What’s next as NADA continues the fight for LIFO relief
By NADA Chairman Paul Walser
As new vehicle inventories dwindled with the onset of the pandemic – and fell through the floor because of the persistent microchip shortage – NADA has been fighting for dealers who rely on the Last-In, First-Out (LIFO) accounting method for their new vehicle inventories and now face significant “LIFO recapture.” Dealers on LIFO with ongoing inventory shortages will face higher income taxes, through no fault of their own, which will strip working capital out of dealerships that are so important to the local communities they support during the economic recovery. I want to update you on our extensive and ongoing advocacy efforts to obtain LIFO relief as well as highlight some planning strategies under current law that could potentially mitigate LIFO recapture for some dealers.
NADA launched an initiative for LIFO relief in November 2020, because of the effect the pandemic was having on new vehicle inventories. NADA petitioned the Department of the Treasury to use authority under a never-before-used section of the Internal Revenue Code (section 473) to grant LIFO relief when it is difficult or impossible for a taxpayer to replace its inventory due to a “major foreign trade interruption.” NADA has met with Treasury four times in the past year, coordinated its advocacy with the American Institute of Certified Public Accountants (AICPA) and other industry groups, and provided data demonstrating the relationship between the pandemic and the unprecedented nature of the inventory decline, but Treasury has failed to act on our petition.