3% Lame Duck Stimulus

November 17, 2008 The Honorable Charles Rangel House Committee on Ways and Means 1102 Longworth House Office Building Washington, DC 20515 - 6348 Dear Chairman Rangel: On behalf of the National Electrical Contractors Association (NECA) and our 120 U.S. chapters, I am writing to urge you to consider attaching H.R. 1023, repealing the imposition of withholding on certain payments made to vendors by government entities, to any future economic stimulus act that might be considered during an upcoming “Lame Duck” Congressional Session. The legislation would repeal the 3% withholding requirement, a tax that presents a particular problem for small businesses in a competitive industry such as construction. The withholding tax was originally included in Section 511 of the Tax Reconciliation Act of 2005. The provision hurts taxpaying businesses by forcing a hold on companies’ capital means. The 3% represents the estimated operating cash flow on a construction project which accounts for the purchase of day-to-day activity, material costs, supplies, and other operating expenses. Contractors already face up to an additional 10% of progress payment on government projects. Additionally, NECA is concerned that current vendors may ultimately decide not to participate in the federal procurement process. In effect, this would reduce the collection of companies bidding on government projects, resulting in higher fees for construction contracts; just one of the many harmful consequences for small businesses. NECA understands that similar infrastructure investment, such as the improvement of roads, dams, bridges, and other projects, may be included in the upcoming stimulus package. In order for the construction industry to remain competitive in these possible government projects that may result from a stimulus package, the 3% withholding tax must be repealed. NECA is the nationally recognized voice of the electrical construction industry, comprised of over 80,000 electrical contracting firms, employing over 750,000 electrical workers and producing an annual volume of over $125 billion in electrical construction. NECA includes 120 U.S. chapters in addition to several affiliated international chapters around the world. NECA is dedicated to enhancing the industry through continuing education, labor relations, government affairs, codes and standards development, marketing and promotional activities.

If you have any questions regarding this matter, please do not hesitate to contact Lake Coulson, Executive Director of Government Affairs at [email protected]. Thank you for your consideration of our views on this issue. Respectfully,

John M. Grau Chief Executive Officer National Electrical Contractors Association 3 Bethesda Metro Center, Suite 1100 Bethesda, MD 20814 |Phone: (301) 657-3110 | Fax: (301) 215-4500 |