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Issue Brief: Repeal of the Mandatory 3 Percent Tax Withholding

The Issue:

The American Society of Landscape Architects supports legislation to repeal a federal law that would require federal, state and local governments to withhold 3 percent of most payments to contractors and vendors.

Background and Analysis:

The Tax Increase Prevention and Reconciliation Act (TIPRA) of 2005, which was signed into law on May 17, 2006, requires federal, state, and local governments to withhold 3 percent of payments to vendors, contractors and others for certain properties, goods and services.  The law, which would allow vendors to claim the withholding upon paying their federal taxes, is intended to encourage businesses hired by governments to comply with tax law.  As a result of the law, many state and local governments and businesses will be burdened with restructuring computer systems and training and hiring new accountants and office managers to assist in complying with the new accounting procedures.  Moreover, many small businesses will be disadvantaged because the up-front tax withholding would severely restrict cash flow.

The law, as passed, would have applied to payments made after December 2010.  However, implementation of the law has been delayed several times. During the 112th Congress, legislation was introduced in both the U.S. House of Representatives and the Senate to repeal this law. The legislation has gained bi-partisan support in both chambers.

Current Status:

H.R. 674, a bill to repeal the mandatory 3 percent withholding on certain payments to vendors by government entities, was signed into law (Public Law No: 112-56) by President Barack Obama on November 21, 2011. 

Sponsors:

Congressman Wally Herger (CA) and co-sponsors

Senator Scott Brown (MA) and co-sponsors 

Resources:

“ASLA Urges Repeal of Onerous Withholding Law” – LAND, October 25, 2011

Business coalition pushes repeal of withholding rule” – The Hill Newspaper, June 9, 2011.  

Feds Delay 3% Withholding Rule” – Governing Magazine, May 11, 2011. 

 The Government Withholding Relief Coalition 



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ASLA Government Affairs
governmentaffairs@asla.org 

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