Editors Blog


Murphy's Law: Taxes - The Good and Bad News

May 28, 2009
/ Print / Reprints /
ShareMore
/ Text Size+

In 2006, the federal government enacted a 3 percent withholding tax on public construction contracts. The good news is that the enactment date is still pending - it won’t go into effect until 2012. The bad news is that it was a bad idea in the first place.

The good news is that the Mechanical Contractors Association of America (MCAA) has been working on this one for a while. MCAA board member, Adam Snavely, president and CEO of Poole & Kent Corp., Baltimore, testified at an IRS public hearing to discuss the problems with the new law. So far, the IRS has published a regulation that says prime contractors can’t pass the 3 percent withholding through to subcontractors. That is also good news. However, the bad news is that the law has not yet been overturned, and IRS regulations come and go.

The Tax Increase Prevention and Reconciliation Act of 2005, Section 511 mandates that city, state, and federal governments withhold 3 percent from payments for goods and services. The main reason for this extra tax withholding is because a lot of contractors have gotten into trouble with Uncle Sam for not paying their taxes on time - or not paying their taxes at all. The good news is that Uncle Sam really does need the money, what with the big deficit spending binge of late.

The bad news for large contractors is that they will be faced with the additional burden of tracking thousands of payments every year. The bad news for small contractors is that it amounts to a tax burden with no clear answer as to how or if that money ever comes back. A few percent could mean really bad cash flow resulting from a bad project. It is already a fairly complicated task to conduct business with governments. Adding another 3 percent of withholding to the mix is not good news.

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

2014 MCAA Annual Convention

Scenes from the 2014 MCAA Annual Convention in Scottsdale, Ariz.

Podcasts

Kyle Gargaro, editor-in-chief of The NEWS, hosted the 2014 ACCA CEO Forum. At the event, six well-known, highly respected company executives, Gary Michel, Ingersoll Rand/Trane; Chris Nelson, Carrier Corp.; Chris Peel, Rheem Mfg. Co.; Rod Rushing, Johnson Controls; Brent Schroeder, Emerson Climate Technologies; and Doug Young, Lennox; provided individual industry outlooks and fielded questions directly from attending contractors. Listen to the entire event on the NEWSMakers podcast. Posted on April 14.

More Podcasts

THE MAGAZINE

ACHRNEWS

NEWS 04-14-14 cover

2014 April 14

Check out the weekly edition of The NEWS today!

Table Of Contents Subscribe

SERVICE CALLS POLL

Which statement on service calls best applies to your business?
View Results Poll Archive

HVACR INDUSTRY STORE

plumbing-hvac.gif
2014 National Plumbing & HVAC Estimator

Every plumbing and HVAC estimator can use the cost estimates in this practical manual!

More Products

Clear Seas Research

 

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications, Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

DON'T MISS A THING

Magazine image
 
Register today for complete access to ACHRNews.com. Get full access to the latest features, Extra Edition, and more.

STAY CONNECTED

facebook icontwitter iconyoutube iconLinkedIn i con