Below is information regarding areas of legislation NACCTFO has been active in.

3% Withholding Repeal

3% Withholding Repealed: President Signs Repeal on November 21, 2011

NACo announces that after years of advocacy to repeal the onerous unfunded mandate known as 3% withholding, the ultimate goal of full repeal has been signed into law. The final version of HR 674 included full repeal of the 3% withholding, language modifying the income definition for determination of eligibility for exchange subsidies under the health reform law and provisions that provide tax credits for businesses hiring veterans. NACo would like to thank all members as this victory would not be possible without your support and efforts over the years!

The Senate and House have both passed legislation to repeal the 3% withholding mandate which required state and local governments to withhold 3% from payments to vendors for goods and services and send it to the IRS. The bill is now headed back to the House where it is expected to pass as amended by the Senate. Read the NACo's News Release which announces the repeal progress.

April 2011

Download the updated NACo Fact Sheet regarding position on 3% Withholding Tax on County Purchases. NACo continues efforts to get a full repeal of this requirement.

October 2009

Efforts Continue to Repeal the 3 Percent Withholding Requirement Legislation has been introduced in both the House and Senate that would repeal the 3 percent withholding requirement on vendor payments for goods and services. The House bill (H.R. 275), sponsored by Rep. Kendrick Meek (D-Fla.), currently has 109 cosponsors, while the Senate bill (S. 292), has 11 cosponsors. A provision in the American Recovery and Reinvestment Act pushed back the effective date of the requirement to Jan. 1, 2012 overriding House-passed language supporting repeal. Earlier this year, NACo provided written and oral testimony to the Internal Revenue Service voicing opposition in response to its proposed regulations implementing the withholding requirement. 

April 2009

NACCTFO is still urging support of the 3% Withholding Repeal initiative. Bills H.R. 275 and S.292 were introduced again this January and the original sponsors are seeking support. This is still a part of NACo's Top Legislative Priorities. Read more about these bills and their status from NACo.

April 2007

On April 19th, President Barbara Ford-Coates was invited to testify on behalf of NACCTFO and NACo on the proposal to expand the IRS offset program to include county tax debts, and weigh in on the 3% withholding tax issue (the proposed property tax reporting requirement and related ‘tax gap’ issues). This testimony was given before the House Committee on Government Oversight and Reform, Subcommittee on Government Management, Organization and Procurement. Also invited to testify were Oklahoma City Mayor Mick Cornett and Arlington County Deputy Treasurer for Litigation Patricia Weth. Read NACo's Official Press Release and President Ford-Coates' Testimony.

President Barbara Ford-Coates & Alysoun McLaughlin, NACo Associate Legislative Director & LiaisonMayor Mick Cornett, President Barbara Ford-Coates & Deputy Treasurer for Litigation Patricia Weth seated before the Committee (L to R)

March 2007

The most recent piece of federal legislation NACCTFO has taken a stance on is H.R. 1023 & S. 777 which supports the repeal of Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222). Section 511 will require federal, state and local governments to withhold 3% from payments for goods and services beginning in 2011. In effect, this imposes a 3% federal sales tax on nearly every purchase made by a state and many counties and cities.

Read the submission, co-sponsored by NACCTFO, to members of the Small Business Committee for the March 22, 2007 hearing on "The New Hidden Tax on Small Business" which addresses reasons for opposing Section 511.

Also, read the official statement, co-sponsored by NACCTFO and signed by President Barbara Ford-Coates, submitted to Senator Larry Craig, ID in support of S. 777 and the official statement to Representatives Kendrick Meek, FL & Wally Herger, CA in support of H.R. 1023 repealing Section 511.

November 2006

Does your county purchase anything from “plumbing services to paperclips”? If so, you will want to read an article written by Alysoun McLaughlin, NACo Associate Legislative Director & NACCTFO Liaison. The article discusses HR Bill 6242 which proposes the repeal of a tax bill signed in May which will require some counties “to withhold 3% of nearly every payment to a vendor or contractor and send it to the federal government”.

To read the article, click on Counties: Uncle Sam wants you to collect federal taxes.

Protect State & Local Taxing Authority Over Online Travel Companies (OTCs)

Information as of February 2011

NACo continues to oppose legislative initiatives that preempt state and local taxing authority over OTCs. Download the NACo Fact Sheet.

January 2010

The following was sent out by NACo: Local and state governments stand to lose more than $8 billion.

The Senate Finance Committee is considering preempting state and local taxing authority over online travel companies as part of a proposed jobs bill. Preempting our authority will not create jobs. In fact, it could cost state and local governments $8.5 billion in annual tax revenues, according to a report prepared by the Center on Budget and Policy Priorities. These funds are often used to promote tourism and pay bond obligations on community projects, such as convention centers and sports arenas. Some communities funnel these revenues into the general fund where they are used for a wide variety of purposes.