PSC seeks tax breaks for contractors working abroad

The Professional Services Council is asking the Senate to modify a provision of the Jobs and Growth Reconciliation Tax Act of 2003, already reported out by the Finance Committee, to retain the earned income exclusion for those U.S. citizens living overseas while working on U.S. government contracts.

The Arlington, Va.-based council sent the letter May 13 to Sen. Charles Grassley, R-Iowa, chairman of the committee, and ranking member Sen. Max Baucus, D-Mont. It argued that federal agencies find it beneficial to rely on government contractors to support critical U.S. programs abroad, and that in many cases only their employees have the needed expertise for the work.

"In these instances, the decision to live in a particular foreign country and the amount of time required to remain there [are] rarely discretionary for the company and the employee," wrote Alan Chvotkin, senior vice president and counsel for PSC.

The letter also noted that the current bill goes into effect Jan. 1, 2004. "Many U.S. government contracts have periods of performance that extend well beyond Dec. 31, 2003, and the proposed statutory change could significantly affect the price of performance of these ongoing contracts to U.S. companies," the letter read.

PSC asked the Senate to "acknowledge the potential impact such a provision may have on the pricing of existing U.S. government contracts and recognize that federal agencies have the flexibility to take these changed statutory provisions into [account] for re-pricing certain ongoing contracts."

PSC represents companies that provide the federal government services such as information technology, consulting, engineering, international development and science.