Engineering Society Achieves Legislative Victory Over Withholding Tax

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Stacey A. Ober
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Thursday, November 17, 2011

The battle to repeal a tax-withholding mandate that would have placed a significant financial and administrative burden on engineering firms contracting with the government ended yesterday when the U.S. House of Representatives passed the Senate-amended version of H.R. 674 by a vote of 422 to 0. The bill now heads to the President's desk, where he is expected to sign it into law.

H.R. 674 would repeal Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (PL 109-222), which requires federal, state, and certain local governments to withhold as tax 3 percent of all payments made to government contractors. The withholding mandate was intended to prevent tax cheating by government contractors but would have punished honest, tax-paying citizens as well as those delinquent in their taxes. If not repealed, the mandate would have taken effect on January 1, 2013. The requirements in the mandate would have been especially hard on engineering firms, whose profit margin on government contracts is often less than 3 percent. Firms would have eventually been able to recoup their expenses, but not until the end of the tax year, causing cash flow problems and costing professional engineers vital funds needed to conduct business.
"Congress has demonstrated they can work together and find bipartisan solutions to laws and regulations that hinder growth, such as the 3 percent withholding tax," said Chris M. Stone, NSPE's 2011–12 President. "NSPE and other professional organizations have worked hard to inform Congress on why this burdensome legislation should be repealed. Once signed by the President, it will provide some much-needed relief for professional engineers hard-hit by the recession."
Since the tax law's passage in 2006, NSPE has been working with the Government Withholding Relief Coalition and the U.S. Chamber of Commerce to repeal the withholding mandate. The GWRC and NSPE sent five letters to Congress over one month alone urging H.R. 674's passage and also sent a letter to the House Ways and Means Committee Chairman Dave Camp (R-MI-4) in support of the repeal. In addition to NSPE's advocacy, its members responded to a "legislative action alert" that asked them to contact their senators in support of the bill. For more information or questions concerning the repeal, please contact Sarah Ogden, Senior Manager of Government Relations at

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The National Society of Professional Engineers is the national society of licensed professional engineers from all disciplines that promotes the ethical and competent practice of engineering, advocates licensure, and enhances the image and well-being of its members. Founded in 1934, NSPE has been promoting professional excellence for over 75 years. NSPE serves more than 43,000 members and the public through 53 state and territorial societies and more than 500 chapters. For more information, please visit