Tax Analysis.

                    D. MACROECONOMIC IMPACT ANALYSIS

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: The effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

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


          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was a result of the Committee's 
oversight review concerning the tax compliance burden on 
taxpayers and the potential for waste, fraud, and abuse with 
respect to exchange subsidies that the Committee concluded that 
it is appropriate to report the bill, as amended, favorably to 
the House of Representatives with the recommendation that the 
bill do pass.

        B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. INFORMATION RELATING TO UNFUNDED MANDATES

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill contains one 
private sector mandate: changes limitations on amounts required 
for repayment on reconciliation of advance premium assistance 
tax credits associated with health insurance exchange.
    The Committee has determined that the bill does not impose 
a Federal intergovernmental mandate on State, local, or tribal 
governments.

                D. APPLICABILITY OF HOUSE RULE XXI 5(B)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the provisions of the bill, and states that 
the provisions of the bill do not involve any Federal income 
tax rate increases within the meaning of the rule.

                       E. TAX COMPLEXITY ANALYSIS

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. The staff of the Joint Committee on Taxation has 
identified only one such provision, which is discussed below. 
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, a summary description of that 
provision is provided, along with an estimate of the number and 
type of affected taxpayers, and a discussion regarding the 
relevant complexity and administrative issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury.

 REPEAL OF EXPANDED INFORMATION REPORTING FOR PAYMENTS WITH RESPECT TO 
               PROPERTY OR PAYMENTS MADE TO CORPORATIONS

Summary description of provision

    Under the provision, section 6041 is amended to delete 
references to gross proceeds from property, a requirement that 
payments to corporations be reported, and a grant of additional 
regulatory authority. Accordingly, the changes to section 6041 
enacted under section 9006 of the Patient Protection and 
Affordable Care Act are repealed in their entirety.
    As a result of the repeal, taxpayers are not required to 
file an information return for all payments aggregating $600 or 
more in a calendar year to any single corporation payee (except 
a tax-exempt corporation). Second, the payments to be reported 
do not include gross proceeds paid in consideration for 
property.

Number of affected taxpayers

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

Discussion

    According to the Government Accountability Office, only 
eight percent of approximately 50 million small businesses with 
less than $10 million in assets filed miscellaneous information 
return Form 1099-MISC.\38\ If greater reporting from small 
businesses were available, it is possible that the IRS could 
more readily identify areas of underreported income of the 
payees. In general, the more payments to which information 
reporting and/or withholding applies, the greater the 
improvement in compliance.\39\ However, since the reporting 
requirements were expanded, numerous critics have pointed to 
disproportionate additional administrative burden on those 
required to comply with the reporting obligations. Thus, 
requiring information reporting for all payments aggregating 
$600 or more in a calendar year to a corporation and for 
payments for property may outweigh the enhanced taxpayer 
compliance.
---------------------------------------------------------------------------
    \38\Government Accountability Office, IRS Could Do More to Promote 
Compliance by Third Parties with Miscellaneous Income Reporting 
Requirements, GAO-09-238 (January 2009).
    \39\See e.g., ``Tax Year 2001 Individual Income Tax Underreporting 
Gap,''  at 2, 
finding that information reporting is the primary differentiator in 
compliance rates. See also, Joseph Bankman, ``Eight Truths About 
Collecting Taxes from the Cash Economy,'' 117 Tax Notes 506, 511 
(2007).
---------------------------------------------------------------------------
    At the time the expanded provisions were under 
consideration, a complexity analysis\40\ suggested that the 
widespread use of computer technology to process and store 
business information should minimize the burden associated with 
generating and transmitting the information necessary to comply 
with the provision, regardless of the extent to which the 
taxpayer is currently subject to information reporting. 
Although the additional burden of expanded reporting would have 
depended on the extent to which taxpayers subject to the 
provision already had adequate procedures and systems in place 
to comply with existing information reporting requirements,\41\ 
uncertainty about the scope of the expansion, and the lack of 
administrative guidance to date has made it difficult for 
taxpayers to determine what steps would be necessary to comply 
with the expanded reporting. Repeal of the additional 
information reporting requirements avoids the need for small 
businesses to develop new bookkeeping systems necessary in time 
for implementation of the expanded reporting in 2012. In 
addition, it relieves the IRS of the need to develop new forms 
and outreach programs to educate the public about the changes 
in reporting obligations.
---------------------------------------------------------------------------
    \40\See, Senate Finance Committee, ``America's Healthy Future Act 
of 2009,'' S. Rep 111-89, October 19, 2009) pp. 365-366.
    \41\See e.g., Government Accountability Office, Costs and Uses of 
Third-Party Information Returns, November 2007, GAO-08-266, available 
at , wherein the GAO, based on 
its case studies, found the compliance costs associated with filing 
information returns to be ``relatively low.''
---------------------------------------------------------------------------

Comments from IRS and Treasury

    No guidance would be required.
    The relevant forms and instructions would not need to be 
modified (Forms 1099, 1098, 3921, 3922, 5498, and W-2G), and 
the instructions for certain other information returns and 
publications would not need to be revised to reflect the 
elimination of the exception for payments to corporations and 
the exception for payments other than for services.
    The IRS would not need to modify existing tax systems to 
reflect this provision.

