Who remembers the School House Rock! video involving a sad little scrap of paper on the Capitol Hill stairs singing, “I’m just a bill; yes, only a bill”? A bill can take a long journey to become a law.
If you recall, that piece of paper was already exhausted halfway up the steps. It sounds like the automotive community’s journey waiting for tax relief for LIFO inventory. Is good news on the horizon?
Well, Automotive News is reporting that U.S. Rep. Dan Kildee (D-MI) earlier this week announced plans to introduce legislation that would provide tax relief to automobile dealers that use the LIFO (last-in, first out) method of accounting for automobile inventories.
Govtrack.us, which tracks the status of proposed legislative bills, notes that “H.R. 7382: To treat certain liquidations of new motor vehicle inventory as qualified liquidations of LIFO inventory for purposes of the Internal Revenue Code of 1986” is in the first stage of the legislative process. It also notes that bill text is not yet available.
We have been talking about LIFO relief since September 2020. We are tired… and sad, just like that scrap of paper. The little boy in the “I’m Just a Bill” video said you must have patience and courage to go through this process. He wasn’t kidding!
If you watch the whole video (about three minutes long), it breaks down the long journey for a bill to become law. To keep it simple:
- An idea becomes a bill.
- A bill is introduced to Congress.
- Committee needs to discuss and debate it.
- If passed by the committee, it goes to the House.
- If passed by the House, it goes to the Senate.
- If passed by the Senate, it goes to the president.
- Then the president can sign or veto it!
I am going to take it further than the cartoon. Trust me, it left a bunch out. After tax legislation is enacted, then comes the regulations to explain the law in further detail. Who knows how long that takes? Here are some potential questions that will need to be addressed in the legislation and/or regulations:
- The tax filing deadline already passed; can I qualify for LIFO relief?
- I already paid the tax at extension; can I get a refund?
- What happens if I went off LIFO; can I go back?
- What happens if I went on the IPIC method of LIFO and actually increased my LIFO reserve; does this impact me?
The message to take away is to not put the cart before the horse (or the car before horsepower, to make a bad pun). We do not have answers for this filing deadline and probably won’t for the final deadlines this fall. There are other legislative priorities such as next year’s budget and competitiveness with China. Washington is also going into mid-term elections.
We are not too confident while in the midst of post-pandemic economic issues, the war in the Ukraine and the other priorities that this legislation will see passage any time soon.
We have other solutions. Please keep in mind that we still believe the IPIC method of accounting is a valid solution for most auto dealers’ LIFO recapture concerns. To read more about the IPIC method of accounting, please click here.
Please reach out to Steve Barber and the Automobile Dealership Group for more information.