It's Up to OMB to Save Small Business
There have already been countless news stories about a provision in the health care legislation, Section 9006, that threatens to substantially increase the paperwork burden on small businesses, non-profit organizations and government entities by vastly increasing the reporting and recordkeeping requirements associated with payments to vendors. A report to Congress by the National Taxpayer Advocate, however, reveals an even greater threat from the law to small businesses.

The Office of the Taxpayer Advocate, a relatively little known but important watchdog, is an autonomous agency within the IRS statutorily charged with assisting taxpayers. In its most recent semi-annual report to Congress, the Advocate states that:

"Small businesses seeking to minimize recordkeeping burden thus will have an incentive to use large vendors that can produce these reports for them. As a consequence, small businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition." In short, the Taxpayer Advocate is warning that Section 9006 threatens to discourage companies from patronizing small businesses, reducing competition and leading to further business consolidation.

The Advocate also warns that the "new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance." Moreover, the report also states that "the IRS will face challenges making productive use of this new volume of information reports." CNN reports that the IRS is already looking "for ways to staunch the paperwork flood."

Although Section 9006 should be repealed, that may not happen right away. In the meantime, OMB needs to use its substantial authority under the Paperwork Reduction Act to minimize the law's impact on small businesses. In particular, OMB needs to determine whether proposed Sec. 9006 collections of information have practical utility and have minimized their burden, particularly on small businesses, as required by law. OMB should refuse to approve any Sec. 9006 information collections that do not meet the highest standards for PRA compliance.

OMB has a crucial opportunity to exercise its lawful authority and prevent the health care bill from killing off small businesses.

See National Taxpayer Advocate Report to Congress