Congress Cancels 3% Withholding Tax on Federal Contractors

On November 17, 2011, the U.S. House of Representatives gave federal contractors and subcontractors an early Thanksgiving present. By a unanimous vote of 422-0, legislators passed H.R. 674, repealing a requirement that federal, state and local governments begin withholding three percent of payments to contractors in 2013. The bill has been sent to President Obama for signature, and the President has promised to sign it.

We discussed this tax in a post last June. We agree with those who fought for repeal of the tax, which, in an effort to curb tax evasion by a few, would have penalized the majority of contractors that meet their obligations fully and on a timely basis. The effect of the tax would have been felt by all contractors, and would have had devastating consequences to small contractors suddenly deprived of cash flow in an already tight economy.

The bill also provides tax credits to employers, ranging from $5,600 to $9,600, that hire former members of the military who are unemployed. These credits offer measurable support to businesses that see returning veterans, who have training, discipline and spirit, as the key to rebuilding and growth – for our businesses and for our communities. The cost of these credits will be offset by limiting pensions to veterans with no dependents or those in Medicaid-covered nursing homes and by allowing the U.S. Department of Veterans Affairs to collect fees on mortgages.

We are proud to have supported the industry representatives who educated the lawmakers on these issues. We extend special congratulations to NUCA, representing utility and excavation contractors, the U.S. Chamber of Commerce, and Women and Veteran Entrepreneurs (WAVE), for their unswerving support on these issues.

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