ESA, SIA Await President’s Approval on Tax Withholding Repeal

ALEXANDRIA, Va. — A bill supported by the Electronic Security Association (ESA) and the Security Industry Association (SIA), which would retract a portion of a law that imposes weighty constraints on government vendors, awaits President Obama’s approval.

The bill, H.R. 674, would repeal Section 511 of the “Tax Increase Prevention and Reconciliation Act of 2005.” The legislation requires all federal, state and local government agencies to reserve 3 percent of all payments for goods and services. Initially expected to take effect this year, the law was pushed back by the economic stimulus package. The Internal Revenue Service (IRS) then postponed the tax’s start date to 2013.

Meant to increase tax compliance for government contractors, the law would increase administrative costs and information reporting for vendors, according to ESA and SIA.

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

The law would also affect cash flow by driving prime contractors to pass the costs of withholding payments on to subcontractors and other smaller businesses. The requirement would also cause government agencies to pay more for security solutions.

“ESA is extremely pleased that these burdensome requirements have been lifted, ESA Executive Director Merlin Guilbeau says. “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.”



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