The House overwhelmingly passed legislation repealing the 3 percent withholding mandate on government contractors, along with a tax credit for hiring veterans.
Dave Camp
Both measures have already been approved by the Senate, allowing them to go to President Obama’s desk for his signature (see Senate Passes Bill Providing Tax Credit for Hiring Veterans).
They had both been pieces of his American Jobs Act and he is expected to sign them into law.
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The House in a show of unanimity voted to pass the bill by a margin of 422 to 0 on Wednesday. The 3 percent withholding rule would have required state, federal and local government agencies to withhold 3 percent of payments owed to their contractors throughout the country as a way to combat tax evasion by government contractors. The provision was introduced in the current bill by Rep. Wally Herger, R-Calif., and in an earlier version by Rep. Kevin Brady, R-Texas.
The American Institute of CPAs was one of a number of business groups that had lobbied to repeal the rule. The legislation also provided a tax incentive for businesses that hire veterans and specialized job training to help unemployed veterans find jobs.
In addition, the bill included a provision modifying the income definition used to determine eligibility for certain health programs, including Medicaid, in the health care reform law to more closely align the definition of income used for certain health programs with other federal means-tested programs. That provision was authored by Rep. Diane Black, R-Tenn. CCH has issued a new tax briefing describing the legislation.
"Congress demonstrated that when we work together, we can find bipartisan solutions to laws and regulations that stifle job creation,” said House Ways and Means Committee Chairman Dave Camp, R-Mich. “The permanent repeal of the 3 percent withholding law gives employers greater certainty that they will have resources to hire and invest in getting America back to work. This deficit reducing legislation also aligns the income definition for certain programs in the Democrats’ health care law with other federal means-tested programs to ensure that taxpayer dollars are targeted only to those low-income families in need of assistance. Finally, the Senate’s addition of the veterans-related provisions can increase opportunities for those who have served our nation and are seeking to join our workforce. I look forward to seeing the President sign this bipartisan bill into law.”
The AICPA applauded the passage of the legislation. “The AICPA has strongly supported H.R. 674 and efforts to repeal the 3 percent withholding requirement," said Edward Karl, vice president of taxation for the American Institute of CPAs in a statement. "With today’s vote, the bill can move to the White House. The AICPA urges President Obama to quickly sign H.R. 674 into law."
Senate Finance Committee Chairman Max Baucus, D-Mont., also hailed passage of the bill, which included the veterans hiring provisions that he and Sen. Chuck Grassley, R-Iowa, have championed since 2009.
“The unemployment rate among veterans is far too high, but this bill will help them find the jobs they deserve when their tours of duty end,” Baucus said in a statement. “This is the jobs investment our economy and veterans need. Veterans have the exact leadership skills and drive that translate directly to employment here at home. We need to continue working to simplify the process and make it easier for businesses to apply for this tax credit to help as many veterans as possible, and this bill lays the foundation we need to do just that.”
The veterans jobs bill the House passed includes a version of Baucus’s tax credit for businesses that hire veterans. The legislation will provide a $5,600 tax credit for hiring long-term unemployed veterans, $2,400 for hiring short-term unemployed veterans and credits of up to $9,600 for hiring unemployed veterans with service-related disabilities.
Baucus noted that his original VETs Jobs bill also included provisions to simplify the certification process to make it easier for businesses to get the tax credit. He said he would continue working to make it easier for businesses to get the credit.
President Obama praised passage of the bill. “I want to congratulate Republicans and Democrats in Congress for coming together to pass these tax credits that will encourage businesses to hire America’s veterans,” he said in a statement. “No veteran who fought for our country should have to fight for a job when they come home. That’s why I proposed these tax credits back in August, and I look forward to signing them into law. This is a good first step, but it is only a step. Congress needs to pass the rest of my American Jobs Act so that we can create jobs and put money in the pockets of the middle class.”
Democrats still hope to pass an extension of the payroll tax holiday, an extension of unemployment benefits for those whose benefits expire next month, and other provisions of Obama’s jobs bill. The provisions that came from Republican-backed legislation were long considered to be easier to pass through Congress.
