Dueling proposals to alter tax-reporting mandate fail in Senate

Despite a backlash from small businesses over a new tax-reporting requirement in the healthcare law, Democrats and Republicans failed again Tuesday to agree on a way to fix the problem, as two amendments to eliminate or modify the mandate collapsed in the Senate.

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 over the next decade and offset the cost of expanding coverage to millions of uninsured Americans.

The small section of the gargantuan bill, 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.

On Tuesday, Republicans blocked a Democratic proposal backed by the White House that would have scaled back the mandate by exempting businesses with 25 employees or fewer and by exempting transactions worth less than $5,000. The cost of altering the proposal was offset by eliminating a tax break for oil and gas companies.

The Democratic proposal, sponsored by Florida Sen. Bill Nelson, drew criticism from leading business groups, which said many businesses would still face the reporting headache.

“At a time when businesses are struggling with a complex tax code, this only makes the tax code more complicated,” said Bill Rys, tax counsel for the National Federation of Independent Business, a leading critic of the healthcare law.

Democrats in turn blocked a GOP proposal that would have eliminated the mandate entirely and also have cut funding for public health programs and exempted more people from having to buy health insurance starting in 2014, a key provision designed to control premiums for everyone.

The Republican proposal, by Nebraska Sen. Mike Johanns, worried many health experts and patient advocates who said it would have substantially weakened the healthcare law.

“It’s so short sighted. It’s really kind of shocking,” said Karl Moeller, executive director of the Campaign for Public Health, a consortium of leading health groups, including the American Heart Assn. and the American Diabetes Assn.

Johanns’ proposal failed 46-52, falling 14 votes short of the 60-vote supermajority needed to be amended to a Democratic bill providing additional aid to small businesses. Nelson’s proposal failed 56-42, falling four votes short of the necessary supermajority.

noam.levey@latimes.com