By Steven D. Mercatante Esq.
 
Are you are a federal, state or local governmental entity? If so, set aside some time to review proposed regulations, REG-158747-06, released on December 5, 2008. REG-158747-06 addresses a new requirement for government entities to withhold 3% when making payments for services or property. The new requirement falls under §3402(t) of the code, previously added by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). Payments made on or after January 1, 2011 would fall under the purview of the new regulations.
 
The proposed regulations contain several withholding requirements, as well as a few exceptions. Overall, the new withholding requirement has an expansive scope. Please note that all Government entities are subject regardless of whether they are at the federal, state or local level. In addition, because withholding is required on payments for services and goods, the new regulations encompass almost all payments. The new regulations propose required withholding whenever a payment is made by a Governmental entity, regardless of if service performance was made or if goods were supplied to that entity. The requirement is irrespective of the payment method or dollar amount.
 
Take care when examining the proposed regulations; exceptions do exist in regards to the 3% withholding rule.