Well, the main tax deadlines for the year have come and gone, and things still keep getting published about LIFO relief. I say, let’s just move on. I called this article “LIFO Relief Update,” but there really isn’t much happening.
Last week, the AICPA once again released its opinion in support of S. 4105, the Supply Chain Disruption Act, which wants to treat certain liquidations of new motor vehicle inventory as qualified liquidations of LIFO inventory for purposes of the IRC. The AICPA has reached out to eight senators who keep pushing for the relief.
The association believes that LIFO relief based on IRC Code Section 473 should provide the necessary support for auto dealers to replenish their inventories within three years without having to recognize any LIFO reserve, which would save current tax liabilities and cash flow over the next year.
The Treasury’s response, however, has left us with little confidence. It believes it doesn’t have the authority to grant this relief, which dealers have been talking about since the fall of 2020. I’m certainly not holding my breath for this measure to be passed. Here’s an articleI wrote last month that’ll help us understand how a bill can become a law.
So, no relief; no problem! We still believe the best way to tackle your lack of inventory and your tax liabilities is to consider the Inventory Price Index Computation method of accounting, which captures the current inflation of the consumer price index. You can read more about that method here.
For even more information or to discuss this method in depth, reach out to Steve Barber or any of our Schneider Downs Auto Advisors.
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