On Monday, November 21, President Obama signed a bill (H.R. 674) to repeal a 3% government contractor withholding requirement. The bill repeals Sec. 3402(t), which would have required withholding of 3% of payments by federal or state governments or their instrumentalities or subdivisions (including multistate agencies) to any person for services or property.
The AICPA had urged Congress to repeal the measure, which was enacted as part of the Tax Increase Prevention and Reconciliation Act of 2005. Ed Karl, the AICPA’s vice president-Taxation, commended Congress for passing the legislation, and he urged the president to sign it quickly.
What other tax provisions are in the bill?
- Introduces returning heroes and wounded warriors work opportunity tax credits, which are tax credits for employers who hire military veterans. The credits will be available for eligible individuals who begin work for the employer after the date of enactment.
- Amends the definition of modified adjusted gross income, which determines eligibility for certain health care benefits and insurance coverage provisions under the Patient Protection and Affordable Care Act of 2010.
- Allows the IRS to impose 100% levy against payment due to a vendor of property sold or leased to the federal government if the vendor has an unpaid federal tax liability. Under current law, only vendors of goods or services are subject to the levy.
If you have any questions about how these tax changes may affect you or your business, contact your friendly MCM tax professional for more information.
