Proposed Internal Revenue Service regulations that would implement a 2005 law requiring all federal, state, and local governmental agencies to withhold a portion of payments to private vendors for tax purposes could result in more costs than benefits, Treasury Department officials are warning.

In addition, all federal agencies could face "hardship" if the proposed rules are adopted, Elaine Munroe, assistant director of internal control at the Treasury's office of the deputy chief financial officer, cautioned in a comment letter, dated March 5 but not publicly released until last week.

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