NSPE Working for You: Withholding Tax Repeal
The House last night passed the Senate-amended version of H.R. 674 by a vote of 422 to 0, ending a protracted battle to repeal an onerous tax-withholding mandate that would place significant financial and administrative burdens on engineering firms that contract with the government. The bill now heads to the president's desk, where he is expected to sign it into law. (Note: H.R. 674 was later signed into law by President Obama on 11/21/11.)
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% 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 If not repealed, the mandate would have taken effect on January 1, 2013.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 requirement would have been especially hard on engineering firms, whose profit margin on government contracts is often less than 3%. Firms would eventually have been able to recoup their expenses, but not until the end of the tax year, causing cash flow problems and costing professional engineers the vital funds they need to conduct business.
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 the month alone urging H.R. 674’s passage. 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. Your grassroots efforts helped build a critical mass of opinion that ensured the bill passed the Senate, ultimately enabling its success.
NSPE is grateful to Reps. Wally Herger (R-CA-2) and Earl Blumenauer (D-OR-3) and Sens. Scott Brown (R-MA) and David Vitter (R-LA) for spearheading the legislative effort; Chairman Dave Camp (R-MI-4) and Ranking Member Sander Levin (D-MI-12) for their leadership in the Ways and Means Committee; Speaker John Boehner (R-OH-8), Leader Eric Cantor (R-VA-7), and Whip Kevin McCarthy (R-CA-22) for putting the withholding repeal on the House’s agenda; and Leader Mitch McConnell (R-KY) for advocating repeal in the Senate.
This legislative victory demonstrates that together, professional engineers can make a difference.