American auto dealers experiencing inventory shortages due to global supply chain issues would get some federal tax relief under a bipartisan bill introduced by U.S. Sen. Tim Scott (R-SC) and 49 of his colleagues.
“Auto dealers across the country have struggled to maintain inventory due to global supply chain constraints,” Sen. Scott said on Feb. 21. “This legislation will help stabilize the industry and support thousands of jobs in South Carolina by providing much needed tax relief to businesses in our state and around the country.”
The Supply Chain Disruptions Relief Act, S. 443, which U.S. Sen. Sherrod Brown (D-OH) sponsored on Feb. 15, would allow new vehicle dealers to delay the recognition of income triggered by the Last-In First-Out (LIFO) recapture for tax years 2020 and 2021, when dealers faced pandemic-driven inventory shortfalls of new vehicles, according to a bill summary provided by Sen. Scott’s staff.
Specifically, S. 443 would provide a statutory determination that the requirements for a qualified liquidation have been satisfied for new motor vehicle dealers that have had a reduction of new vehicles held in LIFO inventory, and would expand the period to replenish inventory and compute LIFO reserve/LIFO recapture until the tax year ending before Jan. 1, 2026, the summary says.
The legislation also would direct the U.S. Treasury Department to provide regulatory guidance to enable dealers to calculate LIFO during the expanded replacement period.
“This legislation will grant much-needed tax relief to auto dealers facing unique supply chain challenges,” said Sen. Brown. “This bill will mean those dealers — that are often small, family-owned businesses — get a temporary break and a chance to spend their funds on replacing their depleted inventories and investing in their workers.”
Sen. Scott signed on as the lead original cosponsor of S. 443, which has 48 other original cosponsors, including U.S. Sens. Marsha Blackburn (R-TN), Shelly Moore Capito (R-WV), Bill Cassidy (R-LA), Steve Daines (R-MT), John Hoeven (R-ND), Jerry Moran (R-KS), Mike Rounds (R-SD), John Thune (R-SD), Thom Tillis (R-NC), and Roger Wicker (R-MS).
The National Automobile Dealers Association endorsed the measure.