The pandemic slowed or stopped production at vehicle assembly plants and suppliers across the globe, creating a major foreign trade interruption in the U.S. vehicle industry. As a result, dealers using the last-in, first-out (LIFO) accounting method cannot acquire sufficient inventory to avoid an unexpected tax liability triggered by LIFO recapture.
Despite broad bipartisan congressional support for the Treasury Department to use its existing authority to allow LIFO relief to businesses if a “major foreign trade interruption” makes inventory replacement difficult, Treasury has declined as it believes it needs additional legislative authority. On April 4, Reps. Dan Kildee (D-Mich.) and Jodey Arrington (R-Texas) introduced the “Supply Chain Disruptions Relief Act” (H.R. 7382) which explicitly provides Treasury with such legislative authority.
NHADA Applauds Rep. Chris Pappas and Senator Maggie Hassan for their support and co-sponsorship of this bipartisan effort. On April 28, Sens. Sherrod Brown (D-Ohio) and Tim Scott (R-S.C.) introduced S. 4105, a Senate companion bill. It is important to note that the bill sponsors drafted this legislation in consultation with the Treasury Department. Here are links to an issue brief, a list of current cosponsors, and a dealer summary of the legislation.
H.R. 7382/S. 4105 will provide relief to businesses facing difficulty replacing vehicle inventory due to pandemic-related supply chain shortages. Many House members and Senators initially signed letters to Treasury Secretary Janet Yellen supporting LIFO relief for dealers.
Stand-alone tax bills are rarely enacted, so generating significant numbers of cosponsors is necessary to encourage Congressional leadership to attach the bill to a broader legislative package that is likely to pass, NADA and NHADA are pursuing this support from our legislators.
