Last night, Senator Bill Nelson unveiled an amendment to H.R. 5297, the House-passed small business bill, that would impose harsh new taxes on American energy production by repealing the Section 199 domestic manufacturing deduction for major oil companies. This amendment comes in response to the Republican amendment, offered by Senator Mike Johanns (R-NE), to permanently repeal Section 1099 modifications in the new health care law. I know this can be confusing, so let me break it down for you:
Obamacare contains a provision that requires companies to submit 1099 forms for goods or services purchased from a vendor for $600 or more. This would entail extremely burdensome regulations on businesses at a time when many are struggling amidst the dismal economic climate. Both Republicans and Democrats have expressed concern over these reporting requirements, but their approaches vary greatly. The Johanns Amendment would repeal Section 1099 modifications altogether, but the Nelson Amendment would simply scale them back by exempting businesses with 25 or fewer employees and raising the payment threshold from $600 to $5,000. What's most troubling about Senator Nelson's amendment, however, is the pay-for: it would repeal Section 199 that allows integrated oil companies to deduct six percent of their income. We sent a letter to selected Senate offices this afternoon (in advance of a Senate-wide communication effort) to highlight the potential devastating effects of such a tax hike. Here's a sample paragraph from the letter:
The amendment "would be 'paid for' by completely eliminating the 199 deduction in the tax code, resulting in a significant and discriminatory levy on oil and gas companies. Increased costs would inevitably be passed down to consumers in the form of higher gas prices and electricity bills, and could also endanger many jobs connected with or supported by the industry. In addition, this punitive tax policy could further hinder our ability to bounce back from the current financial crisis – a liability our nation simply cannot afford."
The Senate will take up the Nelson Amendment when they reconvene in September. We urge a NO vote and will keep all of you apprised of any developments this next month.