Monday, May 23, 2011

FW: S164 Withholding on Government contracts/ SBIR Continuing Resolution

Senator Scott Brown has introduced the Withholding Tax Relief Act of 2011. This will repeal Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 which mandates that federal, state and local governments withhold 3% from payments for goods and services.

This tax withholding requirement affects all government contracts as well as payment to any person for a good or product provided to a government entity. As I mentioned in a prior email this will take effect December 21,2012.

Withholding of 3% has no relationship to a company’s taxable income and is in effect a loan to the government hurting small businesses cash flow.

Interestingly enough the cost of implementing the law will exceed the revenues anticipated according to a study released by the Department of Defense. According to DOD it will cost $17 billion over 5 years. The Joint Committee on Taxation now estimates the revenue generated is $7 billion over 5 years with only $1.1 billion in additional revenue and remainder due to the float.

Small Business California asks Senators Feinstein and Boxer to support this bill. We ask people receiving this email to contact the Senators office to ask them to support this.

You can do so by emailing Brian McKeon at and TC Ostrander at

It is expected that Tuesday the House will be taking up a Continuing Resolution for funding of SBIR/Sttr/Cpp programs. S990 passed in the Senate on a voice vote last week.

Funding for the program runs out the end of this month and the Senate bill would continue funding for a year.

In my conversations with Kevin Wheeler in the Senate Small Business Committee and Lori Pepper from Congresswoman Pelosi’s office ‘it appears this will be amended by House Republicans to three or four months instead of a year.

This is a great program not just for small business but for the country and should have had full authorization years ago but it has been tied up by politics and not just Republicans but Nydia Velazquez when she was Chair of the House Small Business Committee.

California small businesses receive more of these contracts than any other state.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

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