Last In/First Out (LIFO)

Businesses using the LIFO inventory method must maintain a minimum level of inventory at year end or risk triggering a recapture tax. Given the current supply chain issues, auto dealers in particular have been unable to acquire inventories necessary to avoid additional tax liability triggered by LIFO recapture. 

The Supply Chain Disruptions Relief Act was introduced in both the House and Senate in the spring of 2022. The legislation would provide LIFO tax relief via Section 473 of the IRS Code for car dealerships using the LIFO accounting method who were unable to replace their new auto inventory during tax year 2020 and 2021 due to severe supply shortage caused by COVID-19 pandemic.

AIADA supports LIFO recapture relief through the Supply Chain Disruptions Relief Act.

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