🚀 go-pugleaf

mcovingt@athena.cs.uga.edu (Michael A. Covington) writes:

>I have been told that the following 2 things are before the Senate, but
>cannot locate them in Congressional Record and similar sources.  Can
>anyone elucidate?

>(1) A bill to abolish private consulting, "Senate 1706", mentioned by
>a correspondent to Robert Pease in a recent issue of _Electronic Design_.
>(There _is_ a Senate 1706, but it has to do with import duties on some
>industrial chemicals.)

OK, here we go debunking yet another piece of net.hysteria.

This is actually IRS Code Section 1706.  And it's not pending legislation.
It has been the law for six years now.  IT DOES NOT IN ANY WAY ABOLISH
PRIVATE CONSULTING!  What it does is provides a set of questions that
are to be used as guidelines for determining who is a consultant and 
who is really an employee masquerading as an independent consultant to 
allow deductibility of mileage, business lunches, etc.

They were trying to correct abuses where Joe Smith is a "contractor" 
that has only one client -- XYZ company, where he bills 40 hours per 
week.  He gets to write off his mileage, his lunches, and a bunch of 
other stuff that employees of XYZ company don't get to write off.  

Unfortunately, Section 1706 also made it harder for people in legitimate 
long-term contracts (i.e., 6 months of 100% time) to compete without 
hiring themselves out to large "body shop" firms, because the guidelines 
set forth in Sec. 1706 would tend to suggest that they're "employees" 
of the company.  That's why the "body shop" firms actually backed 
Section 1706 when it was first implemented as part of the 1986 
"Tax Reduction" bill.  (Memo to myself:  Ask George Bush why if it 
was tax reduction, the dollar amount of personal income tax collected
in this country more than doubled over the last 6 years.  Sounds like 
another masterful piece of Republican doublespeak to me.)

So Section 1706 does not outlaw consulting -- big companies like 
EDS, Andersen Consulting, as well as many smaller consulting companies
are all having banner years -- but makes it harder for obvious scams.
Unfortunately, it makes it harder for a lot of honest one-man consultants
to make a living as well.  But when have you ever known government to 
correct a problem like this *properly*?

-brent


-- 
Brent Williams/Cooperative Solutions Inc., San Jose CA   (408) 377-0300
brentw@coopsol.com
Cooperative Solutions makes Ellipse, a development environment for
industrial strength graphical client/server business applications.