Opponents of a statutory mandate that agencies withhold 3% of the value of contracts they award are hopeful that House passage on Oct. 10 of a one-year delay of the requirement injects new life into their campaign to abolish it. “I think it helps the repeal effort,” says Steve Hall, the American Council of Engineering Companies’ vice president for government affairs.

The 3% withholding now is to take effect at the end of 2010. A provision to delay it for one year was attached to a bill the House already approved that would bar the Internal Revenue Service from contracting with private firms to collect unpaid taxes. Supporters of repealing the 3% provision say that the vote sends a message to House leaders that a repeal effort could be successful in the lower chamber.

A bill to abolish the 3% withholding was introduced in February by Rep. Kendrick Meek (D-Fla.) and has 223 co-sponsors.

But gaining traction in the Senate may prove difficult. “We’re still at the exact same place in the Senate” as before, says Heidi Blumenthal, Associated General Contractors’ congressional relations director for tax and fiscal affairs. Sen. Charles Grassley (Iowa), the Finance Committee’s top Republican, says that the House debt-collection bill is “dead on arrival” in the Senate as far as he is concerned. The Office of Management and Budget issued a statement opposing the House measure and warning of a veto.

Sen. Larry Craig (R-Idaho) introduced a repeal bill earlier this year, but the proposal has only nine co-sponsors.

As lawmakers in Congress seek to find ways to close an estimated $8-billion gap in tax revenue, groups like AGC and ACEC are working to convince Grassley and Finance Committee Chairman Max Baucus (D-Mont.) to consider alternatives to withholding 3% from contracts. “We don't think this [3% mandate] fixes it,” Blumenthal says.

“I think our argument has been from the get-go that if the [tax gap] is a problem, there are better ways to deal with the problem without hurting the honest taxpayers out there,” says Hall. “I think we're going to kill this thing—it’s just a question of when.”