Washington, DC, April 16, 2009 – A three percent withholding fee on Federal contractors would be "devastating" to private mapping firms, MAPPS Government Affairs Manager John Byrd told the Department of the Treasury today.
Testifying before a public hearing by the Internal Revenue Service (IRS), Byrd said the three percent withholding on Federal Contracts under section 3402(t) of the Internal Revenue Code, currently scheduled to take effect in 2012, would be particularly burdensome for mapping firms, which are classified in the IRS Code and Federal Acquisition Regulations (FAR) as part of architecture and engineering (A&E) services. "A&E firms, including surveying and mapping firms, are currently subject to a 10 percent retainage pursuant to the FAR (48 CFR 52.352-10), so our members, many of which are small businesses, are looking at an effective 13 percent withholding on federal contracts. This will be devastating," said Byrd.
The proposed regulations reflect changes in the law made by the Tax Increase Prevention and Reconciliation Act of 2005 that require private contractors, as well as State and local government entities receiving Federal funds, to have three percent of their revenue from contracts and grants withheld by the Federal government. The IRS has proposed regulations implementing section 3402(t).
Byrd told the IRS that currently Federal procurement regulations provide for a 10 percent withholding or "retainage" of fees on firms providing A&E services. Retainage restricts the cash flow of small businesses, with very little benefit to the government, Byrd said.
"With today’s economy resulting in slower business and declining revenues, as well as a crunch on credit, the combined 13 percent withholding will drive firms out of business. We’re in the mapping business, not the banking business," said Byrd, "Small firms cannot afford to be making interest-free loans to Uncle Sam on 13 percent of their revenue on government contracts. That is more than their profit!"
MAPPS is a member of the Government Withholding Relief Coalition, led by the U.S. Chamber of Commerce. The Coalition was formed to seek repeal of Section 511 of Public Law 109-222, which mandates the sweeping withholding requirement.
For the full testimony, click here.
Formed in 1982, MAPPS is the only national association exclusively comprised of private firms in the remote sensing, spatial data and geographic information systems field in the United States. Current MAPPS memberships span the entire spectrum of the geospatial community, including Member Firms engaged in satellite and airborne remote sensing, surveying, photogrammetry, aerial photography, LIDAR, hydrography, bathymetry, charting, aerial and satellite image processing, GPS, and GIS data collection and conversion services. MAPPS also includes Associate Member Firms, which are companies that provide hardware, software, products and services to the geospatial profession in the United States and other firms from around the world. MAPPS provides its 150+ member firms opportunities for networking and developing business-to-business relationships, information sharing, education, public policy advocacy, market growth, and professional development and image enhancement. For more information on MAPPS, please visit www.MAPPS.org.