Legal Definitions - withholding

The term withholding carries two distinct meanings within a legal context, depending on the situation.

First, withholding commonly refers to the practice of deducting a specific amount of money from a person's income or payment before the full amount is disbursed. These deductions are typically mandated by law, most often for tax purposes, and the party making the deduction (e.g., an employer, a bank, or a lottery agency) is responsible for remitting these funds directly to the appropriate government authority.

Second, withholding can also describe the act of intentionally keeping something back or refusing to provide or grant something. This could involve information, consent, approval, or even a privilege.

• Example 1: Payroll Tax Withholding

  When an employee receives their bi-weekly paycheck, they notice that amounts for federal income tax, state income tax, and Social Security contributions have been deducted from their gross earnings. The employer then sends these deducted amounts to the respective government agencies.

  In this scenario, the employer is legally obligated to withhold these specific tax amounts from the employee's wages. This ensures that the employee's tax liabilities are partially met throughout the year, with the employer acting as the intermediary responsible for collecting and remitting the funds to the government.

• Example 2: Investment Income Withholding

  A foreign investor holds shares in a U.S. company and receives quarterly dividend payments. Before the dividends are paid out, the brokerage firm managing the investor's account deducts a percentage of the earnings for U.S. taxes, as required by law for non-resident aliens.

  Here, the brokerage firm is withholding a portion of the dividend income. This is a common practice to ensure that non-resident investors meet their tax obligations on income earned within the United States, with the financial institution handling the deduction and remittance.

• Example 3: Withholding Information in a Legal Case

  During a civil lawsuit, one party's attorney discovers a document that could be detrimental to their client's case. The attorney decides not to disclose this document to the opposing counsel, despite a court order for full disclosure of all relevant evidence.

  In this instance, the attorney is withholding information. This act of intentionally keeping back a piece of evidence, rather than providing it as required, could have serious legal consequences, including sanctions from the court.

• Example 4: Withholding Consent for a Contractual Action

  A commercial lease agreement states that a tenant may make significant alterations to the leased property only with the prior written consent of the landlord. The tenant proposes a major renovation, but the landlord, without providing a valid reason permitted by the lease, refuses to grant permission.

  Here, the landlord is withholding their consent. This demonstrates the act of refusing to give or grant approval for an action that requires it, potentially leading to a dispute over the terms of the lease agreement.