The Chamber

Repeal of 3% Government Withholding Signed into Law

 In an effort to increase tax compliance by contractors working with the federal government, a 2005 tax cut included a last minute provision to implement a 3% withholding starting in 2013. Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 requires any local government entity, with annual revenues in excess of $100 million, to withhold 3% of total contract payments until contractors have proven that their taxes are paid in full. This move could be crippling to smaller business that typically operate on smaller profit margins.

On November 21, 2011, President Obama sign the 3% withholding repeal legislation (H.R. 674) into law. IEC supported this legislation. The bill passed both the House of Representatives and the Senate with bi-partisan votes.