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On March 10, 2009, FEI’s Committee on Private Companies, Committee on Taxation and Committee on Government Business signed a joint comment letter on the IRS’s proposed rules for 3%withholding for government contractors. The comment letter addresses the high cost of implementation.
The 3% withholding provision requires that federal, state, and certain local governments withhold 3% from contracts and other payments, such as Medicare payments, grants, and farm payments. This unprecedented withholding mandate was originally enacted in Section 511 of the “Tax Increase Prevention and Reconciliation Act of 2005” (P.L. 109-222) and the implementation date was extended by one year to January 1, 2012 in the American Recovery and Reinvestment Act of 2009.
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