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"Would increase taxable income by approx 1/3 on the LIFO reserve that was repealed. THIS WOULD BE BAD."
LIFO (short for "Last In, First Out") is a book and tax accounting method used by businesses including department stores, car dealerships, construction equipment distributors, beer wholesalers, grocery stores, manufacturers, and others to help mitigate the impact of inflation on inventory. Put simply, LIFO assumes that the goods most recently produced or acquired by a company are the first to be sold.
The major advantage to LIFO is that it matches current revenues with current costs. Since
1938, LIFO has been used by thousands of companies to avoid paying taxes
on phantom profits attributable to inflationary increases in inventory
values. However, when prices fall, companies on LIFO are generally faced with higher tax bills.
LIFO repeal was first proposed by the Senate's leadership in 2006 as an offset to a gas tax rebate proposal. Outcry from affected businesses led the Senate to quickly back off from the proposal. However, in late 2007, House Ways & Means Committee Chairman Charlie Rangel (D-NY) revived LIFO repeal as a way to pay for his comprehensive tax reform plan. (Although Rangel's tax bill has not received serious consideration in light of other priorities, it may be revived next year.) More recently, in early 2009 President Obama proposed LIFO repeal as a way to help trim the budget deficit. Although LIFO was not included in either the House or Senate budget resolutions, it resurfaced in mid-2009 as a potential offset to the estimated $1 trillion cost of health care reform.
| This site is designed to help the media, lawmakers, and business owners understand LIFO and the impact that repealing it will have on small and large companies throughout the country. For contact information, click here. |
Explanation of LIFO from Wikipedia
LIFO Coalition briefing document
Who Opposes LIFO Repeal?
Click here for a list of members of the LIFO Coalition, which is managed by the National Association of Wholesaler-Distributors
"LIFO: Real Impact on Manufacturers"(National Association of Manufacturers Manufacts, Sept. 2007)
"Why LIFO Repeal is Not the Way to Go"
(American Enterprise Institute (Nov. 7, 2006)
"LIFO Repeal Still Under Consideration"
(National Truck Equipment Association, Aug. 30, 2006)
"The Battle to Preserve LIFO: Prompted by Congressional Thoughts of Repeal, Companies That Use Last-in, First-out Inventory Accounting Start Mobilizing Their Defense"
(CFO.com, July 21, 2006)
"Survey Shows LIFO Repeal Could Mean $870 Million Tax Increase For Equipment Distributors"
(Associated Equipment Distributors Washington Insights, July 2006)
"Coalition Disputes LIFO Testimony, Saying Use of Method Understated"
(BNA Daily Tax Report, June 28, 2006)
"Do You LIFO?"
(Associated Equipment Distributors Washington Insights, June 2006)
"AED Takes On Fight Against LIFO Repeal"
(Associated Equipment Distributors Washington Insights, May 2006)
"LIFO Repeal Looms: Repeal of Accounting Method Would Make Reserves Taxable"
(Modern Distribution Management, 2006)
LIFO Coalition Submission to Senate Finance Committee in Response to June 2006 Hearing
National Association of Manufacturers (NAM) LIFO web page
National Automobile Dealers Association (NADA) LIFO Briefing Paper (Sept. 2007)
Metals Service Center Institute LIFO Briefer
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SaveLIFO.org is a service of the Associated Equipment Distributors, an Oak Brook, Illinois-based trade association representing companies involved in the sale, rental, and servicing of construction, mining, forestry, agricultural and industrial equipment, and related services. AED is a member of the LIFO Coalition, which is managed by the National Association of Wholesaler-Distributors.
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