Supply Chain Disruptions Relief Act to Bring LIFO Relief

Although the looming FTC vehicle transaction rule is the most ominous and important policy matter facing dealers today, another major need has to do with LIFO Relief.  After vehicle assembly plants and suppliers around the globe ceased or slowed production during the pandemic, new vehicle inventories were drastically reduced.  The shortfall worsened with he worldwide shortage of semiconductors, which are essential to complete vehicles manufactured today.  With no way to replenish vehicle inventory, dealers using the last-in, first-out (LIFO) method of accounting face major unanticipated tax liability due to circumstances beyond their control. The Treasury Department has existing authority to allow LIFO relief to businesses if a “major foreign trade interruption” makes inventory replacement difficult. Despite NADA’s petition and broad bipartisan support for Treasury’s use of this authority, Treasury has declined as it believes additional legislative authority is needed. The “Supply Chain Disruption Relief Act” (H.R. 7382/S. 4105) explicitly provides Treasury such legislative authority.  Dealers should encourage their congressional representatives to pass this bill this year to allow businesses on LIFO extended time to replace vehicle inventories as pandemic related global disruptions and reduced auto production have made it nearly impossible to replenish new vehicle supply.

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