I want to provide an update on NADA’s legislative progress to pass the “Supply Chain Disruptions Relief Act” (H.R. 7382/S. 4105) (issue brief here), which would provide temporary relief for dealers on LIFO. In a significant development, the Treasury Department has indicated its support for a legislative solution to provide LIFO relief for dealers and that they will work cooperatively with Congress to that end.
This legislation is also drafted so that dealers who have filed their final returns for 2021 will still be able to claim relief if this bill passes. As a practical matter, the bill will enable dealers to recompute their tax liability retroactively without the expense of filing an amended return. Dealers will be permitted to determine tax liability for 2021 as if there were no LIFO recapture. Any LIFO recapture that you have paid to date will be deemed prepaid federal income taxes that can be used to offset future tax liability. (See dealer summary and bill analysis).
NADA recognizes the urgency of this issue for dealers. Due to the efforts of ATAEs and NADA’s grassroots, the House LIFO bill currently has 131 cosponsors and the Senate bill has 50 cosponsors – including Senate Majority Leader Chuck Schumer (D-N.Y.).
This broad bipartisan support for H.R. 7382/S. 4105 helps position the bill for passage, but we must continue building strong bipartisan support to increase the likelihood that LIFO relief will be included in a final tax bill, which is expected to occur in a lame duck session after the November elections. Please thank current cosponsors and encourage other Members of Congress to cosponsor the bill. The current target list can be found here.
Key Dealer Talking Points on LIFO Relief
- As a franchised new car dealer in [insert name of city/town] for [insert number of years] years and with [insert # of employees] employees, I have experienced unforeseen and unprecedented inventory challenges due to the pandemic and supply chain disruptions, including semiconductor shortages.
- Despite circumstances beyond my control, this massive LIFO tax bill will severely shrink necessary cash flow (working capital) as we continue to be hit by inventory shortages. Unless this relief is granted, this unexpected LIFO tax liability will hurt our efforts to restock vehicle inventory when it becomes available, make it more difficult to invest in electric vehicle infrastructure required by our manufacturers and impact our ability to retain employees (and other examples).
- Please cosponsor H.R. 7382/S. 4105 and help provide temporary LIFO relief before the end of this year. The bill would determine that the requirements of existing law have been met due to pandemic-related foreign trade interruptions in the auto sector and extends the period to replenish inventory and compute LIFO reserve/recapture until the end of 2025 to allow vehicle production to normalize. This will allow my small business dealerships as a major employer, generator of significant tax revenue and contributor to my local community to continue to lead the economic recovery.
Thank you again for your support of NADA. Please contact NADA Legislative Affairs if you have congressional feedback or any questions [email protected] or 202.547.5500.