The bill repeals the filing requirement, which would have forced millions of businesses to file a tax form for every vendor selling them more than $600 in goods each year, starting in 2012. Although the filing requirement isn’t directly related to health care, it was expected to increase reporting of tax obligations that would then be used to pay for part of the new health care law.

Businesses already must file a Form 1099 with the IRS when they purchase more than $600 in services from a vendor in a year. The new provision would have extended the requirement to the purchase of goods, starting in 2012.

The requirement would have hit about 38 million businesses, charities and tax-exempt organizations, many of them small businesses already swamped by government paperwork, according to a report by the National Taxpayer Advocate, an independent watchdog within the IRS.

The stated purpose of this heightened reporting requirement for businesses was to generate revenue to cover the costs associated with the health care reform law. The Joint Committee on Taxation estimated that this new requirement would raise $17 billion from 2012 through 2019 as it would capture a large percentage of income that currently goes unreported. Conversely, it creates a huge administrative burden on businesses to keep track of all purchases and to obtain taxpayer identification information.

Following the 2010 midterm election, President Barack Obama acknowledged at a November 3, 2010 press conference that the revised 1099 reporting requirements are "too burdensome" for small businesses and "probably counterproductive."

Shortly after President Obama’s comment, U.S. Senator Max Baucus (D-Montana), chair of the U.S. Senate Finance Committee, introduced S. 3946, "Small Business Paperwork Relief Act," to repeal the 1099 reporting requirement. Senator Baucus and Senator Mike Johanns (R-Nebraska) also proposed amendments to S. 510 (Durbin; D-Illinois) to repeal the 1099 reporting requirement. Two efforts to waive U.S. Senate rules to allow consideration of the amendments fell short of the votes necessary for passage on November 29, 2010.