  F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF 
                                BENEFITS

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

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

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986


Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *



Subpart C--Refundable Credits

           *       *       *       *       *       *       *



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

    (a) * * *

           *       *       *       *       *       *       *

    (f) Reconciliation of credit and advance credit.--
            (1) * * *
            (2) Excess advance payments.--
                    (A) * * *
                    (B) Limitation on increase.--
                            [(i) In general.--In the case of a 
                        taxpayer whose household income is less 
                        than 500 percent of the poverty line 
                        for the size of the family involved for 
                        the taxable year, the amount of the 
                        increase under subparagraph (A) shall 
                        in no event exceed the applicable 
                        dollar amount determined in accordance 
                        with the following table (one-half of 
                        such amount in the case of a taxpayer 
                        whose tax is determined under section 
                        1(c) for the taxable year):


------------------------------------------------------------------------
[If the household income (expressed
 as a percent of poverty line) is:     The applicable dollar amount is:
------------------------------------------------------------------------
Less than 200%                       $600
At least 200% but less than 250%     $1,000
At least 250% but less than 300%     $1,500
At least 300% but less than 350%     $2,000
At least 350% but less than 400%     $2,500
At least 400% but less than 450%     $3,000
At least 450% but less than 500%     $3,500]
------------------------------------------------------------------------

                            (i) In general.--In the case of a 
                        taxpayer whose household income is less 
                        than 400 percent of the poverty line 
                        for the size of the family involved for 
                        the taxable year, the amount of the 
                        increase under subparagraph (A) shall 
                        in no event exceed the applicable 
                        dollar amount determined in accordance 
                        with the following table (one-half of 
                        such amount in the case of a taxpayer 
                        whose tax is determined under section 
                        1(c) for the taxable year):


----------------------------------------------------------------------------------------------------------------
   If the household income (expressed as a
         percent of poverty line) is:                           The applicable dollar amount is:
----------------------------------------------------------------------------------------------------------------
Less than 200%...............................  $600
At least 200% but less than 300%.............  $1,500
At least 300% but less than 400%.............  $2,500.
----------------------------------------------------------------------------------------------------------------

                                               

           *       *       *       *       *       *       *
Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *


   Subpart B--Information Concerning Transactions With Other Persons

SEC. 6041. INFORMATION AT SOURCE.

    (a) Payments of $600 or More.--All persons engaged in a 
trade or business and making payment in the course of such 
trade or business to another person, of rent, salaries, wages, 
[amounts in consideration for property,] premiums, annuities, 
compensations, remunerations, emoluments, or other [gross 
proceeds,] fixed or determinable gains, profits, and income 
(other than payments to which section 6042(a)(1), 6044(a)(1), 
6047(e), 6049(a), or 6050N(a) applies, and other than payments 
with respect to which a statement is required under the 
authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 
or more in any taxable year, or, in the case of such payments 
made by the United States, the officers or employees of the 
United States having information as to such payments and 
required to make returns in regard thereto by the regulations 
hereinafter provided for, shall render a true and accurate 
return to the Secretary, under such regulations and in such 
form and manner and to such extent as may be prescribed by the 
Secretary, setting forth the amount of such [gross proceeds,] 
gains, profits, and income, and the name and address of the 
recipient of such payment.

           *       *       *       *       *       *       *

    [(h) Treatment of Rental Property Expense Payments.--
            [(1) In general.--Solely for purposes of subsection 
        (a) and except as provided in paragraph (2), a person 
        receiving rental income from real estate shall be 
        considered to be engaged in a trade or business of 
        renting property.
            [(2) Exceptions.--Paragraph (1) shall not apply 
        to--
                    [(A) any individual, including any 
                individual who is an active member of the 
                uniformed services or an employee of the 
                intelligence community (as defined in section 
                121(d)(9)(C)(iv)), if substantially all rental 
                income is derived from renting the principal 
                residence (within the meaning of section 121) 
                of such individual on a temporary basis,
                    [(B) any individual who receives rental 
                income of not more than the minimal amount, as 
                determined under regulations prescribed by the 
                Secretary, and
                    [(C) any other individual for whom the 
                requirements of this section would cause 
                hardship, as determined under regulations 
                prescribed by the Secretary.
    [(i) Application to Corporations.--Notwithstanding any 
regulation prescribed by the Secretary before the date of the 
enactment of this subsection, for purposes of this section the 
term ``person'' includes any corporation that is not an 
organization exempt from tax under section 501(a).
    [(j) Regulations.--The Secretary may prescribe such 
regulations and other guidance as may be appropriate or 
necessary to carry out the purposes of this section, including 
rules to prevent duplicative reporting of transactions]

