White House pushes bill to scale back tax-reporting law for small businesses

Facing a backlash from small businesses over a new tax-reporting requirement in the healthcare law the president signed in March, the Obama administration is embracing the first change to the landmark legislation.

In a letter to Senate leaders, Secretary of Health and Human Services Kathleen Sebelius and Treasury Secretary Timothy Geithner urged the Senate to back a proposal to scale back the new reporting mandate.

The law currently requires businesses to report to the IRS transactions worth more than $600, a provision that was added to the law to raise an estimated $17 billion and offset the cost of expanding coverage to millions of uninsured Americans.

The small section of the gargantuan legislation, which is unrelated to healthcare, garnered little attention when it was inserted into the bill.

But in recent months, business leaders have signaled growing alarm over what many businesses say would be an administrative nightmare. The reporting requirement is to go into effect in 2012.

Democrats and Republicans on Capitol Hill have said they are committed to modifying or eliminating the mandate but have been unable to agree on a solution amid fierce partisan politicking.

Tuesday, the Senate is to take up two competing proposals to do that as amendments to a small-business assistance bill, one by Florida Democrat Bill Nelson and one by Nebraska Republican Mike Johanns.

In their letter to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell, Sebelius and Geithner endorsed Nelson’s proposal, which would exempt businesses with fewer than 25 employee and all transactions worth less than $5,000.

“The administration believes that the burden created on businesses by the new information reporting requirement on purchases of goods that exceed $600 … is too great,” they wrote.

They also criticized Johanns’ proposal, which would eliminate the reporting requirement altogether in part by tapping a fund in the healthcare law designed to pay for new efforts to prevent chronic diseases.

Neither Nelson’s proposal nor Johanns’ is expected to garner enough votes Tuesday, virtually guaranteeing that the two parties will continue debating the unpopular part of the healthcare law.