With just hours left before the start of its August recess, the Senate passed a $26.1 billion state-aid package that would raise taxes on U.S. companies with overseas operations. The Chamber opposed the measure, noting that it would “hinder job creation, decrease the competitiveness of American businesses, and deter economic growth.” Members of the House are expected to return to Washington for an August 10 vote on the measure.

Tax Debate Set for September

Senate Majority Leader Harry Reid (R-NV) said that the Senate will debate tax policy after lawmakers return from recess on September 14. At issue is trillions of dollars in tax cuts passed in 2001 and 2003 that are set to expire at the end of this year. The Chamber is pushing for a full extension of all the benefits, while the Obama Administration and congressional leadership want to allow rates for the wealthiest taxpayers to return to higher levels. Reid hopes to bring a bill to the floor before October.

Upon its return, the Senate will also wrangle over H.R. 5297, the Small Business Jobs Act, which would provide $12 billion in tax breaks and create a $30 billion lending fund for small businesses. The bill stalled in the Senate earlier this month because of a continuing dispute over which amendments would be considered. This bill has changed a number of times during its short consideration in the Senate. The Chamber would support this bill after fair consideration of Senate amendments.

One such amendment would repeal a non-health care tax provision in the health care bill requiring businesses to file 1099 forms with the Internal Revenue Service when goods purchased from another business without a credit card exceed $600 in a year. The provision is set to go into effect in 2012. Currently, a 1099 filing is required only for services—not goods—provided by self-employed independent contractors.

The Chamber has expressed strong support for legislation introduced by Sen. Mike Johanns (R-NE) to repeal the provision completely and pay for the $19 billion revenue loss by cutting preventative health care services. The Chamber’s letter of support is available here. Companies and associations can sign on to the Chamber’s coalition letter to repeal the 1099 provision.

Democrats, meanwhile, have introduced an alternative bill that would repeal the 1099 filing requirement for all businesses with fewer than 25 employees. For larger businesses, it would hike the threshold for reporting purchased goods, from $600 to $5,000. However, supporters plan to pay for the bill by raising taxes on oil and gas companies.

If the Democratic alternative is adopted, 1099 filing requirements would become even more complicated and would drive millions of dollars in sales from small companies to larger companies. In addition, small companies would be incentivized to keep their payrolls below 25 employees to avoid triggering the reporting requirement.

In addition, even with a higher threshold, governments, nonprofits, and businesses would be required to track purchases and collect tax information from their vendors because they would have no way of determining whether that first purchase from a vendor will be the last or if it will eventually aggregate to $5,000 for the year.

Sen. Reid said that the Senate will break on October 8 to campaign for the elections but convene for a post-election, lame duck session on November 12. There is no word yet on the House calendar after the August recess.