Thursday, September 16, 2010
Jack Siegel, nonprofit law attorney, familiar face in the nonprofit law speaking circuit, and author of A Guide for Non-Profit Directors, Officers and Advisors: Avoiding Trouble While Doing Good, has an interesting post on his Charity Governance web blog. Siegel observes that Section 9006 of the Patient Protection and Affordable Care Act (the “Act”) extends Form 1099 reporting requirements to payments representing the purchase price of goods bought from any vendor whose sales to the payor exceed $600 for the year. Many business entities are fretting the new law. However, Siegel cautions that the new law should also concern tax-exempt entities. Although he recognizes that the expanded reporting provision does not apply to payments to vendors that are exempt from federal income tax under Internal Revenue Code section 501(a) (e.g., tax-exempt charities and other entities described in Code section 501(c)), Siegel believes the provision applies (or at least is being interpreted to apply) to tax-exempt nonprofit payors. Siegel opines that the costs of collecting the required information will be very high and impose a great burden on nonprofit payors. He therefore favors repeal of the provision.
For similar concerns reported on this blog, see here.
Background note: Whether the new provision should concern nonprofits depends upon the proper interpretation of Section 9006(a) of the Act, the relevant portion of which adds a new subsection (h) to Code section 6041, and which reads as follows:
h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).
Code section 6041(a), prior to the effective date of the amendments made by the Act to reach payments for property, reads as follows:
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e), 6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.