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AICPA Applauds Congress for Efforts to Provide Tax Relief to Businesses Unable to Maintain Inventory During Pandemic

The letter urges Treasury to provide tax relief for businesses using the last-in, first-out (LIFO) inventory accounting method who cannot maintain inventory due to the global supply chain interruptions during the pandemic and allow them to replace ...

The American Institute of CPAs (AICPA) is applauding efforts by Congress to provide tax relief to businesses that have been unable to maintain inventory during the pandemic. The AICPA, along with the National Automobile Dealers Association (NADA), has endorsed a bipartisan letter to the Department of the Treasury led by Representatives Dan Kildee (D-MI) and Jodey Arrington (R-TX) and signed by 90 House Members.

The letter urges Treasury to provide tax relief for businesses using the last-in, first-out (LIFO) inventory accounting method who cannot maintain inventory due to the global supply chain interruptions during the pandemic and allow them to replace their inventory over a three-year period.

Government restrictions implemented in response to the pandemic have severely limited manufacturing capacity, causing major disruptions in the global supply chain and making it extremely difficult for U.S. companies to replace inventory, which has resulted in a significant reduction in inventory levels. Sec. 473 of the Internal Revenue Code provides relief for eligible taxpayers that experience qualified liquidations of LIFO inventories and applies if a business has had an interruption in the ability to obtain replacement inventory due to a trade embargo or other international event.

The AICPA submitted two letters earlier this year, in April recommending a safe harbor method that alleviates the burden of paying additional taxes on the related income and eliminates the need to file amended tax returns to obtain section 473 relief, and in August providing details and examples of both the section 473 safe harbor method and the need for expedited relief to elect the section 473 safe harbor method.

“We’re grateful to Congress for the overwhelming bipartisan support on this important issue,” said AICPA Tax Executive Committee Chair, Jan Lewis, CPA. “Recent disruptions in the global supply chain have become a national problem that will hamper taxpayers’ ability to recover in the current economic environment and will subject them to unexpected tax liabilities. We join Congress in strongly urging Treasury to extend relief to businesses during this challenging time.”