Brown’s action comes after U.S. Rep. Dan Kildee, D-Mich., introduced similar legislation in the House this month.
Kildee’s bill would allow dealerships to wait until as late as 2025 for their inventories to be replaced to determine the income attributable to the sale of inventory during 2020 or 2021, giving dealers time to restock as the chip shortage eases and auto production returns to pre-pandemic levels.
His bill would permit those dealerships to file amended tax returns or offset tax liability on future returns to claim relief, according to an NADA analysis. It also would direct the Treasury Department to issue regulatory guidance to allow dealers to calculate LIFO during the extended replacement period.
Kildee’s bill is supported by at least nine House Republicans and 10 Democrats, as well as NADA, the American International Automobile Dealers Association, National Association of Minority Automobile Dealers, Michigan Automobile Dealers Association and the American Institute of Certified Public Accountants.
NADA and the Alliance for Automotive Innovation — along with some Senate Democrats led by Brown and a bipartisan group of U.S. representatives led by Kildee — previously urged the Treasury Department to grant temporary LIFO relief under Section 473.
“Treasury indicated its unwillingness to do so, and so Congress is moving forward, showing the leadership to provide the meaningful relief that’s needed to respond to the global supply chain crisis and all of the problematic consequences that it has created,” Paul Metrey, NADA’s senior vice president of regulatory affairs, told Automotive News this month.
For some dealers, the LIFO recapture has led to additional tax payments from $100,000 to $2 million or more, and those bills were due last week for dealerships structured as pass-through entities or C corporations.
Zach Doran, president of the Ohio Automobile Dealers Association, applauded Brown’s effort to provide “stability to small businesses managing hugely depleted inventories.”
“Granting temporary LIFO relief due to these pandemic-related conditions will strengthen the retail auto industry and protect the investments and jobs in the local economies they serve,” Doran said.