The House voted overwhelmingly on Thursday to repeal the 3 percent withholding rule on payments to contractors.
The 3 percent withholding rule required all levels of government to withhold 3 percent of payments owed to their contractors to prevent government contractors from becoming tax delinquents. The measure passed in the House on Thursday by a lopsided vote of 405-16. The 3 percent withholding requirement was originally passed by Congress in 2005 as part of the Tax Increase Prevention and Reconciliation Act.
The American Institute of CPAs was one of more than 170 groups lobbying for repeal of the tax (see AICPA Asks Congress to Repeal 3% Withholding Rule).
A bipartisan group of lawmakers united in support of the repeal of the provision, led by House Ways and Means Health Subcommittee Chairman Wally Herger, R-Calif., and Rep. Earl Blumenauer, D-Ore., another member of the tax-writing Ways and Means Committee.
“Job creators know all too well that this provision—like many efforts to increase federal revenue and tax compliance—is lined with paperwork, complexity and costs—all of the things that hinder, rather than help, promote a climate for job creation,” said House Ways and Means Committee Chairman Dave Camp, R-Mich. “By considering and passing this bipartisan bill, we will unlock new opportunities for hiring.”
Rep. Sander Levin, D-Mich., the ranking Democrat on the Ways and Means Committee, also supported the repeal.
“I rise in support of this bill,” said Levin. “It should have happened earlier. I think most of us, if not all of us, agree that this provision should be repealed. It is not nearly targeted and it would indeed impose significant and costly burdens on federal, state, and local governments. I think we should all remind ourselves it was passed some years ago and it was, I think, misguided when it was enacted in 2006 when we in the minority here did not control the Congress. Indeed, the Ways and Means Committee when we were in the Majority approved a repeal of the provision in 2009 and the Congress ultimately delayed the provision’s effective date."
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