NSPE Declares Victory Over Burdensome Withholding Tax

Wednesday, November 16, 2011

After a five-year battle, NSPE helped overturn an onerous tax-withholding mandate that would have placed significant financial and administrative burdens on engineering firms and other businesses that contract with the government. H.R. 674, which passed Congress with overwhelming bipartisan support, repeals a requirement that federal, state, and certain local governments withhold as tax 3% of all payments made to government contractors. The tax would have taken effect on January 1, 2013. The tax would have been an interest-free loan to the government while causing cash flow problems for engineering firms and other businesses, costing them the vital funds they needed to conduct day-to-day business (including paying subcontractors). Rather than pay taxes at the end of the year, the government would have withheld 3% of contract fees up front, forcing firms to attempt to recoup their expenses at the end of the year. Since the withholding requirement's passage in 2006, NSPE has been working with the Government Withholding Relief Coalition and the U.S. Chamber of Commerce to repeal the mandate. NSPE also sent a letter to House Ways and Means Committee Chairman Dave Camp (R-MI-4) in support of the repeal. In addition to NSPE's advocacy of H.R. 674, NSPE members responded to an NSPE Legislative Action Center alert asking them to contact their senators in support of the bill, helping to build a critical mass of opinion that ensured the bill passed the Senate. Read NSPE's blog on the repeal here.