In November 2011, NRCA secured a significant legislative victory with repeal of the 3 percent withholding tax on government contracts. The tax was to take effect in 2013 as an enforcement mechanism aimed at achieving better tax compliance among government contractors. Had it taken effect, the withholding tax would have significantly affected the financial viability of many businesses in the roofing industry.
A flawed policy
Originally enacted in 2006 as Section 511 of the Tax Increase Prevention and Reconciliation Act (TIPRA), Section 3402(t) of the Internal Revenue Code required federal and state agencies and many municipal governments to withhold for tax purposes 3 percent of the value of all contracts worth more than $10,000.
Section 511 was added to TIPRA during closed-door final negotiations between the House and Senate just before TIPRA was enacted in May 2006. The language in Section 511 never received a vote as a provision of an earlier House or Senate legislative package.