Ellmers Praises 3% Withholding Repeal

Statement

Congresswoman Renee Ellmers released the following statement from her office in Washington this afternoon:

"This morning, the House successfully passed H.R. 674 which repeals the 3 percent withholding mandate for businesses. This legislation, which I was proud to co-sponsor, gives small businesses the certainty and liquidity to invest in their companies and allow them to create more jobs. It also saves valuable time and money for federal, state, and local governments who would have been forced to comply with the significant, unfunded administrative burdens that the rule would impose. Without this repeal, cash-strapped employers would have been faced with uncertainty and minimal cash on hand, thereby impeding cash flows and further undermining job creation. I urge leaders in the Senate to allow this legislation to come to the floor for a vote so that job creators can start hiring again."

In 2006, Congress enacted a 3% withholding requirement on certain payments made to contractors doing business with federal, state, and local governments. This provision -- which was enacted as part of a larger package featuring numerous other significant tax changes -- was purportedly intended to improve tax compliance. The 3% withholding rule was originally scheduled to take effect on January 1, 2011, but because of strong concerns raised by employers and government entities alike about the potentially significant burdens it could create, the rule's effective date has subsequently been delayed until January 1, 2013. Once the potential burdens of this requirement became evident, House Republicans started working to repeal this rule, including it as part of the GOP alternative to the Democrats' failed 2009 stimulus bill.

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