January 2007 Government Affairs
Update
IN THIS ISSUE …
1. 3% Withholding Tax on Government
Contracts Update
There have
been significant changes to the 3% Withholding Tax issue. This is an issue that
ACSM and NSPS became involved in last year. As a bit of a background, last year
President Bush signed into law the Tax Increase Prevention and Reconciliation
Act of 2005 (P.L. 109-222). Section 511 of the Act calls for
federal, state and local governments to withhold 3% of payments for goods and
services. The withholding tax will also affect Medicare payments, farm
aid and certain grants. Federal, state and local governments with expenditures
of $100 million or more can take the tax, and for now, it applies to all
payments starting in 2011 (although the starting date may be earlier). The
money withheld will be attributed to the company’s overall tax liability. For
example, if a company has $100 withheld and owes a total of $120 in taxes then
they would owe the government $20 dollars. If a company had $100 withheld
and owes a total of only $90 in taxes then the company would get a refund of
$10.
Supporters
of Section 511 argue that imposing withholdings on non-wage payments made by
Federal, state and local governments would improve taxpayer compliance, reduce
the tax gap and promote fairness in the tax system. Opponents of the
withholding tax argue that there are many harmful consequences to businesses,
particularly small businesses, if Section 511 is not repealed. The 3%
withholding significantly affects cash flow and can have a devastating affect
on the bottom line. Here is an example of how devastating this withholding tax
can be:
Let’s say
that a business has a government contract valued at $100. 3% withholding would
equal $3. Now, out of the $100, let’s say the business spends 70% or $70 on
expenses associated with carrying out the contract. That leaves 30% or $30. Out
of that $30, 10% or $3 is the business’ profit (after taxes, etc.), which is
the amount of the withholding tax. In this, 100% of the profit would be
withheld.
This year,
many Members of Congress who support Section 511 want to use it as a revenue
raising source and now want to use the provision as a revenue
offset for the reauthorization of the Secure Rural Schools and Community
Self-Determination Act of 2000. ACSM and other business groups are working to
urge Congress to find another way to offset the Secure Rural Schools and
Community Self-Determination Act of 2000. Additionally, we are concerned that
even if succeed in getting Congress to find another source for the rural
schools, Congress will use the withholding tax to fund some other need. Stay
tuned for more information about this very important issue.
2. National Surveyor’s Week Resolution
2007
Once again,
ACSM will work to get Congress to pass a Resolution honoring surveyors by
recognizing National Surveyor’s Week. Last year, only the Senate passed the
resolution. This year we expect to get the resolution passed in both the House
and the Senate by way of a Concurrent Resolution. This type of Resolution
requires that the language be the same in both the House version and the Senate
version. A Concurrent Resolution does not go in front of the President for
signature because it will not become law; but it is significant because through
it, the entire Congress approves of honoring surveyors. We are in the process
now of finding appropriate sponsors in the House and Senate for the Resolution.
3. PAC Auction in St. Louis
The ACSM
Conference in St. Louis is just around the corner. We still need contributions
of items for the PAC Auction. We have a number of very important issues coming
up within the next two years that not only affect ACSM members, but the entire
surveying and mapping industry as well. The PAC will play in important role in
our government affairs work. Please be generous in your contributions and join
us on Sunday, March 12 for the PAC Auction.