Legislation to repeal a pending rule that would withhold 3 percent
of government payments to contractors passed the House Thursday.
Resolution 674, which passed 405-16, would remove language in the
Internal Revenue Code that in 2013 requires agencies to withhold 3
percent of payments on contracts worth more than $10,000. The code
also restricts payments to grant recipients at for-profit companies,
and to farm and Medicare recipients. The intent is to reduce payments to
people and companies with tax debts.
Repealing the 3 percent
withholding is a part of House Republicans' job creation plan that has
the support of business associations, including the Chamber of Commerce,
National Association of Manufacturers, and National Federation of
Independent Businesses. They say the IRS provision hurts job creation
because it restricts cash flow to contractors.
The Associated General Contractors of America released a survey
of 1,300 construction firms last week showing that 63 percent of firms
reported that their average profit margin for public projects is less
than 3 percent. Forty-nine percent of firms said the withholding measure
could force them to decrease their hiring plans, and 67 percent said
the measure would force them to raise their bid levels.
from a small business background, I can attest that businesses look
several years ahead when they're deciding how to invest," HR 674 sponsor
Rep. Wally Herger, R-Calif., said during discussion of the bill on the
House floor. "Now is the time to eliminate the barriers that are
standing in the way of jobs for American workers."
State and local
government organizations, as well as the Defense Department, have also
voiced concern about the costs to implement the withholding provision.
2008, the Defense Department estimated that the provision would cost
the Pentagon more than $17 billion in the first five years, including
implementation costs and expected escalating costs from contractors.
IRS announced in May that it would delay enactment of the withholding
rule until 2013. The agency said it had received comments expressing
concern about the effect of the rules, and said it wants to alleviate
the administrative burden on agencies and companies whose payments would