Battle for 3% Withholding Relief Continues
This is definitely the website to visit this month as 3% tax withholding implementation draws closer; we must work harder to get Section 511 repealed. Educate yourself; review the site and the law that will greatly impact your business.
NACM and its Government Business Group (GBG) have continued the fight for relief from a pending 3% withholding tax on most federal, state and local government contracts. Enacted as part of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), the now five-year-old fight for repeal most recently took the form of a letter delivered to both houses of Congress this past September, signed by NACM and the dozens of other like-minded associations that comprise the Government Withholding Relief Coalition (GWRC).
â€śThe GWRC and its 110 member associations strongly urge you to include a two-year delay of the 3% tax withholding law in a legislative vehicle moving through Congress this September if repeal is unattainable this year,â€ť said the letter. â€śThe Coalition will continue to vigorously advocate for repeal of this misguided law; however, a delay is urgently needed now to prevent any additional wasteful expenditure of funds and manpower by governments and companies in order to prepare for the looming implementation deadline of January 2012.â€ť
Upon enactment in TIPRAâ€™s Section 511, the tax was set to go into effect on all payments made after December 31, 2010. A one-year delay was included in the American Recovery and Reinvestment Act (ARRA), which passed into law in February 2009. Repeal of the tax has widespread support, but ideas for offsetting the revenue it would generate remain scarce, thereby necessitating the delays.
Originally the tax was included in order to address the nationâ€™s tax gap, which represents the $345 billion annual difference between taxes legally owed and taxes collected. In their letter, the GWRC noted, however, that several other measures passed since TIPRA have been designed to address the tax gap, rendering the 3% withholding tax unnecessary. â€śThere have been numerous legislative and regulatory measures put in place since the enactment of the 3% withholding law back in 2006 that have focused on increasing tax compliance and enhancing transparency for companies that have received government payments. All these initiatives taken together obviate any rationale or need for retaining the withholding mandate and will be far more cost-effective for the government,â€ť said the letter.
While the tax is not set to go into effect until January 1, 2012, in its letter, the GWRC noted that implementation costs have already started to weigh on the nationâ€™s most economically vulnerable entities. â€śBusinessesâ€”the vast majority of which are small businesses without any tax delinquenciesâ€”and governmental entities are starting to expend resources now in preparation for implementation due to major system and process changes needed for withholding, reporting and reconciling the millions of affected payments annually,â€ť they said. â€śThese changes have to be made well in advance of 2012.â€ť
A full repeal may still not be in the cards for Congress, but a two-year delay would go a long way toward abating the pressure this pending requirement currently places on American businesses.
To learn more about NACMâ€™s fight against this unfair and burdensome tax, visit www.nacm.org. To read the GWRCâ€™s full letter, click here. To send a letter to your representative to raise awareness about this issue, click here for suggested letter wording.
Is Your Small Business Certified?
Many more federal contracts are being issued to 8(a) small businesses. If your small business is at least 51% owned and operated by a minority, woman or veteran, it could be worth your time to explore getting certified so you can take advantage of programs reserved especially for this segment of the business community. According to the Small Business Administration (SBA), becoming certified is a way to officially record your business ownership status.
Certification is a review process that ensures a small business is actually owned, controlled and operated by the applicants. The application process is administered by a certifying agency, which may be a government agency or a private organization depending on the type of certification being sought. For many small businesses, certification can lead to the right contract within a federal agency and open the door to several state and local government opportunities.
Click here to find more information on SBA certification.
Electronic Document Access
The Department of Defense (DoD) provides vendors secure, online access to the following electronic documents through its Electronic Document Access (EDA) web pages:
- Post-award Contracts
- Contract Modifications
- Government Bills of Lading
- Payment Vouchers
- Contract Deficiency Reports
- Summaries of Voucher Line Data
- Material Acceptance and Accounts Payable Reports
- Government Transportation Requests
- Signature Cards
This 24/7 informational sharing is an efficient method for accessing contractual and procurement documents. Companies must first register to have access to this information and may do so on the EDA New User Registration web page.
Contracts stored in EDA allow for integration with the DoD Wide Area Workflow Receipt and Acceptance electronic invoice payments system. Using EDA to pre-populate your contracts will ensure timely and accurate information and make the payment process more efficient.