After years of objections by industry, a law that would have withheld 3 percent of government payments to contractors for taxes was repealed by Congress Wednesday, November 16, 2011 and is heading to President Barack Obama for his signature.
A number of bills to repeal the law were introduced in Congress, with this final version - H.R. 674 - including tax credits for businesses that hire veterans. It passed unanimously. The 3 percent withholding rule was enacted in 2006, but has yet to be implemented because of an outcry from the business community and the difficulty in implementation. Earlier this year, the IRS delayed implementing the rule until the end of 2012.
The Senate introduced another bill in October to repeal the law, but failed to gain support from Democrats in Congress and President Barack Obama, because of the $30 billion in discretionary spending cuts included. Under this latest iteration, revenue lost by repeal of the 3 percent withholding law will be gained by changes to Medicaid eligibility that the House of Representatives passed in October.
President Obama is expected to sign it as early as this week.
David E. Shaffer can be reached at 215-441-4600 or Email.