A bill backed by the Electronic Security Association and Security Industry Association to repeal a portion of a law that would have adversely impacted government vendors has passed the U.S. House of Representatives and now awaits approval by President Barack Obama.
According to a statement issued by ESA, the bill, HR 674, would repeal section 511 of the “Tax Increase Prevention and Reconciliation Act of 2005,” which requires federal, state and local governments to withhold three percent of all payments for goods and services. The law was initially supposed to go into effect this year, but was first pushed back by the economic stimulus package and then by the Internal Revenue Service to begin in 2013.
Though the bill was intended to increase tax compliance by government contractors, ESA says it would have increased administrative costs and information reporting for vendors.
"The provision hurts honest tax-paying businesses by forcing companies to provide the government with an interest-free loan," SIA CEO Don Erickson said in the statement.
In addition, the ESA says that the requirement would have also impacted cash flow, requiring prime contractors to pass the costs of these withholding payments on to subcontractors and other smaller businesses, which would have increased the costs of security solutions for government agencies.
"ESA is extremely pleased that these burdensome requirements have been lifted. As an advocate for its members, ESA is always on the front lines to help maintain a growth-oriented business environment for the electronic security industry. This is a great example of how standing united achieves victory for our industry," said Merlin Guilbeau, ESA executive director.