The U.S. Conference of Mayors
2007 ADOPTED RESOLUTIONS
URBAN ECONOMIC POLICY

REPEALING LOCAL GOVERNMENT WITHHOLDING PROVISIONS (SECTION 511) IN THE TAX INCREASE PREVENTION AND RECONCILIATION ACT OF 2005

WHEREAS, the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) was signed into law on May 17, 2006, including a provision (Section 511) requiring municipal governments that expend more than $100 million in outside contracts to withhold three percent from all payments for goods and services; and

WHEREAS, the cost of implementation and compliance for governments has been estimated at $62 million per year by the Congressional Budget Office (CBO); and

WHEREAS, the Joint Committee on Taxation (JCT) of the United States Congress has determined that these costs exceed the threshold established under the Unfunded Mandates Reform Act; and

WHEREAS, enforcing compliance with the federal tax code is a fundamental responsibility of the federal government and function of the Internal Revenue Service, not of municipalities, and current laws and regulations provide sufficient authority for the federal government to collect these taxes from these contractors, and

WHEREAS, the $100 million expenditure threshold is likely to affect a far greater number of municipal governments than originally calculated, and will cause many city and county governments to cross above and below the threshold in various years; and

WHEREAS, costs that companies incur from compliance with the withholding provision likely will be passed through to government customers in the form of higher contractor bids; and

WHEREAS, many municipal governments have been transitioning to commercial purchasing for goods and services, capturing notable price reductions and cost savings, and the withholding requirement introduces significant alterations to this system likely to place government purchasers at a disadvantage to their private sector counterparts; and

WHEREAS, vagaries in the legislation regarding exempt expenditures have not been clarified, which leaves correct withholding amounts difficult to implement; and NOW THEREFORE BE IT RESOLVED, that the U.S. Conference of Mayors calls upon the Congress to immediately repeal the withholding requirements for governments under the Tax Increase Prevention and Reconciliation Act of 2005; and

BE IT FURTHER RESOLVED, that the U.S. Conference of Mayors urges the Department of Treasury to take the adverse impacts of this legislation into account when establishing rules and guidelines, if the Congress does not repeal this provision prior to implementation.

2007 The U.S. Conference of Mayors
Tom Cochran, Executive Director
1620 Eye Street, NW, Washington, DC 20006
Tel. 202.293.7330 ~ Fax 202.293.2352
info@usmayors.org