Legislation to President Obama
Bill Backed by ESA, SIA Would Repeal 3% Withholding
Irving, Texas, Nov. 17, 2011 — Yesterday the U.S. House of Representatives passed legislation, H.R. 674, to repeal the "Tax Increase Prevention and Reconciliation Act of 2005" legislation which imposed burdensome new requirements on government vendors and agencies.
Section 511 of this bill created a sweeping requirement mandating federal, state and local government agencies withhold 3 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 postponed the start date of the tax even later to affect all contracts after Dec. 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. According to the Security Industry Association CEO, Don Erickson, "The provision hurts honest tax-paying businesses by forcing companies to provide the government with an interest-free loan.”
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 been forced 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, ESA Executive Director.
Passage of the H.R. 674 represents a major legislative victory for both the Electronic Security Association (ESA) and the Security Industry Association (SIA). The bill now awaits President Barack Obama’s signature.
Established in 1948, the Electronic Security Association (ESA) is the largest trade association representing the electronic life safety and security industry. Member companies install, integrate and monitor intrusion and fire detection, video surveillance and electronic access control systems for commercial, residential, industrial and governmental clients. In cooperation with an alliance of chapter associations, ESA provides technical and management training, government advocacy and delivers information, advice, tools, and services that members use to grow their businesses and prosper. ESA may be reached at (888) 447-1689 or on the Web at www.ESAweb.org.