Inversions have been in the news consistently this summer as multiple companies have looked for legal paths away from the U.S. corporate tax system. Burger King became the latest corporation to add to the list after they...
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Austin Suicide Pilot Appears to Be Upset About the Tax Reform Act of 1986 (Seriously)
The details regarding this incident are of course still early, but a manifesto/suicide note has been found that was apparently written by Joseph Stack, the pilot who flew his plane into an IRS building in Austin this morning.
Inside this manifesto is this part pasted by me below where he seems to blame his problems on the Tax Reform Act of 1986, the provisions of which our resident tax lawyer, Joseph Henchman, will discuss in a blog post shortly. (We apologize for any inappropriate language.)
Return to the early '80s, and here I was off to a terrifying start as a 'wet-behind-the-ears' contract software engineer... and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.
For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).
SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.
(a) IN GENERAL - Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:
(d) EXCEPTION. - This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.
(b) EFFECTIVE DATE. - The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.
· "another person" is the client in the traditional job-shop relationship.
· "taxpayer" is the recruiter, broker, agency, or job shop.
· "individual", "employee", or "worker" is you.
Admittedly, you need to read the treatment to understand what it is saying but it's not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can't believe my eyes.
During 1987, I spent close to $5000 of my 'pocket change', and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their "freedom". Oh, and don't forget, for all of the time I was spending on this, I was loosing income that I couldn't bill clients.
After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren't going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect.
Again, rewind my retirement plans back to 0 and shift them into idle. If I had any sense, I clearly should have left abandoned engineering and never looked back.
Instead I got busy working 100-hour workweeks. Then came the L.A. depression of the early 1990s. Our leaders decided that they didn't need the all of those extra Air Force bases they had in Southern California, so they were closed; just like that. The result was economic devastation in the region that rivaled the widely publicized Texas S&L fiasco. However, because the government caused it, no one gave a shit about all of the young families who lost their homes or street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to "shore up" their windfall. Again, I lost my retirement.
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