The Senate on Tuesday rejected measures that would either fully or partially repeal a mandate requiring businesses to file a 1099 form with the IRS for non-credit card purchases from other businesses totaling $600 or more per year. The mandate, scheduled to go into effect in 2012, is part of the health care reform bill passed earlier in the year.

“Of all things in the health care law, this is going to be a priority for the business community. It's not going away,” Chamber Executive Vice President for Government Affairs Bruce Josten told the Wall Street Journal.

The Senate rejected a Chamber-backed amendment by Sen. Mike Johanns (R-NE) that would repeal the reporting mandate and make up for the $19 billion revenue loss by cutting preventative health care services. The Chamber’s letter of support is available here.

The Senate also rejected an amendment by Democrats that would have repealed the 1099 filing requirement for businesses with fewer than 25 employees. For larger businesses, the threshold for reporting purchased goods would be increased from $600 to $5,000. Democrats planned to pay for the bill by raising taxes on oil and gas companies.

The 1099 reporting requirement will make accounting exponentially more burdensome and will force small businesses to divert scarce resources from serving customers and creating jobs to bookkeeping and tax filing. It may also cause businesses to run into problems with the IRS. If the revenue reported to the IRS on 1099s doesn’t match company reported revenue, the vendor could be subject to a costly and time-consuming IRS audit.

Nina Olsen, the IRS taxpayer advocate, says the IRS has no capability to process the forms and that the reporting requirement probably won’t result in revenue for the federal government.

The Chamber has generated widespread grassroots support for full 1099 repeal, sending lawmakers a letter in support of the Johanns amendment signed by 2,500 organizations and businesses representing all 50 states and employing millions of American workers. A copy of the letter is available here.

On Wednesday (Sept. 15), the Chamber will host a fly-in for more than 40 small-to-medium-sized businesses, who will head to Capitol Hill to make their views on 1099 known to lawmakers. The business owners will also urge members of Congress to extend the 2001 and 2003 tax cuts and turn back any attempt to resurrect card check legislation.