NEW BILL TO GO INTO EFFECT
Section 511 Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222)
Westcon member and past President, Rod Tosetti forwarded on information which may be of interest to the membership and may also have an impact on your business.
In 2012 a new law will require federal, state, and local governments to withhold 3-percent from all payments for goods and services as a guard against possible business tax evasion. The law:
- Requires withholding of 3% on all government payments for products and services made by the federal, state, and local governments with total expenditures of $100 million or more.
Affects payments for goods and services under government contracts as well as payments to any person for a service or product provided to a government entity (e.g. Medicare, certain grants).
Withholding applies to the Total Contract, not to the net revenue Generated from a project. For construction contractors, this means the government is withholding funds necessary to complete a project, such as those necessary to pay for materials and suppliers.
Less than 3 Percent Profit on Most Construction Contracts. Most general contractors, especially those working as Construction Managers, do not make 3% profit on a contract. This is 350 percent withholding on government
construction contractors’ net income until such time as the government repays what is owed. Nowhere else is one’s
full take home pay withheld as a cost of doing business.
For example, a contractor may hold one government contract which is estimated to be completed in one year for $10 million. This law requires withholding of $300,000 on that contract. Meanwhile, the contractor expects to
net approximately 2.5%, $250,000, after paying for supplies, services, subcontractors and other ordinary business expenses. The tax on the revenue generated is at most 35% of the revenue, which means the maximum tax owed on the $10 million project is $87,500 (35% of $250,000). Ultimately, the government has withheld $300,000 for $87,500 in tax liability.
Below is information taken from an announcement on the PATCA (Professional and Technical Consultants Association) website :
- Any business/agency hiring an independent contractor (anyone who receives a 1099-MISC) will have to reduce
every payment by 3%, and is responsible for remitting that money to the Franchise Tax Board, the state tax collection agency.
- Almost all companies, agencies and non-profits of any kind will have to withhold.
- Almost anyone who receives a 1099-MISC will be withheld upon, including builders, plumbers, real estate agents,
attorneys and health care providers.
Under This Proposal:
- The 3% will be withheld even if the business owes no income taxes for the year due to losses/slim profit
- The state gets to use the money-interest free until tax return time the next year.
- Money is taken out of the pockets of businesses that is needed to keep business afloat, make payroll and pay bills.
- Implementation will be extremely costly and complex for businesses and state and local government agencies.
- The mandate is ongoing and permanent for businesses/agencies.
For more information about this bill or if you wish to voice your opinion, here are the suggestions of the PATCA:
Add your business’s name to the growing coalition against this proposal. To be added, simply e-mail laurie.lively@ calchamber.com. Your business’s name will be added to the coalition fact sheet.
- Write or call your legislators in the Assembly and Senate. Visit www.calchamber.com and go to CalChamber’s grassroots page to view a sample letter and/or look up your legislators’ phone numbers.
- Spread the word. Forward this e-mail and the fact sheet to other businesses that may be concerned.
Westcon is pleased to announce the following new members to the organization:
Keith Weber, owner of Keith Weber, Co.,
is a roofing and waterproofing contractor based
out of Fremont. He has 30 years of experience in the industry including leak detection, below deck
membranes, fluid applied roofing systems, and green roofing systems.
Max Rogers, is the president of Ironwood Plastering, Inc. based in Concord. He is a licensed C35 and B contractor with over 20 years of experience in exterior lath/plaster, EIFS systems and interior specialty plaster. His work consists of new construction, remodeling and patch work for both public and private projects.
Three members of the Sacramento company, C & R Construction Group, have joined us. Reif McElroy, Vice President and General Manager, has multiple areas of expertise, some of which include defective construction analysis, investigation and testing, water intrusion repair and restoration, plan and code compliance, litigation support services and design and construction of structural insulated panels systems (SIPS). Mr. McElroy brings two associates from the firm, project manager Erich Gordon and Lupe Jimenez a project manager and estimator.
President of Commercial Roof Management, David Devine is a civil engineer who performs value engineering development of commercial, industrial roofing, waterproofing and building envelopes. He is a
published author, instructor and technical advisor for roofing and waterproofing.
Ben Venktash is an engineer joining us from City Mechanical, Inc. located in Hercules. Mr. Venktash has expertise in the areas of HVAC, Indoor Air Quality, System Investigations. He performs
installations, inspections, custom builds maintenance programs and does equipment due diligence studies.
If you know people thinking of joining Westcon, now is the best time to have them sign up. If their membership application is approved by the Board of Directors before the end of February, they will be included in the 2010 Westcon directory. Those interested in membership may obtain an application on line at www.westcon.org or by calling Rikki at (707) 792-1323.
March 15 - 17, 2010
California Green Summit
Sacramento Convention Center Sacramento, CA 626.577.5700 www.green-technology.org
March 30, 2010
2010 Safety Expo Statewide Safety Training and Construction Management
Consumnes River College Sacramento, CA 916 442-8991 Email: firstname.lastname@example.org
Wednesday, April 21, 2010
Westcon Dinner Meeting
Encinal Yacht Club, Alameda
Wednesday, May 19, 2010
Westcon Dinner Meeting California Court of Appeals Says Experts Can Be Sued For ‘Negligent’ Testimony
Speaker: Lewis Soffer, Esq. Encinal Yacht Club, Alameda
June 20 - 22, 2010
Forest Products Society’s 64th International COnvention
608-231-1361, ext. 208