8 Comments
I thought they should of added a provision that if a Entity owes back taxes to the Governamnt than the Government can withhold the taxes or a % 3% - 40% of the Contract Payment x taxes owed. So for expample a Business owes $ 135,000 back taxes, be it payroll or corporate and the Government is not allowed to withhold?
Posted by: neparms | November 17, 2011 6:58 PM
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As congress is passing this portion of the bill, we must ask what the long term strategy is for not just getting veterans back to work, but the other Americans who have also been out of work so long. Even though there is an incentive to hire veterans, is that enough to make employers on the whole hire more? Is the tax break enough to put veteran employment over those who may be more qualified for a position that may not have a veteran's distinction? Jobs are in a state where they are few and far between (http://eng.am/s3KrWW) . We need to make sure that we can still keep these young men and women employed for as long as possible. In making progress on all ends, we want to be on the upward path in our economic recovery.
Posted by: Florian Schach | November 17, 2011 5:41 PM
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As congress is passing this portion of the bill, we must ask what the long term strategy is for not just getting veterans back to work, but the other Americans who have also been out of work so long. Even though there is an incentive to hire veterans, is that enough to make employers on the whole hire more? Is the tax break enough to put veteran employment over those who may be more qualified for a position that may not have a veteran's distinction? Jobs are in a state where they are few and far between (http://eng.am/s3KrWW) . We need to make sure that we can still keep these young men and women employed for as long as possible. In making progress on all ends, we want to be on the upward path in our economic recovery.
Posted by: Florian Schach | November 17, 2011 5:41 PM
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The only benefit that hiring a vet gets is a 5,000 + credit, it doesn't tell us if the credit offsets the self employment tax nor if the credit can be carried forward, nor if alt min tax excludes the credit. I as a owner and a veteran would of course, first hire a veteran, but i doubt that such a small amount would push me to hire a veteran and add him or her to my existing staff. Most of us as accountants make in excess of 65K which would let us take the credit But I don't hire anyone for less than 50K per year as I want semi professional or professional. Add health insurance and benefits your looking at around 70 K. The benefit would only help me hire a veteran to replace an existing employee and my employees are not going anywhere in today's economy, and I look at about a 24 month period before the new employee adds to rather than reduces the bottom line. So it is too little
So how about some sort of educational training program (don't make me pay for the educational programs) and an offset to unemployment and give me the benefit of not losing money on the new employee for a year or two
Posted by: strandcpa | November 17, 2011 4:03 PM
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Frankly I don't care if this tax break is discriminatory towards unemployed Americans who did not serve in the military. While those who didn't serve (including me) had the opportunity to develop their civilian skills and enjoy the freedoms of civilian life, the military was out there risking their lives to guard those freedoms. And their families were back home sacrificing to support them. Discrimination overall is a bad thing, but if there is one area where I applaud and encourage discrimination, this is it. Go ahead! Discriminate against me.
Posted by: jeneane1956 | November 17, 2011 11:34 AM
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"...creating a tax break for organizations that hire veterans is discriminatory towards unemployed American's who didn't serve in the militar. Job applicants should be evaluated on their qualifications and nothing else."
Seriously!? I entirely agree that qualifications should be the sole determinant of employment. However, veteran's are in a unique position in that many of their skills attained while in the service are either not accredited or certified as they are in the civilian sector or they are not as easily translated into civilian speak. For example, how do you convey on a resume the intestinal fortitude of the individuals who spend years away from their families, risk their lives on a daily basis, etc etc. Good luck trying.
Posted by: Officer Leroy | November 17, 2011 10:56 AM
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"Job applicants should be evaluated on their qualifications and nothing else." If that were true, our overall workforce would be quite different to what we actually have. Unfortunately, there are varying types of discrimination in hiring, so one more incentive for employees isn't going to change that.
Posted by: svrjceka | November 17, 2011 10:36 AM
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I don't want to sound unsympathethic towards veterans, but -in all fairness- creating a tax break for organizations that hire veterans is discriminatory towards unemployed American's who didn't serve in the military. Job applicants should be evaluated on their qualifications and nothing else.
Posted by: SEMarks | November 17, 2011 9:28 AM
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