A rule which became law in 2005 and never implemented has now officially been repealed, providing a small measure of relief to cash-strapped cities.
With strong bi-partisan support, President Obama has signed into law legislation eliminating the 3 percent withholding rule. The rule was meant to help close the gap between taxes owed and taxes collected. However, the rule was not implemented at the time and was delayed under the Recovery Act until the end of this year. Earlier this year, the Internal Revenue Service (IRS) delayed implementation even further, until the end of 2012.
If it had not been eliminated, federal, state and local governments with more than $100 million in annual expenditures would have had to withhold 3 percent of their payments for goods and services and turn those funds over to the IRS.
Arnold Weinfeld is Director of Strategic Initiatives and Federal Affairs for the Michigan Municipal League. He can be reached at 517-908-0304 or by e-mail.
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