Contractor tax repeal advances

A move to repeal a controversial 3-percent withholding tax on contrractors cleared a hurdle on Oct. 27, as the House passed legislation to do away with the tax. The bill now goes to the Senate.

The bill, HR 674, passed on a 405-16 bipartisan vote.


Related story:

Agencies, companies wait in limbo about tax repeal


If approved by both chambers, the bill would roll back a 2006 law that has been delayed several times and is currently scheduled to take effect in 2012. Under the rule, federal agencies would withhold 3 percent of payment to contractors delinquent on federal taxes. However, contractors were strongly opposed to the requirement and there was debate about whether the administrative costs to implement the rule made it worthwhile.

“Today’s overwhelming passage by the House of Representatives underscores what we’ve been saying all along, that this law makes no sense, costs more to implement than it saves and needs to be repealed,” Olga Grkavac, executive vice president, public sector, for TechAmerica trade association, said in a statement. “We applaud their action and now look to the Senate to take up the repeal, be it in their own bill, or by passing the House bill. “

Thousands of federal contractors owe hundreds of millions of dollars in overdue taxes, which initially fueled passage of the 2006 law in a Republican-led Congress. At the same time, repealing the 3 percent withholding requirement is being supported by President Barack Obama as well as GOP and Democratic lawmakers as a way to support businesses and job creation.

The Congressional Budget Office has estimated that repeal of the 3 percent withholding rule would cost the US Treasury $11.2 billion over 10 years.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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Reader comments

Fri, Oct 28, 2011

Someone tell the Supercommittee that this is a great place to start to get the funds that they are looking for.

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