Obama signs withholding tax repeal

President Barack Obama on Nov. 21 signed legislation that repealed a tax to withhold a percentage of a payment to a contractor.

The 3% Withholding Repeal and Job Creation Act (H.R. 674) amends the tax law to cancel the withholding requirement on payments due to vendors providing goods and services to federal, state, and local government agencies.

The bill also requires the Treasury Department and the Office of Management and Budget to study ways to reduce the amount of federal taxes owed but not paid by contractors. For the study, officials must figure an estimated amount of delinquent taxes and whether having companies certify in bid proposals that their taxes are up to date has helped in compliance. Officials also will have to delve into various aspects of contracts awarded to tax-delinquent companies. The study is due in one year.

Industry groups were pleased with the president’s signature.

“We have been working towards today for five years and couldn’t be more thrilled with the repeal of this nonsensical law,” Olga Grkavac, executive vice president for the public sector at TechAmerica, said in a statement Nov. 21.

“This is a huge weight off the back of businesses,” she added.

The bill passed through Congress Nov. 16 with wide support from Democrats and Republicans. On the final votes on the bill, no members of the House or Senate voted against it.

“We are pleased to see both parties work together to finally prevent the imposition of the burdensome withholding requirement,” said Stan Soloway, president and CEO of the Professional Services Council.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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