WASHINGTON, DC— House Small Business Committee Chairman Sam Graves (R-MO)  issued the following statement on Majority Leader Cantor’s announcement that a bill to repeal the 3% withholding rule would be voted on this month:

“I applaud Majority Leader Cantor continuing his commitment to removing barriers to job creation by announcing that a 3% withholding repeal bill would be voted on this month,” said Chairman Graves.  “Even though this burdensome withholding requirement isn’t scheduled to go into effect for another 15 months, it has an impact on small businesses operations and hiring decisions now because many contracts have a 5 year requirement schedule. Implementation of this tax would significantly affect small business cash flow, especially in sectors such as construction, where pre-tax profit margins rarely meet or exceed 3%, and businesses will lose vital funds needed to finance day-to-day activities and new jobs. To provide more certainty for small companies who do business with the government, this withholding requirement must be repealed right away.”

The Small Business Subcommittee on Contracting and Workforce held a hearing on the 3% withholding requirement on May 26, 2011. Chairman Mulvaney also led two press conferences calling for repeal of the tax, on September 14th and on May 26th.

BACKGROUND: Section 511 in the Tax Increase Prevention and Reconciliation Act of 2005 requires federal, state & local governments to withhold 3% from all payments for goods & services, including from small businesses.  The American Recovery & Reinvestment Act deferred the effective date of this withholding until Dec. 31, 2011, and in May of this year, the Internal Revenue Service (IRS) delayed it again until Dec. 31, 2012. The President’s Jobs Act would defer it yet again for another year. A bipartisan bill to repeal the 3% withholding requirement is H.R. 674 (248 co-sponsors); which has been introduced by Rep. Wally Herger (R-CA).
 

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