Recent Repeals: PA Residential Sprinkler Systems & 1099 Reporting Requirements

May 11, 2011

It doesn’t happen often, but sometimes the government realizes that it may have bitten off more than it can chew and reconsiders its actions. Such reassessment occurred twice this past April when both the Pennsylvania and federal legislatures repealed unpopular portions of legislation they had previously enacted. 

On the state level, the legislature repealed a 2009 addition to the state’s Uniform Construction Code which required residential builders to include sprinkler systems in new construction. Some have estimated that sprinklers add $2,000 to $4,000 to the price of an average new residence. Many builders and real estate professionals asserted that the additional cost would depress an already struggling home builders’ market. Thus, last month, the state legislature reconsidered and authorized a repeal of the provision and Governor Tom Corbett signed the repeal into law on April 25.

On the federal level, Congress repealed an unpopular tax provision related to 1099 reporting that sprung from the health care reform laws enacted last year. In general, different types of income not otherwise reported to the IRS on a W-2 are reported on a form 1099. Currently, 1099s are only required when payments of $600 or more are made to individuals or unincorporated businesses in any given year. However, the provision in question would have required 1099 reporting for such payments to all business entities.

Such an expansion of the reporting requirements proved very unpopular in the business community as many considered it to be unnecessarily onerous. In addition, there were questions as to whether the IRS was administratively capable of handling the substantial increase in the number of filings the provision would have caused. The repeal, which is formally entitled the Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011, was signed into law by President Barack Obama on April 14.