Later this week, HR 674, a bill that would repeal the 3 percent withholding requirement is slated for floor consideration. The bipartisan bill is sponsored by Representatives Wally Herger (R-CA) and Earl Blumenauer (D-OR), and has 267 co-sponsors. The House has not yet announced how it will offset the lost revenue that would come with repealing the provision. One option under consideration is to modify the calculation of modified adjusted gross income for purposes of determining eligibility for certain healthcare-related programs. Previously, on October 13, the House Ways and Means Committee approved HR 674 by voice vote. Enacted in 2006, implementation of the three percent withholding has been delayed until 2013 through a series of temporary postponements. The purpose of the withholding requirement was to ensure that all vendors remitted taxes owed. The Government Withholding Relief Coalition, a group of more than 140 trade associations and state and local governments, argues that the total cost of implementing the language would be about $75 billion over five years.

Additionally, last Thursday, the Senate rejected (57-43) a provision brought up by Senate Minority Leader Mitch McConnell (R-KY) that would eliminate the three percent withholding rule. Although the provision was rejected, Senate Majority Leader Harry Reid (D-NV) stated on the floor that, “the provision will be repealed but it should be done the right way.” The Senate is expected to bring up a repeal bill in November that would offset the lost revenue by repealing certain tax provisions directed at oil and gas companies. A Congressional Budget Office analysis released last week found that repealing the withholding rule would reduce revenues by $11.2 billion over the next 10 years.

Link: H.R.674, CBO Report