The United States Congress passed a law mandating 3% tax withholding on monies paid to government contractors, effective in 2011.

It applies to companies that do work for Federal, state and local governments. The law affects businesses of all sizes — but it would impact small-business suppliers the most by putting a serious crimp in cash flow.

Many small business owners are not aware of this law. Neither, apparently, were some members of Congress. Having discovered they passed this law, representatives of Congress are now are scrambling to try to get it repealed.

This is an example of the kinds of legislative updates you can hear in an interesting “From the Hill” video report by Karen Kerrigan.

Karen is the President and CEO of the Small Business & Entrepreneurship Council. Her “From the Hill” report is an inside-the-beltway look at pending legislation and government agency activity, delivered in an easy conversational format. It looks at activity through the lens of small business. It’s the kind of small-business content that is very helpful but probably would not get coverage on the nightly news.

From the Hill is a recurring feature included in a series of webcasts. Go here to watch yesterday’s webcast. The “From the Hill” report is packaged with some other features in the hour-long webcast — the Report itself starts at roughly the 9:40 minute mark.

UPDATE March 18, 2007: the law Congress passed is Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005. Many organizations are calling for its repeal, including the Small Business Administration’s Office of Advocacy.

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