The House voted on October 27th to repeal the three percent withholding rule on certain payments made to vendors by government entities is moving in both Houses of Congress. The House approved H.R. 674 by a vote of 405-16. The bill as voted on also includes an offset to pay the cost of repealing 3% withholding, even though ASCE and most observers believe the original provision would generate little or no additional revenue.
As enacted by the House, the measure repeals Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) as Section 3402(t) of the Internal Revenue Code, which mandates that federal agencies, states, and certain local governments withhold three percent of nearly all of their contract payments. Specifically, the Section requires withholdings at a rate of 3% on all government payments for products and services made by the federal government, as well as state and local governments, with contracting expenditures of $100 million or more. If not repealed, the measure would take effect on January 1, 2013. Repeal of this unnecessary and costly provision will benefit not only the engineering and business communities, but state and local governments which would otherwise be forced to implement the costly program.
ASCE strongly supports repeal and has worked closely with our coalition partners to advance this legislation. Thanks to the hundreds of ASCE members who responded to the Key Alert and contacted their members of Congress to support this legislation. The focus now shifts to the Senate which will hopefully take up the measure shortly. Senator Scott Brown (R-MA) has called a press conference for Tuesday, November 1st, to highlight the need for the Senate to act on this issue. The Obama Administration has endorsed repeal of the three percent withholding requirement.
Associated Builders and Contractors (ABC)
ABC applauded final passage of the 3 percent withholding tax repeal measure by the U.S. House of Representatives. The legislation amends the Internal Revenue Code to undo the 3 percent withholding tax requirement for government contractors:
“We applaud the House for its leadership on this important issue, and are heartened to see a wide bipartisan majority come together to repeal this job-killing tax on America’s business community, especially construction contractors,” said ABC Vice President of Federal Affairs Geoff Burr.
“We are hopeful that the Senate will move quickly to pass this bill and send it to the president who has already voiced his support,” Burr said.