           *       *       *       *       *       *       *


  VII. Dissenting Views on H.R. 705, The Comprehensive 1099 Taxpayer 
 Protection and Repayment of Exchange Subsidy Overpayments Act of 2011

    We want the record to show clearly that the 15 minority 
members of the Ways and Means Committee voted in support of 
H.R. 4, legislation to repeal the 1099 tax reporting 
requirement enacted as part of health reform. However, we were 
unified in opposition to the second bill, H.R. 705, the 
Comprehensive 1099 Taxpayer Protection and Repayment of 
Exchange Subsidy Overpayments Act of 2011. We opposed H.R. 705 
because it would raise taxes on the middle class.
    According to the Joint Committee on Taxation, repealing the 
1099 provision has a cost of $24.9 billion over 10 years. 
Democrats are clearly on record supporting repeal of 1099 and 
paying for it as well.
    In the 111th Congress, all but one House Democrat supported 
passage of H.R. 5982, a bill to repeal the 1099 provision that 
was offset by closing a number of foreign tax credit loopholes 
to ship jobs overseas and other loopholes that promote tax 
avoidance. That bill failed under suspension of the rules in 
which two-thirds of the House must support the legislation. It 
failed because of almost uniform opposition by House 
Republicans--even though the bill was endorsed by and subject 
to a key vote by the National Federation of Independent 
Businesses. Only two Republicans supported the legislation--one 
of whom is no longer in Congress.
    Now, in the 112th Congress, our Republican colleagues on 
Ways and Means have chosen to pursue a financing mechanism for 
1099 repeal that forces the middle class to shoulder the 
expense of this provision for small businesses. It does this by 
eliminating a protection for individuals and families who 
obtain tax credits for health insurance, a protection that 
prevents substantial tax increases that result from unexpected 
changes in income or family status. As the consumer advocacy 
organization Families USA puts it, ``House Republicans have 
introduced a proposal that would undermine protections in the 
Affordable Care Act for middle-class families and put the 
financial security of these families at risk.''
    Starting in 2014, the health reform law ensures health care 
is affordable for working families by making tax credits 
available for the purchase of health insurance for families 
with incomes below 400 percent of poverty. The amount of the 
tax credit for which people are eligible is based on annual 
income for the year the credits are received. But, because 
people will need help paying their insurance premiums 
throughout the course of the year, the law provides for advance 
payments of the credits. These tax credits never go to the 
families--they are paid directly to health insurers to offset 
the cost of people's health insurance premiums. In order to 
make advanced tax credit payments, the law bases the premiums 
on the taxpayer's most recent tax filing. At the time when 
taxpayers file their annual return, the advance payments are 
reconciled with their actual year income. If the advance 
payments are greater than the final tax credit, the taxpayer 
must pay the difference in the form of higher taxes. This 
process is often called a ``true up.'' Republicans charge that 
the true-up policy captures overpayments that are due to fraud. 
This is not true--the true-up policy in fact relies on 
taxpayers truthfully reporting their actual income for the 
year. If taxpayers do not report extra income on their return 
for the year, then the true-up policy would not apply. Section 
1411(h) of the Affordable Care Act contains protections that 
guard against fraudulent overpayments and permits recoupment of 
such overpayments. This provision of the law permits the 
assessment of a penalty of up to $250,000 in the case of the 
submission of false or fraudulent information in order to 
obtain health tax credits.
    This true-up process will not be infrequent. The incomes of 
hourly-wage workers often fluctuate from week to week and are 
difficult to predict. Dependents may leave or return home at 
any point in the year. People may change jobs midyear, get an 
end-of-year bonus, or go from part-time employment to 
employment on a full-time basis. Any of these changes would 
affect their eligibility for premium tax credits.
    However, the law also recognizes that this true up process 
can put families in a difficult financial situation. At these 
income levels, it is unlikely that people have the resources to 
pay what could be thousands of dollars of unanticipated taxes. 
So, the law protects them by capping tax increases.
    In the original law, the cap was a flat $250 for an 
individual and $600 for a family below 400% of the federal 
poverty level. This policy created a large cliff for people 
whose incomes increase to 400 percent of poverty because they 
would suddenly be liable for 100 percent of any tax credits 
received.
    Last December, in a bipartisan vote of 409-2, the Congress 
voted to alter the true-up policy. The President signed this 
policy into law. It converted the flat cap to a graduated 
income approach that protects those with lower incomes, but 
also mitigated the cliff that people faced at 400 percent of 
poverty by phasing the caps out up to 500 percent of poverty 
($110,000 for a family of four). That was a trade-off Democrats 
were willing to make. The policy under current law (as modified 
by the December legislation) is as follows:

