Congress Passes Repeal of 3 Percent Contractor Withholding Requirement

November 18, 2011

Congress passed legislation Wednesday to repeal a requirement that federal, state and local governments begin withholding 3 percent of payments to contractors in 2013. It now awaits a signature from President Obama.

After Senate passed the bill by a 95-0 margin, the measure cleared its final hurdle with Wednesday’s 422-0 House vote. The legislation also includes tax credits for companies hiring unemployed veterans. Both were pieces of Obama’s American Jobs Act and he is expected to sign them into law, possibly this week.

The 3 percent withholding rule, originally intended to ensure that federal money was not spent on businesses that owed back taxes, was enacted in 2006, but outcry from the business community and difficulty of implementation prevented it from being enforced.

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