Tax Increase Prevention and Reconciliation
Act of 2005
School Advisor, 2007 Issue No. 2
Buried in this legislation is a new withholding requirement that applies to governmental entities that pay more than $100 million annually for property and services (read “expenditures,” unless someone is very creative). Basically, the new law requires a 3 percent withholding on payments for “property and services.” It excludes such items as:
- Payments otherwise subject to withholding (payroll)
- Interest payments
- Payments for real property
- Payments to other governmental entities
The good news—this provision does not go into effect until calendar year 2011.
The bad news—we can only guess the amount of turmoil and confusion this will create in trying to figure out which payments need to be withheld and how to properly deposit and report this activity. We thought we’d alert you to this situation now in case you are contemplating a new cash disbursement system in the near future, as well as to give you a chance to write your legislators seeking elimination of this requirement.
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