U.S. Sen. Tim Scott (R-SC) and a group of Republican colleagues recently sent a letter to Treasury Secretary Janet Yellen urging the U.S. Department of the Treasury to provide temporary and targeted relief to the automobile industry.
The lawmakers urged the agency to use the last-in, first-out (LIFO) method of inventory accounting. The treasury has the power to provide temporary and targeted LIFO relief under Section 473 of the Internal Revenue Code.
“Government restrictions … are likely to result in significant tax costs to taxpayers with LIFO inventories due to artificial and permanent increases in income through an involuntary liquidation of LIFO layers,” according to the American Institute of Certified Public Accountants.
The Alliance for Automotive Innovation provided the Treasury Department with evidence demonstrating auto retailers’ inability to replenish inventory is directly and primarily a result of the foreign disruption in the global supply chain caused by actions related to the pandemic.
The treasury has said that the supply chain shortage of an essential component of a larger product does not satisfy the “major foreign trade interruption” requirement. The lawmakers disagree and urge the agency to reconsider its interpretation and require absolute sourcing to a single origin consistent with modern commerce.