President Obama signed into law today legislation that includes small tax breaks for companies that hire veterans with the repeal of a 3 percent tax withholding on all government contracts, including those between school districts and third-party contractors
The U.S. Senate unanimously passed the bill earlier this month that repeals an IRS rule that requires federal, state and local government entities to withhold 3 percent of payments to contractors. The house later passed its version.
The repeal affects how school districts, especially those in large, urban areas, with budgets larger than $100 million pay contractors or other vendors. The budget dollar amounts exclude payroll, NSTA added in a notice sent to members this week.
H.R. 674 was introduced in February by a bi-partisan group of 269 representatives. A similar resolution passed the House by a vote of 405 to 16 earlier this month. The Senate then combined that with its own bill. NSTA commented this week that the only question that remained at this point was how quickly the House would take up the combined bill and send it to President Obama’s desk for signature.
The bill also seeks to address the misreporting of taxes by government vendors. The repeal includes social security benefits that are excluded from gross income in the calculation of modified adjusted gross income for purposes of determining eligibility for the tax credit for coverage under a qualified health plan.
The IRS issued related final regulations this summer with an effective date of Jan. 1, 2013.
