Congress Votes to Repeal Contractor Withholding Both houses of Congress have voted unanimously to repeal the contractor withholding rule. After the 95-0 Senate vote on Nov. 10, the bill was returned to the House, where it passed on Nov. 16 by 422-0. The Senate added provisions to give tax credits to companies that hire unemployed veterans and provide other aid for veterans re-entering the civilian job market. The withholding rule would have required federal, state and local agencies to hold back 3% of their payments to contractors as a down payment on income taxes. Contractors objected, and state and local agencies complained about being forced to modify their accounting systems to collect taxes for the federal government. Although repeal enjoyed widespread support in Congress, it took more than five years because of disputes over how to offset the loss of revenue. The Obama administration supported the bill, H.R. 674, and indicated the president would sign it. "The repeal of the withholding requirement in HR 674 would reduce a burden on government contractors who otherwise comply with their tax obligations, particularly small businesses," the White House said in a policy statement.