ABC and 112 other associations as part of the Government Withholding Relief Coalition Nov. 11 sent a letter to all members of Congress urging them to delay the 3 percent tax withholding law for at least two years if full repeal is not possible. Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 requires that 3 percent of payments for goods and services made by federal, state and local governments and their agencies be withheld from government contractors and is scheduled to go into effect January 2012.
In the letter, the coalition noted that the law will impose significant financial burdens on businesses and that there are already a number of legislative and regulatory measures that will increase tax compliance and enhance transparency in a way that is more cost-effective and less of a strain on businesses.
“Compliance with this law will impose significant, unnecessary financial burdens on both the public and private sectors,” the letter stated. “The coalition stands ready to work with Congress and the administration to improve tax compliance for companies and other entities receiving federal dollars while also repealing the onerous 3 percent withholding.”
The coalition also pointed out that the 3 percent withholding tax would diminish operating capital for businesses and would be complicated to implement. In addition, the law is already beginning to become costly as businesses, even those without any tax delinquencies, prepare for the law to go into effect by making necessary changes.
The coalition also asked Congress to require an independent entity to assess the costs of the 3 percent withholding tax for federal, state and local governments, as well as the companies that provide goods and services to them.