On November 16, 2011, the U.S. House of Representatives passed a legislation to repeal a requirement that federal, state and local governments begin withholding 3 percent of payments to contractors in 2013.

The legislation also includes tax credits for companies that hire unemployed veterans. A portion of the bill will offer tax credits ranging from $5,600 to $9,600 to companies that hire former members of the military who are unemployed.

A week earlier, the repeal was passed by the U.S. Senate with a 95-0 vote. With the 422-0 House vote, the legislation, known as H.R. 674, is now going to President Barack Obama, who previously said that he would sign the bill into law. “I want to congratulate Republicans and Democrats in Congress for coming together to pass these tax credits that will encourage businesses to hire America’s veterans,” President Obama said in a statement.

According to media reports, Congress passed the withholding requirement in 2006 to reduce tax evasion among government contractors. Stephen E. Sandherr, chief executive officer of the Associated General Contractors, an Arlington, Virginia-based trade group, said the provision would have amounted to “billions in interest-free loans to the federal government.” The repeal “will provide some much-needed relief for a hard-hit industry and its struggling workers,” Sandherr said in a statement.

U.S. Small Business Administration has argued that the three percent contractor withholding requirement would have placed a burden on numerous small businesses. SBA Chief Counsel for Advocacy Dr. Winslow Sargeant praised its repeal, saying: “The repeal of the three percent withholding requirement is a victory for small business. … For small businesses to thrive in government contracting, they need an environment that is clear, transparent and predictable.”

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