3% Withholding on Public Work to Begin in January 2012
Public owners will begin withholding 3 percent of every payment to contractors for goods and services beginning in January 2012. Among the new law’s burdensome effects, contractor cash flow would be diminished and harm their ability to pay subcontractors downstream in a timely manner. These requirements would apply to most federally funded projects.
Senators Scott Brown (R-MA) and David Vitter (R-LA) have offered an amendment to small business legislation pending in the Senate to repeal the 3 percent withholding mandate. A vote on the amendment has not yet been scheduled. Legislation has also been introduced in the House and Senate to repeal this mandate. Currently, H.R. 674 has 38 cosponsors in the House and two Senate bills, S. 89 and S.164, have 10 cosponsors.
MITA and our national affiliate, ARTBA are working with many other groups including the U.S. Chamber of Commerce to kill this poorly developed law before it goes into effect. MITA will keep you updated as to any progress.
Unemployment Insurance Reform Legislation Approved by Legislature
This week the Michigan Legislature passed Unemployment Insurance (UI) reforms in Lansing that will result in nearly $1 billion in savings for job providers over three years and will have a significant impact on the construction industry.
House Bill 4408:
- Reduces state weekly benefit duration from 26 to 20 weeks for new claimants beginning in January of 2012. This change is expected to produce $300 million in annual savings.
- Requires the Unemployment Insurance Agency to more aggressively pursue fraud and abuse in the UI system, which totaled over $143 million in 2009 alone. This change is expected to save $50-80 million in the first year.
- Fulfills a promise made by Congress to allow displaced workers to continue receiving weeks 79 to 99 of benefits through December 2011.
UI reform is a legislative priority for MITA this legislative session. Although this bill was a significant victory, there is more work to be done to solve the state’s current UI crisis. Michigan’s UI Trust Fund has borrowed more than $3.9 billion from the federal government to continue paying benefits and is now forcing job providers to pay penalties for the borrowed money. Without further reforms, Michigan’s businesses’ total additional tax burden will increase by as much as $240 million in 2011 and increase progressively over the next decade to repay the federal debt plus interest. MITA will keep you updated as to any further developments.