Senate Moves Forward on Three-Percent Repeal

November 9, 2011

On Nov. 7, the Senate approved Majority Leader Harry Reid’s (D-Nev.) motion to invoke cloture on the motion to proceed to H.R. 674—legislation to repeal a 2005 law requiring governments to withhold three percent of certain payments to vendors. The bill now moves forward with a full Senate vote scheduled for tomorrow, Nov. 10.

The vote, 94-1, moves the House-passed bill to the floor for consideration later in the week with limited debate. The House approved the legislation 405-16 on Oct. 27 and it has been endorsed by the administration. The House package includes an offset to pay for the repeal by changing the definition of income for eligibility for certain health care programs, such as Medicaid and the Children’s Health Insurance Program. Majority Leader Reid has said he does not like the House-passed offset and would like to change it to address concerns over contractor delinquency.

The law mandates that federal, state and local governments with expenditures of more than $100 million, withhold three percent of payments for products and services. The requirement was scheduled to take effect on Jan. 1, 2011, but was delayed a year in the 2009 American Recovery and Reinvestment Act. On May 5, 2011, the Internal Revenue Service issued regulations that further delayed the implementation of the withholding provision until Jan. 1, 2013.  On Sept. 12, 2011, President Obama proposed the American Jobs Act of 2011, which included a section that would delay implementation of the withholding provision until after December 31, 2013.

During Senate consideration, Democrats intend to offer amendments to the legislation, including one that is a portion of President Obama’s jobs bill and will provide tax credits for hiring veterans, as well as other options to encourage hiring.

Specifically, the amendment would offer a tax credit of $2,400 for veterans who have been unemployed for at least four weeks, but less than six months, and a credit of up to $5,600 for hiring veterans who have been jobless for at least six months.

Veterans with service-connected disabilities who have been unemployed for more than six months are eligible for a tax credit of up to $9,600 under the amendment, which is being sponsored by Sen. Patty Murray (D-Wash.) and is co-sponsored by Senate Finance Committee Chairman Max Baucus (D-Mont.).

NSBA is urging all small businesses to contact their Senators TODAY and urge their support of H.R. 674.