Congress has drafted the “Supply Chain Disruptions Relief Act”, H.R. 7382/S.4105 bill, which provides relief to dealers that have recaptured LIFO reserves as income in 2020 and 2021. The bill has not been passed but has bipartisan support in Congress. The National Automobile Dealers Association has been the driving force in lobbying Congress on this matter and hopes the bill will be passed by year end.
The issue is complicated, as the Treasury Department has existing authority to provide LIFO relief to businesses if a “major foreign trade interruption” makes inventory replacement difficult. The Treasury Department has indicated that they need additional legislative authority from Congress to implement the authority under IRS code 473.
If the bill is passed, it is uncertain how the relief will be calculated. There is language in the bill stating that dealers will need to restore inventory levels by 2025. The tax relief may be provided as an offset against future tax liabilities. This would eliminate the need to file amended returns for 2020 and 2021, since the filing deadlines for those returns has passed.
We all know that getting bills passed in Congress is difficult in the current political environment, but at least the issue is in front of Congress and has bipartisan support. NADA has indicated that the bill has 145 cosponsors in the House and more than 55 cosponsors in the Senate.
If you have any questions regarding this article, please contact Paul McGovern at 800-849-6022 or at PMcGovern@DowneyCoCPA.com.
