Vehicle assembly plants around the globe ceased or slowed production during the pandemic, drastically reducing new vehicle inventory. The shortfall worsened with the worldwide shortage of semiconductors, which are increasingly essential to vehicle production. With no way to replenish vehicle inventory, dealers using the last-in, first-out (LIFO) method of accounting are facing 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 broad bipartisan support for Treasury’s use of its authority, Treasury has declined as it believes additional legislative authority is needed.
The “Supply Chain Disruptions Relief Act” (H.R. 700/S. 443) would determine that the requirements under existing law have been met for new vehicles due to pandemic-related foreign trade interruptions which created inventory shortfalls. The reintroduced legislation is identical to the bills from last Congress which received overwhelming bipartisan support and passed the Senate without opposition. Members of Congress should cosponsor the “Supply Chain Disruptions Relief Act” to allow businesses on LIFO extended time to replace vehicle inventories as pandemic-related global disruptions and reduced auto production made it nearly impossible to replenish new vehicle supply.