------------------------------------------------------------------------
                                   Repayment for an     Repayment for a
        Percent of Income             individual            family
------------------------------------------------------------------------
<200% FPL.......................               $300                $600
200%-<250%......................                500                 750
250%-<300%......................                750               1,500
300%-<350%......................              1,000               2,000
350%-<400%......................              1,250               2,500
400%-<450%......................              1,500               3,000
450%-<500%......................              1,750               3,500
------------------------------------------------------------------------

    In H.R. 705, the Ways and Means Republicans are reversing 
the December policy and reinstating the original cliff to 
generate more taxes from middle-class families. They are 
collapsing the income categories so that many people under 400 
percent of poverty will owe $500 in higher taxes, and they are 
reinstating the cliff at 400 percent of poverty. In other 
words, H.R. 705 eliminates the protections for families with 
incomes between 400 and 500 percent of poverty ($88,000 to 
$110,000 for a family of four). If a family's actual income was 
even one dollar above 400 percent of poverty, they could have 
to pay the IRS the entire value of their health insurance 
premium tax credit--which could be as high as nearly $12,000 in 
2014.
    Middle-income Americans will be forced to pay higher taxes 
under this proposal. The financial security of these families 
could be put in jeopardy when they are forced to pay the IRS 
the full value of their health premium tax credits simply 
because they accepted a better job, picked up extra shifts, 
received a holiday bonus, or saw a reduction in household size, 
such as a drop due to a death in the family or a child reaching 
adulthood.
    We would also like to note that each of our colleagues on 
the other side of the aisle signed the Americans for Tax 
Reform's ``Taxpayer Protection Pledge'' committing to oppose 
any and all tax increases. Their party-line vote in support of 
this middle-income tax increase violates that pledge.
    According to the Joint Committee on Taxation, this 
Republican proposal will increase the number of uninsured by 
266,000. Over a quarter of a million individuals will no longer 
receive health insurance out of fear that they will be forced 
to pay substantial amounts to the IRS at tax-time.
    The Republican proposal will also disproportionally affect 
families who live in parts of the country with higher health 
insurance premiums due to circumstances in the local market. 
While families in both high and low-cost insurance areas will 
be protected from having to pay more than 9.5 percent of their 
income for health coverage, families in high-cost insurance 
areas will receive tax credits in higher dollar amounts than 
families in low-cost areas because their coverage is more 
expensive, and these higher dollar amounts are what would be 
required to be fully repaid.
    If our Republican colleagues wonder why we refuse to return 
to the flawed true-up policy, the answer is simple: There are 
25 billion reasons. With a score from the Joint Committee on 
Taxation of $25 billion, this bill gouges mostly middle-income 
American families by adding $25 billion in new taxes simply 
because they were doing the right thing and providing health 
insurance for their families.
    Another aspect of this bill that should be the topic of 
discussion on both sides of the aisle is the growing tax gap. 
In January of this year, the Committee received testimony from 
Taxpayer Advocate Nina Olson that,

        ``Noncompliance cheats honest taxpayers, who must pay 
        more to make up the difference. According to the IRS's 
        most recent comprehensive estimate, the net tax gap 
        stood at $290 billion in 2001, when 132 million tax 
        returns were filed. This means that each taxpayer was 
        effectively paying a `surtax' of some $2,200 to 
        subsidize noncompliance by others.''

    While we remain concerned about the burdens that may result 
from the 1099 reporting requirements that would go into effect 
in 2012, it is important to note that the revenues that would 
have come in to the Treasury as a result of those provisions 
were not additional taxes, as many have attempted to 
characterize them. This is increased revenue associated with 
encouraging greater compliance with our tax laws. While efforts 
to collect these dollars should not present burdensome new 
requirements on job-driving businesses, the Committee must work 
in a bipartisan fashion in order to ensure that the tax gap 
does not transfer tax liabilities to honest taxpayers in order 
to subsidize noncompliance to others.
    In closing, we reiterate our longstanding support for 
repealing the 1099 provision. However we refuse to do so on the 
backs of working Americans. We urge our colleagues on the other 
side of the aisle to seek a new financing mechanism for the 
1099 repeal. We will gladly work with them to find an 
acceptable revenue source. This one is unacceptable.

                                   Sander M. Levin.
                                   Charles B. Rangel.
                                   Pete Stark.
                                   Jim McDermott.
                                   John Lewis.
                                   Richard Neal.
                                   Xavier Becerra.
                                   Mike Thompson.
                                   John Larson.
                                   Earl Blumenauer.
                                   Ron Kind.
                                   Bill Pascrell.
                                   Shelley Berkley.
                                   Joe Crowley.

                                  
