Print Page   |   Your Cart   |   Sign In
News & Press: Arizona Business News Updates

House Passes Repeal of Three Percent Withholding on Government Vendors

Friday, October 28, 2011   (0 Comments)
Posted by: Rhette Baughman
Share |
House measure would repeal rule to withhold contract payments
By SARAH CHACKO, Federal Times

Legislation to repeal a pending rule that would withhold 3 percent of government payments to contractors passed the House Thursday.

House 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.

"Coming 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.

In 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.

The 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 be withheld.


Don’t offer a 401K? No problem.


Introducing Guaranteed Retirement Income from NationwideSM
This new way to save for retirement gives your employees guaranteed retirement income every month for life, for as little as $10 a month.


Save up to 25% off regular rates.

Constant Contact

Save up to 25% off regular rates as an ASBA member. No obligation 60 day trial with one-on-one coaching and support to help get you started!


Think BIG, with UPS.


Whether your business is high tech or handmade, our expert-designed products and services can make your small business run more efficiently. Our solutions were created with the specific needs of small businesses in mind.



Experience ASBA


Date: Held monthly
Time: Click for times based on location
Location: Phoenix or Tucson


ASBA Speed Networking


Date: Held monthly
Time: Click for times based on location
Location: Phoenix or Tucson

Affordable Dental Plans for ASBA Members

Delta Dental

Your smile deserves Delta Dental, the nation’s leading dental benefits provider. With the largest network of dentists, personalized service & special pricing for ASBA members, we make it easy to keep your smile healthy.


Have questions on small business and health insurance?

Health Insurance

Get the latest on individual, sole proprietor, or group plans related to small business. We can help you find the right plan for you, and your employees. Click to learn more!


Small is the New Black


What's trending for 2017? Small Business! This year, resolve to support our local economy by "Thinking Small" at least one time each week! Need help finding a small biz? Visit! #ThinkSmallBiz


Association Management Software Powered by YourMembership  ::  Legal