Construction: Legislation Repeals Three Percent Withholding on Payments to Government Contractors
11/22/2011
President Obama signed into law, on November 21, 2011, legislation repealing the three percent withholding on payments to government contractors.
The Tax Increase Prevention and Reconciliation Act (“TIPRA”) of 2005 enacted a three percent government withholding requirement on any payments, of $10,000 or more, to government contractors for providing property and/or services. The mandatory withholding applied not only to payments from the Federal government but also to payments from state and local governments as well as their political subdivisions. This provision of TIPRA had originally been scheduled to apply to payments made after December 31, 2010 but was delayed twice before finally being repealed.
Critics of the three percent withholding had argued that the withholding of funds would have put a financial burden on government contractors and stifled economic progress. In addition, the compliance cost to implement this provision would have been onerous.
For further information, please contact Joseph Tighe, CPA, J.H. Cohn partner and a member of the Firm’s Construction Industry Practice, at jtighe@jhcohn.com or 973-618-6243, or John Apisa, CPA, a J.H. Cohn senior manager and member of the Firm’s Construction Industry Practice, at japisa@jhcohn.com or 732-380-8631.
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