IRS Will Delay to 2013 Its Rule On 3% Contractor Withholding

The U.S. Internal Revenue Service has approved a one-year delay—to Jan. 1, 2013—of a requirement that government agencies must withhold 3% of their payments to contractors. Design and construction groups oppose the mandate. The extension was published on May 9 in an IRS final rule and will apply to federal, state and local agencies' payments. The mandate, part of a 2006 statute, originally was to take effect at the start of 2011. The 2009 economic stimulus act extended the deadline until Jan. 1, 2012. The mandate applies to agencies whose total annual spending on goods and services is $100 million or more. Construction and other business groups have criticized the 3% requirement for holding up funds needed to complete projects and for increasing administration costs. Three bills are pending in Congress to repeal the mandate.