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ACEC scores big win with repeal of 3% withholding requirement

Yesterday, Christmas came early for ACEC.  With National Council President Dave Raymond looking on, President Obama signed legislation to repeal a tax law that would have required most government agencies to withhold 3 percent from payments made to contractors beginning in 2013.

Final approval of the legislation ends a five-year drive by ACEC and many other business groups to repeal the onerous provision. The Council was the lead lobbying group for the U.S. Chamber of Commerce's broad-based repeal coalition.

The House originally passed the repeal measure (H.R. 674) in October.  The Senate approved it last week, but not before amending it to provide a tax credit for companies that hire veterans. The House quickly voted to concur in the Senate's amendment last week, sending it to Obama's desk.

The 3 percent withholding rule was buried in a massive tax bill enacted in 2005.  The intent of the legislation was to make sure government contractors couldn't evade federal taxes, but when the costly implications of the law became clear, both the business community and state and local governments coalesced around the effort to repeal.

Had the requirement stood, state and local government agencies with annual budgets in excess of $100 million would have been required to withhold 3 percent of payments to all contractors, causing cash flow problems for businesses and administrative burdens for the agencies forced to collect the withholding.

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