Summary for LIFO Method
Reasons why the LIFO method should not be repealed in the context of business tax reform
In response to proposals by the Obama Administration to repeal the LIFO inventory method as part of the Administration’s budget proposals for Fiscal Years 2010-2013, the LIFO Coalition, which represents trade associations and business of every size and industry that employ the LIFO method, provided reasons why the LIFO method should not be repealed.
The reasons for opposing the repeal of the LIFO inventory method in the context of corporate tax reform are included as follows.
1. The present criteria for tax expenditures reported by JCT staff are neither logical nor internally consistent.
2. LIFO inventory method should not be classified as a tax expenditure, no matter what criteria are ultimately adopted.
3. The repeal of the LIFO inventory method would single out users of the LIFO inventory method for a unique retroactive increase in taxes.
4. Future tax rate reductions would in no way compensate companies for the damaging effects to their capital base resulting from the recapture of LIFO reserves into taxable income as a result of repeal of the LIFO inventory method.
5. Any reduction in corporate income tax rates that might accompany a repeal of the LIFO inventory method would not provide any offsetting relief for smaller companies who are using LIFO inventory method.
6. Once companies’ LIFO reserves are fully recovered through amortization into taxable income by reason of the repeal of the LIFO inventory method, the ongoing annual revenue savings from the elimination of the LIFO inventory method would not be significant.
7. The SEC Staff Report on International Financial Reporting Standards (“IFRS”) (IFRS makes it clear that adoption of IFRS in the U.S will not occur in the near term, and even if occur, it would most likely occur in a way that does not result in the elimination of the LIFO method for financial reporting purposes.
8. Repeal of the
In response to proposals by the Obama Administration to repeal the LIFO inventory method as part of the Administration’s budget proposals for Fiscal Years 2010-2013, the LIFO Coalition, which represents trade associations and business of every size and industry that employ the LIFO method, provided reasons why the LIFO method should not be repealed.
The reasons for opposing the repeal of the LIFO inventory method in the context of corporate tax reform are included as follows.
1. The present criteria for tax expenditures reported by JCT staff are neither logical nor internally consistent.
2. LIFO inventory method should not be classified as a tax expenditure, no matter what criteria are ultimately adopted.
3. The repeal of the LIFO inventory method would single out users of the LIFO inventory method for a unique retroactive increase in taxes.
4. Future tax rate reductions would in no way compensate companies for the damaging effects to their capital base resulting from the recapture of LIFO reserves into taxable income as a result of repeal of the LIFO inventory method.
5. Any reduction in corporate income tax rates that might accompany a repeal of the LIFO inventory method would not provide any offsetting relief for smaller companies who are using LIFO inventory method.
6. Once companies’ LIFO reserves are fully recovered through amortization into taxable income by reason of the repeal of the LIFO inventory method, the ongoing annual revenue savings from the elimination of the LIFO inventory method would not be significant.
7. The SEC Staff Report on International Financial Reporting Standards (“IFRS”) (IFRS makes it clear that adoption of IFRS in the U.S will not occur in the near term, and even if occur, it would most likely occur in a way that does not result in the elimination of the LIFO method for financial reporting purposes.
8. Repeal of the