SIA and ESA Support Tax Withholding Repeal

  • Nov 17, 2011
On Wednesday, Nov. 16, the U.S. House of Representatives passed H.R. 674 to repeal the "Tax Increase Prevention and Reconciliation Act of 2005," legislation that imposed burdensome new requirements on government vendors and agencies. Passage of H.R. 674 represents a major legislative victory for both the Security Industry Association (SIA) and the Electronic Security Association (ESA). The bill now awaits President Barack Obama’s signature.

Section 511 of the 2005 bill created a sweeping requirement mandating federal, state and local government agencies to withhold three percent of all payments for goods and services, starting in 2011. It was delayed by one year to 2012 by the American Recovery and Reinvestment Act (P.L. 111-5) that was signed into law in February 2009. In May 2009, the Internal Revenue Service further postponed the start date of the tax to after December 31, 2012.

Intended to increase tax compliance by government contractors, this unprecedented withholding requirement would have dramatically increased administrative costs and information reporting for vendors and their agency customers. The withholding requirement would have also adversely impacted cash flow. Prime contractors would have been forced to pass a disproportionate amount of withholding payments on to subcontractors and smaller businesses. Government agencies also would have had to pay more for security solutions as a result of this requirement.

“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, executive director of ESA.

“This provision would have hurt honest tax-paying businesses by forcing companies to provide the government with an interest-free loan,” said Don Erickson, CEO of SIA. “The repeal of this legislation will be a boon for not only the security industry but all business.”

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